Miles v. American Tel. & Tel. Co.

• Decision Date: 22 April 1983
• Docket Number: No. 82-1533,82-1533
• Parties: Dr. Brendan M. MILES, Plaintiff-Appellant, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 193

703 F.2d 193

Dr. Brendan M. MILES, Plaintiff-Appellant, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY, Defendant-Appellee.

No. 82-1533

Summary Calendar.

United States Court of Appeals Fifth Circuit.

April 22, 1983.

Wm. Andress & Associates, Wm. Andress, Jr., Dallas, Tex., for plaintiff-appellant.

W. Edward Walts, II, Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before CLARK, Chief Judge, POLITZ and GARWOOD, Circuit Judges.

POLITZ, Circuit Judge:

Brendan M. Miles appeals the summary judgment dismissal of his tortious invasion of privacy suit against American Telephone and Telegraph Company (AT & T). The district court granted AT & T's motion on the ground that AT & T was not liable as the alter ego of its wholly-owned subsidiaries, Southwestern Bell Telephone Company (Southwestern) and South Central Bell Telephone Company (South Central). Finding no error of fact or law, we affirm.

Factual Background

Brendan Miles and his wife Elizabeth separated in October 1975. Mrs. Miles left the matrimonial domicile in Lafayette, Louisiana and took up residence with the family of Mrs. Chris Williams in Longview, Texas. Sometime during the spring of 1976, Brendan Miles engaged detective agencies and attorneys in Shreveport, Louisiana and in Longview to place his wife under surveillance, preparatory to litigation in which he planned to seek a divorce and custody of the couple's three small children. Miles communicated by telephone with the investigators and attorneys on a regular basis during the spring and summer of 1976.

In October 1976, Mrs. Miles was informed of her husband's plan to sue for divorce and custody of the children. The information was conveyed in an anonymous telephone call to the Williams house, a call received by Mrs. Williams' teenage daughter. To determine the identity of the caller, Mrs. Williams solicited the assistance of her niece, Brenda Morphew, an employee in Southwestern's security department in Dallas, Texas. Morphew purportedly traced the anonymous call to Miles' Lafayette residence, secured a list of his long-distance toll records from South Central and furnished them to Mrs. Miles. By calling the numbers, Mrs. Miles learned of her husband's telephone contacts with the offices of the attorneys and private investigators.

In January 1979, Miles filed this diversity action against AT & T and Morphew, seeking damages for tortious invasion of an asserted right to privacy. Neither Southwestern nor South Central was made a party-defendant; Miles would hold AT & T liable for their actions and that of Morphew under an alter ego theory. AT & T moved for summary judgment, contending that there was no basis for disregarding the separate corporate identities of itself and its subsidiaries. AT & T and Morphew jointly moved for dismissal on the grounds that the complaint failed to allege a viable cause of action, a motion the district court denied because the record did not conclusively establish that Miles was without a cognizable right to privacy under Texas law. The court granted AT & T's motion, having determined that no material issue of fact existed with respect to its alter ego status. Miles then voluntarily dismissed with prejudice his claim against Morphew. The sole issue addressed on appeal is the grant of summary judgment to AT & T. ¹

The Summary Judgment Vehicle

Miles argues that the district court erred in granting summary judgment to AT & T, since there is a factual dispute as to the degree of control exercised by AT & T over Southwestern and South Central. Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment only where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." In gauging the propriety of the district court's grant of summary judgment, we invoke the same legal standards as those that bind the district court. Impossible Elec. Tech. v. Wackenhut Prot. Systems, 669 F.2d 1026 (5th Cir.1982). We must view the evidence in the light most favorable to the opposing party, resolving all reasonable doubts concerning the facts in his favor. Breen v. Centex Corp., 695 F.2d 907 (5th Cir.1983). We may not weigh the probative value of the evidence adduced, nor decide any factual issues we might discern in the record, but are instead limited to a determination of whether a genuine issue of material fact remains for disposition " 'so as to insure that factual issues will not be [decided] without the benefit of the truth seeking procedures of a trial.' " Id. at 910 (quoting from Southern Distributing Co. v. Southtown, Inc., 574 F.2d 824, 826 (5th Cir.1978)).

Alter Ego

AT & T argues that it cannot be held accountable for tortious conduct of Southwestern, South Central, or their employees because the evidence establishes its lack of control over these subsidiaries. Conversely, Miles maintains that AT & T's pervasive influence over the regional companies, all integral components of the unitary Bell System, dictates the conclusion that the parent corporation is indeed the alter ego of its subsidiaries.

As traditionally applied in the parent-subsidiary context, the alter ego doctrine permits the imposition of liability upon the parent company for torts and contractual obligations of its subsidiary, where the parent exercises actual control over the subsidiary and operates it as a mere instrumentality or tool. Under these circumstances, the subsidiary is merely a conduit through which the parent conducts its business. Edwards Co., Inc. v. Monogram Industries, Inc., 700 F.2d 994 (5th Cir.1983); Bay Sound Transportation Co. v. United States, 350 F.Supp. 420 (S.D.Tex.1972), aff'd, 474 F.2d 1397 (5th Cir.1973); see Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571 (Tex.1975); Hanson Southwest Corp. v. Dal-Mac Construction Co., 554 S.W.2d 712 (Tex.Civ.App.--Dallas 1977, writ ref'd n.r.e.). Texas courts are loathe to merge the separate legal identities of parent and subsidiary unless the latter exists as a mere tool or "front" for the parent, or the corporate fiction is utilized to achieve an inequitable result, or to conceal fraud or illegality. Edwards Co., Inc.; Gentry. However, the Texas courts have been less reluctant to disregard the integrity of related corporations in tort, as contrasted with contract, cases. This differential treatment can be attributed in major part to the element of choice inherent in a contractual relationship. Texas Indus., Inc. v. Lucas, 634 S.W.2d 748 (Tex.Civ.App.--Houston 1982); Hanson Southwest Corp.

Although the attitude toward judicial piercing of the corporate veil is more flexible in tort, the legal precepts governing both tort and contract suits are substantially the same. Hanson Southwest Corp. Proof of an identity of shareholders or of corporate directors and officers, or of domination by the parent of its subsidiary's affairs, will not justify treatment of the two as one business unit. Gentry. Nor does the parent's ownership of 100 percent of the subsidiary's stock alone defeat their separate existence. Edwards Co., Inc.

A variety of factors must instead be evaluated to determine whether "management and operations are assimilated to the extent that the subsidiary" is nothing more than a mere adjunct of the parent. Id. at 573. As expounded by the late Justice William O. Douglas and Professor Carroll M. Shanks in their seminal article, Insulation from Liability Through Subsidiary Corporations, 39 Yale L.J. 193 (1929), frequently cited by the Texas courts as furnishing an invaluable analytic aid, see, e.g., Gentry; Bell Oil & Gas Co. v. Allied...