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FANFAN v. BERWIND CORP.

August 17, 1973

Carlos FANFAN
v.
BERWIND CORPORATION


Broderick, District Judge.


The opinion of the court was delivered by: BRODERICK

Broderick, District Judge.

 This is an action based on the Jones Act and the law of unseaworthiness which is before the Court on the defendant's motion to dismiss and/or for summary judgment. The issue before the Court is whether a Puerto Rico seaman injured in the territorial waters of Puerto Rico while working for a Puerto Rico corporate employer insured pursuant to the Puerto Rico Workmen's Accident Compensation Act, 11 L.P.R.A. § 1 et seq., can pierce the corporate veil of his Puerto Rico employer and recover against the parent corporation of his employer for the alleged Jones Act negligence and unseaworthiness of a tug owned and operated by its Puerto Rico subsidiary.

 Both parties have filed affidavits and briefs in support of their respective positions on the motion. Since matters outside the pleadings were presented to the Court, we will treat the motion as one for summary judgment. See Rule 12(b), Federal Rules of Civil Procedure; Kauffman v. Moss, 420 F.2d 1270 (3rd Cir. 1970), cert. den. 400 U.S. 846, 91 S. Ct. 93, 27 L. Ed. 2d 84.

 The material facts, as to which there is no genuine issue, are as follows:

 Plaintiff, Carlos Fanfan (Fanfan), a native-born resident and citizen of Puerto Rico, is by profession an American Merchant seaman. Fanfan has sued the defendant, Berwind Corporation (Berwind), the sole shareholder of Fanfan's employer, Puerto Rico Lighterage Company (Lighterage), for the alleged Jones Act negligence and the alleged unseaworthiness of the Tug El Morro, arising out of an accident on November 22, 1971 in San Juan, Puerto Rico, while the tug was at dockside. At the time of the alleged accident, Fanfan was an employee of Lighterage, which owned and operated the Tug El Morro. Berwind is a Pennsylvania corporation with its principal place of business in Pennsylvania. Lighterage, which does not do business in the State of Pennsylvania, is an insured employer under the Puerto Rico Workmen's Accident Compensation Act, 11 L.P.R.A. § 1 et seq., and is subject to suit in the Courts of Puerto Rico as well as the United States District Court for the District of Puerto Rico. The president, corporate officers and personnel of Lighterage are all residents of Puerto Rico. Berwind's registered Service Mark, a square and a circle above the name "BERWIND," is similar to the logo employed by Lighterage on its ships and equipment. The stationery of Lighterage, in small type, contains a notation that it is a subsidiary of Berwind.

 The bases for Berwind's motion are that Berwind is not liable for the Jones Act negligence and unseaworthiness of the Tug owned and operated by its subsidiary, Lighterage, and that Fanfan's sole remedy is against his immediate employer, Lighterage, pursuant to the Puerto Rico Workmen's Accident Compensation Act, 11 L.P.R.A. § 1 et seq. Berwind relies on Fonseca v. Prann, 282 F.2d 153 (1st Cir. 1960), cert. den. 365 U.S. 860, 81 S. Ct. 826, 5 L. Ed. 2d 822 (1961). Fanfan claims that the decision of the First Circuit in Fonseca, supra, is incorrect on the ground that Puerto Rico seamen have the same rights as all other seamen under the Jones Act and the law of unseaworthiness. In addition, Fanfan claims that he is entitled to maintain an action against Berwind as the alleged real owner of the vessel, relying on Hellenic Lines v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970), Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), and Armit v. Loveland, 115 F.2d 308 (3d Cir. 1940).

 This Court had been presented with no reason which persuades it to differ with the decision of the First Circuit in Fonseca v. Prann, supra. A Puerto Rico seaman injured in the territorial waters of Puerto Rico while working for an employer insured pursuant to the Puerto Rico Workmen's Accident Compensation Act, 11 L.P.R.A. § 1 et seq., cannot sue his employer under the Jones Act or under the law of unseaworthiness. Fonseca v. Prann, supra. Therefore, Fanfan's exclusive remedy against Lighterage for the alleged accident within the territorial waters of Puerto Rico is the Puerto Rico Workmen's Accident Compensation Act, 11 L.P.R.A. § 1 et seq.

 The only issue remaining for decision is whether this Court should pierce the corporate veil of Lighterage, an insured employer under the Puerto Rico Workmen's Accident Compensation Law, 11 L.P.R.A. § 1 et seq., and hold Berwind, the parent company which is uninsured under the Puerto Rico statute, liable for the Jones Act negligence and the unseaworthiness of a tug owned and operated by its wholly-owned subsidiary, which allegedly caused injury to a Puerto Rico seaman within the territorial waters of Puerto Rico.

 As a general rule, a parent corporation is not liable for the acts of its subsidiary unless the subsidiary is a mere instrumentality of the parent. Steven v. Roscoe Turner Aeronautical Corporation, 324 F.2d 157, 160 (7th Cir. 1963). The "mere instrumentality" rule was applied by this Court in Whayne v. Transportation Management Service, 252 F. Supp. 573 (1966), aff'd 397 F.2d 287, cert. den. 393 U.S. 978, 89 S. Ct. 445, 21 L. Ed. 2d 438. In that case, a cook aboard a tug injured in a collision while in the employ of M.V. Shutter, Inc., the owner of the tug, attempted to recover from the parent corporation, Transportation Management Service, for the Jones Act negligence and unseaworthiness of the tug. Judge Van Dusen (now Circuit Judge) enumerated three elements that the plaintiff must prove to recover against a parent corporation under the "mere instrumentality" test:

 
(1) that the parent controls the subsidiary to such a degree that the subsidiary is a mere instrumentality;
 
(2) that the parent is perpetrating a fraud or wrong through its subsidiary (e.g., torts, violation of a statute, or stripping the subsidiary of its assets); and
 
(3) an injust loss or injury to the claimant, such as insolvency of the subsidiary. Id. at 577.

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