Santiago-Hodge v. Parke Davis & Co.
| Decision Date | 08 June 1988 |
| Docket Number | Nos. 86-2135,87-1461,SANTIAGO-HODGE,s. 86-2135 |
| Citation | 859 F.2d 1026 |
| Parties | Mercedes, et al., Plaintiffs, Appellees, v. PARKE DAVIS & COMPANY, et al., Defendants, Appellants. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Donald R. Ware, with whom Steven W. Phillips, Andrew Z. Schwartz, and Foley Hoag & Eliot, Boston, Mass., were on brief, for defendants, appellants.
Alvaro Calderon, Jr., Hato Rey, P.R., with whom Jose L. Rodriguez Mangual and Jose Julian Alvarez-Gonzalez, Hato Rey, P.R., were on brief, for plaintiffs, appellees.
Before COFFIN, BOWNES and TORRUELLA, Circuit Judges.
This appeal follows a jury trial in which plaintiffs prevailed against the parent company of their employer and two officers on claims predicated on negligent failure to provide a safe workplace. Appellants raise five issues: namely, whether the parent corporation is a "statutory employer" under Puerto Rico law and therefore immune from liability, whether the officers of the employer corporation are immune from liability under Puerto Rico law, whether the court erred in not polling the jury after a conversation between several jurors and an expert witness, whether the claims of five of the plaintiffs were barred by the applicable statute of limitations, and whether one of the plaintiffs has yet to exhaust available administrative remedies. We conclude that the first and possibly controlling issue, the status of the parent corporation, is yet unsettled under Puerto Rico law, and raises issues of such importance to the local authorities that we certify the issue to the Supreme Court of the Commonwealth of Puerto Rico, before reaching the remaining grounds for appeal.
In 1970 Parke Davis & Company ("Parke"), a pharmaceutical company engaged in the manufacture and distribution of drug products, created Parke Davis Labs (then known as Partab Corporation) ("Labs"), a wholly-owned corporation, incorporated under the laws of Puerto Rico. It is undisputed that Parke created Labs to benefit from the incentives and tax advantages offered by Congress and by the Commonwealth Parke and Labs signed a "License and Technical Assistance Agreement" ("the Agreement"). Although the Agreement permitted Labs to sell its products without any constraints, in fact it has always sold all of its production to Parke. Under the Agreement Parke also provided Labs manufacturing directions, quality control standards, packaging specifications, and similar processing guidelines. Parke reserved the right to conduct on-site inspections of the manufacturing processes and products. Parke also provided technical assistance on a variety of matters, including diverse issues related to employee safety.
government to foster the industrial development of the island. Since 1970 Labs has manufactured and packaged oral contraceptives.
The injured plaintiffs (relatives who suffered indirectly also filed claims) suffered a variety of ailments, which the jury found to be caused by exposure to hormones in the work environment. The injuries included loss of libido, depression, schizophrenia, dizziness, headaches, fibrocystic disease of the breasts, mastectomies, gastrointestinal disorders, gynecomastia and galactorrhea.
Labs was an insured employer under the Puerto Rico Workmen's Accident Compensation Act, P.R.Laws Ann. tit. 11 (1977 & Supp. 1987) ("the Act"), and thus immune from liability. Id. Sec. 21. The defendants were officers of Labs and Parke, which was sued as a third party. See id. Sec. 32 ().
After a month-long trial, the jury returned verdicts in favor of nine plaintiffs in the aggregate amount of $7,276,000--reduced after a motion for remittitur to $2,815,000.
The statutory employer issue
Defendants appellants requested judgment notwithstanding the verdict on the grounds that Parke is a statutory employer under the law of Puerto Rico. Because it is so crucial to our case, we reproduce the court's analysis in toto:
Under Puerto Rico's Workmen's Compensation law an employee's remedy for a work related injury against the direct employer and "statutory employer" is limited to a claim through the State Insurance Fund. 11 L.P.R.A. sects. 20, 21. "Statutory employer" has been defined as a general contractor who maintains an employment relationship with the injured employee of an insured subcontractor. Ruiz Diaz v. Vargas, 109 D.P.R. 761 (1980); Lugo Sanchez v. Puerto Rico Water Resources Authority, 105 P.R.R. 1015 (1974). See Santiago v. Becton Dickinson & Co., S.A., 571 F.Supp. 904, 907 (D.P.R.1985). A statutory employer has also been held to be an owner of a particular site which is leased to another party; as in a shipowner who charters the vessel to another company. See Miro Martinez v. Compania Transatlantica Espanola, S.A., 643 F.2d 897 (1st Cir.1981); Garcia v. Friesecke, 597 F.2d 284 (1st Cir.1979). In addition, a parent corporation may be considered a statutory employer if the corporate veil can be pierced because the parent corporation so completely dominates the subsidiary that the two are actually a single entity. See Muniz v. National Can Corp., 737 F.2d 145, 147, n. 2 (1st Cir.1984); see also Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 905 (1st Cir.1980).
In an attempt to prevail on their claim that Parke Davis is a statutory employer and immune from tort liability, defendants confuse the business relationship between Parke Davis and Partab, plaintiffs' direct employer. They argue that Parke Davis is a general contractor and Partab a subcontractor. The scant evidence presented to this issue at trial contradicts the argument and establishes that Parke Davis and Partab are two separate business entities linked together as parent company and subsidiary respectively. [Footnote: Defendants argue that the Technical Assistance Agreement between Parke Davis and Partab establishes a subcontract between the parties. We find, to the contrary, that the agreement indicates the independence of the companies. For example, Partab was not required to sell or submit the licensed products it produced to Finally, we hold that sufficient evidence was presented for the jury to find that Parke Davis assumed a duty to act by affirmatively undertaking to provide a safe working environment at Labs and was negligent in performing that duty. See Cardona Munoz [Muniz] v. National Can Corp., 737 F.2d 145 (1st Cir.1984) ().
Parke Davis, but was free to sell the products "in any area of the world."] As a parent company Parke Davis could be considered a statutory employer only if it so dominated Partab that the two companies were in reality a single entity. Under the law of Puerto Rico "strong and robust" evidence of control by the parent company over the subsidiary must be produced to pierce the corporate veil. San Miguel Fertilizer Corp. v. P.R. Drydock & Marine Terminals, 94 P.R.R. 403, 409 (1967). The evidence here does not indicate such control or domination to find Parke Davis to be a "statutory employer" immune from liability. .
No. 78-175, Opinion and Order, slip op. at 6-8 (D.P.R. October 2, 1986). Before entering into the analysis of the statutory employer doctrine in Puerto Rico law, we point out two basic conceptual flaws in the court's reasoning: first, the "alter ego" (piercing the corporate veil) analysis--usually seen in the context of jurisdictional concepts or in that of a corporation that is avoiding liability shielded by the veil of a shell corporation--is inapposite in the context of statutory employer analysis. If the corporate veil is pierced, there is a legal identity between both corporations and the employer's immunity extends to the newly discovered party, not because the employer is the statutory employer but because it is the real or "direct" employer. Secondly, in the present case it has been undisputed throughout that both corporations are separate entities, and there are no allegations of de facto identity, so the language about piercing the corporate veil simply should play no role in this context. The appropriate context for, and the parameters of, the statutory employer doctrine will be the stuff of the next section. Because the facts relevant to a case vary with the applicable legal rules, we must discuss first the conceptual framework of the statutory employer doctrine to explain the full complexity of the issue before us.
The statutory employer doctrine is the result of judicial interpretation of the Puerto Rico Workmen's Compensation Act. P.R.Laws Ann. tit. 11, Sec. 20 (1978) states:
Every insured employer shall, on reporting his annual payrolls, include in said payrolls the wages paid to all the workmen and employees working for or employed by him, whether by the job or under some person with whom the employer contracted for the job, or under a contractor or independent subcontractor employed or contracted by said employer; and all accounts or taxes collected by the State shall be based on the employer's current payroll in which shall be included the above-mentioned laborers; provided, that this provision shall not be applicable to employers for whom work is done by an independent contractor who is insured as an employer under the provisions of this Act.
The Puerto Rico Supreme Court explained the section as follows:
The purpose of this provision is...
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