Key v. Liquid Energy Corp.

• Decision Date: 21 June 1990
• Docket Number: No. 88-2643,88-2643
• Citation: 906 F.2d 500
• Parties: James V. KEY; Francis L. Key; John E. Outhouse; Glenda Outhouse, Plaintiffs-Appellees, v. LIQUID ENERGY CORPORATION, a Delaware Corporation; Mitchell Energy and Development Corporation, a Texas corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 500

906 F.2d 500

James V. KEY; Francis L. Key; John E. Outhouse; Glenda Outhouse, Plaintiffs-Appellees, v. LIQUID ENERGY CORPORATION, a Delaware Corporation; Mitchell Energy and Development Corporation, a Texas corporation, Defendants-Appellants.

No. 88-2643.

United States Court of Appeals Tenth Circuit.

June 21, 1990.

As Amended Aug. 23, 1990.

Daniel J. Hoehner, Tom L. King and Jeff R. Beeler, King, Roberts & Beeler, Oklahoma City, Okl., for defendants-appellants.

Howard K. Berry, Jr., Berry and Berry, Oklahoma City, Okl., for plaintiffs-appellees.

Before BALDOCK and EBEL, Circuit Judges, and CONWAY, ^* District Judge.

CONWAY, District Judge.

After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed.R.App.P., 34(a); 10th Cir.R. 34.1.9. Therefore, the case is ordered submitted without oral argument.

This is an appeal from an order of the United States District Court for the Western District of Oklahoma denying the Motion for Judgment Notwithstanding the Verdict, or in the Alternative, Motion for a New Trial, filed by Liquid Energy Corporation and Mitchell Energy and Development, collectively referred to as "the defendants" or "the appellants." The final order was entered on September 19, 1988, and this appeal was timely filed on October 18, 1988. The following issues are raised on appeal.

As to appellant Mitchell Energy and Development (Mitchell): whether the district court erred in failing to direct a verdict or grant a judgment notwithstanding the verdict in favor of Mitchell. As to both appellants: whether the district court erred in failing to direct a verdict or grant a judgment notwithstanding the verdict in favor of the appellants on the issue of proximate cause; whether the district court erred in failing to direct a verdict or grant a judgment notwithstanding the verdict in favor of the appellants on the issue of legal duty; whether the district court erred in giving a negligence per se instruction, and an instruction regarding future loss of earnings, and in not giving an instruction regarding proximate cause; and, whether the district court erred in awarding two rates of pre-judgment interest.

We are persuaded by Mitchell's argument that the district court erred in failing to direct a verdict or grant judgment notwithstanding the verdict as to Mitchell, and we will therefore reverse the district court on that basis. Having made this determination, we need not address the remaining issues as to appellant Mitchell. In addition, we find that the district court did not err in refusing to direct a verdict or grant a judgment notwithstanding the verdict in favor of Liquid Energy on either the issue of proximate cause or legal duty. We also find that the district court properly instructed the jury and will therefore affirm on those issues related to the jury instructions. Finally, we find that the district court did not err in awarding two separate rates of pre-judgment interest, and instead acted within the scope of its discretion. The district court will therefore be affirmed on this final issue.

Facts

This is an action for damages resulting from an explosion which injured plaintiffs/appellees Key and Outhouse, who were employed as truck drivers by the Great Plains Transport Company on February 6, 1985, the date of the accident. In January of 1985, approximately one month before the accident, the plaintiffs began hauling butane condensate from the appellant Liquid Energy Company's facility in Stinnett, Texas, to Velma, Oklahoma. Liquid Energy has three separate stations for loading condensate, variously known as Canadian River, Barnhill and TP-1. On February 5, 1985, both Key and Outhouse loaded their tanks at the Canadian River plant pursuant to Liquid Energy's instructions. The appellees then drove to Clinton, Oklahoma where they stopped for the night. The following morning, samples were taken from their trailers, and the appellees drove on to Velma, Oklahoma. Upon arriving at the Lee Petroleum facility in Velma, the appellees were advised by a Mr. Kappel, a Lee Petroleum employee, that tests had to be made on the condensate they were transporting. The tests were made on the product contained in the trailer driven by Key, but Kappel was unable to perform the tests on the condensate in the trailer driven by Outhouse due to pressure in the tank. After lunch, on February 6, Kappel and Outhouse decided to take a sample from the second trailer for testing. Outhouse checked the rear vent, then both men got on top of the trailer and prepared to open the rear hatch. When Outhouse released the rear hatch, the still pressurized condensate blew out in a 15-foot high column. While airborne, the condensate ignited, causing the explosion which resulted in the appellees' injuries.

The appellees' theory at trial was that the product they received from Liquid Energy was a high pressure condensate and should not have been transported in the type of trailers provided.

At the close of the evidence, the defendants moved for a directed verdict which was denied by the trial court. Defendant Mitchell specifically moved for a directed verdict on the theory that it could not be held liable for the acts of its subsidiary, Liquid Energy. The jury returned a verdict finding negligence on all parties and awarding damages to the plaintiffs. The defendants then filed a Motion for Judgment Notwithstanding the Verdict ("JNOV"), or in the Alternative, for a New Trial, which was also denied by the trial court. The defendants now request the trial court be reversed on these rulings and that judgment be entered in their favor, or in the alternative, that a new trial be ordered.

In ruling on an appellant's request to overturn a trial court for failure to direct a verdict or grant a JNOV, the appeals court must determine whether the trial court's refusal to set aside the jury verdict constituted a manifest abuse of the trial court's discretion. Karns v. Emerson Electric Co., 817 F.2d 1452 at 1456 (10th Cir.1987); Brown v. McGraw Edison Co., 736 F.2d 609, 616 (10th Cir.1984). A verdict claimed to be against the weight of the evidence is normally not reversed absent an "unusual situation" or a "gross abuse of discretion." Brown, 736 F.2d at 616. We now turn to Mitchell's first argument regarding the trial court's denial of a directed verdict or a JNOV in favor of Mitchell.

Mitchell urges that the sole basis for judgment against it is its status as a parent corporation of Liquid Energy. In support of its motion for directed verdict and/or JNOV, Mitchell argued that it was at all relevant times a distinct corporate entity, insufficiently related to Liquid Energy to warrant liability. Mitchell further argued that the plaintiff had failed to prove that it should be liable given the factors set forth in Rea v. An-Son Corp., 79 F.R.D. 25 (W.D.Okla.1978). Mitchell states that at the trial the plaintiffs were only able to prove that the Liquid Energy facility at Stinnett, Texas had a sign which read "Liquid Energy Company, a Subsidiary of Mitchell Energy and Development Company." In its favor, Mitchell argues that there was no evidence that any of Mitchell's employees were in any way involved in the alleged acts of negligence, and further argues that Liquid Energy was owned entirely by Liquid Energy Corporation and not by Mitchell. Finally, Mitchell argues that it has no interest in any of the field liquids sold by Liquid Energy.

By way of response, the appellees urge that Liquid Energy and Mitchell Energy are both energy-related businesses, that Liquid Energy is designated a subsidiary of Mitchell on the sign in front of the Canadian River plant, and that the post office box address in Woodlands, Texas is the same for both corporations. As a legal basis for imposing liability on Mitchell, the appellees contend that the relationship between Mitchell and Liquid Energy is analagous to that of an employer and an independent contractor and not necessarily that of a parent and its subsidiary corporation. Having thus characterized the relationship between Mitchell and Liquid Energy, the appellees argue that the employer, by analogy, Mitchell, cannot shed liability for the actions of the independent contractor, by analogy, Liquid Energy, where the work involved has a peculiar risk of physical harm to others. This argument is founded on section 413 of the Restatement Second of Torts and is commonly known as the Peculiar Risk Doctrine.

We will first address the validity of Mitchell's argument under traditional parent/subsidiary analysis and will then turn to the alleged applicability of the Peculiar Risk Doctrine.

This Circuit's prior decisions on the law applicable to parent/subsidiary corporations are clear, and consistent with Oklahoma law in setting forth the appropriate concerns when determining whether a parent may be held liable for the acts of its subsidiary. In Fish v. East, 114 F.2d. 177 (10th Cir.1940), this Court addressed the question of the liability of a parent corporation for the acts of its subsidiary in the context of a bankruptcy proceeding. The Court held that where the subsidiary is a mere instrumentality of the parent the corporate entity may be disregarded. In addition, the Court identified the following determinative circumstances for deciding whether a subsidiary is a mere instrumentality of the parent:

whether the parent owns all of the stock of the subsidiary; whether the corporations have common directors and officers; whether the parent finances the subsidiary; whether the parent caused the subsidiary's incorporation; whether the parent pays salaries or expenses of the subsidiary; whether the subsidiary has business with anyone outside the parent, or assets which have not been transferred to it by the parent; whether the directors and officers act independently in the interest of the...