Forsythe v. Clark Usa, Inc.

• Decision Date: 16 February 2007
• Docket Number: No. 101570.,101570.
• Citation: 864 N.E.2d 227,224 Ill.2d 274
• Parties: Marguerite FORSYTHE et al., Appellees, v. CLARK USA, INC., Appellant.
• Court: Illinois Supreme Court

864 N.E.2d 227

224 Ill.2d 274

Marguerite FORSYTHE et al., Appellees, v. CLARK USA, INC., Appellant.

No. 101570.

Supreme Court of Illinois.

February 16, 2007.

John C. Berghoff, Jr., Michele Odorizzi, of Mayer, Brown, Rowe & Maw, LLP, Chicago, for appellant.

Philip H. Corboy, Edward G. Willer, of Corboy & Demetrio, P.C., William R. Quinlan, James Niewiara, of Quinlan and Carrol, Martin J. Healy, Jr., David P. Huber, Chicago, for appellees.

Francis K. Tennant, of Wolf & Tennant, Chicago, for amicus curiae Illinois Trial Lawyers Association.

Justice GARMAN delivered the judgment of the court, with opinion:

On March 13, 1995, Michael F. Forsythe and Gary Szabla, mechanics at a refinery owned and operated by Clark Refining and Marketing (Clark Refining), were killed. The estate of each decedent received payment from Clark Refining pursuant to the Workers' Compensation Act (820 ILCS 305/1 et seq. (West 2002)). In 1996 and 1997, plaintiffs Marguerite Forsythe and Elizabeth Szabla, as special administrators of the estates of their late husbands, filed suits against Clark Refining and other defendants. Subsequently, plaintiffs added Clark Refining's parent company, Clark USA, as a defendant.

Clark USA is the only defendant involved in this appeal. At the close of discovery, the trial court granted Clark USA's motion for summary judgment pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005 (West 2002)). The trial court did not state its reasoning. Plaintiffs appealed, and the appellate court reversed and remanded. 361 Ill.App.3d 642, 297 Ill.Dec. 119, 836 N.E.2d 850. Following that decision, defendant petitioned this court for leave to appeal pursuant to Supreme Court Rule 315 (177 Ill.2d R. 315).

We granted defendant's petition to consider two issues: first, whether a parent company can be held liable under a theory of direct participant liability for controlling its subsidiary's budget in a way that led to a workplace accident; second, if such a theory is recognized, whether the exclusive-remedy provision of the Workers' Compensation Act (820 ILCS 305/5 (West 2002)) immunizes a parent company from liability.

BACKGROUND

Clark Refining operated an oil refinery in Blue Island, Illinois. Defendant is Clark Refining's parent company and sole shareholder. On March 13, 1995, decedents were on their lunch break when a fire broke out at the refinery, killing them both. The fire was apparently caused when other Clark Refining employees attempted to replace a valve on a pipe without ensuring that flammable materials within the pipe had been depressurized. Plaintiffs claim that those employees were not maintenance mechanics and were not trained or qualified to perform the work they were attempting.

Plaintiffs' allegations of liability center around defendant's overall budgetary strategy. Specifically, plaintiffs allege that defendant breached a duty to use reasonable care in imposing its business strategy on Clark Refining by (1) "requiring [Clark Refining] to minimize operating costs including costs for training, maintenance, supervision and safety," (2) "requiring [Clark Refining] to limit capital investments to those which would generate cash for the refinery thereby preventing [Clark Refining] from adequately reinforcing the walls of the lunchroom or relocating the lunchroom to a safe position within the refinery," and (3) "failing to adequately evaluate the safety and training procedures in place at the Blue Island Refinery." Moreover, plaintiffs allege that defendant's strategy of capital cutbacks forced Clark Refining to have unqualified employees act as maintenance mechanics which, in turn, led to the fire that killed the decedents. This, plaintiffs argue, constitutes proximate cause.

In support of its motion for summary, judgment, defendant contended that it owed no duty to either decedent by virtue of its status as a mere holding company, which was connected to Clark Refining only as a shareholder. Defendant submitted evidence to prove that Clark Refining owned and operated the refinery while defendant itself had no control over the day-to-day operations. Plaintiffs countered that defendant was directly responsible for creating conditions that precipitated the accident.

In support of their argument, plaintiffs cited evidence that defendant's directors created and approved Clark Refining's budget, striving to "position itself as a low cost refiner and marketer" with the goal of replenishing defendant's cash reserve by "decreas[ing] capital spending * * * to minimum sustainable levels" through the institution of a "survival mode" business plan. Plaintiffs also produced evidence that the boards of directors of Clark Refining and defendant met simultaneously. Moreover, plaintiffs relied upon evidence that the belt-tightening budget created by Clark Refining was overseen by Paul Melnuk, who served as defendant's president as well as chief executive officer of Clark Refining.

The trial court granted summary judgment without explanation. Subsequently, plaintiffs appealed and the appellate court reversed and remanded, rejecting a claim by defendant that it was entitled to immunity under the Workers' Compensation Act. The appellate court held that "plaintiffs presented sufficient evidence to raise an issue of material fact as to whether defendant directly participated in creating conditions within the refinery which led to the deadly fire." 361 Ill.App.3d at 655, 297 Ill.Dec. 119, 836 N.E.2d 850. One justice dissented, finding that plaintiffs presented no evidence of separate acts, attributable solely to defendant, by which defendant directly caused the injuries in this case. 361 Ill.App.3d at 658, 297 Ill.Dec. 119, 836 N.E.2d 850 (McNulty, J., dissenting).

ANALYSIS

Section 2-1005 of the Code of Civil Procedure provides for summary judgment when the pleadings, depositions, and admissions on file, together with any affidavits, show that there is no genuine issue as to any material fact such that the moving party is entitled to a judgment as a matter of law. 735 ILCS 5/2-1005 (West 2002). The purpose of summary judgment is not to try a question of fact but simply to determine if one exists. Robidoux v. Oliphant, 201 Ill.2d 324, 335, 266 Ill.Dec. 915, 775 N.E.2d 987 (2002). In reviewing a summary judgment disposition, this court will construe the record strictly against the movant and liberally in favor of the nonmoving party. Jackson v. TLC Associates, Inc., 185 Ill.2d 418, 423-24, 235 Ill.Dec. 905, 706 N.E.2d 460 (1998). Moreover, it must be noted that summary judgment dispositions "should not be allowed unless the moving party's right to judgment is clear and free from doubt." Jackson, 185 Ill.2d at 424, 235 Ill.Dec. 905, 706 N.E.2d 460. If the undisputed material facts could lead reasonable observers to divergent inferences, or where there is a dispute as to a material fact, summary judgment should be denied and the issue decided by the trier of fact. Jackson, 185 Ill.2d at 424, 235 Ill.Dec. 905, 706 N.E.2d 460. This court reviews a grant of summary judgment de novo. Roth v. Opiela, 211 Ill.2d 536, 542, 286 Ill.Dec. 57, 813 N.E.2d 114 (2004).

I. Direct Participant Liability

To state a cause of action for negligence, plaintiffs must show that defendant owed and breached a duty of care, proximately causing the plaintiffs injury. Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill.2d 107, 114, 208 Ill.Dec. 662, 649 N.E.2d 1323 (1995). The threshold issue in this case is the existence of a duty, which is a question of law for the court to decide. Chandler v. Illinois Central R.R. Co., 207 Ill.2d 331, 340, 278 Ill.Dec. 340, 798 N.E.2d 724 (2003). As we have recently stated, the "touchstone of this court's duty analysis is to ask whether a plaintiff and a defendant stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff." Marshall v. Burger King Corp., 222 Ill.2d 422, 436, 305 Ill.Dec. 897, 856 N.E.2d 1048 (2006), citing Happel v. Wal-Mart Stores, Inc., 199 Ill.2d 179, 186, 262 Ill.Dec. 815, 766 N.E.2d 1118 (2002). Four factors inform this inquiry: (1) the reasonable foreseeability of injury, (2) the likelihood of injury, (3) the magnitude of the burden of guarding against the injury, and (4) the consequences of placing the burden upon the defendant. Marshall, 222 Ill.2d at 436-37, 305 Ill.Dec. 897, 856 N.E.2d 1048.

Before undertaking our analysis, we note, as did the parties and the appellate court, that the theory of direct participant liability presented here has not previously been addressed in Illinois. It has been addressed in other states and throughout the federal courts, however. We will consider this authority where appropriate in our analysis.

Plaintiffs argue that defendant demanded Clark Refining operate its refinery pursuant to an overall business strategy that it knew would adversely affect safety by forcing reductions in training and maintenance. Indeed, plaintiffs contend that defendant actively and directly mandated unreasonable cuts in Clark Refining's budget in order to carry out its strategy. This strategy was outlined in Clark USA business records calling for a "survival mode" business philosophy accomplished through "reduced capital spending," "reduced working capital investment," and "reduced operating expense level." Plaintiffs allege that this "survival mode" strategy was mandated, despite the fact that defendant knew or should have known that the only feasible budget cuts would come from safety, maintenance, and training expenses. This, plaintiffs' conclude, constitutes direct participation by defendant in the harm caused. As such, plaintiffs contend the appellate court correctly found that defendant owed them a duty based on the direct participant theory and not on the legal relationship of defendant to its subsidiary.

Defendant contends that unless the...