Somrak v. Kroger Co.
Filing
64
MEMORANDUM AND ORDER granting 54 Motion for Summary Judgment. This case is closed. The clerk of the court is directed to enter judgment in favor of defendant and against plaintiff. Signed by District Judge Carlos Murguia on 4/26/2019. (ydm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
MARY SOMRAK,
Plaintiff,
v.
Case No. 17-2480-CM
KROGER, CO.,
Defendant.
MEMORANDUM & ORDER
Plaintiff Mary Somrak brings this diversity action against defendant Kroger, Co. for negligence
after she slipped and fell in a Dillon’s grocery store. This case is now before the court on defendant’s
Motion for Summary Judgment (Doc. 54). Defendant argues that plaintiff cannot hold it liable for any
torts committed by Dillon Companies, Inc. (“Dillon”), which is a wholly owned subsidiary of defendant.
For the reasons stated below, the court grants defendant’s motion.
I.
Background
On September 10, 2015, plaintiff was shopping at a Dillon’s grocery store in Salina, Kansas.
After plaintiff checked out at one of the self-checkout counters, she slipped, fell, and cut her left hand
on a jar of spaghetti sauce that had broken during the fall.
Plaintiff brought this suit against defendant claiming negligence and willful and wanton conduct.
Defendant maintains that it is the parent company of Dillon—who operates Dillon’s grocery stores—
and is therefore not liable for any tortious act of its subsidiary and its subsidiary’s employees. According
to defendant’s in-house counsel, Dillon is a limited liability company formed in the State of Kansas and
is a wholly owned subsidiary of defendant. Dillon is responsible for the day-to-day management of its
stores—including the Salina store at issue—and is responsible for the employment decisions regarding
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employees at Dillon’s stores in Kansas. According to a filing from the Kansas Secretary of State, Dillon
is incorporated in Kansas.
Brenda Willey, a Dillon’s store employee, was responsible for monitoring the self-checkout lanes
and was working on the day of the incident. Plaintiff provided Willey’s W-4 forms from 2007, which
indicate she is employed by defendant. Plaintiff also provided a number of documents and materials
used at the Dillon’s store at issue that contain defendant’s logo. These include the incident report used
after the incident, a safety requirement poster used at the store, and records from a safety program utilized
by defendant and implemented at the Dillon’s store at issue.
II.
Legal Standards
Summary judgment is appropriate if the moving party demonstrates that there is “no genuine
issue as to any material fact” and that it is “entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c). A “genuine” factual dispute requires more than a mere scintilla of evidence. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986). The party seeking summary judgment bears the initial burden of
showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Once the moving party demonstrates an absence of evidence in support of an element of the
case, the burden then shifts to the nonmoving party who “must set forth specific facts showing that there
is a genuine issue for trial.” Anderson, 477 U.S. at 248. The nonmoving party “may not rest upon the
mere allegations or denials of his pleading.” Id.
In making the summary judgment determination, the court must view the evidence and
reasonable inferences in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores,
Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986)). Ultimately, the court evaluates “whether the evidence presents a sufficient
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disagreement to require submission to the jury or whether it is so one-sided that one party must prevail
as a matter of law.” Anderson, 477 U.S. at 252.
III.
Analysis
Defendant claims it is entitled to summary judgment because it is not liable for any injury plaintiff
sustained at a store operated by Dillon, its wholly owned subsidiary. Defendant argues plaintiff has not
shown any reason that this court should pierce the corporate veil and hold it liable for the negligence of
its subsidiary. Plaintiff, however, maintains it is not necessary to pierce the corporate veil because
defendant is the real party in interest. Plaintiff claims that Willey is an employee of defendant, and
defendant is therefore liable for her negligence under a theory of respondeat superior. Plaintiff also
argues that evidence shows that defendant was directly involved in the operation and management of the
Dillon’s store at issue.
Plaintiff claims that defendant’s negligence caused the injuries she sustained when she fell. In
order to establish negligence under Kansas law, the plaintiff must prove: (1) the defendant owed a duty
to the plaintiff; (2) the duty was breached; (3) the breach was the proximate cause of the plaintiff’s injury;
and (4) the plaintiff sustained damages. Adams v. Bd of Sedgwick Cnty. Comm’rs, 214 P.3d 1173, 1179
(Kan. 2009). Defendant essentially argues it is entitled to summary judgment because any duty owed
plaintiff was owed only by its subsidiary.
It is undisputed that Dillon is a wholly owned subsidiary of defendant. A subsidiary corporation
is a corporation “in which a parent corporation has a controlling share.” CORPORATION, Black's Law
Dictionary (10th ed. 2014). “A corporation holding stock in another corporation stands in the same
relation as a stockholder.” Dean Operations, Inc. v. One Seventy Assocs., 896 P.2d 1012, 1016 (Kan.
1995). And “[t]he fact that one corporation owns the controlling stock of another does not destroy the
identity of the other corporation as a distinct legal entity.” 18A Am. Jur. 2d Corporations § 727.
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Therefore, liability is not ordinarily imposed upon a parent corporation for the torts of its subsidiary. Id.;
see also Dean Operations, 896 P.2d at 1016 (“In the absence of fraud or other invidious and vitiating
circumstances, the fact that one corporation is instrumental in the formation of another corporation and
owns nearly all of the stock of the latter corporation does not have the legal effect of making the parent
corporation liable for the debts of the subsidiary corporation.”).
The “fiction” of two separate corporate identities, however, “will not be extended to permit one
of the corporations to evade its obligations; to promote fraud, illegality, or injustice; or to defend crime.”
Id. In circumstances such as these, a parent company may be considered an “alter ego” of its subsidiary
and may be held liable for the acts of the subsidiary. The alter ego concept is well-established in Kansas
law, but “examples of its application in a parent-subsidiary corporate context are scarce.” Id.
Kansas uses a number of factors to determine whether a subsidiary corporation is an
instrumentality of the parent corporation:
(1) whether the parent corporation owns all or a majority of the capital stock of the
subsidiary;
(2) whether the corporations have common directors or officers;
(3) whether the parent corporation finances the subsidiary;
(4) whether the parent corporation subscribed to all of the capital stock of the subsidiary
or otherwise causes its incorporation;
(5) whether the subsidiary has grossly inadequate capital;
(6) whether the parent corporation pays the salaries or expenses or losses of the
subsidiary;
(7) whether the subsidiary has substantially no business except with the parent
corporation, or no assets except those conveyed to it by the parent corporation;
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(8) whether 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) whether the directors or executives of the subsidiary do not act independently in the
interest of the subsidiary but take direction from the parent corporation; and
(10) whether the formal legal requirements of the subsidiary as a separate and
independent corporation are not observed.
Id. at 1017.
Plaintiff argues that the court does not need to apply these factors, arguing instead that defendant
actually has direct involvement in the Dillon’s store operation as evidenced by the fact that Krogerbranded posters regarding employee safety were displayed at the Dillon’s store, that the Dillon’s store
uses the Kroger-adopted safety program, and that Kroger’s name appears on incident report procedure
forms. But plaintiff has not provided any authority that this evidence is conclusive that defendant, in
fact, operates Dillon’s stores. The evidence shows that Dillon is a separate corporate entity, formed
under the laws of the State of Kansas. Dillon elects its own officers, has its own separate Board of
Directors, and is responsible for the day-to-day management of its stores. Plaintiff’s evidence does not
overcome the undisputed fact that Dillon is a wholly owned subsidiary of defendant and therefore liable
for its own torts. And plaintiff has provided no evidence to show that defendant is actually the alter ego
of Dillon when applying the Dean factors. Further, a statement made by defendant in another case is
not conclusive evidence that it is the alter ego of Dillon. That statement alone, that “[d]efendant admits
that it is an active corporation in good standing, with its corporate offices in Cincinnati, Ohio, and doing
business in the State of Kansas as Dillon Stores,” is not an admission of any material fact relevant to this
case.
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Further, plaintiff has not provided any authority to show that defendant is the employer of
Dillon’s employees—triggering respondeat superior liability—simply because defendant’s name is
listed as the employer on the employees’ tax documents. Without further evidence or authority, the court
will not ignore the well-established principle that a wholly owned subsidiary is still a distinct legal
corporation that is responsible for its day-to-day operations, including employment decisions.
The court finds that plaintiff has not met its burden to show that defendant owed her a duty,
because Dillon—although a wholly owned subsidiary of defendant—is a distinct legal entity that is liable
for its own torts. Plaintiff has not shown that she would be prejudiced or unable to recover from Dillon
or that defendant is the alter ego of Dillon. For these reasons, the court finds that defendant is entitled
to summary judgment.
IT IS THEREFORE ORDERED that defendant’s Motion for Summary Judgment (Doc. 54) is
granted.
This case is closed. The clerk of the court is directed to enter judgment in favor of defendant and
against plaintiff.
Dated April 26, 2019, at Kansas City, Kansas.
s/ Carlos Murguia
CARLOS MURGUIA
United States District Judge
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