Fletcher v. Atex, Inc.

United States Court of Appeals for the Second Circuit · 1995 · Corporations

68 F.3d 1451 (1995)

Updated August 1, 2026

Corporationsparent-subsidiary piercingveil piercingalter egosingle economic entityinjustice or unfairnessparent-subsidiaryactual authority

Facts

Atex manufactured the keyboards at issue, and Kodak was Atex's wholly owned parent from 1981 until December 1992. Plaintiffs argued Kodak was liable because Atex was Kodak's alter ego, Kodak's agent, Kodak was the apparent manufacturer, and Kodak acted in concert with Atex. Plaintiffs relied on evidence including Kodak's cash management system, Kodak approval of major transactions, some statements in promotional materials describing Atex as connected to Kodak, use of the Kodak logo, and Kodak's 1990 ergonomic evaluation of three Atex keyboards. The record also showed Atex kept separate corporate records, held regular board meetings, filed its own tax returns, paid its own taxes, and had its own employees and managers handling day-to-day operations.

Issue

Whether summary judgment for Kodak was improper because genuine issues of material fact existed as to Kodak's liability for Atex's keyboards under alter ego, agency, apparent manufacturer, or concerted action theories. Also, whether a New York state court's earlier statements about Kodak's domination of Atex collaterally estopped Kodak from relitigating that issue.

Rule

Under Delaware law, a plaintiff seeking to pierce the veil on an alter ego theory must show both that parent and subsidiary operated as a single economic entity and that an overall element of injustice or unfairness is present. Overlap in directors, centralized cash management, parental approval of major transactions, and loose references in promotional materials are insufficient by themselves where corporate formalities and separate operations are maintained. Agency liability requires evidence that the parent authorized or appeared to authorize the subsidiary to act on its behalf, and apparent authority also requires reliance by the third party. Under New York law, apparent manufacturer liability does not extend to a parent that was not the seller or distributor of the product, and concerted action requires either an agreement to commit a tortious act or, assuming substantial-assistance liability exists, evidence of knowledge of the breach and substantial assistance or encouragement.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Wilmington, Orion Health Devices, Inc., a Delaware corporation, is wholly owned by North River Holdings. Orion keeps separate books, files its own tax returns, pays its own taxes, holds regular board meetings with minutes, and has its own managers running daily operations. North River requires approval for major asset sales and capital expenditures and uses a centralized zero-balance cash system with precise intercompany accounting.

If an injured consumer sues North River on an alter ego theory, which is the strongest conclusion?

Explanation. Under Delaware law, the plaintiff must show both that parent and subsidiary operated as a single economic entity and that an overall element of injustice or unfairness is present. The majority held that separate records, taxes, meetings, and day-to-day management strongly support separateness, while centralized cash management and parental approval of major transactions are insufficient by themselves.