Archem, Inc. v. Simo

• Decision Date: 07 February 1990
• Docket Number: No. 03A01-8907-CV-263,03A01-8907-CV-263
• Citation: 549 N.E.2d 1054
• Parties: ARCHEM, INC., a Wisconsin Corporation, Appellant (Defendant Below), v. Gerald SIMO a/k/a Jerry Simo, Appellee (Plaintiff Below).
• Court: Indiana Appellate Court

Page 1054

549 N.E.2d 1054

ARCHEM, INC., a Wisconsin Corporation, Appellant (Defendant Below), v. Gerald SIMO a/k/a Jerry Simo, Appellee (Plaintiff Below).

No. 03A01-8907-CV-263.

Court of Appeals of Indiana,

First District.

Feb. 7, 1990.

Rehearing Denied March 27, 1990.

Thomas C. Bigley, John A. Stroh, Sharpnack, Bigley, David & Rumple, Columbus, Bruce C. O'Neill, Fox, Carpenter, O'Neill & Shannon, S.C., Milwaukee, Wis., for appellant.

Cory Brundage, James R. Fisher, Bette J. Dodd, Ice Miller Donadio & Ryan, Indianapolis, for appellee.

ROBERTSON, Judge.

Appellant-plaintiff Archem, Inc. (Archem) appeals from a jury verdict against it in favor of Gerald Simo (Simo), and from the trial court's granting judgment on the evidence in favor of Simo.

We affirm.

Archem is a wholly-owned subsidiary of Share Corporation (Share) of Milwaukee Wisconsin. Archem manufactures and distributes industrial chemical products. Share acquired Archem, an Arkansas corporation, in December, 1986.

In April, 1986, prior to Share's acquisition of the "old" Archem, salesman Gerald Simo signed an independent distributorship agreement with old Archem, then headed by Stan Goss. At the time he agreed to sell old Archem's products, Simo had worked for NCH, a competing business. His contract with NCH included a covenant not to compete. As a condition for Simo's joining Archem, Goss agreed to pay any legal fees incurred by Simo in defending any lawsuit NCH might bring against Simo on the restrictive covenant. NCH did bring suit, naming Simo and Archem.

The parties were sharply divided on the factual issue of whether Share undertook to pay Simo's attorney fees as part of its purchase agreement, or whether the "new" Archem agreed to pay Simo's fees only after Simo agreed to work for the new Archem five years and to sell Archem products exclusively.

New Archem alleged that Simo made oral assurances that he would sell Archem's products exclusively for at least five years, and that upon that promise, counsel for new Archem drafted a contract in which Simo was to agree that he would repay attorney fees expended by new Archem in the NCH litigation if Simo ever breached his contract with new Archem. No written contract to sell exclusively was ever signed by Simo. In April, 1987, the NCH litigation was settled, and Share had paid over $31,000 in legal fees for Simo and old Archem. The record revealed that Share had made a practice of bringing litigation against former salespeople who left the company to induce them to stay.

In August, 1987, Simo ordered for a customer a product from Athea, also a subsidiary of Share and a manufacturer of chemicals, because new Archem did not have the product in its line. When Share officers heard of this, they told Carter Elliott, then a vice-president of the new Archem, to prevail upon Simo to sign a five-year contract or face a lawsuit demanding return of the $31,000 in fees that Share had paid on Simo's behalf. Share hoped to make an example of Simo if he didn't desist from selling competitors' products. Upon learning that Simo had been selling chemical products manufactured by competitors, Share refused to fill Simo's orders. When Simo refused to sign a contract with Share, Share filed suit against Simo for misrepresentation and unjust enrichment. A third count alleging breach of contract was added later.

Simo brought a counterclaim against Archem, alleging several counts.

By the time the case reached the jury, the court had granted judgment in favor of Simo on Archem's complaint, and only three of Simo's counts remained to be decided by the jury: breach of contract, abuse of process and corrupt business influence. The jury found in favor of Simo on the breach of contract and abuse of process claims, awarding him $11,000 in compensatory damages and $750,000 in punitive damages.

The parties name six issues for our consideration:

1) whether the trial court erred in admitting evidence of Share's financial position in this suit against Archem;

2) whether the trial court erred in admitting a videotaped deposition of Carter Elliott where Archem was unable to attend the deposition and was relegated to conducting its cross-examination over a speaker telephone;

3) whether the trial court erred when it denied Archem's local counsel the opportunity to give the closing argument;

4) whether the punitive damages were excessive in proportion to compensatory damages;

5) whether judgment in favor of Simo was supported by the evidence; and

6) whether the trial court erred in granting judgment on the evidence against Archem.

I.

Essentially, Archem argues that financial documents of Share were inadmissible because no Indiana case has allowed evidence of the wealth of a parent corporation in assessing punitive damages against a subsidiary. However, in other contexts, Indiana courts have held that "the fiction of corporate entity may be disregarded where one corporation is so organized and controlled and its affairs are so conducted that it is, in fact, a mere instrumentality or adjunct of another corporation." Feucht v. Real Silk Hosiery Mills, Inc. (1938), 105 Ind.App. 405, 12 N.E.2d 1019; General Finance Corp. v. Skinner (1981), Ind.App., 426 N.E.2d 77; Extra Energy Coal Co. v. Diamond Energy (1984), Ind.App., 467 N.E.2d 439.

As Archem fashions its argument concerning the admissibility of financial documents (and not the sufficiency of the evidence to sustain the jury verdict awarding the high punitive damages judgment), we need only determine whether there was a sufficient evidentiary basis for the court's determination. Clark v. Walker Kurth Lumber Co. (1985), Tex.App., 689 S.W.2d 275; Miller v. Goodwin (1969), 246 Ark. 552, 439 S.W.2d 308. The economic wealth of a defendant is admissible evidence for the purpose of determining what amount of punitive damages would be appropriate to punish and deter the defendant. Allied Mills, Inc. v. P.I.G., Inc. (1983), Ind.App., 454 N.E.2d 1240. ¹

Before admitting evidence of Share's wealth, the court heard evidence that Paul Des Jardins was the only member of Archem's board of directors and he was chairman of the board of Share Corporation. Share filed consolidated tax returns, and Archem had not produced an annual report apart from the consolidated Share annual financial report. John Wright, who was a Share director, ran the Archem facility in Conway, Arkansas. Archem did not have its own in-house corporate counsel.

Identity of corporate officers is one consideration favoring piercing the corporate veil. Stacey-Rand, Inc. v. J.J. Holman (1988), Ind.App., 527 N.E.2d 726. The corporation's filing a consolidated tax return is another factor. Extra Energy, supra. There was a sufficient evidentiary basis for admitting the evidence concerning Share, and allowing such evidence to go to the jury on the question of piercing the corporate veil. See Merriman v. Standard Grocery Company (1968), 143 Ind.App. 654, 242 N.E.2d 128.

In addition, it should not be availing to Share that Share was not joined as a party, because our recognizing the corporations as a single entity should have the effect of making Share a party, just as piercing the corporate veil will have the effect of making service on the subsidiary corporation service to the parent, as well. See General Finance Corp. v. Skinner (1981), Ind.App., 426 N.E.2d 77.

We discern no reversible error in admitting evidence of Share's worth.

II.

Carter Elliott was deposed by Simo's attorney at Little Rock, Arkansas. The parties agree that notice of the deposition was properly served, and Archem had actual notice of the time and place of the deposition. Nevertheless, because Archem's attorney had missed his flight, Archem did not attend the videotaped deposition of Carter Elliott, and therefore objected to its admission into evidence.

Admission of a deposition at trial will be affirmed by this court unless it appears that such admission constituted an abuse of discretion. Gallagher v. State (1984), Ind.App., 466 N.E.2d 1382; Thomas v. State (1981), Ind.App., 423 N.E.2d 682; Front v. Lane (1982), Ind.App., 443 N.E.2d 95. Subparagraph (A) of Ind.Trial Rule 32 provides that "a deposition ... may be used against any party who was present or represented at the taking of the deposition by or against any party who had reasonable notice thereof ..." The appellate court in Rambend Realty Corp. v. Backstreets Band (1985), Ind.App., 482 N.E.2d 741 noted that our T.R.Rule 32 tracks the language of Fed.R.Civ.P. 32. The rule implies a principle of fairness requiring that the opposing party have the right or opportunity to be present at the deposition. Bobb v. Modern Products, Inc. (5th Cir.1981), 648 F.2d. 1051.

The parties in the instant case present markedly different views of the events which led to Archem's failure to attend the properly noticed deposition. Had the trial court merely ruled that the facts militated in favor of Simo's version of events and therefore ruled the deposition admissible, we would likely have upheld the decision as one well within the court's discretion.

However, the court apparently admitted the deposition provided that Archem be given an opportunity to cross-examine. This is evident from several entries of the record. Initially, the judge ruled: "The deposition will be admissible. What I have not decided is whether or not the gentleman who gave the deposition can be cross-examined by telephone and that's what I'm ... the question that's still up in the air as far as I'm concerned." Record 905. Later, the court promised to strike the deposition if Carter Elliott did not make himself available for telephonic cross-examination by the time all the evidence had been presented. Record, 2074, 2374-75.

Assuming that the court viewed the circumstances of the taking of Carter Elliott's deposition in a light more favorable to Archem, and then endeavored to ensure that, as a remedy, Archem had an opportunity to...