Herbolsheimer v. SMS Holding Co., Inc.

• Decision Date: 04 April 2000
• Docket Number: Docket No. 204631.
• Citation: 608 N.W.2d 487,239 Mich. App. 236
• Parties: Jenee S. HERBOLSHEIMER, Personal Representative of the Estate of Royce S. Herbolsheimer, Deceased, Plaintiff-Appellee, v. SMS HOLDING COMPANY, INC. and Saginaw Machine Systems, Inc., Defendants-Appellants, and Collins & Aikman Products Company, Defendant, and Michigan Manufacturers Association, Amicus-Curiae.
• Court: Court of Appeal of Michigan — District of US

608 N.W.2d 487

239 Mich. App. 236

Jenee S. HERBOLSHEIMER, Personal Representative of the Estate of Royce S. Herbolsheimer, Deceased, Plaintiff-Appellee, v. SMS HOLDING COMPANY, INC. and Saginaw Machine Systems, Inc., Defendants-Appellants, and Collins & Aikman Products Company, Defendant, and Michigan Manufacturers Association, Amicus-Curiae.

Docket No. 204631.

Court of Appeals of Michigan.

Submitted March 9, 1999, at Lansing.

Decided January 4, 2000, at 9:05 a.m.

Released for Publication April 4, 2000.

Grimaldi, Vary, Pearson & Weyand, P.C. (by William S. Pearson and Karl J. Weyand, Jr.), Saginaw, for Jenee S. Herbolsheimer.

Williams, Williams, Ruby & Plunkett, P.C. (by John W. Griffen, Jr., and Jennifer M. Chapla), Birmingham, for SMS Holding Company, Inc., and Saginaw Machine Systems, Inc.

Clark Hill P.L.C. (by Duane L. Tarnacki and J. Walker Henry), Detroit, for amicus curiae Michigan Manufacturers Association.

Before: MARKMAN, P.J., and HOEKSTRA and ZAHRA, JJ.

MARKMAN, P.J.

This case presents a question of first impression in Michigan. We are asked to decide whether an employee can sue his employer—as a successor in liability—in a third-party lawsuit under Michigan's Worker's Disability Compensation Act (WDCA). We are also asked to consider whether plaintiff can bring her suit against a company that holds all the stock in the employer company. The trial court denied defendants' motion for summary disposition with respect to both of these issues, and we granted defendants leave to bring this appeal.¹ We reverse.

The parties agree on the essential facts. Royce Herbolsheimer, the decedent, worked for Saginaw Machine Systems, Inc. (SMS), where he operated a turning machine, a tool that turns metal at high speeds. Tragically, while Herbolsheimer was operating the machine in 1992, a piece of metal flew off the machine and broke through a viewing window in the machine's door, hitting him in the head and eventually killing him. Herbolsheimer's family collected worker's disability compensation survivor benefits under the WDCA from SMS, and plaintiff, the personal representative of Herbolsheimer's estate then attempted to sue the manufacturer of the machine, alleging that the window was negligently designed. However, during discovery, plaintiff learned that the machine had originally been designed with three small, reinforced safety windows, not a single larger window. Because plaintiff believed that the window would not have broken but for the modification, she also sought to sue the party that modified the window.

The company that manufactured the machine sold it to the Saginaw Machine and Tool Division of the Wickes Corporation (SMT), the company that plaintiff alleges made the negligent modification. Wickes then combined SMT with several other divisions to create the Wickes Machine Tool Group Division. Later, Wickes formed the Wickes Machine Tool Group, Inc. (WMTG) and transferred all the division's assets to the new corporation. Sometime later, SMS Holding Company, Inc. (the holding company), purchased all of WMTG's stock from Wickes under a stock purchase agreement. The holding company then changed the corporation's name from WMTG to SMS. The holding company is thus the sole shareholder/parent corporation of SMS. Defendant SMS concedes that it is the successor in liability to the original corporation that purchased and modified the machine. It is also the company that later hired decedent.

In the court below, plaintiff filed suit against SMS and the holding company on the theory that they are the corporate successors to the entity that modified the machine, and that the dual-capacity doctrine overcomes the exclusive remedy provision of the WDCA, M.C.L. § 418.131; MSA 17.237(131). SMS and the holding company brought a motion for summary disposition. They claimed that plaintiff was legally barred from bringing the suit by the exclusive remedy provision of the WDCA. The trial court issued an opinion and order denying defendants' motion. The trial court then also denied defendants' motion for reconsideration. This Court granted leave to appeal.

We review questions regarding the exclusive remedy provision of the WDCA pursuant to MCR 2.116(C)(4) to determine whether the circuit court lacked subject matter jurisdiction because the plaintiff's claim was barred by the provision. James v. Commercial Carriers, Inc., 230 Mich.App. 533, 536, 583 N.W.2d 913 (1998); Bitar v. Wakim, 211 Mich.App. 617, 619, 536 N.W.2d 583 (1995), rev'd on other grounds 456 Mich. 428, 572 N.W.2d 191 (1998). We review decisions on motions for summary disposition under MCR 2.116(C)(4) de novo to determine if the moving party was entitled to judgment as a matter of law, or whether the affidavits and other proofs show that there was no genuine issue of material fact. MCR 2.116(I)(1); Faulkner v. Flowers, 206 Mich.App. 562, 564, 522 N.W.2d 700 (1994).

The WDCA substitutes statutory compensation for "common-law tort liability founded upon an employer's negligence in failing to maintain a safe working environment." Mathis v. Interstate Motor Freight System, 408 Mich. 164, 179, 289 N.W.2d 708 (1980); Clark v. United Technologies Automotive, Inc., 459 Mich. 681, 686, 594 N.W.2d 447 (1999). Under the WDCA, employers provide compensation to employees for injuries suffered in the course of employment, regardless of fault. Clark, supra at 686-687, 594 N.W.2d 447; MCL 418.301; MSA 17.237(301). "In return for this almost automatic liability, employees are limited in the amount of compensation they may collect from their employer, and, except in limited circumstances, may not bring a tort action against the employer." Id. at 687, 594 N.W.2d 447; MCL 418.131; MSA 17.237(131). This rule is embodied in the exclusive remedy provision, M.C.L. § 418.131; MSA 17.237(131), which provides in pertinent part:

The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease. The only exception to this exclusive remedy is an intentional tort.

By its terms, the exclusive remedy provision limits the liability of the "employer." Thus, if a defendant is found to be the plaintiff's employer, the plaintiff is limited to worker's compensation benefits and may not sue the employer independently.

However, in cases where the injury is due to a third party's negligence, a plaintiff can collect worker's compensation benefits and sue the third party. MCL 418.827; MSA 17.237(827). Michigan courts have recognized that in very limited circumstances an employer can have additional relationships with its employees that extend beyond, or are in addition to, the customary employer-employee relationship. This separate relationship may provide the grounds for a suit against an "employer" in addition to worker's compensation benefits. The parties in this case frame their arguments with regard to a separate relationship in terms of the dual-capacity doctrine.² The Supreme Court has twice recognized this doctrine, at least in some form. Howard v. White, 447 Mich. 395, 398, 523 N.W.2d 220 (1994); Wells v. Firestone Tire & Rubber Co., 421 Mich. 641, 653, 364 N.W.2d 670 (1984).³ In both Wells and Howard, the Supreme Court recognized the dual-capacity exception to the WDCA. In both cases, however, the Supreme Court declined to apply the dual-capacity doctrine and found instead that the exclusive remedy provision of the WDCA barred the employee's suit against the employer.

Perhaps because the dual-capacity doctrine was not applied in either Wells or Howard, the doctrine as adopted in Michigan has not been defined with ideal clarity. There appears to be some confusion in the case law over whether Michigan recognizes the dual-capacity doctrine or the dual-persona doctrine. The difference in terminology marks the degree to which the additional relationship must be distinct from the employer-employee relationship. Stated more precisely, the dual-persona doctrine requires that any additional relationships between the employer and the employee be more distinct than simply an additional capacity on the part of the former. According to 6 Larson, Workers' Compensation Law, § 113.01[1], p. 113-2, the dual-persona doctrine requires that the employer possess "a second persona so completely independent from and unrelated to its status as employer that by established standards the law recognizes that persona as a separate legal person."⁴

In Howard, the Supreme Court stated that the "dual-capacity doctrine is recognized in Michigan." Id. at 398, 523 N.W.2d 220. However, in defining this doctrine, the Court adopted a definition more consistent with the concept of dual persona. The Supreme Court stated:

Since the term "dual capacity" has proved to be subject to such misapplication and abuse, the only effective remedy is to jettison it altogether, and substitute the term "dual persona doctrine." The choice of the term "persona" is not the result of any predilection for elegant Latinisms for their own sake; it is dictated by the literal language of the typical third-party statute, which usually defines a third party, in the first instance, as "a person other than the employer." This is quite different from "a person acting in a capacity other than that of employer." The question is not one of activity, or relationship—it is one of identity. [ Id. at 399, 523 N.W.2d 220, quoting 2A Larson, Workmen's Compensation, § 72.81(a), p. 14-290.89.]

Because the Supreme Court in Howard expressly abandoned the looser standards commonly associated with the dual-capacity doctrine in favor of stricter standards more often identified with the dual-persona doctrine, we will, for clarity's sake, refer to the Michigan judicially created exception to the WDCA as the dual-persona doctrine.

Providing a name by which to identify this judicial exception to the WDCA does not, unfortunately, provide clarity or...