Wodogaza v. H & R Terminals, Inc.

• Decision Date: 30 October 1987
• Docket Number: No. 89085,89085
• Citation: 411 N.W.2d 848,161 Mich.App. 746
• Court: Court of Appeal of Michigan — District of US
• Parties: Steve WODOGAZA and Joanne Wodogaza, Plaintiffs-Appellants, v. H & R TERMINALS, INC., an Indiana Corporation, and S & P Equipment, Inc., an Indiana Corporation, Defendants-Appellees. 161 Mich.App. 746, 411 N.W.2d 848

Page 848

411 N.W.2d 848

Steve WODOGAZA and Joanne Wodogaza, Plaintiffs-Appellants, v.H & R TERMINALS, INC., an Indiana Corporation, and S & P Equipment, Inc., an Indiana CorporationDefendants-Appellees.

No. 89085.

161 Mich.App. 746, 411 N.W.2d 848

Court of Appeals of Michigan.

Submitted Feb. 5, 1987.

Decided July 21, 1987.

Released for Publication Sept. 18, 1987.

Leave to Appeal Denied Oct. 30, 1987.

[161 MICHAPP 748]Sachs, Nunn, Kates, Kadushin, O'Hare, Helveston & Waldman by Theodore Sachs and William E. Maxwell, Jr., Detroit, for plaintiffs-appellants.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, P.C. by Joseph G. Lujan and Ernest R. Bazzana, Detroit, for defendants-appellees.

Before WAHLS, P.J., and KELLY and SIMON, Jr., ^* JJ.

WAHLS, Presiding Judge.

Plaintiffs appeal as of right from a grant of summary disposition to defendants on a personal injury claim.Central to plaintiffs' appeal is the question whether, as a matter of law, wholly owned corporate subsidiaries of an injured worker's corporate employer may avoid tort liability on the basis of the exclusive remedy provision of the Workers' Disability Compensation Act, M.C.L. Sec. 418.101 et seq.;M.S.A. Sec. 17.237(101) et seq.Under the facts in this case and after an analysis of these facts in light of the applicable "economic reality" test and of certain equitable considerations, we hold that plaintiff is not barred by the exclusive remedy provision from pursuing damages against the wholly owned corporate subsidiaries.Accordingly, we reverse the circuit court's grant of summary disposition to defendants and remand the case for further proceedings.

PlaintiffSteve Wodogaza, an employee of Preston[161 MICHAPP 749]Trucking Company, Inc., a Maryland corporation, was injured during the course of his employment on May 6, 1981.Plaintiff alleged that he sustained injuries when the forklift he was operating fell or overturned due to actions of a co-worker who was driving a yard transfer tractor.The tractor was owned by defendantS & P Equipment, Inc., and the accident occurred on premises owned by defendantH & R Terminals, Inc.Both S & P and H & R are wholly owned subsidiaries of Preston.Subsequently, plaintiff applied for and received workers' compensation benefits from Preston and thereafter filed a complaint against defendants, alleging that H & R was negligent in failing to properly maintain its premises and that S & P incurred liability under the owner liability provision in the Michigan Vehicle Code,M.C.L. Sec. 257.401;M.S.A. Sec. 9.2101.

On September 4, 1985, defendants filed a motion for summary disposition under MCR 2.116(C)(4), lack of subject matter jurisdiction, and MCR 2.116(C)(8), failure to state a claim on which relief can be granted.Defendants contended that plaintiffs' exclusive remedy for injuries sustained was against Preston, as provided in the exclusive remedy provision of the Workers' Disability Compensation Act (WDCA), M.C.L. Sec. 418.131;M.S.A. Sec. 17.237(131).Defendants maintained that Michigan law does not recognize claims of a parent corporation's employee against wholly owned subsidiaries of the parent corporation.In support of their position, defendants relied heavily on Wells v. Firestone Tire & Rubber Co., 421 Mich. 641, 364 N.W.2d 670(1984).Plaintiffs, also relying heavily on Wells, argued that Preston alone was the employer in this case and that, as such, Preston alone was entitled to the protection of the exclusive remedy provision.On October 25, 1985, Wayne Circuit[161 MICHAPP 750] Judge Charles Kauffman, stressing that defendants were wholly owned subsidiaries of Preston and that Preston had "complete dominion over everything," granted defendants' motion for summary disposition, apparently under MCR 2.116(C)(8).

The standard of review employed by this Court regarding a circuit court's grant of summary disposition pursuant to MCR 2.116(C)(8) is well settled:

"The motion is to be tested by the pleadings alone.The motion tests the legal basis of the complaint, not whether it can be factually supported.The factual allegations of the complaint are taken as true, along with any inferences or conclusions which may fairly be drawn from the facts alleged.Unless the claim is so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recover, the motion under this subrule should be denied."Ortiz v. Textron, Inc., 140 Mich.App. 242, 244, 363 N.W.2d 464(1985).

On appeal, plaintiffs argue that the trial court erred in concluding that defendants, as matter of law, may avoid liability under the exclusive remedy provision of the WDCA.That provision states that the right to recover benefits as provided in the WDCA"shall be the employee's exclusive remedy against the employer."M.C.L. Sec. 418.131;M.S.A. Sec. 17.237(131).Plaintiffs essentially argue that protection under that provision is limited, by its terms, to an "employer," which, in this case, includes Preston, but not defendants.Defendants respond that they and plaintiff's employer, their parent corporation, were properly treated as one entity by the circuit court under the authority of Wells.We disagree.

In Wells, the plaintiff was injured in the course [161 MICHAPP 751] of his employment at Muskegon Firestone Auto Supply while changing a tube and tire on a truck rim manufactured by the defendant, Firestone Tire & Rubber Company.At the time of the injury, Muskegon Firestone was a wholly owned subsidiary of defendant Firestone.All of the subsidiary's directors were employees of the parent corporation, and the latter carried the workers' compensation coverage for employees at Muskegon Firestone.Plaintiff, citing the parent corporation as his employer, filed for and received compensation benefits and subsequently filed a product liability suit against that same corporation.This Court reversed the trial court's denial of summary judgment to the parent corporation based on the exclusive remedy provision of the WDCA, and the Supreme Court affirmed in a 4-3 decision.The Supreme Court, applying the economic reality test to the facts in the case, engaged in a "reverse-piercing" of the parent corporation's corporate veil, concluding that it would be inequitable to deny that corporation the benefit of the exclusive remedy provision.The Court reasoned that if a parent corporation is, under the economic realities of the situation, the true employer of an injured worker, then the parent corporation should not be denied the protection of the exclusive remedy provision merely because the injured worker was employed in name by a subsidiary of the parent corporation.

It is apparent that the instant case presents facts similar to those in Wells: A worker injured during the course of his employment at a wholly owned subsidiary and who received compensation benefits by citing the parent corporation as his employer is subsequently seeking civil damages in circuit court for injuries.In Wells, however, the plaintiff sought damages against the parent corporation,[161 MICHAPP 752] whereas in this case damages are sought against the subsidiary corporations.In light of the holding in Wells, this dissimilarity is no surprise.If plaintiffs had sued Preston, the parent corporation, they would clearly have been precluded from recovering based on the Wells rule.

The majority opinion in Wells emphasized that the economic reality test is appropriate for determining "which of the two separate corporations, parent or subsidiary, was plaintiff's actual employer for purposes of the Worker's Disability Compensation Act."421 Mich. at 647, 364 N.W.2d 670.The Court, quoting from Farrell v. Dearborn Mfg Co., 416 Mich. 267, 276, 330 N.W.2d 397(1982), described that test as follows:

"The issue of whether employment exists for purposes of the workers' compensation law has been frequently addressed by our courts.The standard to be used is the economic reality test, a broad approach which, in the oft-quoted language of Justice Talbot Smith, looks to the totality of the circumstances surrounding the performed work.

" 'Control is a factor, as is payment of wages, hiring and firing, and the responsibility for the maintenance of discipline, but the test of economic reality views these elements as a whole, assigning primacy to no single one.'Schulte v. American Box Board Co., 358 Mich. 21, 33, 99 N.W.2d 367(1959).

"See, also, Tata v Muskovitz, 354 Mich 695; 94 NW2d 71(1959);Askew v Macomber, 398 Mich 212; 247 NW2d 288(1976);McKissic v Bodine, 42 Mich App 203; 201 NW2d 333(1972);Nichol v Billot, 406 Mich 284; 279 NW2d 761(1979);Solakis v Roberts, 395 Mich 13; 233 NW2d 1(1975);Allossery v Employers Temporary Service, Inc, 88 Mich App 496; 277 NW2d 340(1979).

"The economic reality test looks to the employment situation in relation to the statutory scheme of workers' compensation law with the goal of [161 MICHAPP 753] preserving and securing the rights and privileges of all parties.No one factor is controlling."421 Mich. at 648, 364 N.W.2d 670.

We have often stated the relevant factors to be considered under the economic reality test:

"(1) control of a worker's duties; (2) payment of wages; (3) the right to hire, fire, and discipline; and (4) the performance of the duties as an integral part of the employer's business toward the accomplishment of a common goal.Lambard v Saga Food Service, Inc, 127 Mich App 262, 270; 338 NW2d 207(1983), lv den419 Mich 958[357 N.W.2d 665](1984);Askew v Macomber, 398 Mich 212, 217-218; 247 NW2d 288(1976)."Nezdropa v. Wayne Co., 152 Mich.App. 451, 465, 394 N.W.2d 440(1986).

See alsoParkkonen v. Cleveland Cliffs Iron Co., 153 Mich.App. 204, 209, 395

N.W.2d 289(1986), andWhite v. Central Transport, Inc., 150 Mich.App. 128, 130, 388 N.W.2d 274(1986).Application of these factors to the facts in this case does not lead us to the conclusion that defendants ar...