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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

Marianne E. FLETCHER, Nancy L. Bartley, Raphael Paganelli, and Charlotte Evans, Plaintiffs-Appellants, v. ATEX, INC., Defendant, EASTMAN KODAK COMPANY, Defendant-Appellee. and Jenny L. HERMANSON and Christy Scattarella, Plaintiffs-Appellants, v. 805 MIDDLESEX CORP., f/k/a Atex, Inc., and Apple Computers, Inc., Defendants, Eastman Kodak Company, Defendant-Appellee.

A subsidiary corporation is a corporation whose shares are owned entirely (or mostly) by another corporation. As between parent corporations and their subsidiaries, the default rule of limited liability still applies. A parent corporation will not normally be held liable for the debts of its subsidiary corporations.

In Fletcher, tort victims are asking the court to pierce the corporate veil of one of its defunct subsidiaries in order to make Kodak liable for the subsidiaries debts that resulted from an alleged product defect that caused repetitive stress disorders in customers.  

The Fletcher court uses two different theories to test whether it should pierce the corporate veil and make Kodak, the sole stockholder of Atex, liable for the damages caused by Atex. The first theory is the same two prong test applied in other piercing the corporate veil cases. The second theory relies on more straightforward concepts of agency law. These theories are not necessarily mutually exclusive.