Gardemal v. Westin Hotel Co.
186 F.3d 588 (5t Cir. 1999)
Westin was a parent
corporation that owned a number of hotel chains including one in Mexico.
Gardemal's husband drowned
while at a Westin hotel in Mexico. She sued both the American Westin
corporation, as well as the Mexican Westin corporation, in a Texas court.
The Trial Court dismissed.
Gardemal appealed.
The Trial Court found that
there was a lack of personal jurisdiction to sue Westin Mexico in Texas.
The Court found that as a
parent, Westin is a separate corporate entity from Westin Mexico and cannot
be held liable for acts by its subsidiary.
The Appellate Court affirmed.
Gardemal argued that Westin
Mexico was functioning as the alter ego of Westin. However the Appellate
Court found that Westin maintained a separate corporate identity, and the
two companies were not so intermingled that they were alter egos of each
other.
Under the alter ego
doctrine, a parent corporation can
be held liable for the acts of another if the subject corporation is
organized or operated as a mere tool or business conduit.
One of the major factors
for establishing liability under this doctrine would be if Westin Mexico
was undercapitalized, but there
was no evidence of that in this case.
Gardemal argued that Westin
and Westin Mexico operated as a single business enterprise. However the
Court didn't find evidence that this was the case.
Under the single
business enterprise doctrine, a
corporation can be held liable for the acts of another if they are not
operated as separate entities, but integrate their resources to achieve
a common business purpose.
The Court noted that
Gardemal should go sue Westin Mexico directly in a Mexican court.
Gardemal probably sued in
the US because at the time Mexico had a damage cap of $25k for wrongful
death.
Since piercing the
corporate veil done for reasons of
equity, maybe it isn't right to do it when someone is just forum
shopping?