Issue: Under Wyoming law, when can a parent corporation be held liable for the acts of its subsidiary corporation under the theory of direct liability?
|Area of Law:||Business Organizations & Contracts, Corporate & Securities|
|Keywords:||Parent corporation's liability; Subsidiary corporation's acts; Direct liability and derivative liability|
Generally, two theories exist to establish a parent corporation’s liability for its subsidiary corporation’s acts: direct liability and derivative liability. United States v. Bestfoods, 524 U.S. 51, 64-65 (1998). In Bestfoods the Supreme Court noted that direct liability may be imposed on the parent when:
the alleged wrong can seemingly be traced to the parent through the conduit of its own personnel and management and the parent is directly a participant in the wrong complained of. In such instances, the parent is directly liable for its own actions. [Even][a]part from corporation law principles, a shareholder, whether a natural person or a corporation, may be liable on the ground that such shareholder’s activity resulted in the liability. The fact that a corporate subsidiary happens to own a polluting facility operated by its parent does nothing, then, to displace the rule that the parent corporation is [itself] responsible for the wrongs committed by its agents in the course of its business.
Wyoming courts, state and federal, recognize and apply similar principles. Thus, in Loredo v. Solva America Inc., 2009 WY 93 ¶ 11, 212 P.3d 614, the Wyoming Supreme Court summarized Wyoming law in this area as follows:
We have adopted as the legal standard for the liability of a parent corporation the requirement that the parent assume some independent legal duty by retaining or exercising control over some aspect of the operation of a subsidiary corporation which was involved in the […]