Giarla et al v. The Coca-Cola Company et al
Filing
39
DECISION AND ORDER -- IT IS HEREBY ORDERED, that Defendants' Motion to Dismiss (Docket No. 16) is GRANTED. IT IS FURTHER ORDERED, that leave to amend this Complaint (see Docket No. 19, Pls. Memo. at 18) is GRANTED. SO ORDERED. Signed by William M. Skretny, United States District Judge on 3/23/2021. (JCM)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
JAMES J. GIARLA,
AMBER L. GIARLA,
Plaintiffs,
DECISION AND ORDER
v.
17-CV-359S
THE COCA-COLA COMPANY,
COCA-COLA REFRESHMENTS USA, INC.,
Defendants.
I.
Introduction
This is a removed diversity personal injury action for injuries suffered by Plaintiff
James Giarla while driving a tractor trailer on the Queen Elizabeth Way in Ontario,
Canada. Plaintiffs are New York residents (Docket No. 1, Ex. B, Compl. ¶ 1; Docket No.
1, Notice of Removal ¶10). Defendants are corporations incorporated in Delaware and
do business in Georgia (Docket No. 1, Ex. B, Compl. ¶¶ 2-3, 20-21; Docket No. 1, Notice
of Removal ¶10).
James Giarla was hit by a truck owned by Coca-Cola Refreshments Canada.
Plaintiffs now allege that Defendants, the Coca-Cola Company and Coca-Cola
Refreshments USA, Inc., are responsible for Coca-Cola Refreshments Canada in this
action.
For the reasons stated herein, Defendants’ Motion for Judgment to Dismiss the
Complaint (Docket No. 16) is granted. Plaintiffs argue that they should be granted leave
to replead (Docket No. 19, Pls. Memo. at 18). Leave to amend is granted; Plaintiffs shall
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file and serve their Motion for Leave to Amend (with the proposed Amended Complaint)
within fourteen (14) days of entry of this Order.
II.
Background
A. Defendant Coca-Cola’s Corporate Organization
Pertinent to this case, Plaintiffs allege the corporate affiliation of Coca-Cola
Company (“Coke”) and the history of Defendant Coca-Cola Refreshments USA (“CCR”),
the wholly owned subsidiary of Coke (Docket No. 1, Ex. B, Compl. ¶¶ 19-21). CCR is
Coke’s largest bottler (id. ¶¶ 16-18). Coke acquired Coca-Cola Enterprises and CocaCola Enterprises was renamed Coca-Cola Refreshments, Inc. (id. ¶¶ 16, 18).
Plaintiffs allege the Coca-Cola Refreshments Canada (“CCR-Canada”) was a
wholly owned subsidiary of CCR as of 2015 (id. ¶¶ 27-28, 37, 64-68). They claim that
there were not separate “operating segments” for the United States and Canada but a
unified operation under the “North America segment” caption (id. ¶ 71). They argue that
Coke did not distinguish between CCR and CCR-Canada, allegedly treating them as one
operating segment for North America (id. ¶ 73). As an example of the continental
perspective, Plaintiffs point to the January 2016 transfer by Coke of bottling and related
supply chain operations from CCR and CCR-Canada to a Bottling Investment segment
(id. ¶ 82), although this change post-dates James Giarla’s accident.
Plaintiffs conclude that Coke and CCR “should be held accountable to a New York
State resident and not be allowed to escape that responsibility by asserting a corporate
separation that exists in name only” (id. ¶ 89).
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B. Queen Elizabeth Way Collision, February 25, 2015
James Giarla was a tractor trailer driver. On February 25, 2015, he was driving
from Michigan back to his employer in Blaisdell, New York, passing through Ontario,
Canada, on the Queen Elizabeth Way (Docket No. 1, Ex. B, Compl. ¶¶ 33-35). Plaintiffs
allege that driver Francesco Rappazzo, employed by CCR-Canada, drove a CCRCanada truck, and collided into James Giarla’s tractor trailer on the Queen Elizabeth Way
in Grimsby, Ontario (id. ¶ 38). Plaintiffs contend that CCR-Canada is a wholly owned
subsidiary of Coke (id. ¶ 37; see Docket No. 15, Am. Ans. ¶ 7 (admitting allegation that
CCR-Canada owned the truck and it was operated by Rappazzo in the course of his
employment with CCR-Canada)).
C. Plaintiffs’ New York State Complaint (Docket No. 1, Ex. B)
Plaintiffs sued in New York State Supreme Court, Niagara County (Docket No. 1,
Ex. B, Compl.). Plaintiffs did not set forth a formal First Cause of Action, but they allege
a claim for negligence for the injuries to James Giarla (see id. ¶¶ 30-89) and a Second
Cause of Action asserting a consortium claim for Plaintiff Amber Giarla (id. ¶¶ 90-91).
For their state action, Plaintiffs alleged New York State courts jurisdiction over this
matter (see id. ¶¶ 46-63). Plaintiffs claim that they had only minimal contacts with the
Province of Ontario because it was the site of the accident, stating that James Giarla
drove through the Province but otherwise had his medical treatments exclusively in New
York (id. ¶¶ 46-54). James Giarla received workers’ compensation in New York and no
income or other benefits in Ontario (id. ¶¶ 51, 53, 52).
They next argue that Defendants (Coke, CCR, and non-party CCR-Canada) have
significant contacts with New York (id. ¶¶ 55-63). Plaintiffs claim that Coke and CCR has
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common ownership over Coke’s wholly own subsidiary, CCR-Canada, and minimal
contacts in Canada (id. ¶¶ 64-70). They contend that Coke considered the United States
and Canadian operations the “North American” operations (id. ¶¶ 71, 73, 74). Plaintiffs,
however, did not sue CCR-Canada.
Plaintiffs next assert prejudice to them if Ontario law applies in this case,
concluding that New York law should apply (id. ¶¶ 83-89).
D. Answer and Proceedings
Defendants separately answered the Complaint (id., Exs. C (Ans. of Coca-Cola
Company), D (Ans. of Coca-Cola Refreshments USA)). They separately served demands
pursuant to N.Y. CPLR 3017(c) for Plaintiffs to allege the amount of their damages (id.
Exs. F, G). Plaintiffs responded on April 21, 2017, alleging damages totaling at least
$2 million, but claiming that James Giarla then still was undergoing medical treatment (id.,
Ex. H) that might increase their damages.
Defendants then removed this action on April 27, 2017 (Docket No. 1). They then
jointly amended their Answer (Docket No. 15).
E. Defense Motion for Judgment on Pleadings Dismissing the Complaint
(Docket No. 16)
On September 19, 2017, Defendants filed their present Motion 1 for Judgment on
the Pleadings to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(c)
(Docket No. 16).
1In support of motion, Defendants submit their attorney’s Affirmation, exhibit (state court Summons
and Complaint), and Memorandum of Law, Docket No. 16; and in reply, they submitted their Reply
Memorandum, Docket No. 21. In opposition, Plaintiffs submit their Memorandum of Law with exhibits,
Docket No. 19.
Defendants then moved to stay discovery, Docket No. 25, which Magistrate Judge Foschio granted,
Docket No. 28.
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Responses to this motion, as extended (see Docket Nos. 18, 17), were due by
October 9, 2017, and reply was due by October 16, 2017 (Docket No. 20).
III.
Discussion
A. Applicable Standards
1. Motion for Judgment on Pleadings to Dismiss
Under Rule 12(c) of the Federal Rules of Civil Procedure, after pleadings are
closed a party “may move for judgment on the pleadings,” Fed. R. Civ. P. 12(c). Since
this rule calls for a summary proceeding that may deprive the opponent of the opportunity
to a full and fair hearing on the merits of their claims, the movants must show a clear right
to judgment on the pleadings, that there are no material issues of fact to be resolved, and
entitlement to judgment as a matter of law, 5C Charles A. Wright, Arthur R. Miller, Federal
Practice and Procedure § 1368, at 223 (Civil 3d ed. 2004). “A motion for judgment on the
pleadings . . . theoretically is directed towards a determination of the substantive merits
of the controversy; thus federal courts are unwilling to grant a judgment under Rule 12(c)
unless it is clear that the merits of the controversy can be fairly and fully decided in this
summary manner,” id., § 1369, at 259.
Rule 12(c) “should be read in conjunction with several other federal rules
authorizing pretrial motions, especially the various Rule 12(b) motions to dismiss,” id. at
258. Rule 12(b)(6), in turn, provides that the Court cannot dismiss a Complaint unless it
appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99,
2 L.Ed.2d 80 (1957). As the Supreme Court held in Bell Atlantic Corp. v. Twombly,
550 U.S. 554, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), a Complaint must be dismissed
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if it does not plead “enough facts to state a claim to relief that is plausible on its face,” id.
at 570 (rejecting longstanding precedent of Conley, supra, 355 U.S. at 45-46); Hicks v.
Association of Am. Med. Colleges, No. 07-00123, 2007 U.S. Dist. LEXIS 39163, at *4
(D.D.C. May 31, 2007).
To survive a motion to dismiss, the factual allegations in the Complaint “must be
enough to raise a right to relief above the speculative level,” Twombly, supra, 550 U.S. at
555; Hicks, supra, 2007 U.S. Dist. LEXIS 39163, at *5. As reaffirmed by the Court in
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’ [Twombly, supra, 550 U.S.] at 570 . . . . A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.
Id., at 556 . . . . The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully. Ibid. Where a complaint pleads facts that are ‘merely
consistent with’ a defendant’s liability, it ‘stops short of the line between
possibility and plausibility of “entitlement to relief.”’ Id., at 557 . . . (brackets
omitted).”
Iqbal, supra, 556 U.S. at 678 (citations omitted).
A Rule 12(c) motion is addressed to the face of the pleading, “otherwise, a
summary judgment motion or trial is necessary,” 5C Federal Practice and Procedure,
supra, § 1368, at 248, 251. The pleading is deemed to include any document attached
to it as an exhibit, Fed. R. Civ. P. 10(c), or any document incorporated in it by reference.
Goldman v. Belden, 754 F.2d 1059 (2d Cir. 1985).
In considering such a motion, the Court must accept as true all the well pleaded
facts alleged in the Complaint. 5C Federal Practice and Procedure, supra, § 1368, at
227, 230, 237-38; Oneida Indian Nation of N.Y. v. City of Sherrill, N.Y., 337 F.3d 139, 152
(2d Cir. 2003) (court applies same standard for Rule 12(b) and 12(c) dismissals), rev’d
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on other grounds sub nom. City of Sherrill, N.Y. v. Oneida Indian Nation of N.Y., 544 U.S.
197, 125 S.Ct. 1478, 161 L.Ed.2d 386 (2005); Bloor v. Carro, Spanbock, Londin, Rodman
& Fass, 754 F.2d 57 (2d Cir. 1985). However, conclusory allegations that merely state
the general legal conclusions necessary to prevail on the merits and are unsupported by
factual averments will not be accepted as true. New York State Teamsters Council Health
and Hosp. Fund v. Centrus Pharmacy Solutions, 235 F. Supp. 2d 123 (N.D.N.Y. 2002).
2. Choice of Law
As a diversity action, the procedures are governed by federal law and rules, while
the substantive law is governed by state law, see Erie R.R. v. Tompkins, 304 U.S. 64,
58 S.Ct. 817, 82 L.Ed. 1188 (1938); Ocean Ships, Inc. v. Stiles, 315 F.3d 111, 116 n.4
(2d Cir. 2002). A federal court sitting in diversity (as here) applies the choice of law rules
from the state in which it sits, Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct.
1020, 85 L.Ed. 1477 (1941), here New York law.
Under New York’s choice of law rules, “the first step in any case presenting a
potential choice of law is to determine whether there is an actual conflict between the
laws of the jurisdiction involved.” Matter of Allstate Ins. Co., 81 N.Y.2d 219, 223, 597
N.Y.S.2d 904, 905 (1993). This Court need not determine which jurisdiction’s law applies
where the relevant issue would turn out the same under the forum’s law or the other cited
jurisdiction and no true conflict exists, Elgin Sweeper Co. v. Melson Inc., 884 F. Supp.
641, 648 (N.D.N.Y. 1995); Howard v. Clifton Hydraulic Press Co., 830 F. Supp. 708, 712
(E.D.N.Y. 1993).
Another factor in identifying the proper jurisdiction’s law under New York’s choice
of law rules is whether the law regulates conduct or allocates loss, Padula v. Lilarn
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Properties Corp., 84 N.Y.2d 519, 522, 620 N.Y.S.2d 310, 313 (1994) (Docket No. 19, Pls.
Memo. at 12-13). Loss allocation, such as vicarious liability laws, guest statutes, or
charitable immunity laws, id., and agency law, see Presbyterian Church of Sudan v.
Talsiman Energy, Inc., 453 F. Supp.2d 633, 687-88 (S.D.N.Y. 2006) (plaintiff failed to
address choice of law for question of which jurisdiction’s agency law applies), “are those
which prohibit, assign, or limit liability after the tort occurs,” Padula, supra, 84 N.Y.2d at
522, 620 N.Y.S.2d at 313. The Neumeier rules (Neumeier v. Kuehner, 31 N.Y.2d 121,
335 N.Y.S.2d 64 (1972)) apply to determine the appropriate substantive law for loss
allocation depending upon the domicile of the parties and the interests of the applicable
jurisdictions.
Contrast conduct regulation, such as Labor Law §§ 240, 241, as held in Padula,
supra, 84 N.Y.2d at 523, 620 N.Y.S.2d at 313, where “conduct-regulating rules have the
prophylactic effect of governing conduct to prevent injuries from occurring. ‘If conflicting
conduct-regulating laws are at issue, the law of the jurisdiction where the tort occurred
will generally apply because that jurisdiction has the greatest interest in regulating
behavior within its borders’ (Cooney v. Osgood Mach., 81 N.Y.2d 66, 72, 595 N.Y.S.2d
919, 612 N.E.2d 277 [1993]),” Padula, supra, 84 N.Y.2d at 522, 620 N.Y.S.2d at 313.
In personal injury actions, New York generally applies the law of the jurisdiction in
which the injury occurred, see Cooney v. Osgood Machinery, Inc., 81 N.Y.2d 66,
595 N.Y.S.2d 919 (1993); Neumeier, supra, 31 N.Y.2d 121, 335 N.Y.S.2d 64; that would
be Ontario and Canadian law here.
Under Neumeier, where the Plaintiffs are residents of one state (here, New York),
the Defendants a second state (here, Georgia or Delaware, the state of incorporation),
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and the accident occurred in a third jurisdiction (the Province of Ontario), for loss
allocation matters Neumeier’s third rule applies and the law of the site of the accident
generally applies “but not if it can be shown that displacing that normally applicable rule
will advance the relevant substantive law purposes without impairing the smooth working
of the multistate system or producing great uncertainty for litigants,” Neumeier, supra,
31 N.Y.2d at 128, 335 N.Y.S.2d at 70; In re Air Crash Near Clarence Center, N.Y.,
983 F. Supp.2d 249, 253-54 (W.D.N.Y. 2013) (Skretny, C.J.) (see Docket No. 19, Pls.
Memo. at 12-13; Docket No. 16, Defs. Memo. at 2, 6).
3. Piercing the Corporate Veil in Ontario and New York
Under New York law “the doctrine of piercing the corporate veil is typically
employed by a third party seeking to go behind the corporate existence in order to
circumvent the limited liability of the owners and to hold them liable for some underlying
corporate obligation,” In Matter of Morris v. New York State Dep’t of Tax. & Fin., 82 N.Y.2d
135, 140-41, 603 N.Y.S.2d 807, 810 (1993) (footnote omitted). “The concept of piercing
the corporate veil is a limitation on the accepted principles that a corporation exists
independently of its owners, as a separate legal entity, that the owners are normally not
liable for the debts of the corporation, and that it is perfectly legal to incorporate for the
express purpose of limiting the liability of the corporate owners,” id., 82 N.Y.2d at 140,
603 N.Y.S.2d at 810 (citation omitted).
As Defendants note (Docket No. 16, Defs. Memo. at 4), Plaintiffs as the parties
seeking to pierce a corporate veil bear “a ‘heavy burden’ of demonstrating complete
domination by the parent and that such domination was the instrument of fraud or
otherwise resulted in inequitable consequences,” Christensen v. SBM Indus., Inc.,
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9 F. App’x 52, 53 (2d Cir. 2001) (summary Order); TNS Holdings, Inc. v. MKI Sec. Corp.,
92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 893 (1998). Evidence only of domination by one
corporation of another, even identical shareholders, officers, and directors, does not
warrant piercing the second corporation, see Spano v. V&J Nat’l Enterp. LLC,
264 F. Supp.3d 440, 451 (W.D.N.Y. 2017) (Wolford, J.). Additional evidence of fraud,
inequity, or misfeasance is required, id. “Indeed, even the fact that corporations have
identical controlling stockholders, officers, and directors does not, by itself, warrant
disregard of the separate corporate entities,” Bagel Bros Maple v. Ohio Farmers, Inc.,
279 B.R. 55, 65 (Bankr. W.D.N.Y. 2002) (Kaplan, Bankr. J.) (quotations and citations
omitted).
“The party seeking to pierce the corporate veil must establish that the owners,
through their domination, abused the privilege of doing business in the corporate form to
perpetrate a wrong or injustice against that party such that a court in equity will intervene,”
Morris, supra, 82 N.Y.2d at 142, 603 N.Y.S.2d at 811 (citations omitted).
Here, Plaintiffs are New York State residents, Defendants are Delaware
corporations headquartered in Georgia but licensed to do business in New York and the
accident occurred in Ontario. The parties dispute whether Ontario (as Defendants urge)
or New York (as Plaintiffs argue) law applies. If the standards for piercing the corporate
veil are the same in Ontario and New York law, then there is no conflict and either
jurisdiction’s law applies.
The parties agree that Ontario and New York law regarding piercing the corporate
veil are substantially similar (Docket No. 16, Defs. Memo. at 6; Docket No. 19, Pls. Memo.
at 15). Under Ontario law, to pierce a corporate veil, the party needs to allege that the
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corporation was formed “for an illegal, fraudulent or improper purpose. But it can also be
pierced if when incorporated those in control expressly direct a wrongful thing to be done,”
Mitchell v. Lewis, 2016 ONCA 903, at *7 (Ont. Ct. App. 2016) (Docket No. 16, Defs.
Memo. at 6). Under New York law, piercing the corporate veil requires a fraudulent,
wrongful, or unjust act (id. at 4-5), see, e.g., Spano, supra, 264 F. Supp.3d at 451.
Thus, under New York choice of law rules, there is no substantive dispute. For
convenience, this Court will cite to New York law regarding piercing the corporate veil.
4. Agency of Subsidiary to Parent
As noted by the United States District Court for the Southern District of New York,
“at the motion to dismiss stage, the question ‘is not whether plaintiffs have proved the
existence of an agency relationship, merely whether they should have the chance to do
so,’” In re South African Apartheid Litig., 617 F. Supp.2d 228, 273 (S.D.N.Y. 2009),
mandamus denied, 727 F.3d 174 (2d Cir. 2013); In re Parmalat Secs. Litig., 501 F.
Supp.2d 560, 588 (S.D.N.Y. 2007) (Docket No. 19, Pls. Memo. at 8).
Under New York law, “a parent company will not be held liable for the torts of its
subsidiary unless it can be shown that the parent exercises complete dominion and
control over the subsidiary,” (Docket No. 19, Pls. Memo. at 8), holding that the plaintiff
failed to establish material issue of fact whether that defendant “so controlled the
operations of the subsidiary company that it should be held liable for the negligence of
the delivery truck driver,” Montes Serrano v. New York Times Co., 19 A.D.3d 577, 578,
797 N.Y.S.2d 135, 136 (2d Dep’t 2005) (Docket No. 19, Pls. Memo. at 8).
Under Ontario law, a subsidiary is not liable as an alter ego unless the subsidiary
is under the complete control of the parent and the subsidiary is “nothing more than a
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conduit used by the parent to avoid liability,” Gregorio v. Intrans-Corp., 18 O.R.3d 527,
¶ 28 (Ont. Ct. App. 1994) (Docket No. 21, Defs. Reply Memo. at 8).
5. Leave to Amend
Plaintiffs alternatively seek leave to replead if there are deficiencies with the
Complaint (Docket No. 19, Pls. Memo. at 18).
Under Federal Rule of Civil
Procedure 15(a), amendment of pleadings after the time to do so as of right requires
either consent of all parties or by leave of the Court. The parties here have not indicated
Defendants’ consent to an amendment and Plaintiffs have not submitted a proposed
amendment. Motions for leave to amend the Complaint are to be freely given when justice
requires. Granting such leave is within the sound discretion of the Court. Foman v. Davis,
371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Zenith Radio Corp. v. Hazeltine
Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971). “In the absence
of any apparent or declared reason–such as undue delay, bad faith or dilatory motive on
the part of the movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of the amendment,
futility of amendment, etc.–the leave sought should, as the rules require, be ‘freely given.’”
Foman, supra, 371 U.S. at 182 (quoting Fed. R. Civ. P. 15(a)).
B. Parties’ Contentions
Defendants moved for judgment dismissing the Complaint under Federal Rule of
Civil Procedure 12(c). They argue that Plaintiffs have not alleged a fraudulent, wrongful,
or unjust act that would allow piercing the corporate veil of CCR-Canada to reach
Defendants under either New York or Canadian law (Docket No. 16, Defs. Memo. at 1,
4-6). To Defendants, Plaintiffs’ theory is that CCR-Canada is vicariously liable for the
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collision by its driver, Rappazzo, and Plaintiffs then impute this vicarious liability to
Defendants Coke and CCR by piercing CCR-Canada’s corporate veil (see Docket No. 1,
Ex. B, Compl. ¶ 41).
In response, Plaintiffs argue liability due to CCR-Canada’s agency for Coke and
CCR (Docket No. 19, Pls. Memo. at 6, 8-9). They contend that the Complaint alleges the
piercing of CCR-Canada’s corporate veil to reach Defendants (id. at 10-11). They next
argue that New York law (rather than Ontario) applies (id. at 12-16). They cite four
Canadian cases on the principal liability for its agent’s actions (Docket No. 19, Pls. Memo.
at 16, 17, Exs.) as an alternative argument that, under Canadian law, CCR-Canada was
agent for Defendants, as it would be under New York agency law (id. at 16-17).
Alternatively, if this Court requires further specificity for their agency or corporate
veil arguments, Plaintiffs seek leave to amend the Complaint (id. at 18).
In reply, Defendants argue that Plaintiffs’ agency argument also is insufficiently
pled, that any factual allegations fail to plausibly allege a cause of action (Docket No. 21,
Defs. Reply Memo. at 1, 2, 4). As a Motion to Dismiss, they contend that this Court need
not accept Plaintiffs’ legal conclusions (id. at 3). Defendants renew their contention that
Plaintiffs have not pled piercing the corporate veil of CCR-Canada (id. at 6). Defendants
refute the existence of any agency relationship was alleged between Coke, CCR, and
CCR-Canada (id. at 3-6). The choice of law need not be resolved for this motion, but
Defendants alternatively offer that the applicable jurisdiction’s law is Ontario’s or
Canadian law (id. at 1, 6-7).
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Defendants did not take a position on possible amendment of the Complaint,
although by moving to dismiss under Rule 12(c) implies that they would object to
amendment.
C. Piercing CCR-Canada’s Corporate Veil to Reach Defendants
1. Choice of Law
The parties agree (Docket No. 16, Defs. Memo. at 6; Docket No. 19, Pls. Memo.
at 15) that Ontario (or Canadian) law and New York law are similar for piercing the
corporate veil. Under New York’s choice of law principles, New York substantive law
regarding piercing the corporate veil applies.
2. Piercing CCR-Canada’s Corporate Veil under New York Law
Plaintiffs have not named CCR-Canada (or Rappazzo) as a Defendant. Instead,
they sue Coke and CCR, arguing that Rappazzo’s vicarious liability from CCR-Canada
extends to these Defendants because of their ownership and control of CCR-Canada.
Applying New York piercing the corporate veil law, Plaintiffs fail to allege that CCRCanada’s incorporation was a product of fraud, misconduct, or was an unjust act to
warrant piercing CCR-Canada’s corporate veil. Despite Plaintiffs alleging close corporate
affiliation between Defendants and CCR-Canada, even the internal disregard by Coke of
the corporate distinctions between its subsidiaries CCR and CCR-Canada, Plaintiffs do
not allege this arrangement was the product of fraud or misconduct or results in an unjust
act.
Plaintiffs did not meet the standard they cited for piercing the corporate veil, that
is showing that CCR-Canada “was dominated as to the transaction attacked and that
such domination was the instrument of fraud or otherwise result in wrongful or inequitable
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consequences” (Docket No. 19, Pls. Memo. at 10, citing TNS Holdings, supra, 92 N.Y.2d
at 339, 680 N.Y.S.2d at 893), see Morris, supra, 82 N.Y.2d at 141, 603 N.Y.S.2d at 810.
While Plaintiffs assert Defendants’ ownership of CCR-Canada, they fail to meet their
heavy burden of demonstrating that this complete domination by Defendants was the
instrument of fraud or other wrongdoing or Defendants’ control extended to Rappazzo’s
driving CCR-Canada’s truck on the Queen Elizabeth Way. The arguments Plaintiffs raise
in support of piercing (id. at 11) is the objection to application of Ontario law (or potentially
litigating this case in Ontario) rather than the relationships between the corporate
Defendants and CCR-Canada to show that the corporate nature of CCR-Canada should
be disregarded. If deemed an unjust act, it only arises from the differences of law between
Ontario and New York and not from Defendants’ action. Defendants’ internal disregard
of the corporate form of CCR-Canada by allegedly treating it as a “segment” of Coke
without more does not establish a basis for this Court to disregard CCR-Canada’s
incorporation. Coke and CCR are entitled to establish wholly owned subsidiaries, such
as CCR-Canada, to keep Defendants at arm’s length from CCR-Canada’s obligations.
Again, as Plaintiffs point out (id., citing Morris, supra, 82 N.Y.2d 135, 141,
603 N.Y.S.2d at 810), piercing a corporate veil is dependent upon the facts and
circumstances alleged. Here, Plaintiff James Giarla was hit by a truck owned by CCRCanada and driven by one of its employees, Rappazzo. Plaintiffs generally allege that
corporate parents CCR and Coke owned and operated CCR-Canada, now arguing that
Defendants “completely dominated CCR-Canada in all phases of its operation” (id. at 11).
The Complaint, however, alleges the ownership and global operation of Coke (Docket
No. 1, Ex. B, Compl. ¶¶ 16-19, 25-26, 27-29, 64-81), including CCR operating a fleet of
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trucks and other vehicles for distribution and delivery of beverage products (id. ¶ 80).
They fail to allege fraud, misconduct that alleges that CCR-Canada’s incorporation was
in effect a sham and the real operators are Defendants.
Defendants’ motion (Docket No. 16) for judgment on the pleadings under Rule
12(c) dismissing Plaintiffs’ allegations of piercing the corporate veil of CCR-Canada is
granted.
D. Agency Liability
Plaintiffs alternatively argues that principles of agency extend liability to
Defendants for the actions of CCR-Canada (Docket No. 19, Pls. Memo. at 7-9), also
contending under Canadian law that the principal is liable for torts committed within the
authority of its agent (id. at 16), Keddie v. Canada Life Assur. Co., 1999 BCCA 541 (B.C.
Ct. App. 1999) (id. at 16, Ex. A).
Defendants reply that, under applicable Canadian law, a subsidiary is an agent of
the parent company only if the subsidiary is the “alter ego” of the parent (Docket No. 21,
Defs. Reply Memo. at 8). Defendants distinguish corporate agency from employeremployee agency Plaintiffs implicitly relied upon (Docket No. 21, Defs. Reply Memo. at
8).
1. Choice of Law
Plaintiffs cite to Canadian law for its similarity to New York law that generally a
principal is responsible for the acts of its agent (Docket No. 19, Pls. Memo. at 16-17,
Ex. A). Two of the four Canadian cases cited (and opinions reproduced by Plaintiffs) are
from the British Columbia Court of Appeal, Thiessen v. Clarica Life Ins. Co., 2002 BCCA
501 (B.C. Ct. App. 2002); Keddie, supra, 1999 BCCA 541 (B.C. Ct. App. 1999). Although
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citing British Columbia cases, Plaintiffs fail to explain whether British Columbia law of
agency would be the same as in Ontario to make these precedents relevant in this case.
Keddie and Thiessen are further distinguished because they involved allegations that an
insurance broker was acting as an agent for the insurance company, Keddie, supra,
1999 BCCA 541, at 13-23, 23 (distinguishing between agency and being a broker);
Thiessen, supra, 2002 BCCA 501, at 2 (issue is “who is to bear the risk of a defalcating
life insurance representative”).
The two other cases they cited are from the Supreme Court of Canada, Bazley v.
Curry, 2 R.C.S. 534 (1999); 671122 Ontario Ltd. v. Sagaz Indus. Canada Inc., 2 R.C.S.
983 (2001). Bazley held that an employer is vicariously liable for the actions of its
employee, there the sexual assault by the employee, 2 R.S.C. at 563, 543-63. Citing
Bazley, the Canadian Supreme Court in 671122 Ontario Ltd. denied defendant’s vicarious
liability for the acts of its independent consultant, 2 R.S.C. at 988, 995-96. These cases
support extending liability for Rappazzo’s actions to CCR-Canada in the employment
context, but they fail to further extend that liability to Defendants as the corporate parent
of CCR-Canada.
Plaintiffs do not cite Canadian or Ontario cases involving subsidiaries and the
parent corporation’s liability for their actions as agents for the parent. Plaintiffs have not
addressed the liability of a subsidiary to the parent. They merely allege the CCR-Canada
is the wholly owned subsidiary of Coke (Docket No. 1, Ex. B, Compl. ¶ 27).
Defendants cite to Gregorie v. Intrans-Corp., supra, 18 O.R.3d 527 (Ont. Ct. App.
1994), that a subsidiary will not be found to be the alter ego of the parent corporation
“unless the subsidiary is under the complete control of the parent and is nothing more
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than a conduit used by the parent to avoid liability,” id. ¶ 28 (Docket No. 21, Defs. Reply
Memo. at 8).
The parties have not concluded that Ontario and New York agency laws are
substantially similar. But comparing the cited provisions of these jurisdictions’ law on
agency, both are similar. Ontario and New York agency laws both rest upon the degree
of control by the parent corporation over the subsidiary to conclude that the subsidiary
also acts as an agent for the parent.
Ontario agency law provides that a subsidiary will not be found to be the alter ego
of the parent corporation “unless the subsidiary is under the complete control of the parent
and is nothing more than a conduit used by the parent to avoid liability,” Gregorie v.
Intrans-Corp., supra, 18 O.R.3d 527, ¶ 28 (id.); see Aluminum Co. of Canada Ltd. v.
Toronto (City), [1944] S.C.F. 267, 271 (¶ 16) (S.C.C. 1944); Kentucky Fried Chicken
Canada v. Scott’s Food Servs., Inc., 35 B.L.R. (2d) 21, at ¶¶ 59-62 (Ont. Gen. Div. 1997)
(subsidiary held not alter ego or agent of parent corporation even though parent controlled
long-term decisions and budget of subsidiary, subsidiary ran substantial day-to-day
operations), rev’d on different grounds, 118 O.A.C. 357 (Ont. Ct. App. 1998).
New York agency law requires an allegation that the parent corporation “so
controlled the operations of the subsidiary company that it should be held liable for the
negligence of the delivery truck driver,” Montes Serrano, supra, 19 A.D.3d at 578, 797
N.Y.S.2d at 136 (Docket No. 19, Pls. Memo. at 8).
At the threshold and under New York choice of law principles, there is no conflict.
Both New York and Ontario determine that a subsidiary’s agency exists from the control
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by the parent corporation over the subsidiary. On choice of law principles, absent a
conflict between these two jurisdictions’ agency laws, New York law applies.
2. Agency Law
Thus, under New York agency law, the corporate subsidiary can be shown to be
the agent of the parent either by the subsidiary doing all the business that the parent could
do or the subsidiary was a “mere department” of the parent (Docket No. 19, Pls. Memo.
at 8). Four factors to establish a subsidiary is a “mere department” is common ownership
with the parent; financial dependency of the subsidiary to the parent; degree of parent’s
involvement in the selection and assignment of subsidiary executive personnel and failure
to observe corporate formalities; and the degree of the parent’s control of the subsidiary’s
marketing and operational policies. Darden v. DaimlerChrysler N. Am. Holding Corp.,
191 F. Supp. 2d 382, 387, 388 (S.D.N.Y. 2002) (id.); see also Kentucky Fried Chicken
Canada, supra, 35 B.L.R. (2d) 21, at ¶ 59 (Ontario agency law has six factors who owns
profits, who provides day-to-day operation of subsidiary, who was the “brains behind” the
day-to-day operation, who made policy and financial decisions, whether profits were
directly traceable to the skill and direction of the parent, and whether control by parent
was constant or merely periodic, citing Smith, Stone & Knight Ltd. v. Birmingham (City),
4 All E.R. 116 (Eng. K.B. 1939)).
Agency also is manifested if the parent corporation gives actual authority to the
subsidiary to act on its behalf, Fletcher v. Atex, Inc., 68 F.3d 1451, 1461-62 (2d Cir. 1995)
(see Docket No. 21, Defs. Reply Memo. at 4), or apparent authority where one can see
acts of the parent corporation which reasonably give an appearance of authority for the
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subsidiary to conduct the transaction, id. at 1462 (quoting Greene v. Hellman, 51 N.Y.2d
197, 204, 433 N.Y.S.2d 75, 80 (1980)).
Plaintiffs argues that they allege sufficiently that CCR-Canada is the agent of
Defendants (id. at 9). Defendants deny that Plaintiffs alleged facts that CCR-Canada is
a mere department of Defendants or that CCR-Canada had no independent functioning
(Docket No. 21, Defs. Reply Memo. at 8).
Plaintiffs, however, have not alleged CCR-Canada had the actual authority from
Defendants to act as their agents. The Complaint also does not allege the appearance
of Defendants’ authorizing CCR-Canada to act on their behalf to allege apparent
authority.
Plaintiffs allege that Coke is the world’s largest beverage company that operates
“a worldwide system with subsidiaries across the globe, many of which are wholly-owned
subsidiaries” (Docket No. 1, Ex. B, Compl. ¶¶ 8, 10), marketing and distributing products
throughout New York and Ontario (among other places) through its global distribution
system (id. ¶ 12). In 2010, Coke acquired Coca Cola Enterprises, the bottler, and thus
directly owned 100% of Coca-Cola Refreshments (later renamed CCR) (id. ¶¶ 16, 17, 18,
19). CCR-Canada allegedly is the wholly owned subsidiary of CCR (id. ¶ 27) and in turn
Coke (id. ¶ 28).
Plaintiffs allege that CCR “operated in Canada through the CCR-CANADA unit”
(id. ¶ 29). In establishing jurisdiction in New York State, Plaintiffs claim that Coke, as the
parent, “exercises control over its subsidiaries, CCR and CCR CANADA, which is so
pervasive, controlling and continuous as part of the Defendant [Coke’s] organizational
structure and system that the said subsidiaries’ corporate independence from the parent
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company is essentially non-existent” (id. ¶ 56).
They claim common ownership,
interlocking directorates, and executive management of CCR and CCR-Canada with
Coke (id. ¶ 64). They conclude that CCR-Canada was under the direction and complete
control of Defendants (id. ¶ 69).
Although they make the above allegations of this complete control by Defendants
of CCR-Canada, Plaintiffs fail to allege one factor to establish agency, that Coke and CCR
select CCR-Canada’s management.
Thus, Defendants’ Motion for Judgment (Docket No. 16) pursuant to Rule 12(c) to
dismiss the agency claims in the Complaint (and the entire Complaint) is granted.
E. Leave to Amend
Plaintiffs alternatively ask for leave to replead their Complaint (Docket No. 19, Pls.
Memo. at 18). If needed, they offer to amend to specify principal-agency or piercing the
corporate veil (id.). Again, Defendants took no position on this alternative; Defendants
have only voiced their objection to them remaining as parties in this case.
Before this Court are the questions can Plaintiffs amend to allege agency claims
and whether an unspecified amendment to “adequately set for the plaintiff’s claims
against the defendants” (id.) would be futile, which Plaintiffs deny (id.). Plaintiffs have not
provided a proposed Amended Complaint or state the basis for amendment but offers to
amend to specify piercing the corporate veil or principal-agency relationship. They have
not stated whether their clarifying amendment would add CCR-Canada as a Defendant.
Absent an amendment stating that CCR-Canada’s incorporation was fraudulent or
created to conduct wrongdoing (especially leading to the truck accident at issue here), a
further amendment alleging piercing the corporate veil here would be futile.
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As for an amended pleading specifying the agency relationship, the original
Complaint elaborates on the corporate organization and relationships between
Defendants and CCR-Canada but fails to allege Defendants’ role in the management and
operation of CCR-Canada.
Again, “the question ‘is not whether plaintiffs have proved the existence of an
agency relationship, merely whether they should have the chance to do so,’” In re South
African Apartheid Litig., supra, 617 F. Supp.2d at 273. It would not be futile for Plaintiffs
to amend their Complaint to try to state an agency relationship between Defendants and
CCR-Canada. If the facts warrant, Plaintiffs could allege the day-to-day operations of
CCR-Canada and show whether Defendants so control CCR-Canada to render it an
agent for these principal corporations. Leave to amend to specify the agency relationship
between Defendants and CCR-Canada (see Docket No. 19, Pls. Memo. at 18) is granted.
Plaintiffs have fourteen (14) days from entry of this Order to file and serve their
Motion for Leave to Amend the Complaint with the proposed Amended Complaint and a
redline/strikeout version comparing the original pleading with the proposal, see W.D.N.Y.
Loc. Civ. R. 15(b).
IV.
Conclusion
Plaintiffs here cannot reach non-party CCR-Canada by suing the named
Defendants here. Defendants’ Motion for Judgment (pursuant to Rule 12(c) (Docket No.
16)) to Dismiss this case is granted.
Plaintiffs’ alternative seeking leave to amend (Docket No. 19, Pls. Memo. at 18) to
further specify piercing the corporate veil of CCR-Canada would be futile and is denied.
Leave to amend (id.) to specify the agency relationship between Defendants and CCR-
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Canada (Docket No. 19, Pls. Memo. at 18), however, is granted; Plaintiffs have fourteen
(14) days from filing this Order to file motion for leave to amend with proposed Amended
Complaint.
V.
Orders
IT IS HEREBY ORDERED, that Defendants’ Motion to Dismiss (Docket No. 16) is
GRANTED.
IT IS FURTHER ORDERED, that leave to amend this Complaint (see Docket
No. 19, Pls. Memo. at 18) is GRANTED.
SO ORDERED.
Dated:
March 23, 2021
Buffalo, New York
s/William M. Skretny
WILLIAM M. SKRETNY
United States District Judge
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