Fletcher v. Atex, Inc.

• Citation: 68 F.3d 1451
• Decision Date: 05 October 1995
• Docket Number: D,1427,Nos. 1426,s. 1426
• Parties: Prod.Liab.Rep. (CCH) P 14,358 Marianne E. FLETCHER, Nancy L. Bartley, Raphael Paganelli, and Charlotte Evans, Plaintiffs-Appellants, v. ATEX, INC., Defendant, EASTMAN KODAK COMPANY, Defendant-Appellee. and Jenny L. HERMANSON and Christy Scattarella, Plaintiffs-Appellants, v. 805 MIDDLESEX CORP., f/k/a Atex, Inc., and Apple Computers, Inc., Defendants, Eastman Kodak Company, Defendant-Appellee. ockets 94-9080, 94-9120.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 1451

68 F.3d 1451

Prod.Liab.Rep. (CCH) P 14,358

Marianne E. FLETCHER, Nancy L. Bartley, Raphael Paganelli, and Charlotte Evans, Plaintiffs-Appellants, v. ATEX, INC., Defendant, EASTMAN KODAK COMPANY, Defendant-Appellee. and Jenny L. HERMANSON and Christy Scattarella, Plaintiffs-Appellants, v. 805 MIDDLESEX CORP., f/k/a Atex, Inc., and Apple Computers, Inc., Defendants, Eastman Kodak Company, Defendant-Appellee.

Nos. 1426, 1427, Dockets 94-9080, 94-9120.

United States Court of Appeals Second Circuit.

Argued May 26, 1995.

Decided Oct. 5, 1995.

Steven J. Phillips, Levy Phillips & Konigsberg, New York City (Alani Golanski, Levy Phillips & Konigsberg, New York City, on the brief), for Plaintiffs-Appellants.

Thomas E. Reidy, Nixon, Hargrave, Devans & Doyle, Rochester, New York (Henry J. DePippo, Flor M. Ferrer-Colon, Nixon, Hargrave, Devans & Doyle, Rochester, New York, on the brief), for Defendant-Appellee.

Before: KEARSE, CALABRESI, and CABRANES, Circuit Judges.

JOSE A. CABRANES, Circuit Judge:

This is a consolidated appeal from a final judgment of the United States District Court for the Southern District of New York (Morris E. Lasker, Judge ), granting defendant-appellee Eastman Kodak Company's motion for summary judgment and dismissing all claims against it in two actions, Fletcher v. Atex, Inc., 92 Civ. 8758 and Hermanson v. 805 Middlesex Corp., Inc., 94 Civ. 1272. Fletcher v. Atex, Inc., 861 F.Supp. 242 (S.D.N.Y.1994). The plaintiffs-appellants filed suit against Atex, Inc. ("Atex") and its parent, Eastman Kodak Company ("Kodak"), to recover for repetitive stress injuries that they claim were caused by their use of computer keyboards manufactured by Atex.

Plaintiffs-appellants argue that the district court erred in granting summary judgment in favor of Kodak on the ground that Kodak could be held liable for the plaintiffs' alleged injuries. They contend that summary judgment was inappropriate because genuine issues of material fact existed regarding Kodak's liability as a defendant under each of the plaintiffs' four theories of liability, which we describe below.

I. BACKGROUND

The Fletcher and Hermanson plaintiffs filed their respective complaints on December 4, 1992, and February 25, 1994, seeking recovery from Atex and Kodak, among others, for repetitive stress injuries that they claim were caused by their use of Atex computer keyboards. From 1981 until December 1992, Atex was a wholly-owned subsidiary of Kodak. In 1987, Atex's name was changed to Electronic Pre-Press Systems, Inc., ("EPPS"), but its name was changed back to Atex in 1990. In December 1992, Atex sold substantially all of its assets to an independent third party and again changed its name to 805 Middlesex Corp., which holds the proceeds from the sale. Kodak continues to be the sole shareholder of 805 Middlesex Corp.

After extensive discovery, Kodak moved for summary judgment in Fletcher on April 21, 1994, and in Hermanson on April 28, 1994. The plaintiffs opposed Kodak's motion, arguing that genuine issues of material fact existed as to Kodak's liability under any number of theories, including (1) that Atex was merely Kodak's alter ego or instrumentality; (2) that Atex was Kodak's agent in the manufacture and marketing of the keyboards; (3) that Kodak was the "apparent manufacturer" of the Atex keyboards; and (4) that Kodak acted in tortious concert with Atex in manufacturing and marketing the allegedly defective keyboards.

In support of their first theory, the plaintiffs argued that Kodak "dominated and controlled" Atex by maintaining significant overlap between the boards of directors of the two companies, "siphoning" off funds from Atex through use of a cash management system, requiring Kodak's approval for major expenditures, stock sales, and real estate acquisitions, participating in negotiations involving the sale of Atex to a third party, and including references to Atex as a "division" of Kodak and to the "merger" between Atex and Kodak in Atex's promotional literature and Kodak's Annual Report. Second, the plaintiffs claimed that, at the very least, the references to Atex in the promotional literature raised a question of material fact regarding Kodak's intent to confer authority on Atex to act as its agent in the manufacturing and marketing of computer keyboards. In support of their third theory, the plaintiffs maintained that the use of Kodak's name in Atex's advertising, promotional, and packaging materials provided assurances to consumers that the Kodak name stood behind Atex's products, and Kodak could thus be held liable as the "apparent manufacturer" of the keyboards. Finally, they argued that the fact that Kodak was generally aware of the danger of repetitive stress injuries and the fact that Kodak had tested the ergonomics of three Atex keyboards in 1990 presented evidence of concerted tortious action between Atex and Kodak. The Fletcher and Hermanson actions were consolidated before the district court for the purposes of summary judgment proceedings.

On August 17, 1994, the district court rejected each of the plaintiffs' theories of Kodak's liability and granted Kodak's motion for summary judgment in both actions. In its opinion, the court referred to, but did not rely upon, an identical suit filed against Atex and Kodak in New York state court, King v. Eastman Kodak Co., No. 23439/92 (N.Y.Sup.Ct. June 9, 1994), in which Kodak's motion for summary judgment was granted on similar grounds. Fletcher, 861 F.Supp. at 243.

First, the district court found that Kodak and Atex observed all corporate formalities and maintained separate corporate existences. It held that Atex's participation in Kodak's cash management system and Kodak's control over Atex's major expenditures and asset sales were insufficient to raise an issue of material fact regarding Kodak's liability under an alter ego theory. Id. at 244-45. Second, it held that the representations in various advertisements, promotional literature and annual reports were similarly insufficient as a matter of law to find Kodak liable under an agency theory. Id. at 247. Third, the court held that Kodak was entitled to summary judgment on the plaintiffs' apparent manufacturer theory because the company was not involved in the sale or distribution of the keyboards. Id. at 245-46. Finally, the court found that the plaintiffs' concerted action theory failed as a matter of law because they offered no evidence indicating that Kodak and Atex had agreed to commit a tortious act. Id. at 246. This appeal followed.

II. DISCUSSION

A. The Summary Judgment Standard

We review a district court's grant of summary judgment de novo to determine whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Healy v. Rich Prods. Corp., 981 F.2d 68, 72 (2d Cir.1992). Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits ... 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). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986) (emphasis in original). While the court must view the inferences to be drawn from the facts in the light most favorable to the party opposing the motion, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986), a party may not "rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). The non-moving party may defeat the summary judgment motion by producing sufficient specific facts to establish that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Finally, " 'mere conclusory allegations or denials' " in legal memoranda or oral argument are not evidence and cannot by themselves create a genuine issue of material fact where none would otherwise exist. Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (quoting SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir.1978)).

B. Theories of Liability

Plaintiffs argue that the district court should have denied Kodak's motion for summary judgment on the ground that genuine issues of material fact existed regarding each of the plaintiffs' four theories of liability. We consider the plaintiffs' arguments on each of these theories in turn.

1. Alter Ego Liability

The plaintiffs claim that the district court erred in granting Kodak's motion for summary judgment on their alter ego theory of liability. The plaintiffs offer two arguments in this regard. First, they contend that the district court was estopped from granting Kodak's motion for summary judgment because the New York state court found in King v. Eastman that issues of material fact existed regarding Kodak's domination of Atex. Second, they argue that even if collateral estoppel does not apply in the instant case, genuine issues of material fact remain that preclude a grant of summary judgment in favor of Kodak.

The district court correctly noted that "[u]nder New York choice of law principles, '[t]he law of the state of incorporation determines when the corporate form will be disregarded and liability will be imposed on shareholders.' " Fletcher, 861 F.Supp. at 244 (quoting Kalb, Voorhis & Co. v. American Fin. Corp., 8 F.3d 130, 132 (2d Cir.1993)). Because Atex was a Delaware...