In re Silicone Gel Breast Implants Products Liability Litigation
887 F.Supp. 1447 (1995)



PROCEDURE:Breast implant recipients brought products liability action against silicone products manufacturer, asserting negligent undertaking claim.

FACTS:FACTS: MEC is a wholly owned subsidiary of D. Plaintiffs were allegedly injured by silicone breast implants created by MEC and wish to pierce the corporate veil of MEC and hold D liable for the actions of its subsidiary. Evidence indicates that D had two of its employees on the board of MEC and most resolutions that were adopted by MEC's board were prepared by D's employees. MEC had to carefully report its activities regarding the implants to D. Cash and loans were freely transferred between the parent D and its subsidiary. D set wages for MEC employees and approved of new hires. Legal counsel and regular audits were shared between the two. It is key that the Bristol Myers name and logo appeared on package inserts and promotional products regarding the silicone implants.

ISSUE:Whether or not a plaintiff in tort sue not only a medical product manufacturer, but also its sole shareholder, when the shareholder actively controlled the business of the subsidiary?


RULE: If a parent corporation uses a subsidiary as its alter ego, as demonstrated by shared common directors or business departments, consolidated financial statements and tax returns, and an inadequately capitalized subsidiary, a plaintiff may assert its claims against the parent.


HOLDING: Yes. Because multiple forum states are involved, the court must consult several states' laws. If a corporation is owned by a single shareholder, the potential for abuse is great, but the court must recognize both that a parent must control its subsidiary and that the law presumes limited liability. In determining the existence of an alter ego, a court should consider whether the entities had common directors or officers, common business departments, or consolidated financial statements and tax returns. The court may also consider whether the subsidiary is adequately capitalized or relies on the parent for its business, whether the parent pays the subsidiary's expenses or uses the subsidiary's property as its own, whether the subsidiary has separate daily operations, and whether the subsidiary observes basic corporate formalities.