Hargrave v. Fibreboard Corp.

• Decision Date: 01 August 1983
• Docket Number: Nos. 82-2231,82-2236,JOHNS-MANVILLE,s. 82-2231
• Citation: 710 F.2d 1154
• Parties: Rodney J. HARGRAVE, Plaintiff, v. FIBREBOARD CORPORATION, et al., Defendants, Nicolet Industries, Inc., Defendant-Third Party Plaintiff-Appellant, v. TURNER & NEWALL, LTD., Third Party Defendant-Appellee. Alton Troy FULTS, Plaintiff, Nicolet, Inc., Third-Party Plaintiff-Appellant Cross-Appellee, v.SALES CORPORATION, et al., Defendants, Turner & Newall, Ltd., Third-Party Defendant-Appellee Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1154

710 F.2d 1154

Rodney J. HARGRAVE, Plaintiff, v. FIBREBOARD CORPORATION, et al., Defendants, Nicolet Industries, Inc., Defendant-Third Party Plaintiff-Appellant, v. TURNER & NEWALL, LTD., Third Party Defendant-Appellee.

Alton Troy FULTS, Plaintiff, Nicolet, Inc., Third-Party Plaintiff-Appellant Cross-Appellee, v. JOHNS-MANVILLE SALES CORPORATION, et al., Defendants, Turner & Newall, Ltd., Third-Party Defendant-Appellee Cross-Appellant.

Nos. 82-2231, 82-2236.

United States Court of Appeals Fifth Circuit.

Aug. 1, 1983.

As Amended on Denial of Rehearing and Rehearing En Banc Nov. 3, 1983.

Jack E. Urquhart, John E. Nelson, III, Houston, Tex., for Nicolet Industries, Inc.

Marvin S. Sloman, Jane Makela, Dallas, Tex., Harold Peterson, Beaumont, Tex Philip L. Graham, Jr., Sullivan & Cromwell, New York City, for Turner & Newall, Ltd.

Appeals from the United States District Court for the Eastern District of Texas.

Before CHARLES CLARK, Chief Judge, GOLDBERG and POLITZ, Circuit Judges.

GOLDBERG, Circuit Judge:

In these consolidated appeals we are asked to review the dispositions of various pretrial motions filed by a third-party defendant embroiled in asbestos-related litigation. In Fults (No. 82-2236), third-party defendant Turner & Newall, Ltd. ("T & N") moved to dismiss the third-party complaint against it for lack of in personam jurisdiction and also moved for summary judgment in its favor. In Hargrave (No. 82-2231), T & N waived its objection to the court's personal jurisdiction and entered a motion for summary judgment. The district court denied the jurisdictional motion to dismiss in Fults, but granted summary judgment for T & N in both cases. Because we conclude that the district court erred in denying T & N's motion to dismiss in Fults, we vacate the summary judgment entered in that case and remand to the district court with instructions to dismiss. As to the district court's entry of summary judgment in Hargrave, we affirm.

I. FACTS AND PROCEEDINGS BELOW

A. Facts

Three corporate entities--one now defunct--play the lead roles in this procedural sideshow: third-party plaintiff Nicolet, Inc. ("Nicolet"), third-party defendant T & N, and Keasbey & Mattison Co. ("K & M"), a former subsidiary of T & N. The relationships between and among these entities furnish the dramatic tension that pervades this juridical pageant. We provide here a brief outline of those relationships, with the details to be sketched in later in the opinion.

K & M was a Pennsylvania asbestos company founded in 1873; it was incorporated in 1892 and maintained its headquarters in Ambler, Pennsylvania. T & N is a publicly held English corporation formed in 1920 and headquartered in Manchester, England. T & N is involved in the asbestos, plastics, and electronics industries. In the mid-1930's T & N began acquiring the stock of K & M for investment purposes, until by 1938 it was K & M's sole shareholder. From 1938 until 1962, K & M operated as a wholly owned subsidiary of T & N.

In 1962, as part of a plan of dissolution, K & M sold its manufacturing facilities and other assets to various companies. Nicolet was among the purchasers. Nicolet's acquisition from K & M included certain assets comprising K & M's asbestos insulation manufacturing facilities. K & M was formally dissolved in 1967 when the Pennsylvania Department of State issued a dissolution certificate.

B. Procedural History

This appeal involves two of the multitudinous asbestos cases currently pending in the United States District Court for the Eastern District of Texas. The original plaintiffs in all of these cases alleged injury from exposure to asbestos-containing insulation products made by various defendants, including Nicolet. None of the plaintiffs made any claim against T & N.

In each of these many actions Nicolet filed an identical third-party complaint against T & N. Each third-party complaint sought a declaratory judgment that T & N was liable for any and all injuries arising from the plaintiffs' exposure to asbestos products manufactured by K & M. Nicolet's third-party complaints urged a triumvirate of theories upon which T & N's liability might be based: (1) that T & N was liable as the "alter ego" of K & M; (2) that T & N was liable as the successor in interest to K & M; and (3) that T & N was liable for contribution or indemnity as K & M's supplier of asbestos fiber.

T & N soon launched its own tripartite attack, challenging Nicolet's complaints on jurisdictional, substantive, and procedural grounds. First, T & N moved to dismiss the third-party complaints against it for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2). Second, T & N filed motions for summary judgment, challenging Nicolet's complaints on the merits. Third, T & N sought to sever the third-party complaints from the underlying primary claims.

Following a preliminary hearing, the parties briefed the various motions and prepared for oral argument. T & N's brief presented several grounds in support of its motion for summary judgment. T & N first argued that the Pennsylvania two-year survival of claims statute barred the actions against T & N as the shareholder of a dissolved company. T & N also asserted that the degree of control exercised by T & N as K & M's shareholder was insufficient to warrant the imposition of alter ego liability and that no fraud or injustice had resulted from T & N's ownership of K & M. Finally, T & N urged that no basis existed for the imposition of liability upon T & N as the successor in interest to its defunct subsidiary. In response, Nicolet's brief addressed only the alter ego issue, claiming that a genuine issue of fact existed as to whether T & N was the alter ego of K & M. Nowhere in its brief did Nicolet counter the other arguments advanced in T & N's brief, nor did Nicolet attempt to raise factual questions with respect to the alternative theories it had presented in its initial third-party complaint.

The district court held oral argument on T & N's motions on March 23, 1982. At the hearing, T & N withdrew its motion to dismiss for lack of personal jurisdiction in Hargrave, thereby waiving its objection to the court's jurisdiction in that case. The transcript of the hearing indicates that, while most of the discussion centered on the alter ego question, T & N pressed its arguments regarding the Pennsylvania survival of claims statute and the absence of successorship liability as well.

On April 14, 1982, the district court issued its rulings on T & N's motions to dismiss and motions for summary judgment. The court's opinion stated:

The Court is persuaded that under the alter-ego standard applied in Texas for jurisdictional purposes, Dotson v. Fluor Corp., 492 F.Supp. 313, 317 (W.D.Tex.1980); Reul v. Sahara Hotel, 372 F.Supp. 995 (S.D.Tex.1974), Turner & Newall exercised sufficient control over Keasbey-Mattison so as to subject Turner & Newall to personal jurisdiction in this federal court on the basis of Keasbey-Mattison's contracts. As a parent company Turner & Newall exercised general guidance and retained the necessary authority to ensure the continued profitability of its subsidiary. As a stockholder Turner & Newall purposefully availed itself of the benefits of Keasbey-Mattison's activities in Texas and should reasonably have anticipated being haled into federal court here. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 [100 S.Ct. 559, 62 L.Ed.2d 490] (1980).

This Court is not, however, persuaded that Turner & Newall's control over Keasbey-Mattison was such as to allow liability against Turner & Newall for the torts of that subsidiary. Under both Texas and Pennsylvania law the alter-ego doctrine is premised upon a finding that the parent-subsidiary relationship was a fiction. The subsidiary must have been controlled as "a mere instrumentality" of the parent. Zubik v. Zubik, 384 F.2d 267 (3rd Cir.1967) (applying Pennsylvania law), cert. denied, 390 U.S. 988 [88 S.Ct. 1183, 19 L.Ed.2d 1291] (1968); Fanfan v. Berwind Corp., 362 F.Supp. 793 (E.D.Pa.1973); Mortgage & Trust, Inc. v. Bonner & Co., 572 S.W.2d 344 (Tex.Civ.App.--Corpus Christi 1978, writ ref'd. n.r.e.); Fitz-Patrick v. Commonwealth Oil Co., 285 F.2d 726 (5th Cir.1960). As indicated the facts do not evidence such a relationship.

Accordingly, the court denied T & N's jurisdictional motions, but granted summary judgment in T & N's favor. The court then dismissed Nicolet's third-party complaints and entered final judgments pursuant to Fed.R.Civ.P. 54(b).

Following the entry of the final judgments, Nicolet filed a motion to reconsider, seeking relief on two grounds. Nicolet first asked the court to dismiss most of its third-party complaints against T & N for lack of a justiciable controversy. The thesis of this assertion was that the original plaintiffs in most of the cases had not sought recovery from Nicolet for the torts of K & M; thus, in those cases Nicolet had no cause of action against T & N. In addition, Nicolet urged the court to reconsider its grants of summary judgment in favor of T & N. Once again, however, Nicolet restricted its argument to a discussion of the alter ego theory; Nicolet did not urge reconsideration on the basis of its pleaded theories of successorship liability and contribution/indemnity.

The district court refused to change its position on the summary judgment question, but agreed with Nicolet that many of the third-party complaints presented no case or controversy. In all but two of the actions under consideration, the plaintiffs had not specifically alleged that Nicolet was K & M's successor; accordingly, in those cases the district court vacated its summary judgments and dismissed Nicolet's third-party claims against T & N without prejudice. In the two remaining cases, Hargrave and Fults, the original plaintiffs had made such allegations; thus, Hargrave and Fults stood as they had prior to Nicolet's motion for reconsideration.

Both...