Lucas v. Kapstone Paper & Packaging Corp.

441 S.C. 595

894 S.E.2d 831

Jacque LUCAS, Shirley Ann Lucas, and Daniel Simerly, Appellants,

v.KAPSTONE PAPER AND PACKAGING CORPORATION, KapStone Kraft Paper Corporation, Safway Group Holdings, LLC, Easy Way Insulation Co., Sypris Technologies, Inc. f/k/a Tube-Turns Technologies Inc., Thompson Construction Group, Inc., and Thompson Industrial Services, LLC, Defendants,of which KapStone Paper and Packaging Corporation and KapStone Kraft Paper Corporation are the Respondents.

Appellate Case No. 2020-001210

Opinion No. 6036

Court of Appeals of South Carolina.

Heard October 11, 2023

Filed November 15, 2023

Rehearing Denied December 11, 2023

Appeal, from Charleston County, Jennifer, B. McCoy, Circuit Court Judge

Badge Humphries, of Griffin Humphries LLC, of Sullivan’s Island, and Russell S. Post, of Houston, Texas, for Appellants.

Richard Hood Willis and Brian Hollis Gibbs, both of Williams Mullen, of Columbia, for Respondents.

GEATHERS, J.:

Appellants—Jacque Lucas, Shirley Ann Lucas, and Daniel Simerly—challenge the circuit court’s order dismissing this personal injury action as to Respondents, KapStone Paper and Packaging Corporation (Paper) and KapStone Kraft Paper Corporation (Kraft), for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), SCRCP. Appellants argue the circuit court erred by concluding that Respondents were alter egos of KapStone Charleston Kraft, LLC (Employer) for purposes of the exclusivity provision of the South Carolina Workers’ Compensation Law,¹ section 42-1-540 of the South Carolina Code (2015).² We affirm.

FACTS/PROCEDURAL HISTORY

On May 24, 2016, Jacque Lucas and Daniel Simerly (collectively, Employees) were involved in a horrific accident at their workplace in North Charleston, a paper mill owned by Employer. While Employees were clearing and cleaning a large overhead vessel used to hold hot chemicals, they opened a door at the bottom of the vessel, and a buildup in the vessel caused hot "black liquor" to rush out and spray them, resulting in severe burns across their bodies.³ They received extensive treatment at the Augusta Burn Center, including skin grafts and psychological counseling.

On February 17, 2017, Appellants filed this personal injury action against Paper, the parent corporation of Employer’s sole member (Kraft),⁴ and other defendants not involved in this appeal.⁵ In their First Amended Complaint, Appellants added Employer’s sole member, Kraft,⁶ as a defendant and asserted causes of action for "Negligence, Gross Negligence and Recklessness" and Loss of Consortium. According to paragraph 20 of the First Amended Complaint, Paper and Kraft provided "consulting and other services to [Employer] to develop, supervise[,] and implement safety procedures and comply with applicable regulations [or] standards at the subject facility[ ] as well as authorize certain capital projects at the facility." Paragraph 21, states that Paper and Kraft "had a duty to[,] but failed to[,] identify the dangers inherent in the process of cleaning the vessel and failed to recommend measures to avoid the injuries suffered by [Employees]." Para- graph 25 lists several duties attributed to Paper and Kraft, including adequately training their "employees, agents [or] contractors," "timely and adequately remedy[ing] a known hazard," "provid[ing] a safe working environment," and timely approving "necessary capital projects."

Subsequently, Respondents filed a motion to dismiss this action pursuant to Rule 12(b)(6), SCRCP, on the ground that they both "qualif[ied] as statutory employers because they operate[d] for all practical purposes as one integrated entity," citing to Poch v. Bayshore Concrete Products/South Carolina, Inc., 405 S.C. 359, 372–73, 747 S.E.2d 757, 764 (2013), and therefore, they were immune from suit pursuant to the South Carolina Workers’ Compensation Law. They later amended the motion on two occasions and indicated that their motion was based on Rule 12(b)(1), SCRCP, rather than Rule 12(b)(6). Respondents also indicated that they were seeking dismissal as to themselves only. According to Respondents, in November 2018, while their motion to dismiss was pending, WestRock purchased Paper and all of its subsidiaries. Those subsidiaries included Employer and Kraft.

In February 2020, the circuit court granted Respondents’ motion to dismiss, concluding that Employer and Respondents were economically integrated pursuant to the factors set forth in Poch. The circuit court later denied Appellants’ Rule 59(e), SCRCP, motion. This appeal followed.

ISSUES ON APPEAL

I. Did the circuit court misapply the "alter ego" factors set forth in Poch by treating Paper and Kraft as one?

II. Were Paper and Employer separate and distinct corporate entities rather than alter egos under the Poch factors?

III. Were Kraft and Employer separate and distinct corporate entities rather than alter egos under the Poch factors?

STANDARD OF REVIEW

[1, 2] Generally, "[w]hether subject matter jurisdiction exists is a question of law, which th[e appellate c]ourt is free to decide with no particular deference to the circuit court." S.C. Pub. Int. Found. v. Wilson, 437 S.C. 334, 340, 878 S.E.2d 891, 894 (2022). "[D]etermination of the employer-employee relationship for workers’ compensation purposes is jurisdictional. Consequently, this [c]ourt has the power and duty to review the entire record and decide the jurisdictional facts in accord with the preponderance of the evidence." Keene v. CNA Holdings, LLC, 426 S.C. 357, 365, 827 S.E.2d 183, 188 (Ct. App. 2019) (alterations in original) (quoting Poch, 405 S.C. at 367, 747 S.E.2d at 761), aff’d, 436 S.C. 1, 870 S.E.2d 156 (2021).

LAW/ANALYSIS

Appellants argue that both Respondents were separate and distinct from Employer rather than alter egos of Employer, and thus, they, were not immune from this lawsuit for purposes of section 42-1-540. We disagree.

I. Background

[3, 4] "A parent corporation is generally not immune from an action in tort by an injured employee of its subsidiary by virtue of the employee’s entitlement to workers’ compensation." Poch, 405 S.C. at 370, 747 S.E.2d at 763 (quoting 82 Am. Jur. 2d Workers’ Compensation § 90 (2003)).

Where an employee of a subsidiary is injured while working on property owned by the parent corporation and receives workers’ compensation benefits from the subsidiary, the employee may maintain an action in tort against the parent corporation even though parent and subsidiary are covered by same policy of workers’ compensation insurance.

However, a parent corporation’s immunity has been recognized in some instances, on the theory that the parent is or may be found to be the alter ego of the employer-subsidiary corporation.

Id. at 370–71, 747 S.E.2d at 763 (quoting 82 Am. Jur. 2d Workers’ Compensation § 90 (2003)). In Poch, our supreme court applied the factors set forth in Monroe v. Monsanto Company, 531 F. Supp. 426 (D.S.C. 1982), "that courts should consider in determining whether two related businesses are separate and distinct corporations for workers’ compensation purposes." 405 S.C. at 371–74, 747 S.E.2d at 763–65. The court stated,

These factors may be assessed by answering the following questions:

(1) Did the two businesses maintain separate corporate identities?

(2) Did the two businesses maintain separate Boards of Directors?

(3) Did the two businesses transact business from different locations under different managers?

(4) Did the two businesses hire and pay their own employees?

(5) Did the two corporations hold themselves out to their employees as two separate identities?

(6) Did the two corporations engage in different business activities?

(7) Did the two corporations maintain separate books, bank accounts, and payroll records?

(8) Did the two corporations file separate tax returns?

Id. at 372, 747 S.E.2d at 764 (citing Monroe, 531 F. Supp. at 434). The court also noted that there may be additional relevant factors in any given case and no one factor by itself provides immunity. Id. at 373, 747 S.E.2d at 764. After applying these eight factors to compare the claimant’s statutory employer with its parent corporation, the court found the preponderance of the evidence showed the two corporations "operated as one economic entity." Id. at 374, 747 S.E.2d at 765.

In the present case, during oral argument, Appellants urged us to apply the Poch factors narrowly because (1) the alter-ego analysis is merely one means of piercing the corporate veil, and our courts have discouraged veil piercing;⁷ and (2) the general rule is that a subsidiary’s employee may maintain an action in tort against the parent corporation and the alter-ego theory is an exception to that rule. Appellants argue this places the burden on Respondents to show they have a genuine economic identity with Employer. Appellants further argue that Respondents have shown merely the kind of identity that exists in every "common multi-entity corporate structure" designating a holding company as the parent entity providing shared financial and operational services and oversight to the operations of its subsidiaries. Appellants ask us to draw a "principled line" to avoid "collapsing" all of these common structures into alter egos and, thus, inverting the general rule (that a claimant may sue a parent corporation) and the rule’s exception.

[5] To illustrate their point, Appellants cite to Respondents’ One KapStone project, which we address in more detail below, as "the most compelling evidence that supports reversal" of the circuit court’s order. However, Poch reminds us that "no one factor is controlling." 405 S.C. at 373, 747 S.E.2d at 764. Further, we view the determination of whether two corporations truly operate as one economic entity (and are, therefore, alter egos) as already built into the Poch factors such that our duty is to simply weigh the evidence relevant to those factors in an unbiased manner. See Keene, 426 S.C. at 365, 827 S.E.2d at 188 ("[D]etermination of...