Corrigan v. U.S. Steel Corp.

Decision Date05 March 2007
Docket NumberNo. 05-4625.,05-4625.
Citation478 F.3d 718
PartiesJames T. CORRIGAN, et al., Plaintiffs-Appellants, v. UNITED STATES STEEL CORPORATION; Kobe Steel, Ltd., Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: Scott J. Orille, McIntyre, Kahn & Kruse Co., Cleveland, Ohio, for Appellants. Dianne Foley, Spieth, Bell, Mccurdy & Newell, Cleveland, Ohio, Thomas J. Lee, Taft, Stettinius & Hollister, Cleveland, Ohio, for Appellees. ON BRIEF: Scott J. Orille, McIntyre, Kahn & Kruse Co., Cleveland, Ohio, for Appellants. Dianne Foley, Spieth, Bell, McCurdy & Newell, Cleveland, Ohio, Thomas J. Lee, Ronn J. Gehring, Taft, Stettinius & Hollister, Cleveland, Ohio, Michael P. Duff, United States Steel Corporation, Pittsburgh, Pennsylvania, for Appellees.

Before: RYAN, BATCHELDER, and SUTTON, Circuit Judges.

OPINION

RYAN, Circuit Judge.

The plaintiffs, James T. Corrigan and William Watterson, are former nonunion steel industry employees. After the two men retired, they sued United States Steel Corp. (U.S.Steel) and Kobe Steel, Ltd., claiming entitlement to increased retirement benefits and damages for age discrimination. Neither defendant was ever the plaintiffs' direct employer. The district court granted summary judgment for the defendants, holding that on both claims—retirement benefits and age discrimination—the plaintiffs, to survive summary judgment, had to demonstrate that they were entitled to pierce the defendant corporations' corporate veils under Ohio law, and failed to do so.

We affirm the district court's application of Ohio state law piercing standards, rather than the federal law standards, and we agree that, as a matter of law, the plaintiffs have not made out a justiciable case showing the defendants' liability for the enhanced retirement benefits the plaintiffs claim. However, we also conclude that the district court erred in finding against the plaintiffs on their state law discrimination claim because the plaintiffs' veil piercing efforts failed. We hold, rather, that while the plaintiffs' age discrimination claim against U.S. Steel required no veil piercing, the claim fails because the plaintiffs have not shown that they are victims of unlawful age discrimination.

Accordingly, we affirm summary judgment in favor of the defendants.

I.

In 1970, Corrigan and Watterson began working for USX Corporation, the corporate predecessor to defendant U.S. Steel, at its Lorain Works facility. As a term of their employment with USX, the plaintiffs were enrolled in a "30 and out" pension and retirement benefit plan, which allowed nonunion workers, like the plaintiffs, to retire with full pension benefits once they had completed 30 years of continuous service with USX. In May 1989, USX, Kobe Steel, USS Lorain Holding Company, and Kobe/Lorain, Inc., entered into an agreement forming USS/Kobe Steel Company (USS/Kobe) as an Ohio general partnership, the equal partners being USS Lorain and Kobe/Lorain. USS Lorain was a wholly owned subsidiary of USX. Kobe/Lorain was a wholly owned subsidiary of Kobe Delaware, Inc., which in turn was a wholly owned subsidiary of Kobe Steel USA Holding, Inc., which in turn was a wholly owned subsidiary of defendant Kobe Steel. Under the 1989 agreement, Lorain Works became a part of USS/Kobe, and the plaintiffs became employees of USS/Kobe. The USX "30 and out" benefit plan continued to recognize service and earnings with USS/Kobe for employees, such as the plaintiffs, who had worked for USX prior to June 30, 1989.

In 1999, Republic Technologies International Holdings, LLC (RTI), a new company in which Kobe Steel and USX each held only a minority interest, agreed to purchase part of the Lorain Works facility from USS/Kobe. At the same time, Lorain Tubular Company, LLC, a 50/50 joint venture between a Kobe Steel subsidiary and USX before merging into U.S. Steel in 2001, agreed to purchase the remaining part of the Lorain Works facility. Under the new 1999 Master Restructuring Agreement governing these transactions, the plaintiffs became employees of RTI. (This fact is critical.) USX agreed to continue to honor its employee benefit obligations and RTI assumed the employee benefit obligations of USS/Kobe. The plaintiffs also requested employment with Lorain Tubular, but they were not hired.

In August 1999, RTI, the plaintiffs' new employer, changed its retirement plans and froze all age, service, and earnings accrual plans as of September 30, 1999. However, USX, the plaintiffs' original employer, continued to offer the 30 year class pension. This meant that an employee who had 30 years of service with USX USS/Kobe, and RTI combined, but only 19 years of service with USX, would be eligible for a 30 year class pension from USX, but the benefit would be paid only for the 19 years of service to USX. RTI, which assumed USS/Kobe's pension responsibilities, was responsible for the remainder of the 30 year pension, i.e., 11 years of service. Watterson retired in 2000 and Corrigan retired in 2001. Each was awarded pension benefits based on 30 years of service, but U.S. Steel paid only for the 19 years of service at USX.

The plaintiffs filed suit in an Ohio court alleging claims of fraud, breach of contract, and promissory estoppel to recover additional benefits they believe they are owed under the 30 year pension plan, mainly the other 11 years of benefits. The plaintiffs also claimed USX discriminated against them on the basis of age when its subsidiary, Lorain Tubular, did not hire them. USX removed the case to federal district court, where summary judgment was granted for the defendants on all claims. The court held that the plaintiffs failed to show, under Ohio state law standards for piercing the corporate veil, that U.S. Steel, or USX, and Kobe Steel were not separate and distinct from USS/Kobe and RTI. The plaintiffs appealed.

II.

We review a summary judgment decision de novo, using the same standards considered by the district court. Thomas v. Cohen, 453 F.3d 657, 660 (6th Cir.2006). Summary judgment is proper only where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment must be entered against the opposing party, however, if that party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which [it] will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In making these determinations, the court "`must view the factual evidence and draw all reasonable inferences in favor of the non-moving party.'" Thomas, 453 F.3d at 660 (citation omitted). A grant of summary judgment will be upheld only if the district court applied the proper law. Equitable Life Assurance Soc'y of the U.S. v. Poe, 143 F.3d 1013, 1015-16 (6th Cir.1998).

III.

Under the long-standing Erie doctrine, in actions brought in federal court invoking diversity jurisdiction, a court must apply the same substantive law as would have been applied if the action had been brought in a state court of the jurisdiction where the federal court is located. Poe, 143 F.3d at 1016 (citing Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). When the success of a state law claim brought in federal court under diversity jurisdiction is dependent on piercing the corporate veil, this question of substantive law is governed by the law of the state in which the federal court sits. See, e.g., Taylor Steel, Inc. v. Keeton, 417 F.3d 598, 604 (6th Cir.2005). In this case, all the claims brought by the plaintiffs—fraud, breach of contract, promissory estoppel, and age discrimination—are governed by state law. Therefore, the district court, sitting in Ohio, properly applied the State of Ohio's piercing law.

In Employment Retirement Income Security Act (ERISA) cases, some courts, including this circuit, have applied a federal standard for piercing the corporate veil, see, e.g., Michigan Carpenters Council Health and Welfare Fund v. C.J. Rogers Inc., 933 F.2d 376, 384 (6th Cir.1991); Lumpkin v. Envirodyne Indus., Inc., 933 F.2d 449, 460 (7th Cir.1991), but they have done so because the underlying ERISA claim is a federal law claim. See Lumpkin, 933 F.2d at 460, and Alman v. Danin, 801 F.2d 1, 3-4 (1st Cir.1986). Since the plaintiffs brought only state law claims, cases applying a federal veil-piercing standard do not apply. Under the Erie doctrine, the district court correctly applied the Ohio standard.

IV.

The plaintiffs brought their claims of fraud, breach of contract, and promissory estoppel against U.S. Steel and Kobe Steel, even though neither of these companies was their direct employer when the alleged misdeeds took place. Rather, during the relevant time period, the plaintiffs worked for USS/Kobe and RTI. The plaintiffs' fraud claim is directed at statements made by the president of USS/Kobe and the breach of contract claim is based on benefit provisions that bound only U.S. S/Kobe and RTI, not defendants U.S. Steel and Kobe Steel. Therefore, in order to hold U.S. Steel and Kobe Steel liable for the actions of USS/Kobe and RTI, the plaintiffs must pierce the corporate veil between these companies.

A parent corporation generally is not liable for the acts of its subsidiary, even if its subsidiary is wholly owned. United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998); LeRoux's Billyle Supper Club v. Ma, 77 Ohio App.3d 417, 602 N.E.2d 685, 687-88 (1991). However, in extraordinary cases, such as the corporate form being used for wrongful purposes, courts will pierce the corporate veil and disregard the corporate entity, treating the parent corporation and its subsidiary as...

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