Fletcher v. Apex

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Plaintiff

Fletcher

Defendant

Apex (corporation who makes keyboards) Kodak (sole shareholder in Apex)

Facts

The plaintiff is trying to recover for repetitive injuries sustained by using keyboards manufactured by Apex. Apex was at one point a wholly owned subsidiary of Kodak. Now it has changed its name to 805 Middlesex Corp. but Kodak is still its sole shareholder.

Plaintiff's argument

  1. Atex is an alter ego or instrumentality of Kodak
  2. Atex was Kodak's agent
  3. Kodak was the apparent manufacturer of the Atex keyboard
  4. Kodak "acted in tortuous concert with Atex in manufacturing and marketing the alleged keyboards"

Discussion

"Delaware law permits a court to pierce the corporate veil of a company where there is fraud or where it is in fact a mere instrumentality or alter ego of its owner."

To win under an alter ego theory, one must show that:

  1. the parent and the subsidiary "operated as a single economic entity" and
  2. "that an overall element of injustice or unfairness ... is present"

Fraud does not have to be shown for this theory.

Things that might show that there was a single economic entity:

  1. Was the corporation solvent
  2. were the dividends paid, corporate records kept, officers and directors functioned properly, corporate formalities observed
  3. did the dominant shareholder siphon funds
  4. was one corporation a facade for another corporation

The court then goes through a number of factual ways in which the Kodak corporation and the Apex Corporation were linked, and says that none of these linkages are enough to substantiate the alter ego claim.