Alabama Workers' Comp Blawg

Alabama Supreme Court Declines to Extend Immunity to Employer’s Parent Company in Deadly Accident

 

The Alabama Supreme Court recently released its opinion addressing the issue of whether a parent company of an employer is immune from suit based on the exclusivity provisions of The Alabama Workers’ Compensation Act. In Ex parte Ultratec Special Effects, Inc., (hereinafter referred to as “Ultratec”) a Canadian lighting and special effects equipment manufacturing company, sought mandamus review of the Circuit Court of Madison County’s denial of its motion for summary judgment in two related cases involving the deaths of Aimee Cothran and Virginia Sanderson.

 

On February 6, 2015, Cothran and Sanderson were killed in an explosion while working at a pyrotechnic manufacturing facility owned and operated by Ultratec Special Effects (HSV)’s in Owens Crossroads, Alabama. Ultratec Special Effects (HSV) (hereinafter referred to as “Ultratec HSV”) is an Alabama corporation that is a wholly-owned subsidiary of Ultratec.

 

There was no dispute that the deaths of Cothran and Sanderson occurred in and arose out of their employment with Ultratec HSV. However, Ultratec asserted that the plaintiffs’ tort claims were barred under the exclusivity provisions of the Act, and that the plaintiffs were not entitled to damages beyond the benefits provided in the Act and paid by Ultratec HSV’s workers’ compensation insurer. Ultratec asserted that (1) Ultratec and Ultratec HSV jointly employed Cothran and Sanderson; (2) Ultratec HSV operated as a division of Ultratec; (3) Ultratec retained a right of control over Ultratec HSV’s employees, and (4) public policy strongly favors extending immunity to the parent company . The plaintiffs opposed Ultratec’s motions, asserting that Ultratec and Ultratec HSV were separate companies and were not joint employers. The trial court denied Ultratec’s motions for summary judgment, and Ultratec petitioned the Supreme Court to overrule the trial court. In a lengthy written opinion, the Supreme Court denied Ultratec’s petition, holding that there are genuine issues of material fact that precluded summary judgment, and that Ultratec failed to show that it had a clear right to an order directing the trial court to vacate its order denying summary judgment. The Supreme Court also rejected Ultratec’s public policy argument, stating that the issue was best left to the Alabama legislature.

 

The Supreme Court pointed out that Ultratec’s argument that it and Ultratec HSV were an “employer group” was misplaced,. The Court held that the exclusivity provisions provide immunity to groups that act as a service company for a self-insured employer, and that there was no evidence that Ultratec qualified as such a service company by providing assistance in administering Ultratec HSV’s workers’ compensation plan. The Court held that there were genuine issues of material fact as to whether Ultratec reserved a right of control over Ultratec HSV’s employees such that Ultratec would qualify as a joint employer or special employer. The Court rejected Ultratec’s argument that Ultratec HSV operated as a division of Ultratec, based on fact that Ultratec and Ultratec HSV were legally separate corporations based in different countries, and had filed separate corporate income tax returns. Finally, the Court noted that Ultratec’s directing officer had successfully petitioned OSHA to have Ultratec’s name removed as a respondent-employer in proceedings OSHA brought against both companies after the fatal accident.

 

Justices Wise and Mitchell recused, and Justices Shaw, Bryan, and Sellers dissented. Justice Sellers penned the dissenting opinion, in which he stated that the Legislature originally intended to consider companies like Ultratec and Ultratec HSV as a group of entities that employs workers, such that they would be treated as a single employer for purposes of workers’ compensation. The dissent noted that Ultratec owned 100% of the stock of Ultratec HSV, that the two companies were highly integrated, and even operated under the direction of a single officer. The dissent also pointed to the fact that the licenses and permits that allowed the manufacture of pyrotechnics in Owens Crossroads were issued by the State Fire Marshall and the Federal Bureau of Alcohol, Tobacco, Firearms & Explosives to Ultratec - not Ultratec HSV.

 

MY TWO CENTS

 

Generally speaking, the appellate courts will not hear a petition for writ of mandamus on the denial of a motion for summary judgment. One of the few exceptions is when the basis of the motion is immunity, as it was here. However, it is important to note that just because the Supreme Court denied Ultratec’s petition, there has not yet been a final determination. This holding merely means that the issue of whether Ultratec is immune from the plaintiffs’ claims will be decided by a jury. At the summary judgment stage of proceedings, the movant must show that there is no genuine issue of material fact, and that it is therefore entitled to judgment as a matter of law. The fact that Ultratec had taken inconsistent positions(filing separate tax returns and asserting that the two companies were separate in the OSHA investigation) muddied the waters and raised issues of fact that the trial court felt should be decided by a jury.

---

About the Author

This article was written by Charley M. Drummond, Esq. of Fish Nelson & Holden, LLC. Fish Nelson & Holden is a law firm located in Birmingham, Alabama dedicated to representing employers, self-insured employers, and insurance carriers in workers’ compensation cases and related liability matters. Drummond and his firm are members of The National Workers’ Compensation Defense Network (NWCDN). The NWCDN is a national and Canadian network of reputable law firms organized to provide employers and insurers access to the highest quality representation in workers’ compensation and related employer liability fields. If you have questions about this article or Alabama workers’ compensation issues in general, please feel free to contact the author at cdrummond@fishnelson.com or (205) 332-3414.