HOME

Business Organizations

Previous Outline

Next Outline

 

 

Outline

Parent-subsidiary liability / Intra-enterprise liability 

  • separation of assets / risks
    • identifying scope of business
    • subsidiary operation
  • piercing factors: 
    • compare closely / publicly held holding companies
    • compare individual vs. corporate investment
    • relevance: corporate formalities, overlapping mangement, commingled business
  • alter ego
    • control / domination
    • fraud / injustice
    • proximate cause of harm

Daily Thoughts

The average cost of rehabilitating a seal after the Exxon Valdez oil spill in Alaska was $80,000. At a special ceremony, two of the most expensively saved animals were released back into the wild amid cheers and applause from onlookers. A minute later, in full view, they were both eaten by a killer whale.

Two animal rights protesters were protesting at the cruelty of sending pigs to a slaughterhouse in Bonn. Suddenly the pigs, all two thousand of them, escaped through a broken fence and stampeded, trampling the two helpless protesters to death.

Problems

Anthony, Carol and James DiDomenico own a variegated bus business -- lots of different risks and lots of bus-related assets. They come to you and ask for advice on separating their assets from the risk of liability.  You figure you will "diversify" the assets so that no one part is exposed to the risks of other parts.  Eagle Bus operates the buses. Bravo Bus owns the buses and leases to Eagle. Carol Coaches garages the buses for Eagle.  Other corporations do other things. Yagoda is an insurance agent who sells insurance to the DiDomenicos' bus companies. He worries about the DiDomenicos not paying premiums. Advise him.  What should he do, short of dumping their business?

Anthony, Carol and James separate the businesses of Eagle, Bravo, Carol Coaches, All American, ACJ and PDQ -- with "TYPE A" precision.  They keep immaculate records, follow formalities to a tee, commingle not and siphon nothing.  This way if All American or Eagle crashes with a busload of latent tort victims, the other assets will be saved.  Easterbrook & Fischel might say this is "socially excessive amount of risky activities."  Is it? 

Readings