Corporate Families May Create Obligations and Liabilities Not Evident from Corporate Structure Diagr
Corporate families with tiered structures create legal responsibility issues of many kinds. Sophisticated plaintiff’s lawyers for injured persons are increasingly delving into the specifics, and finding that the overlapping structures create legal obligations and remedies probably not foreseen by many corporate lawyers. The obligations and remedies can arise when there are separate but overlapping functions, similar or identical directors, and varying chains of command and control.
On ongoing case in Delaware flags the issue in the context of worker’s compensation claims. There, Mr. Mitchell died in a silo, crushed by tons of soybean meal. The ultimate parent company paid a worker’s compensation claim, but ultimately plaintiff’s counsel figured out that it appeared a different entity (a subsidiary) was the actual employer. Therefore, plaintiff sought other remedies against the parent entity. The parent objected, saying it was the employer. Not so, according to a Delaware trial judge who geld hearings, took evidence, looked at the relevant factors under Delaware law, and concluded that the subsidiary was the employer. The main opinion is here. Rehearing was denied with a brief opinion.
A bottom line for litigators? Among other things, we need to keep reminding our corporate brethren – and our clients – that the real world presents complexities that are not always evident from the boxes on corporate structure diagrams.