Jodelle Kirk v. Schaeffler Group USA
Opinion of the Court
From 1973 to 1982, FAG Bearings Corporation released thousands of gallons of trichloroethylene (TCE), a volatile organic compound now classified as a hazardous substance, at its manufacturing facility in Joplin, Missouri. In 1991, the Missouri Department of Health and the Environmental Protection Agency (EPA) detected TCE contamination in residential wells in the Villages of Silver Creek and Saginaw, communities south of the FAG Bearings plant. Subsequent litigation established that FAG Bearings was solely responsible for the TCE contamination in Silver Creek and Saginaw. FAG Bearings began cooperating with EPA and Missouri Department of Health remediation, efforts that continued after Schaeffler Group USA acquired the facility in 2005.
Janice and Stan Kirk moved to Silver Creek in 1987. Their daughter, plaintiff Jodelle Kirk (Kirk), was born the following year and spent her entire childhood in Silver Creek. In 2002, Kirk was diagnosed with autoimmune hepatitis (AIH), a liver disease that occurs when a person's immune system produces antibodies that attack
liver proteins, creating inflammation that can lead to fibrosis and cirrhosis. Kirk remains on medication to manage her AIH and faces serious medical issues in the years ahead. In 2013, Kirk brought this diversity action against FAG Bearings, LLC
After discovery, the district court denied Schaeffler's motion for summary judgment. As relevant here, the court concluded that Kirk presented sufficient evidence of causation for a jury to find defendants liable, and that Schaeffler Group USA is judicially estopped to deny it can be held responsible as successor for FAG Bearings' tortious conduct. After a lengthy trial, the district court instructed the jury to return a verdict for Kirk if it found that defendants' negligent "handling, use, or disposal of [TCE] at the Joplin plant, or [failure] to properly warn Plaintiff of the TCE contamination," had directly caused or contributed to Kirk's injury. The jury awarded Kirk $7,600,000 in compensatory damages and, after submission of additional testimony and evidence addressing whether "Defendants' conduct showed complete indifference to or conscious disregard for the safety of others," $13,000,000 in punitive damages. The district court denied Schaeffler's motions for judgment as a matter of law and a new trial. This appeal followed.
On appeal, Schaeffler argues (i) the district court erred in concluding that judicial estoppel bars Schaeffler Group USA from denying that it is liable for FAG Bearings' pre-acquisition torts; (ii) the court abused its discretion by admitting Kirk's experts' opinions regarding whether TCE exposure caused Kirk's AIH, and evidence of regulatory standards governing safe levels of TCE in drinking water; and (iii) the court erred in denying judgment as a matter of law on the causation issue and on Kirk's failure to warn claim. We reverse the district court's judicial estoppel ruling and conclude that (i) Schaeffler Group USA was entitled to summary judgment on the successor liability issue, and therefore (ii) the jury's general verdict requires a new trial on Kirk's punitive damages claim against FAG Bearings, LLC.
I. The Judicial Estoppel Issue.
A. Kirk's complaint alleged that Schaeffler Group USA "owns the brand FAG and ... took on, purchased or otherwise assumed all assets, properties and liabilities of FAG Bearings LLC, and/or FAG Bearings Corporation." Schaeffler's motion for summary judgment alleged that, after the 2005 conversion, FAG Bearings became Schaeffler Group USA's wholly owned subsidiary; that under Missouri law a parent corporation is not responsible for its subsidiary's actions unless it is the subsidiary's alter ego or plaintiff pierces the corporate veil; that Kirk has the burden to prove Schaeffler Group USA is responsible for FAG Bearings' actions; and that Kirk had no evidence to show that the corporate veil should be pierced or that the Schaeffler parent had any role in FAG Bearings' alleged pre-acquisition tortious acts.
In response, Kirk argued that Schaeffler Group USA should be judicially estopped to deny successor liability because "it has taken the position in other litigation that its ... purchase of FAG Bearings amounted to a merger of the two companies and that it is responsible for the ... actions of FAG Bearings." Kirk cited a complaint Schaeffler Group USA filed against the United States before the United States Court of International Trade (CIT) in November 2006, and a February 2008 memorandum it filed in the District of Connecticut in unrelated litigation.
The district court denied Schaeffler Group USA's motion for summary judgment, invoking judicial estoppel based on the allegation in its complaint to the CIT that FAG Bearings Corporation "by change of name and/or merger" was "absorbed into Schaeffler."
First, a party's later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Absent success in a prior proceeding, a party's later inconsistent position introduces no risk of inconsistent court determinations.... A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party.
The district court ruled that Schaeffler Group USA's position before the CIT was "clearly inconsistent" with its position in this case because "it is black letter law that a parent corporation lacks standing to sue for injuries suffered by a subsidiary." The court noted that the CIT stated in an opinion rejecting Schaeffler Group USA's claim on the merits that the court "accepts [Schaeffler Group USA's] undisputed representation that it is the legal successor to ... FAG Bearings Corp."
Schaeffler Grp. USA, Inc. v. United States
,
The parties on appeal, like the district court, argue the judicial estoppel issue based on the above-quoted standards from
New Hampshire
and
Stallings
, cases that were governed by federal law. However, in this diversity case, we apply the Missouri law of judicial estoppel.
See
Monterey Dev. Corp. v. Lawyer's Title Ins. Corp.
,
We conclude the answer under Missouri law is not so simple. One month before the decision in State Board , the Supreme Court of Missouri ruled:
The doctrine of judicial estoppel provides that "[w]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him." Zedner v. United States ,547 U.S. 489 [, 504,126 S.Ct. 1976 ,164 L.Ed.2d 749 ] (2006), quoting Davis v. Wakelee ,156 U.S. 680 , 689 [15 S.Ct. 555 ,39 L.Ed. 578 ] (1895).
Taylor v. State
,
Both federal and Missouri courts have long considered judicial estoppel an equitable doctrine designed to protect the integrity of the judicial process, preserve the dignity of the courts, and insure order in judicial proceedings.
See
New Hampshire
,
When summary judgment is denied based on resolution of a preliminary legal issue such as estoppel, the ruling may be reviewed on appeal from the district court's final order entered after trial.
See
N.Y. Marine & Gen. Ins. Co. v. Cont'l Cement Co.
,
Under Missouri law, the first
New Hampshire
factor, whether a party's positions are "clearly inconsistent," is "the threshold essential to a judicial estoppel defense."
Imler v. First Bank of Mo.
,
In its 2006 lawsuit, Schaeffler Group USA alleged that a 1989 Department of Commerce antidumping order declared the domestic ball-bearings industry materially injured by foreign competitors' dumping practices, and the U.S. Bureau of Customs and Border Protection began collecting antidumping duties. The Continued Dumping and Subsidy Offset Act (CDSOA), enacted in 2000, permitted "affected domestic producers" to claim a share of the antidumping duties, but limited this benefit to an "affected domestic producer" that "was a petitioner or interested party in support of the petition with respect to which an antidumping duty order ... has been entered, and remains in operation." 19 U.S.C. § 1675c(b)(1)(A)-(B). FAG Bearings, though a member of the injured industry, had not supported the petition that led to the 1989 order. Schaeffler Group USA alleged that the CDSOA's petition-support requirement was unconstitutional and therefore it was entitled to FAG Bearings' "share of CDSOA disbursements for fiscal years 2004 and 2005." The CIT denied relief but accepted Schaeffler Group USA's representation that it would have been entitled to FAG Bearings' share had the claim prevailed.
The district court concluded that Schaeffler Group USA's claim to recover antidumping duties to which FAG Bearings was entitled was necessarily a representation that Schaeffler Group USA is a legal successor to FAG Bearings, a representation "clearly inconsistent" with its position denying successor liability for Kirk's tort claims based on FAG Bearings' pre-acquisition conduct. As a general matter of corporate law, we find no clear inconsistency inherent in an acquiring corporation claiming that it has succeeded to the acquired company's claim to a government benefit and also claiming that it did not assume the acquired company's liabilities. Under Missouri law, even if all or substantially all of FAG Bearings' assets were acquired, this fact alone would not constitute a merger nor transfer FAG Bearings' liabilities to Schaeffler Group USA.
See, e.g.
,
Edwards v. Black Twig Mktg. & Commc'ns LLC
,
In this case, the lack of a clear inconsistency becomes clear upon analysis of the CIT judicial proceeding. Customs regulations implementing the CDSOA provide:
In the case of a company that has succeeded to the operations of a predecessor company that appeared on the USITC list, the successor company may file a certification to claim an offset as an affected domestic producer on behalf of the predecessor company. In its certification, the company must name the predecessor company to which it has succeeded and it must describe in detail the duly authorized succession by which it is entitled to file the certification.
Schaeffler Group USA's unopposed representation "accepted" by the CIT in 2012 was not clearly inconsistent with the parent-subsidiary relationship claimed in this case. In substance, Schaeffler Group USA pleaded that it was entitled to assert FAG Bearings' claim because it acquired at least a substantial portion of the aggrieved domestic ball-bearing production assets, and FAG Bearings transferred or assigned its right to seek CDSOA distributions that FAG Bearings had been unlawfully denied.
Cf.
Vt. Agency of Nat. Res. v. United States ex rel. Stevens
,
The district court erred in applying judicial estoppel based on Schaeffler Group USA's pleading before the CIT. The court stated it is "black letter law" that a parent corporation has no standing to assert a subsidiary's claims. That is doubtless true in many contexts, but it is not "clearly" applicable to the unique regulatory claim at issue before the CIT. When a party's position is not clearly inconsistent with the position taken in another proceeding, "there is no reason to estop it from asserting that position."
Hossaini v. W. Mo. Med. Ctr.
,
Kirk also argued to the district court that judicial estoppel was warranted
because Schaeffler Group USA represented to the U.S. District Court for the District of Connecticut that "FAG Bearings Corp., does not exist as a separate legal entity apart from Schaeffler." The district court did not rely on this alleged inconsistency, and Kirk notes but does not argue the issue on appeal. But Judge Shepherd in dissent concludes that judicial estoppel is properly invoked because Schaeffler asserted that FAG Bearings "has no distinct corporate existence," contrary to its position in this case that Schaeffler Group USA is not liable for the torts of its subsidiary, FAG Bearings, LLC. We disagree for numerous reasons. First, the Connecticut litigation context. Schaeffler Group USA and FAG Bearings Corporation were brought into a jet engine malfunction damage action as additional defendants when discovery revealed that engine bearings may have been manufactured by "FAG Germany." Their motion for summary judgment was based on the fact that neither "had any relationship to the bearings" in question-the separate German corporation was not a subsidiary of Schaeffler Group USA, and FAG Bearings Corporation was not a "distinct legal entity ... subject to suit." Second, after the 2005 conversion, it was FAG Bearings, LLC that survived as Schaeffler Group USA's wholly-owned subsidiary, not FAG Bearings Corporation, so the representation that "FAG Bearings Corp., does not exist as a separate legal entity" was accurate. Third, the memorandum did not assert that FAG Bearings, LLC was an "unincorporated division." It simply cited that aspect of Connecticut law to illustrate that a non-entity lacks the capacity to be sued. Fourth, and most important, Schaeffler Group USA and FAG Bearings were voluntarily dismissed from the action before the Connecticut court ruled on their motion, so Schaeffler Group USA did not "obtain[ ] benefits from that position in that [proceeding],"
State Board
,
Schaeffler Group USA did not take "clearly inconsistent" positions in the CIT litigation considered by the district court, or in the Connecticut litigation on which Judge Shepherd bases his dissent. Nor do the other New Hampshire factors warrant invoking the equitable doctrine of judicial estoppel. Schaeffler Group USA's unopposed position that was accepted by the CIT did not mislead that court nor result in a benefit to Schaeffler Group USA other than "standing" to assert FAG Bearings' unsuccessful claim. Nor did Schaeffler's attempt to clarify the legal status of FAG Bearings Corporation in 2008 mislead the district court in Connecticut or benefit Schaeffler Group USA. Any disadvantage to Kirk from allowing Schaeffler Group USA to assert its position in this case will result from Missouri law limiting a parent corporation's liability for the torts of its subsidiary, not from Schaeffler Group USA playing "fast and loose" with the courts. For these reasons, we conclude the district court abused its discretion in ruling that Schaeffler Group USA is judicially estopped to deny successor liability.
B.
The remaining question is the relief to which Schaeffler Group USA is entitled on appeal. Schaeffler argues the district court should have dismissed this defendant because Kirk failed to meet her burden of proving successor liability. The district court simply noted that Kirk's "failure to plead piercing the corporate veil or [her] inability to show alter ego liability is irrelevant if judicial estoppel applies." Kirk's appeal brief did not address this issue. We conclude it is proper to direct Schaeffler Group USA's dismissal because the summary judgment record warranted that relief as a matter of law.
See
Nat'l Farmers Union Std. Ins. Co. v. Morgan
,
Bernitsky v. United States
,
Schaeffler's summary judgment motion asserted that Schaeffler Group USA and FAG Bearings, LLC have a parent-subsidiary corporate relationship. Schaeffler submitted an affidavit by Schaeffler Group USA's corporate Treasurer declaring he had personal knowledge of the transaction and stating that FAG Bearings, LLC was formed on January 6, 2005, and "[s]ince the date of its formation ... has been wholly owned by Schaeffler Group USA, Inc.," and that "[p]rior to 2005, Schaeffler Group USA, Inc., had no ownership interest in either FAG Bearings Corporation or FAG Bearings, LLC." Kirk submitted no evidence showing that Schaeffler Group USA is liable for FAG Bearings' pre-acquisition torts.
The general rule that a parent corporation is not liable for torts committed by its subsidiary is well established:
As a general rule, two separate corporations are to be regarded as distinct legal entities, even if the stock of one is owned partly or wholly by the other. Ordinarily, a parent corporation is not liable for the acts of its subsidiary corporation. An exception to the rule occurs in the situation where the plaintiff pierces the corporate veil.
Mitchell v. K.C. Stadium Concessions, Inc.
,
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff's legal rights; and
(3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
Collet v. Am. Nat'l Stores, Inc.
,
In opposing summary judgment, Kirk submitted no evidence showing she may pierce the corporate veil of Schaeffler Group USA's wholly-owned subsidiary, FAG Bearings, LLC. Rather, Kirk urged the district court to apply judicial estoppel because "a legal successor through merger or change of name" is responsible for the actions of the acquired company. This assertion was based on another well-established principle of Missouri corporate law:
[W]here one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the former ... [except]: (1) when the purchaser expressly or impliedly agrees to assume the debts and liabilities; (2) when the transaction amounts to a consolidation or merger ; (3) when the purchaser is merely a continuation of the seller; and (4) when the transaction is entered into fraudulently to escape liability for the debts and liabilities.
Edwards
,
Kirk, at the close of extensive discovery, opposed Schaeffler's motion for summary judgment on the successor liability issue solely on the basis of a judicial estoppel defense we have rejected. As Kirk otherwise failed to prove successor liability, the district court erred in denying summary judgment dismissing Schaeffler Group USA as a separate defendant. This disposition obviously does not moot Schaeffler's appeal from the final judgment against FAG Bearings, LLC.
II. FAG Bearings' Appeal.
Post-trial dismissal of Schaeffler Group USA because Kirk failed to prove successor liability does not affect the jury's finding that FAG Bearings, LLC is liable for negligently causing Kirk's AIH injury, so we must turn to FAG Bearings' appeal from the final judgment awarding Kirk compensatory and punitive damages.
A. Punitive Damages.
The jury awarded Kirk $13,000,000 in punitive damages against both Schaeffler Group USA and FAG Bearings, LLC. The jury returned a general verdict, which failed to distinguish how much Schaeffler Group USA owes from how much FAG Bearings, LLC owes. Since Kirk invited the jury to base the award in part on Schaeffler Group USA's conduct (
e.g.
, that Schaeffler Group USA's 2010 environmental statement "misleading[ly]" told the public that FAG Bearings' release of TCE was "accidental"), the general award cannot be upheld against FAG Bearings only.
See
State ex rel. Hall v. Cook
,
Where the judgment is based upon a cause of action of such a nature that it might work injustice to one party defendant, if it were to remain intact as against him, while reversed for error as to the other defendants, then we think the power exists in the court, founded upon such fact of possible injustice, to reverse the judgment in toto and grant a new trial in regard to [the remaining] defendants.
A partial new trial on damages is permitted by Rule 59(a)(1). Although this procedure should not be used when damages and liability are "so interwoven ... that the former cannot be submitted to the jury independently of the latter without confusion and uncertainty,"
Gasoline Prods. Co. v. Champlin Ref. Co.
,
B. Causation.
An essential element of a negligence claim is proof of "causation in fact," a reasonable connection between the defendant's tortious conduct and the plaintiff's injury.
Elam v. Alcolac, Inc.
,
1. On appeal, Schaeffler first argues that Kirk failed to prove causation in fact because Dr. Gilbert and Dr. Zizic failed to establish she was exposed to a level or quantity of TCE significant enough to cause her AIH, as in
Wright v. Willamette Industries, Inc.
,
2. Schaeffler further argues the district court abused its discretion by admitting speculative opinions by Dr. Gilbert and Dr. Zizic that TCE exposure specifically caused Kirk to develop AIH. An expert's testimony to be admissible "must be reliable or trustworthy in an evidentiary sense, so that, if the finder of fact accepts it as true, it provides the assistance the finder of fact requires."
Johnson v. Mead Johnson & Co.
,
Prior to trial, the district court denied Schaeffler's motion to exclude opinions by these experts that it is more likely than not that TCE caused Kirk's AIH (specific causation). As to Dr. Gilbert, the court explained:
Dr. Gilbert's opinion is not connected to the existing data merely by her own empty assertion. It relies on a significant amount of admissible evidence to posit that [Kirk] was exposed to a significant level of TCE both in utero and while growing up in Silver Creek, by ingesting, inhaling, and absorbing TCE through her skin. While Dr. Gilbert's report does not estimate an exact level of exposure, it explains why such an estimate is not possible. It also provides a reliable basis for her opinion that [Kirk's] exposure to TCE was such that, over time, acting on a genetic predisposition, it caused [Kirk] to develop AIH, and it was not idiopathic [i.e., of unknown cause].
On appeal, Schaeffler argues, as it argued to the district court, that these specific causation opinions were inadmissible because Dr. Gilbert and Dr. Zizic (i) could not systematically rule out alternative causes of Kirk's AIH; (ii) did not establish that Kirk was exposed to an amount of TCE that can cause AIH in humans; and (iii) did not adequately explain why Kirk's AIH was more likely caused by TCE exposure rather than some unknown cause. The argument is not focused on the experts' specific trial testimony, except Dr. Gilbert's testimony that:
where a young woman in a very small community is living over a Superfund Site that is contaminated with TCE, and the chances of anybody in that small group getting [AIH], which is a rare disease, is very small.
So, to me, that seemed pretty much like a no-brainer.
A differential etiology rules in plausible causes and then systematically rules out less plausible causes until a most plausible cause emerges. A medical causation opinion based upon proper differential etiology "is acceptable causation testimony under
Daubert
."
Johnson
,
3. Prior to trial, the district court denied Schaeffler's motion to exclude eight government reports, explaining they were "generally admissible" under the public records exception to the hearsay rule. See Fed. R. Evid. 803(8). On appeal, Schaeffler argues the district court abused its discretion by admitting the portions of EPA and Minnesota Department of Health reports stating the public health regulatory standards for TCE, and instructing the jury that "exceeding these numbers does not in and of itself establish causation in this case, though it may be considered by you in determining causation." The standards at issue are EPA's "maximum contaminant level" under the Safe Drinking Water Act of five parts per billion, and a Minnesota Health Department "Guidance for Drinking Water" of 0.4 parts per billion TCE.
We have little doubt the regulatory standards were probative evidence, to be compared to the concentrations of TCE found in Silver Creek wells in addressing the levels of TCE contamination to which residents were exposed. But whether exceeding the concentrations set forth in those regulatory standards was direct evidence of general and specific causation is a different question, as the district court initially recognized. Regulatory standards express risk assessments that are designed to protect public health. "[A] regulatory standard, rather than being a measure of causation, is a public-health exposure level that an agency determines pursuant to statutory standards."
Sutera v. Perrier Grp. of Am. Inc.
,
C. Failure to Warn.
To recover for negligent failure to warn, Kirk must prove cause in fact-that the FAG Bearings hazard caused her injury-and proximate cause-that an adequate warning from the defendant "would have altered the behavior of the individuals involved in the accident."
Moore v. Ford Motor Co.
,
Under Missouri law, there is a rebuttable presumption that a plaintiff with no prior knowledge of the hazard would have heeded an adequate warning of the specific danger that caused her injury.
Arnold v. Ingersoll-Rand Co.
,
At trial, Kirk's mother testified that, if adequately warned, the family would not have moved to Silver Creek in 1987, years before the discovery that FAG Bearings' releases of TCE at its facility had caused significant off-site contamination.
See
Lewis v. FAG Bearings Corp.
,
III. Conclusion.
For the foregoing reasons, the judgment of the district court is reversed and the case is remanded with directions to dismiss the claims against Schaeffler Group USA with prejudice, and for further proceedings not inconsistent with this opinion regarding the punitive damage claim against FAG Bearings, LLC.
In January 2005, FAG Bearings Corporation converted to FAG Bearings, LLC under
The court declined to consider whether Schaeffler's memorandum in the District of Connecticut litigation warranted judicial estoppel.
By contrast, most circuits apply federal judicial estoppel standards, even in diversity cases.
See
Frazer,
Reassessing the Doctrine of Judicial Estoppel: The Implications of the Judicial Integrity Rationale
,
Dissenting Opinion
Vacating a jury's decision is not to be done lightly on appellate review. Because the majority dismisses a defendant and vacates the jury's punitive damages verdict on procedurally and substantively suspect grounds, I respectfully dissent from Sections I, II.A, and III of the majority opinion.
The punitive damages verdict is only vacated because the majority disagrees with the application of judicial estoppel. Schaeffler Group USA ("Schaeffler") remained in this action because the district court estopped it from arguing that it was a separate entity from FAG Bearings, LLC ("FAG Bearings"). The majority disagrees and so, effectively, dismisses Schaeffler. From there, the majority goes on to hold that Schaeffler's presence at trial tainted the punitive damages verdict and thus overturns it.
I first part ways with the majority on how it handles the judicial estoppel ruling. I concede that there was an abuse of discretion in how the district court applied judicial estoppel here.
See
Stallings v. Hussmann Corp
.,
Normally when this occurs, we "remand[ ] for application of the correct legal standard."
Rille v. PricewaterhouseCoopers LLP
,
Yet the majority forgoes our normal route. I respectfully disagree with the result reached. Because this Court can affirm "on any ground supported by the record,"
Chavez-Lavagnino v. Motivation Educ. Training, Inc.
,
First, the legal backdrop. The majority concedes that the Supreme Court of Missouri has never adopted three-factor federal judicial estoppel framework articulated in
New Hampshire v. Maine
,
This starting point is problematic because "only decisions of a state's highest court can bind us on state law," and while "decisions of state intermediate courts can be persuasive, they are not controlling."
Boswell v. Panera Bread Co.
,
In contrast with the majority, I begin with the Supreme Court of Missouri's formulation of judicial estoppel.
Cf.
Mo. Const. art. V, § 2 ("The supreme court shall be the highest court in the state ... [i]ts decisions shall be controlling in all other courts."). In its last opinion articulating a standard for judicial estoppel, the Supreme Court of Missouri opted for a general formulation: "[j]udicial estoppel will lie to prevent litigants from taking a position, under oath, in one judicial proceeding, thereby obtaining benefits from that position in that instance and later, in a second proceeding, taking a contrary position in order to obtain benefits ... at that time."
State Board
,
Just as instructive as the
State Board
formulation is the
State Board
analysis. There, it was alleged that a "representation" made in a prior brief estopped a party from making an argument. The
State Board
court was not concerned with factors other courts have held to be decisive, including (1) whether the opposing party relied on the statement,
cf.
18B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 4477 (2d ed. 1981 & Supp. 2017) (" Federal Practice and Procedure § 4477") (describing reliance requirement adopted by some courts)
All this is to say that the Supreme Court of Missouri has adopted an analytic framework, binding on us, of judicial estoppel that is less focused on rigid requirements and more on "preserv[ing] the dignity of the courts."
Edwards v. Durham
,
I believe we can answer that question in the affirmative, which brings me to the prior representations made by Schaeffler. There are two representations in the record, one made before the Court of International Trade, and one made in the District of Connecticut.
As a threshold matter, the majority suggests that, under
State Board
, Schaeffler did not "obtain[ ] benefits" from the position it took before the district court in Connecticut because it was voluntarily dismissed. This is a mischaracterization of
State Board
. The pertinent portion of the
State Board
formulation, again, is "[j]udicial estoppel will lie to prevent litigants from taking a position, under oath, in one judicial proceeding,
thereby
obtaining benefits."
On the substance, the majority argues that Schaeffler represented to the district court in Connecticut that "FAG Bearings Corporation" lacked the capacity to be sued. So, because "FAG Bearings, LLC"-not "FAG Bearings Corporation"-"survived as Schaeffler's wholly-owned subsidiary," the majority finds no inconsistency with the representation made here by Schaeffler: FAG Bearings, LLC is a distinct corporate entity.
The majority does not grapple, however, with the core of Schaeffler's position in the Connecticut proceeding. After Schaeffler acknowledged FAG Bearings converted from a corporation to an LLC, it gave its bottom line: " 'FAG Bearings' is an assumed name or a 'd/b/a' under which Schaeffler sometimes conducts business ... [i]t has no distinct corporate existence." D. Conn. Motion at 2.
It is true that before asserting that FAG Bearings had "no distinct corporate existence," Schaeffler referred to it as a "wholly-owned subsidiary of Schaeffler." D. Conn. Motion at 2. As the majority correctly notes, even if "Schaeffler acquired all or substantially all of FAG Bearings' assets, this fact alone would not ... transfer FAG Bearings' liabilities to Schaeffler." There are, however, broad-based exceptions to this, including "when the purchaser is merely a continuation of the seller."
Edwards v. Black Twig Mktg. & Commc'ns LLC
,
By all measures, Schaeffler argued it was a continuation of FAG Bearings before the district court in Connecticut. It argued that FAG Bearings "sold all of its assets except for some land and buildings" to Schaeffler. D. Conn. Motion at 2. And, critically, it argued that " 'FAG Bearings' is an assumed name or a 'd/b/a.' " D. Conn. Motion at 2. Add that to Schaeffler's unqualified assertion that FAG Bearings "has no distinct corporate existence," D. Conn. Motion at 2, it becomes clear that Schaeffler argued that "[Schaeffler] is merely a continuation of [FAG Bearings]."
Edwards
,
In sum: Schaeffler's General Counsel swore in another proceeding before an Article III court that FAG Bearings lacks a "distinct corporate existence" from Schaeffler in order to avoid liability and, in these proceedings, Schaeffler argues that "[it] is separate from FAG Bearings," Appellant Br. 11, to, again, avoid liability.
Cf.
New Hampshire
,
The disagreement over how Missouri law applies to the facts here reinforces that remand-and a decision after briefing and argument-is the correct course of action. But given that we have decided not to remand, I believe that the majority errs in reversing the district court's judicial estoppel determination. Because this is the only reason the majority dismisses Schaeffler and reverses the punitive damages verdict, I do not believe those actions are warranted. Instead, I would uphold both the compensatory and punitive damages verdicts in full against both Schaeffler and FAG Bearings. Thus, I join in Sections II.B and II.C of the majority opinion, which upholds the compensatory damages verdict against FAG Bearings, but respectfully dissent from the rest of the opinion.
The majority deems it significant that the Supreme Court of Missouri once cited the U.S. Supreme Court for a general formulation of judicial estoppel.
See
Taylor v. State
,
In
Taylor
, the Supreme Court of Missouri counseled that judicial estoppel should apply "especially if"-not only if-"it be to the prejudice of the party who has acquiesced in the position formerly taken by him."
The District of Connecticut representation was made in a motion for summary judgment. See RAPP 634-36. It is referred to throughout as the "D. Conn. Motion."
Schaeffler's General Counsel at that time, Steven L. Crow, Esq., swore to these facts in an affidavit underlying the D. Conn. Motion. No party entered the underlying affidavit in the record here.
Reference
- Full Case Name
- Jodelle L. KIRK, Plaintiff-Appellee v. SCHAEFFLER GROUP USA, INC.; FAG Bearings, LLC, Defendants-Appellants
- Cited By
- 26 cases
- Status
- Published