Suing the Parent Company

Here is a great decision out of the state of Illinois, home of the World Champion White Sox. (I never thought I would type that phrase.)

The Fourth Division of the Illinois Court of Appeals said that “plaintiffs presented evidence that one result of the budget cuts mandated by defendant [corporate parent] was a decrease in the number of trained maintenance mechanics at the refinery, undermining the overall level of safety at the refinery. In fact, the fire was apparently caused by workers who were conducting maintenance on machinery that they were not trained or qualified to work on.” The opinion goes on to say that “Plaintiffs here alleged that defendant [parent] was a proximate cause of the decedent’s deaths via its own direct conduct, i.e., by mandating that [its subsidiary] Clark Refinery operate the refinery at “survival mode” and by reducing the capital expenditures to the “minimum sustainable level,” defendant created conditions within the refinery which posed an unreasonable risk of harm to refinery employees like the decedents. In other words, by mandating how Clark Refining was to operate the Blue Island refinery (at a 25% cost reduction), plaintiffs allege that defendant “interposed a guiding hand” in Clark Refining’s management of the refinery, leaving Clark Refining “no choice but to obey.”

After analyzing corporate law and various decisions concerning the relationship between parent and subsidiary corporations and the liability of parent corporations, the Court noted that “it has long been acknowledged that parents may be ‘directly’ liable for their subsidiaries’ actions when the ‘alleged wrong can seemingly be traced to the parent through the conduit of its own personnel and management,’ and the parent has interfered with the subsidiary’s operations in a way that surpasses the control exercised by a parent as an incident of ownership.”

The Court later held that “[b]ecause plaintiffs’ theory of negligence does not rest upon defendant’s legal status in relation to Clark Refinery, but instead on defendant’s own conduct, we find that plaintiffs have invoked the ‘direct participation’ exception, and the duty owed and (allegedly) breached by defendant is that owed by each individual to another ‘to exercise ordinary care to guard against injury which naturally flows as a reasonably probable and foreseeable consequence of his act.'” [Citation ommitted.]

Isn’t that interesting? Read the opinion here.

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