DANIA JAI-ALAI PALACE, INC. V. SYKES

425 So.2d 594 (Fla. 1983)

HURLEY, JUDGE. On December 15, 1977, Gladys Sykes attempted to patronize the Dania Jai-Alai fronton.

She arrived in her car and was directed into the valet parking area by a security guard employed by Dania Jai-Alai Palace, Inc. She purchased a parking ticket and turned the car over to the ticket seller who was employed by another corporation, Carrousel Concessions, Inc. Then she began to walk forward in front of her car toward the main gate of the fronton.

Ms. Sykes' car was the last in a short line of cars which were temporarily stopped near the fronton entrance waiting to be moved by parking attendants. There was about a four foot space between the Sykes' car and the one ahead. Since parking attendants were about to move the other cars in the line, the ticket seller, who was in overall charge of keeping things moving, got into Ms. Sykes' car and prepared to drive it. He looked at the gear shift indicator and moved it from "park to "drive." As he did so, he took his foot from the brake pedal and placed it on the accelerator pedal. The car began to move forward and, at this point, he looked up and saw Ms. Sykes in front of the car, near its center. He attempted to brake, but his foot slipped and hit the accelerator. Ms. Sykes was propelled forward and crushed into the stationary car ahead; she was seriously injured.

Initially, Ms. Sykes sued Dania Jai-Alai Palace, Inc. (Dania). Later, when her attorneys discovered that Carrousel Concessions, Inc. (Carrousel) was running the valet parking, she amended her complaint to include Carrousel and to include Saturday Corporation (Saturday), the parent corporation of Dania and Carrousel. [The jury returned a verdict against all three corporate defendants for $775,000.]

May a parent corporation be held liable for torts committed by an employee of a wholly-owned subsidiary? In this instance, the answer is "yes." Here, the jury applied the long-established principle of Florida law that, when one corporation controls and dominates another corporation to the extent that the second corporation becomes the "mere instrumentality" of the first, the dominant corporation is liable for the torts of the subservient corporation. In light of the jury's affirmative finding, our responsibility is not to re-weigh the evidence, but only to determine whether the verdict is supported by competent substantial evidence.

At the outset, we reject appellants' contention that, in order to utilize the instrumentality doctrine, the plaintiff had to establish fraud or other wrongdoing on the part of Saturday. Although there are conflicting lines of cases on this point, we took a definitive position in Vantage View, Inc. v. Bali East Development Corp., 421 So.2d 728 (Fla. 4th DCA 1982), and said that we intend to "follow the decision of the Supreme Court in Barnes, Mayer, Aztec and Levenstein which have held it sufficient to allege domination and control without the necessity of alleging improper purpose or unjust loss."

Whether a subsidiary is a mere instrumentality is normally a question of fact for the jury. "The central factual issue is control, i.e., whether the parent corporation dominates the activities of the subsidiary." Japan Petroleum Co. (Nigeria) Ltd. v. Ashland Oil, Inc., 456 F.Supp. 831, 841 (D.Del. 1978). The degree of control necessary to sustain liability under the instrumentality rule has been characterized as "total domination of the subservient corporation, to the extent that the subservient corporation manifests no separate corporate interests of its own and functions solely to achieve the purposes of the dominant corporation." Krivo Industrial Supply Co. v. National Distillers & Chemical Corp., 483 F.2d 1098, 1106 (5th Cir. 1973). .

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A number of courts have suggested that the following factors are relevant in determining the applicability of the instrumentality rule. (1) The parent corporation owns all or majority of the capital stock of the subsidiary. (2) The parent and subsidiary corporations have common directors or officers. (3) The parent corporation finances the subsidiary. (4) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation. (5) The subsidiary has grossly inadequate capital. (6) The parent corporation pays the salaries or expenses or losses of the subsidiary. (7) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation. (8) In the papers of the parent

corporation, and in the statements of its officers, "the subsidiary" is referred to as such or as a department or division. (9) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take direction from the parent corporation. (10) The formal legal requirements of the subsidiary as a separate and independent corporation are not observed.

Turning to the evidence in the case at bar and viewing it in the light most favorable to the plaintiff/appellee, we find that Carrousel was wholly owned by Saturday and that they shared common officers. Furthermore, although there was testimony that the day-to-day operation of Carrousel was placed in the hands of an independent general manager, there was other testimony that the general manager regularly reported to one of the common officers and thereafter implemented his directions. Testimony also indicated that the common officer was present on the premises of the fronton and had-the ability to hire and fire employees of Carrousel. The proof further demonstrated that Saturday created Carrousel and initially funded it through Dania, its other subsidiary.

A highly relevant factor in evaluating the application of the instrumentality rule is whether there is proof that the subservient corporation was being used to further the purposes of the dominant corporation to the extent that the subservient corporation in reality had no separate, independent existence of its own. In the case at bar, there was substantial proof that Carrousel existed only to serve the needs of Saturday. For example, Carrousel only operated at two frontons, both of which were owned either directly or indirectly by Saturday. Carrousel maintained its offices within the fronton and gave all outward appearances of being part of an integrated operation. In this respect, it is noteworthy that Saturday and its two subsidiary corporations filed a consolidated federal income tax return and were jointly insured. The evidence suggests that Saturday maintained a pervasive control over all aspects of the fronton's operations and, given such evidence, we cannot say that the jury's finding that Carrousel was the mere instrumentality of Saturday is clearly erroneous. Therefore, we affirm the verdict finding Saturday liable for the acts of Carrousel. [The court remanded the case for further proceedings to determine whether Ms. Sykes had been negligent.]