Court of Appeals of Texas, Fourth District, San Antonio

August 3, 2022, Delivered; August 3, 2022, Filed

No. 04-22-00004-CV

Reporter

2022 Tex. App. LEXIS 5453 *; 2022 WL 3046946

RATTLESNAKE RIDGE VENTURES, LLC, Appellant v. Alicia ORTIZ, Individually and as Next Friend of M.D.M. and A.D.M., Appellee

Prior History:  [*1] From the 229th Judicial District Court, Starr County, Texas. Trial Court No. DC-21-372. Honorable Baldemar Garza, Judge Presiding.

Disposition: REVERSED AND RENDERED.

Core Terms

special appearance, trial court, reinstatement, pleadings, limited liability company, personal jurisdiction, dissolved, long-arm, undisputed, argues, dissolution, privileges, resident, struck, trial court’s order, impairs, interferes, forfeited, annual, notice, forfeiture, defunct

Case Summary

Overview

HOLDINGS: [1]-Given that claimant failed to meet her burden to prove that the defendant’s actions were within the reach of Texas’s long-arm statute, and the undisputed jurisdictional evidence showed the defendant was not a resident of, or doing business in Texas, the trial court erred when it denied the defendant’s special appearance pursuant to Tex. R. Civ. P. 120a.

Outcome

Reversed and rendered.

LexisNexis® Headnotes

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

HN1  Standards of Review, De Novo Review

Generally, the issue of which state’s law applies is a question of law an appellate court resolves by reviewing the record de novo.

Business & Corporate Law > … > Dissolution & Receivership > Termination & Winding Up > Limited Survival

HN2  Termination & Winding Up, Limited Survival

The question of whether a foreign corporation continues in existence, after the surrender of its charter, for the purpose of pending suits is to be determined by the statutes and laws of the State in which the corporation was created.

Civil Procedure > … > Service of Process > Service of Summons > Issuance of Summons

HN3  Service of Summons, Issuance of Summons

In Texas, any party may file a special appearance for the purpose of objecting to the jurisdiction of the court over the person or property of the defendant on the ground that such party or property is not amenable to process issued by the courts of this State. Tex. R. Civ. P. 120a.

Civil Procedure > … > In Rem & Personal Jurisdiction > In Personam Actions > Challenges

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

HN4  In Personam Actions, Challenges

Whether a court can exercise personal jurisdiction over nonresident defendants is a question of law, and thus we review de novo the trial court’s determination of a special appearance.

Civil Procedure > Preliminary Considerations > Jurisdiction

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

HN5  Preliminary Considerations, Jurisdiction

When jurisdictional facts are undisputed, whether those facts establish jurisdiction is also a question of law.

Civil Procedure > … > In Rem & Personal Jurisdiction > In Personam Actions > Long Arm Jurisdiction

Torts > Procedural Matters > Commencement & Prosecution > In Personam Jurisdiction

HN6  In Personam Actions, Long Arm Jurisdiction

When a defendant challenges personal jurisdiction, Texas’s special-appearance jurisprudence imposes shifting burdens of proof on the plaintiff and the defendant. The plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas’s long-arm statute. If the plaintiff fails to plead facts bringing the defendant within reach of the long-arm statute, i.e., for a tort claim, that the defendant committed tortious acts in Texas, the defendant need only prove that it does not live in Texas to negate jurisdiction.

Civil Procedure > … > Jurisdiction > In Rem & Personal Jurisdiction > Constitutional Limits

Constitutional Law > … > Fundamental Rights > Procedural Due Process > Scope of Protection

Civil Procedure > … > In Rem & Personal Jurisdiction > In Personam Actions > Long Arm Jurisdiction

Civil Procedure > … > In Rem & Personal Jurisdiction > In Personam Actions > Due Process

HN7  In Rem & Personal Jurisdiction, Constitutional Limits

So long as the exercise of personal jurisdiction over the defendant comports with state and federal constitutional due process guarantees, Texas courts may exercise personal jurisdiction over a nonresident if the Texas long-arm statute authorizes the exercise of jurisdiction.

Civil Procedure > … > In Rem & Personal Jurisdiction > In Personam Actions > Long Arm Jurisdiction

Torts > Procedural Matters > Commencement & Prosecution > In Personam Jurisdiction

HN8  In Personam Actions, Long Arm Jurisdiction

The Texas long-arm statute allows the exercise of personal jurisdiction over a nonresident defendant who commits a tort in whole or in part in this state.

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion

Governments > Courts > Authority to Adjudicate

Civil Procedure > Pleading & Practice > Motion Practice

HN9  Standards of Review, Abuse of Discretion

An appellate court reviews a trial court’s ruling on a motion to show authority for an abuse of discretion.

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion

HN10  Standards of Review, Abuse of Discretion

A trial court abuses its discretion when it misinterprets or misapplies the law.

Civil Procedure > Appeals > Appellate Jurisdiction > Interlocutory Orders

Civil Procedure > Appeals > Appellate Jurisdiction > Lower Court Jurisdiction

HN11  Appellate Jurisdiction, Interlocutory Orders

The relevant portion of Tex. R. App. P. 29.5, which applies while an appeal from an interlocutory order is pending, reads as follows, the trial court must not make an order that interferes with or impairs the jurisdiction of the appellate court or effectiveness of any relief sought or that may be granted on appeal. Tex. R. App. P. 29.5(b).

Civil Procedure > Dismissal > Involuntary Dismissals > Failure to Prosecute

Civil Procedure > Pleading & Practice > Pleadings

HN12  Involuntary Dismissals, Failure to Prosecute

Under Tex. R. Civ. P. 12, the trial court may only strike a pleading when no authorized person appears to prosecute or defend the pleading. While Rule 12 requires the trial court to dismiss counsel who fails to show authority to prosecute or defend the proceeding, pleadings filed by any such counsel are not nullified and may only be stricken if no person who is authorized to prosecute or defend appears.

Business & Corporate Law > Limited Liability Companies > Management Duties & Liabilities

HN13  Limited Liability Companies, Management Duties & Liabilities

Texas jurisprudence looks to the law of the state in which the limited liability company was created to determine the entity’s status.

Counsel: For Alicia Ortiz, Appellee: Omar Escobar Jr., Carlos Omar Escobar.

For Rattlesnake Ridge Ventures, LLC, Appellant: Vincent P. Vasquez, Larry J. Goldman, Nissa M. Dunn.

Judges: Opinion by: Patricia O. Alvarez, Justice. Sitting: Patricia O. Alvarez, Justice, Luz Elena D. Chapa, Justice, Lori I. Valenzuela, Justice.

Opinion by: Patricia O. Alvarez

Opinion

MEMORANDUM OPINION

REVERSED AND RENDERED

This is an appeal from the trial court’s order denying the defendant’s special appearance, granting the plaintiff’s motion to show authority, and striking the defendant’s special appearance and answer pleadings.

Because the plaintiff failed to meet her burden to prove that the defendant’s actions were within the reach of Texas’s long-arm statute, and the undisputed jurisdictional evidence shows the defendant was not a resident of, or doing business in, Texas, the trial court erred when it denied the defendant’s special appearance. Accordingly, we reverse the trial court’s order denying the defendant’s special appearance, we vacate the trial court’s order granting the plaintiff’s [*2]  motion to show authority and striking the defendant’s pleadings, and we render judgment dismissing the plaintiff’s claims against the defendant for want of personal jurisdiction.

Background

The underlying case arose from a traffic accident in Minnesota.

A. Traffic Accident

On July 29, 2021, Ramon Arturo Moya Jr., a resident of Starr County, Texas, was driving eastbound on Interstate Highway 90, near Austin, Minnesota. The pickup truck Moya was driving was owned by A&L Express LLC, a Texas limited liability company. In the pickup truck with Moya were Melanie Diane Moya and Angel Darian Moya, minor children, riding as passengers.

On the same highway, Danny Ralph Hoffman, a resident of another state,¹ was driving a semi-tractor trailer owned by Rattlesnake Ridge Ventures, LLC, a Wyoming limited liability company. When Moya braked to avoid hitting another vehicle, Hoffman’s tractor trailer rear-ended the pickup truck Moya was driving. Neither of the children in the pickup truck were wearing seatbelts at the time of the accident, and both were injured.

B. The Lawsuit

On August 19, 2021, Alicia Ortiz, a resident of Starr County, Texas, individually and as next friend of the two minor children, sued [*3]  Moya. Ortiz later added A&L Express LLC; Rattlesnake Ridge Ventures, LLC (RRV); and Hoffman as defendants.

Hoffman is the registered agent for RRV. On October 14, 2021, RRV and Hoffman filed a special appearance.

After a hearing, the trial court granted Hoffman’s special appearance, but it denied RRV’s special appearance.

When Ortiz sued RRV, it had not filed its 2019 annual report, and it had been administratively dissolved by the Wyoming Secretary of State.

The trial court granted Ortiz’s motion to show authority, and it struck RRV’s special appearance and answer pleadings.

On January 3, 2022, RRV filed its notice of accelerated appeal. Subsequently, it moved this court to review the trial court’s January 10, 2022 order which granted Ortiz’s motion to show authority and struck RRV’s special appearance and answer pleadings. In its brief, RRV argues the trial court erred by denying its special appearance.

Limited Liability Company Status

Before we address RRV’s special appearance, we address the prerequisite issue of RRV’s status as a legal entity at the time it filed its special appearance.

A. Parties’ Arguments

Ortiz, citing Wyoming and Texas law, contends that RRV’s special appearance pleading [*4]  was a legal nullity because, when it filed its special appearance, RRV had been dissolved and its rights and privileges forfeited. She argues that RRV’s attorneys had no authority to file RRV’s special appearance and answer. Thus, when RRV filed its jury demand and later appeared at the special appearance hearing, its actions constituted general appearances and subjected RRV to the trial court’s jurisdiction.

RRV argues that under Wyoming law, when its privileges were reinstated, the reinstatement related back to the date of dissolution as if the LLC had never been dissolved, and its attorneys acted with its authority when they filed its special appearance.

B. Established Facts

The following facts pertaining to RRV’s dissolution and reinstatement are undisputed or conclusively established.

RRV is a limited liability company organized under the laws of Wyoming in 2018. On February 8, 2020, RRV was administratively dissolved for failure to file its 2019 annual report and pay its annual license tax.

The accident involving RRV’s vehicle occurred on July 29, 2021. Ortiz filed suit on August 19, 2021. And RRV filed its special appearance on October 14, 2021. During this period, for all three [*5]  dates, RRV’s rights and privileges as a limited liability company had been administratively dissolved.

On November 22, 2021, after it filed its annual reports and paid the applicable fees, RRV’s certificate of dissolution was cancelled, and RRV’s privileges were reinstated.

C. LLC Dissolution, Reinstatement

A crucial question is what effect RRV’s dissolution and reinstatement had on its special appearance in the underlying case.

1. Applicable Law

HN1 “Generally, the issue of which state’s law applies is a question of law we resolve by reviewing the record de novo.” Compaq Computer Corp. v. Lapray, 135 S.W.3d 657, 672 (Tex. 2004); accord Hughes Wood Products, Inc. v. Wagner, 18 S.W.3d 202, 204 (Tex. 2000).

HN2 “The question of whether a foreign corporation continues in existence, after the surrender of its charter, for the purpose of pending suits is to be determined by the statutes and laws of the State in which the corporation was created.” Miller Management Co. v. State, 140 Tex. 370, 167 S.W.2d 728, 730 (Tex. 1943); accord Baker Hughes Inc. v. Brooks, 405 S.W.3d 246, 250 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).

Given RRV was created under the laws of Wyoming, we look to its statute governing administrative forfeiture of authority:

If any limited liability company has failed to pay the fee required by W.S. 17-29-210 or any penalties imposed under W.S. 17-28-109, it shall be deemed to be transacting business within this state without authority and to have forfeited any franchises, rights or privileges acquired under [*6]  the laws thereof. The forfeiture shall be made effective in the following manner. The secretary of state shall provide notice to the limited liability company at its last known mailing address by first class mail or by electronic means. Unless compliance is made within sixty (60) days of the date of notice the limited liability company shall be deemed defunct and to have forfeited its articles of organization or certificate of authority acquired under the laws of this state. Provided, that any defunct limited liability company may at any time within two (2) years after the forfeiture of its articles of organization of certificate of authority, be revived and reinstated by paying the amount of the delinquent fees. When the reinstatement is effective, it relates back to and takes effect as of the effective date deemed defunct pursuant to this subsection and the limited liability company resumes carrying on its business as if it had never been deemed defunct.

Wyo. Stat. Ann. § 17-29-705(b) (emphasis added); accord Mayflower Rest. Co. v. Griego, 741 P.2d 1106, 1112 (Wyo. 1987) (“We conclude therefore, that the reinstatement of a repealed corporate charter relates back to the date of forfeiture and validates acts of the corporation in the interim.”).

2. Effect of LLC Dissolution, [*7]  Reinstatement

On this choice of law question, we conclude that Wyoming law applies. See Miller Mgmt., 167 S.W.2d at 730; Baker Hughes, 405 S.W.3d at 250.

Under the applicable Wyoming statute, when RRV failed to file its 2019 annual report and pay its annual license tax, on February 8, 2020, it “forfeited any franchises, rights or privileges acquired under [Wyoming’s] laws” including its existence as a limited liability company. See Wyo. Stat. Ann. § 17-29-705(b); Mayflower Rest., 741 P.2d at 1112. Thus, when it filed its special appearance on October 14, 2021, it did so in an administratively dissolved status. See Wyo. Stat. Ann. § 17-29-705(b).

However, when it was reinstated on November 22, 2021, its reinstatement related back to February 8, 2020, and its reinstatement allowed RRV to “resume[] carrying on its business as if it had never been deemed defunct.” See id.; Mayflower Rest., 741 P.2d at 1112; cf. Baker Hughes, 405 S.W.3d at 250. More specifically, under Wyoming law, RRV’s reinstatement validated its special appearance and the other pleadings it filed during the period between its dissolution and reinstatement. See Mayflower Rest., 741 P.2d at 1112 (concluding that reinstatement “validates acts of the corporation in the interim”).

Accordingly, RRV’s special appearance and its other pleadings filed before its November 22, 2021 reinstatement have the same legal effects as if RRV had never been administratively dissolved. See [*8]  Wyo. Stat. Ann. § 17-29-705(b); Miller Mgmt., 167 S.W.2d at 730; Mayflower Rest., 741 P.2d at 1112.

We turn now to RRV’s first issue.

Special Appearance

In its first issue, RRV argues that the trial court erred when it denied RRV’s special appearance. We begin by reciting the standard of review and the applicable law.

A. Standard of Review

HN3 In Texas, any party may file a special appearance “for the purpose of objecting to the jurisdiction of the court over the person or property of the defendant on the ground that such party or property is not amenable to process issued by the courts of this State.” Tex. R. Civ. P. 120a; accord Hernandez v. Ebrom, 289 S.W.3d 316, 327 (Tex. 2009).

HN4 “Whether a court can exercise personal jurisdiction over nonresident defendants is a question of law, and thus we review de novo the trial court’s determination of a special appearance.” Kelly v. General Interior Constr., Inc., 301 S.W.3d 653, 657 (Tex. 2010); accord BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).

HN5 “When jurisdictional facts are undisputed, whether those facts establish jurisdiction is [also] a question of law.” Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018) (citing Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004)).

B. Shifting Burdens of Proof

HN6 When a defendant challenges personal jurisdiction, Texas’s special-appearance jurisprudence imposes shifting burdens of proof on the plaintiff and the defendant. Old Republic, 549 S.W.3d at 559 (citing Kelly, 301 S.W.3d at 658). “The plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas’s long-arm statute.” Id. [*9] ; accord Kelly, 301 S.W.3d at 658. “If the plaintiff fails to plead facts bringing the defendant within reach of the long-arm statute (i.e., for a tort claim, that the defendant committed tortious acts in Texas), the defendant need only prove that it does not live in Texas to negate jurisdiction.” Kelly, 301 S.W.3d at 658-59 (citing Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982)).

C. Personal Jurisdiction

HN7 So long as the exercise of personal jurisdiction over the defendant comports with state and federal constitutional due process guarantees, “Texas courts may exercise personal jurisdiction over a nonresident if ‘. . . the Texas long-arm statute authorizes the exercise of jurisdiction.'” Old Republic, 549 S.W.3d at 558 (quoting Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 149 (Tex. 2013)). See generally Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041-.045 (addressing long-arm jurisdiction in a business transaction or tort suit).

HN8 “The long-arm statute allows the exercise of personal jurisdiction over a nonresident defendant who ‘commits a tort in whole or in part in this state.'” Moncrief Oil, 414 S.W.3d at 149 (quoting Tex. Civ. Prac. & Rem. Code Ann. § 17.042(2)).

D. Ortiz’s Burden

Ortiz bore the initial burden to prove that RRV’s actions were “within the reach of Texas’s long-arm statute.” See Old Republic, 549 S.W.3d at 559; Kelly, 301 S.W.3d at 658.

In her pleadings, Ortiz alleges that Hoffman was negligent in operating the vehicle owned by RRV, and under the doctrine of respondeat superior, RRV was liable for Hoffman’s negligence. Notably, the jurisdictional [*10]  facts Ortiz pled are undisputed. Ortiz pled that the accident occurred near Austin, Minnesota; Rattlesnake Ridge Ventures, LLC is a limited liability company organized under the laws of Wyoming; and Hoffman is not a Texas resident.

Ortiz’s pleadings do not allege that RRV was subject to personal jurisdiction in Texas on any other basis besides Hoffman’s alleged tortious conduct. Cf. Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (“Acts Constituting Business in This State”). Considering the undisputed jurisdictional facts pled by Ortiz, we conclude they do not bring RRV within the reach of the long-arm statute. See Old Republic, 549 S.W.3d at 559; Kelly, 301 S.W.3d at 658.

E. RRV’s Burden

Because Ortiz failed to plead facts that would bring RRV within the reach of the long-arm statute, the burden shifted to RRV to prove that it is not a Texas resident. See Kelly, 301 S.W.3d at 658-59. Ortiz’s pleadings allege that RRV is a Wyoming limited liability company, and Hoffman’s affidavit and the documents from the Wyoming Secretary of State confirm that fact. Further, as we have already explained, when RRV remedied its administrative dissolution, its reinstatement related back to February 8, 2020—which was before it filed its special appearance on October 14, 2021. See Wyo. Stat. Ann. § 17-29-705(b); Miller Mgmt., 167 S.W.2d at 730 (“The question of whether a foreign corporation [*11]  continues in existence, after the surrender of its charter, for the purpose of pending suits is to be determined by the statutes and laws of the State in which the corporation was created.”).

F. No Personal Jurisdiction Over RRV

The undisputed jurisdictional facts conclusively establish that RRV was not a Texas resident, which negated the trial court’s personal jurisdiction over RRV. See Kelly, 301 S.W.3d at 658-59. Further, when RRV filed its jury demand and later appeared at the special appearance hearing, its actions taken after it filed its special appearance did not constitute general appearances. See Tex. R. Civ. P. 120a; Dawson-Austin v. Austin, 968 S.W.2d 319, 322 (Tex. 1998). Therefore, the trial court erred when it denied RRV’s special appearance.

We sustain RRV’s first issue.

Motion to Show Authority

In its second issue, RRV argues that the trial court erred when it granted Ortiz’s motion to show authority and struck RRV’s special appearance and answer pleadings.

A. Additional Background

On December 9, 2021, Ortiz filed a motion to show authority and moved the trial court to strike RRV’s special appearance and answer pleadings. See Tex. R. Civ. P. 12 (“Attorney to Show Authority”); In re Murrin Bros. 1885, Ltd., 603 S.W.3d 53, 61 (Tex. 2019) (orig. proceeding). Ortiz’s motion argued that because RRV was an administratively dissolved entity when it filed its [*12]  special appearance, the special appearance pleading was a legal nullity, and even if RRV’s rights had been reinstated, trial counsel had no authority to file the special appearance on RRV’s behalf while RRV was in its administratively dissolved status.

RRV filed its notice of appeal on January 3, 3022.

Three days later, at the hearing on Ortiz’s motion to show authority, Ortiz stated the undisputed facts that on February 8, 2020, RRV was administratively dissolved; and on November 22, 2021, RRV was reinstated. Notably, Ortiz did not challenge RRV’s lawyers’ authority to appear on its behalf in that hearing or any time after November 22, 2021. The only basis Ortiz raised to challenge RRV’s counsel’s authority was their alleged lack of authority to file the special appearance on RRV’s behalf on October 14, 2021.

On January 10, 2022, the trial court granted Ortiz’s motion to show authority, and it struck RRV’s special appearance and answer pleadings.

Subsequently, RRV moved this court to review the trial court’s January 10, 2022 order rendered after RRV filed its notice of appeal.

B. Parties’ Arguments

On appeal, RRV argues that the trial court’s January 10, 2022 order violated Appellate Rule 29.5 when it granted [*13]  Ortiz’s motion to show authority because the trial court was barred from making an order that “interferes with or impairs the jurisdiction of the appellate court or effectiveness of any relief sought or that may be granted on appeal.” See Tex. R. App. P. 29.5(b).

RRV also argues the trial court violated Civil Rule 12 when it struck its pleadings because its authorized counsel appeared at the motion to show authority hearing. See Tex. R. Civ. P. 12.

Finally, RRV argues that, under Appellate Rule 29.6(a)(2), we may review the trial court’s January 10, 2022 order because it “interferes with or impairs the effectiveness of the relief sought or that may be granted on appeal.” See Tex. R. App. P. 29.6(a)(2).

Ortiz contends that Civil Rule 12 must be an exception to Appellate Rule 29.6 because otherwise, “no party could ever obtain relief under Texas Rule of Civil Procedure 12, attacking an attorney[‘s] authority to file a Special Appearance, when a Special Appearance, is filed.”

C. Standard of Review

HN9 “We review a trial court’s ruling on a motion to show authority for an abuse of discretion.” R.H. v. Smith, 339 S.W.3d 756, 762 (Tex. App.—Dallas 2011, no pet.) (citing Urbish v. 127th Judicial Dist. Court, 708 S.W.2d 429, 432 (Tex. 1986)); accord In re Guardianship of Benavides, 403 S.W.3d 370, 373 (Tex. App.—San Antonio 2013, pet. denied).

HN10 “A trial court abuses its discretion when it misinterprets or misapplies the law.” In re Millwork, 631 S.W.3d 706, 711 (Tex. 2021) (orig. proceeding) (per curiam); accord In re Guardianship of Benavides, 403 S.W.3d at 373-74.

D. Authority to Review Further Orders

On January 10, 2022, after RRV filed its notice of appeal, the trial court signed an order [*14]  granting Ortiz’s motion to show authority. In its order, the trial court also struck RRV’s special appearance and answer pleadings.

Subsequently, citing Appellate Rule 29.6, RRV moved this court to review the trial court’s January 10, 2022 order. See Tex. R. App. P. 29.6.

Under Appellate Rule 29.6, while we are considering RRV’s appeal from the trial court’s order denying its special appearance, see Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (interlocutory appeal), we may review the trial court’s January 10, 2022 order that RRV argues interferes with or impairs our appellate jurisdiction, see Tex. R. App. P. 29.6; Better Bus. Bureau of Metro. Hous., Inc. v. John Moore Servs., Inc., 500 S.W.3d 26, 38 (Tex. App.—Houston [1st Dist.] 2016, pet. denied).

We grant RRV’s motion to review the trial court’s January 10, 2022 order, and we turn now to whether the order was prohibited by the appellate or civil rules. See Tex. R. App. P. 29.6.

E. Appellate Rule 29.5

HN11 The relevant portion of Appellate Rule 29.5, which applies “[w]hile an appeal from an interlocutory order is pending,” reads as follows: “the [trial] court must not make an order that . . . interferes with or impairs the jurisdiction of the appellate court or effectiveness of any relief sought or that may be granted on appeal.” Tex. R. App. P. 29.5(b); accord Better Bus. Bureau of Metro. Hous., 500 S.W.3d at 38; Garcia v. Marichalar, 185 S.W.3d 70, 72 (Tex. App.—San Antonio 2005, no pet.). Thus, after RRV initiated its interlocutory appeal, the trial court was prohibited from making an order that interfered with or impaired this court’s jurisdiction or the effectiveness of RRV’s requested appellate [*15]  relief. See Tex. R. App. P. 29.5; Garcia, 185 S.W.3d at 72.

RRV’s requested appellate relief includes granting its special appearance and dismissing Ortiz’s claims, but the trial court’s January 10, 2022 order striking RRV’s special appearance pleading would nullify that pleading and remove the basis for this court to grant RRV’s special appearance. Cf. Garcia, 185 S.W.3d at 72.

Therefore, because the trial court’s January 10, 2022 order interferes with or impairs this court’s ability to grant RRV’s requested appellate relief, the order was prohibited. See Tex. R. App. P. 29.5; Garcia, 185 S.W.3d at 72, 74.

F. Civil Rule 12

Even assuming the trial court’s order striking RRV’s special appearance and answer pleadings did not interfere with or impair this court’s jurisdiction or RRV’s requested appellate relief, the trial court also lacked authority to strike the pleadings under Civil Rule 12. See Tex. R. Civ. P. 12.

HN12 Under Civil Rule 12, the trial court may only strike a pleading when no authorized person appears to prosecute or defend the pleading. See Kinder Morgan SACROC, LP v. Scurry Cty., 622 S.W.3d 835, 846 (Tex. 2021) (“While Rule 12 requires the trial court to dismiss counsel who fails to show authority to prosecute or defend the proceeding, pleadings filed by any such counsel are not nullified and may only be stricken ‘if no person who is authorized to prosecute or defend appears.'” (quoting Tex. R. Civ. P. 12)).

The record conclusively establishes [*16]  that RRV’s attorney appeared at the December 1, 2021 hearing on RRV’s special appearance, and he defended its special appearance pleading. RRV’s attorney also appeared at the January 6, 2022 hearing on Ortiz’s motion to show authority, and he again defended its special appearance pleading.

The trial court had no authority to strike RRV’s special appearance and answer pleadings under Civil Rule 12. See Tex. R. Civ. P. 12; Kinder Morgan SACROC, 622 S.W.3d at 846.

G. Trial Court’s Order Prohibited

When it granted Ortiz’s motion to show authority and struck RRV’s special appearance and answer pleadings, the trial court misapplied the civil and appellate rules. See Tex. R. App. P. 29.5; Tex. R. Civ. P. 12; Garcia, 185 S.W.3d at 72. In doing so, it abused its discretion. See In re Millwork, 631 S.W.3d at 711.

We sustain RRV’s second issue.

Conclusion

It is undisputed that RRV’s rights and privileges as a Wyoming LLC had been forfeited when it filed its special appearance in the trial court. HN13 However, Texas jurisprudence looks to the law of the state in which the LLC was created to determine the entity’s status. Under Wyoming law, when RRV was reinstated, its reinstatement related back to the date its privileges were forfeited as if the forfeiture never occurred. Thus, because Ortiz failed to meet her burden to prove that RRV’s actions were within the reach [*17]  of Texas’s long-arm statute, and the undisputed jurisdictional evidence shows RRV was not a resident of, or doing business in, Texas, the trial court erred when it denied RRV’s special appearance.

Further, when it granted Ortiz’s motion to show authority and struck RRV’s special appearance and answer pleadings, the trial court abused its discretion.

Accordingly, we reverse the trial court’s order denying RRV’s special appearance, we vacate the order granting Ortiz’s motion to show authority and striking RRV’s special appearance and answer pleadings, and we render judgment dismissing Ortiz’s claims against RRV for want of personal jurisdiction.

Patricia O. Alvarez, Justice

End of Document

---

¹ Ortiz’s pleadings show Hoffman’s residence as Minnesota, but RRV’s attorneys denied that he lives in Minnesota. There was no evidence that Hoffman resides in Texas.

United States District Court for the Northern District of Ohio, Western Division

July 25, 2022, Filed

Case No. 3:19-CV-01516

Reporter

2022 U.S. Dist. LEXIS 131859 *; 2022 WL 2916868

Madera, et al., Plaintiffs v. KTC Express, Inc., et al., Defendants.

Prior History: Madera v. KTC Express, Inc., 2021 U.S. Dist. LEXIS 61949, 2021 WL 1206437 (N.D. Ohio, Mar. 31, 2021)

Core Terms

pgID, summary judgment motion, plaintiffs’, negligence per se, piercing, training, punitive damages, summary judgment, corporate veil, foreseeable, driver, truck, prong, supervision, driving, veil, regulations, proximate, damages, issue of material fact, negligent hiring, injuries, factors, vicarious liability, alter ego, records, hiring, respondeat superior, statutory violation, personally liable

Counsel:  [*1] For James R. Madera, Joni Madera, Plaintiffs: Michael B. Pasternak, Beachwood, OH; Jeffrey W. Saks, Saks Law Office, Beachwood, OH.

For KTC Express, Inc., Inderpal S. Dhillon, Defendants, Cross Defendants: James E. Siepler, Law Office of Craig A. Holtz, Glendale; Joseph F. Nicholas, Jr., Mazanec, Raskin & Ryder, Cleveland, OH; Kirk E. Roman, Law Offices of Kirk E. Roman, Richfield, OH; Robert B. Sutherland, Richfield, OH.

For Ohio Department of Medicaid, Defendant: Marshal M. Pitchford, DiCaudo Pitchford & Yoder, Akron, OH.

For John Does, 1-10 inclusive, Defendants whose names are currently unknown, Defendant, Cross Defendant: Joseph F. Nicholas, Jr., Mazanec, Raskin & Ryder, Cleveland, OH.

For KTC Logistics LLC, Defendant, Cross Defendant: David R. Hudson, Reminger Co. – Toledo, Toledo, OH.

For Irwinjit Singh, Defendant: James E. Siepler, Law Office of Craig A. Holtz, Glendale; Kirk E. Roman, Law Offices of Kirk E. Roman, Richfield, OH; Robert B. Sutherland, Richfield, OH.

For Ohio Department of Medicaid, Cross-Claimant: Marshal M. Pitchford, DiCaudo Pitchford & Yoder, Akron, OH; Joseph M. McCandlish, Office of the Attorney General – Consumer Frauds & Crimes, State of Ohio, Columbus, OH. [*2] 

For Inderpal S. Dhillon, Irwinjit Singh, Cross Defendants: James E. Siepler, Law Office of Craig A. Holtz, Glendale; Kirk E. Roman, Law Offices of Kirk E. Roman, Richfield, OH; Robert B. Sutherland, Richfield, OH.

Judges: James G. Carr, Senior United States District Judge.

Opinion by: James G. Carr

Opinion

ORDER

This is a personal injury action resulting from a May 25, 2018 collision between a car and a semi-truck.

Defendant Inderpal S. Dhillon was driving the truck in the course of his employment with defendant KTC Express, Inc. (Express) when he hit plaintiff James Madera’s vehicle. Mr. Madera alleges that he suffered serious injuries from this accident. He and his wife, Joni, have sued Dhillon, Express, Irwinjit Singh, the owner of now defunct Express, and Dhillon’s present company, KTC Logistics LLC (Logistics).

Mr. Madera asserts claims for negligence, statutory violations, respondeat superior/vicarious liability, strict liability, negligent hiring, training and/or supervision, and punitive damages against some or all of those defendants. Mrs. Madera seeks compensation for loss of consortium.

Pending are the parties’ motions for summary judgment. (Docs. 66, 77, 78, 79). For the reasons discussed below, I deny plaintiffs’ [*3]  motion in part and grant it in part, and I deny defendants’ motions.

Background

1. KTC Express

Defendant Singh founded the company Express in 2014. (Doc. 62-1, pgID 954). He and his father, Inderpal Dhillon, were the only two employees. (Doc. 61-1, pgID 651). They worked out of Dhillon’s house in Bakersfield, California. (Id.).

Express was a trucking company. It owned two semi-trucks and two trailers. (Id.). Defendant Singh operated the business and drove trucks for Express, while defendant Dhillon simply drove for the company. (Id., pgID 652).

2. Defendant Dhillon’s Qualifications

To obtain the training necessary to receive his Commercial Driver’s License (CDL), defendant Dhillon testified that he attended Akal Driving School in Bakersfield and completed both coursework and on-the-road training there. (Id., pgID 655). According to plaintiffs, however, there is no record of defendant Dhillon having attended this driving school. (Id.).

Defendant Dhillon obtained his CDL in 2014 from the Bakersfield Department of Motor Vehicles, although plaintiffs question its validity. (Id., pgID 656-57; Doc. 66-1, pgID 1164).¹

3. The Accident

According to Mr. Madera, he was traveling southbound on I-71 in [*4]  the middle lane, and defendant Dhillon was driving in the left lane. (Doc. 60-1, pgID 600). Mr. Madera recalled seeing a large truck on his left hit him and cause his vehicle to spin out of control. (Id.). After his vehicle came to a stop, Mr. Madera woke up to someone, whom he later identified as defendant Dhillon, banging on his car window. (Id.). He recalls that defendant Dhillon offered him water, but he could not understand Dhillon, as he was not speaking English. (Id.). Mr. Madera then recalls a truck driving away. (Id.). Shortly thereafter, Mr. Madera called 911. (Id.). Someone handed plaintiff a piece of paper with a license plate number. (Id.). Using that number, law enforcement officers were able to connect the truck to Express.

Defendant Dhillon recalls the accident quite differently. Dhillon testified that he was in the middle lane, and Mr. Madera was in the left lane. (Doc. 61-1, pgID 673). He claims that Mr. Madera suddenly merged in front of him to avoid a deer, causing Dhillon to veer off to the left in an attempt to avoid a collision. (Id.). According to Dhillon, it was then that he hit Mr. Madera’s car with the right front of his truck. (Id.).

After the impact, defendant [*5]  Dhillon testified that both he and Mr. Madera got out of their vehicles. (Id. at 662, 673). He then offered Mr. Madera some water and allegedly suggested they exchange information. (Id. at 662). He claims that Mr. Madera told him “No. It’s just a minor loss. I’ll go to my own insurance and take care.” (Id.). Dhillon further testified that Mr. Madera told him he was not injured, there was no damage to the vehicle, and he did not need help. (Doc. 61-1, pgID 662). Dhillon recalls that he stayed at the scene for 15-20 minutes. (Id.). He departed before the police and paramedics arrived. (Id.).

Once the paramedics arrived, they transported Mr. Madera to the hospital. (Doc. 60-1, pgID 523-24). Mr. Madera claims that as a result of the accident, he suffered a concussion and continues to experience headaches, memory loss, difficulty speaking, trouble with his vision, numbness, and pain in his back and neck. (Id., pgID 581-86).

4. KTC Logistics

After the accident, Express’s insurer canceled its policy. (Doc. 62-1, pgID 957). Once that occurred, Express fired defendant Dhillon. (Doc. 61-1, pgID 668).

On November 15, 2018, Dhillon created Logistics, which, like Express, was a trucking business. ( [*6] Id.). Dhillon is Logistics’ only driver. (Id., pgID 657). As before, the trucking business operates out of the home that Dhillon shares with Singh in Bakersfield. (Id., pgID 651, 678). Logistics does not own any trucks or trailers; Dhillon leases one truck that he operates. (Id., pgID 680).

In the months following its formation, Logistics transported loads for Express as a sub-hauler. (Doc. 64-1, pgID 1099).

Not long after Logistics began operating, in July 2019, Singh decided to close Express. (Doc. 62-1, pgID 958). He testified that he did so because of “the consequences of [the] accident,” which included the higher insurance rates he had to pay because the previous insurer canceled his policy. (Id., pgID 957). On closing the business, Singh destroyed all of Express’s records, including records of driving violations, inspections, and tax documents. (Id.; Doc. 64-1, pgID 1099). He also paid Dhillon $150,000. (Id.). Singh claims those payments compensated Logistic for loads it had transported for Express. (Id.).

Defendant Singh maintains that he was not at all involved in the operations of Logistics and did not help his father set up the company or make business decisions. (Doc. 62-1, [*7]  pgID 963).

Standard of Review

Summary judgment is appropriate under Federal Rule of Civil Procedure 56 where the opposing party fails to show the existence of an essential element for which that party bears the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

The movant initially must show the absence of a genuine issue of material fact. Id. at 323. “[I]f the moving party seeks summary judgment on an issue for which it does not bear the burden of proof at trial, the moving party may meet its initial burden by showing that ‘there is an absence of evidence to support the nonmoving party’s case.'” Lindsey v. Whirlpool Corp., 295 F. App’x 758, 764 (6th Cir. 2008) (quoting Celotex, supra, 477 U.S. at 325).

Once the movant carries its burden, the burden shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Rule 56 “requires the nonmoving party to go beyond the [unverified] pleadings” and submit admissible evidence supporting its position. Celotex, supra, 477 U.S. at 324.

In evaluating counter motions for summary judgment, I “must evaluate each party’s motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 592 (6th Cir. 2001). Summary judgment is proper where “in light of the evidence viewed in the light most favorable to the [nonmovant], no reasonable juror could fail to [*8]  return a verdict for the [movant].” Benison v. Ross, 765 F.3d 649, 658 (6th Cir. 2014).

Discussion

The following claims are at issue in the parties’ motions for summary judgment: 1) negligence, 2) statutory violations/negligence per se, 3) respondeat superior/vicarious liability, 4) strict liability, 5) negligent hiring, training and/or supervision, and 6) punitive damages. The parties additionally disagree as to whether I should pierce the corporate veil to 1) hold defendants Dhillon and Singh individually liable for the actions of Express and 2) hold Logistics liable for the actions of Express as its alter ego.

1. Negligence

Plaintiffs bring their claim for negligence against only defendant Dhillon. They argue that Dhillon has conceded that he was negligent in causing the accident, and therefore, I should grant summary judgment in plaintiffs’ favor.

Defendant Dhillon responds that he only conceded the duty and breach aspects of the negligence analysis – he did not concede causation and damages. Therefore, I should deny summary judgment and send this claim to the jury.

In Ohio, the elements of a negligence claim are “(1) the existence of a legal duty, (2) the defendant’s breach of that duty, and (3) injury that is the proximate cause of [*9]  the defendant’s breach.” Wallace v. Ohio Dep’t of Com., 96 Ohio St. 3d 266, 274, 2002- Ohio 4210, 773 N.E.2d 1018 (2002). In other words, the plaintiff must show duty, breach, proximate causation, and injury/damages.

The question here, then, is whether there is a genuine issue of material fact as to proximate causation and damages.

There is no question that defendant Dhillon caused the accident at issue in this case. While he attempts to deflect blame to Mr. Madera in his deposition, claiming that Mr. Madera abruptly merged in front of him, Dhillon’s attorneys have declined to advance that version of events. In an email dated August 16, 2021, Dhillon’s attorney, Mr. Sutherland, confirmed that “Defendants will not argue negligence on the part of Plaintiff for causing the 5/25/18 accident.” (Doc. 66-2, pgID 1194). Therefore, defendant Dhillon accepts that the accident was his fault.

Dhillon has not, however, conceded that the accident caused the injuries of which Mr. Madera complains. He further argues that plaintiffs have failed to present evidence, specifically expert testimony, on that issue.

Plaintiffs have, however, presented expert testimony as to causation. They submitted the report of Dr. Barry Layton, who opines that “to a reasonable degree of psychological probability” the [*10]  “injuries caused by the 5/25/2018 MVC [motor vehicle crash] have resulted in permanent and substantial loss of functioning” to Mr. Madera. (Doc. 83-1, pgID 1557-58). Dr. Layton further states that the “[e]ffects of the MVC are the direct and proximate cause of disabling impairments.” (Id., pgID 1559).

Defendant Dhillon neither challenges the doctor’s qualifications to render his opinion; nor has he provided contradictory expert testimony as to causation. Therefore, the only issues left in dispute as to plaintiffs’ negligence claim are the extent of Mr. Madera’s injuries and the resulting damages, if any.

I thus deny plaintiffs’ motion for summary judgment on negligence (Count I), as the jury must decide these remaining issues.

2. Negligence Per Se

Plaintiffs next bring a claim against defendant Dhillon for negligence per se. They argue that he violated various statutes and regulations in operating his truck, including on the day of the accident. He asserts that those statutory violations constitute negligence per se.

Defendant Dhillon also moves for summary judgment on this claim, arguing that none of the statues or regulations plaintiffs cites provide an independent right of action or [*11]  specific duty sufficient to form the basis of a claim for negligence per se.

“Where a legislative enactment imposes a specific duty for the safety of others, failure to perform that duty is negligence per se.” Chambers v. St. Mary’s Sch., 82 Ohio St. 3d 563, 565, 1998- Ohio 184, 697 N.E.2d 198 (1998). A finding that a defendant is liable for negligence per se “means that the plaintiff has conclusively established that the defendant breached the duty that he or she owed to the plaintiff. It is not a finding of liability per se because the plaintiff will also have to prove proximate cause and damages.” Id.²

Plaintiffs point to eight statutes or regulations that they argue defendant Dhillon violated. Violation of these laws will only constitute negligence per se if the statute or regulation established a “positive and definite standard of care” and that standard of care is relevant to this case.

Plaintiffs first highlight several regulations from the Federal Motor Carrier Safety Regulations (FMCSR) that they allege defendant Dhillon violated. However, I agree with defendant Dhillon that these regulations cannot form the basis for a finding of negligence per se. Another federal district court in Ohio recently found that the “violation of an administrative rule does not constitute [*12]  negligence per se.” Parker v. Miller, No. 2:16-CV-1143, 2018 U.S. Dist. LEXIS 132577, 2018 WL 3743981, at *7 (S.D. Ohio) (quoting Chambers., supra, 82 Ohio St. 3d at 568) (interpreting both federal and Ohio law). This is because a regulation is not legislatively enacted, and negligence per se only applies to duties set forth in legislation. Chambers, supra, 82 Ohio St. 3d at 565.

Plaintiffs then point to several Ohio statutes that they claim support a finding of negligence per se. First, they cite to Ohio Rev. Code § 4511.202. That provision requires drivers to operate their vehicles with “reasonable control.” Because this is a “general duty statute” rather than a “specific duty statute,” it cannot establish the basis for a claim of negligence per se. Morris v. Gavan, No. 1:08-CV-01436, 2009 U.S. Dist. LEXIS 56880, 2009 WL 1921116, at *3 (N.D. Ohio) (Vecchiarelli, M.J.) (citing Campbell v. Hall, 1989 Ohio App. LEXIS 1115, 1989 WL 29856 (Ohio App. 6 Dist.)).

Plaintiffs next highlight two statutes that do not appear to apply to this case. Ohio Rev. Code § 4511.27 requires drivers to signal before passing other vehicles, and Ohio Rev. Code § 4513.20 requires drivers to maintain functioning brakes. Plaintiffs do not explain how either of these statutes is relevant to the accident here. They do not point to, and I cannot find, any evidence in the record indicating that defendant Dhillon failed to signal or that his brakes were not functioning properly. There is simply no evidence that he violated either of these statutes. Therefore, neither supports a finding of negligence [*13]  per se.

Another statute that plaintiffs claim defendant Dhillon violated is Ohio Rev. Code § 4549.02(A)(1). This statute requires drivers to stop at the scene of an accident and exchange information with the other individuals involved. Plaintiffs claim that defendant Dhillon left the scene without doing so. Even accepting that allegation as true, Ohio Rev. Code § 4549.02(A)(1) does not provide a clear basis for negligence per se. An Ohio court that considered the issue observed, “[w]e are unaware of any Ohio case holding that violation of the [statute] constitutes negligence per se” and therefore declined to apply it in that case. Johnson v. Helmus, No. C.A. E-86-19, 1987 Ohio App. LEXIS 7287, 1987 WL 12150, at *2 (Ohio Ct. App.). I likewise cannot locate any Ohio cases permitting a finding of negligence per se based on this statute, and plaintiffs do not identify any. I therefore decline to find that plaintiffs can base their negligence per se claim on Ohio Rev. Code § 4549.02(A)(1).

The final statute that plaintiffs reference is Ohio Rev. Code § 4511.33, which requires drivers to stay in their lane and change lanes only when they have determined they can do so safely. A violation of this statute constitutes negligence per se. Wheeler v. Estes Exp. Lines, 53 F. Supp. 3d 1032, 1038 (N.D. Ohio 2014) (citing Orr v. Zeff, No. C-790022, 1980 Ohio App. LEXIS 11874, 1980 WL 352761, at *1 (Ohio Ct. App.)).

The only question, then, is if there is a dispute of material fact as to whether defendant Dhillon violated this statute. I find that there is not. While defendant [*14]  Dhillon initially testified that Mr. Madera was at fault for the accident, he, in effect, recanted that testimony when he admitted through counsel that the accident was his fault. He does not now dispute that he crossed over into another lane to cause the accident with Mr. Madera.

I therefore find that plaintiffs have established their claim of negligence per se, and I grant plaintiffs’ motion for summary judgment on that claim and deny defendant Dhillon’s.

3. Respondeat Superior/Vicarious Liability

Plaintiffs also bring a claim for respondeat superior/vicarious liability against Express, Logistics, and Singh. They argue that because defendant Dhillon admitted he was negligent and because he was acting in the course of his employment with Express at the time of the accident, Express is vicariously liable for his actions. They further argue that Logistics and defendant Singh are liable under a piercing the corporate veil theory.

Express responds that plaintiffs have not established causation or damages, and therefore, it cannot be vicariously liable. Singh and Logistics both argue that they did not have an employment relationship with defendant Dhillon – his employer was Express.

“Under [*15]  the principle of respondeat superior the employer is liable for damages caused by the negligence of his employ[ee] while engaged in the business of the former.” Elms v. Flick, 100 Ohio St. 186, 126 N.E. 66 (1919).

There is no dispute here that Express was defendant Dhillon’s employer. There is likewise no dispute that the accident occurred within the scope of the employment relationship. Therefore, if the jury finds that Dhillon was negligent, Express will be vicariously liable for that negligence. Accordingly, I deny plaintiffs’ motion for summary judgment because there are remaining issues of material fact regarding negligence.

Further, because I find that there are issues of fact as to piercing the corporate veil, which I explain below, I deny defendant Singh’s and Logistics’ motion for summary judgment on this issue.

4. Strict Liability

Plaintiffs bring a claim for strict liability against only Express. Plaintiffs advance the same argument as to vicarious liability – Express is strictly liable because defendant Dhillon conceded negligence.

Express responds that plaintiffs have not established all the elements of negligence.

As I stated with respect to plaintiffs’ claim for vicarious liability, there are issues of fact regarding defendant [*16]  Dhillon’s negligence. Therefore, I deny plaintiffs’ motion for summary judgment as to strict liability.³

5. Negligent Hiring, Training, and/or Supervision

Plaintiffs next bring a claim for negligent hiring, training, and/or supervision against Express, Logistics, and defendant Singh. Plaintiffs argue that defendant Dhillon was not qualified to operate a commercial vehicle, Express and defendant Singh knew he was not qualified, they failed to properly train him, and their negligence in hiring, training, and supervising Dhillon proximately caused Mr. Madera’s injuries.

Express responds that plaintiffs cannot satisfy one of the elements of their claim: namely, that the accident was reasonably foreseeable.

Defendant Singh and Logistics both argue that they cannot be held liable because there was no employment relationship between either of them and defendant Dhillon.

In Ohio, the elements of a claim for negligent training, negligent supervision, and negligent hiring are essentially the same. Sheldon v. Kettering Health Network, 2015- Ohio 3268, 40 N.E.3d 661, 678 (Ohio Ct. App. 2015). Plaintiffs must show: “(1) the existence of an employment relationship; (2) the employee’s incompetence; (3) the employer’s actual or constructive knowledge of such incompetence; (4) the employee’s act [*17]  or omission causing the plaintiff’s injuries; and (5) the employer’s negligence in hiring or retaining [or training or supervising] the employee as the proximate cause of plaintiff’s injuries.” Id.

Express does not challenge plaintiffs’ ability to satisfy the first four prongs of this analysis. Rather, it focuses on foreseeability, which relates to the fifth prong, proximate cause. Gay v. O.F. Mossberg & Sons, Inc., 2009-Ohio-2954, ¶ 56 (plaintiff must establish that negligence was the proximate and foreseeable cause of injury).

To succeed on a claim of negligent training, supervision, or hiring, plaintiffs must show that the employee’s act was reasonably foreseeable. Wagoner ex rel. Washburn v. United Dairy Farmers, Inc., No. C-990767, 2000 Ohio App. LEXIS 5320, 2000 WL 1714252, at *1 (Ohio Ct. App.). In this case, that means plaintiffs must establish that the car accident was reasonably foreseeable to Express.

Reasonable foreseeability means that the employer knew, or should have known, of the employee’s “propensity to engage in similar criminal, tortious, or dangerous conduct.” Id.; see also Ball v. Stark, 2013-Ohio-106, ¶ 76 (“The foreseeability of harm usually depends on the defendant’s knowledge of unreasonable risk,” and liability only arises where the employee’s incompetence “would cause a reasonably prudent person to anticipate the employee’s misconduct.”).

Express claims that the accident was not [*18]  foreseeable primarily because defendant Dhillon had not been in any accidents at the time Express hired him. Express further argues that there are no facts suggesting Dhillon was not properly licensed or qualified to drive, and plaintiffs cannot demonstrate that any of Dhillon’s alleged statutory violations caused Mr. Madera’s injuries. For example, his lack of proficiency in English did not cause the accident with Mr. Madera.

Plaintiffs respond that there is extensive evidence of Dhillon’s lack of qualifications to operate a commercial vehicle: he did not receive proper training, he admitted to not understanding many federal safety regulations applicable to him, he was not proficient in English, he did not obtain his CDL legally, and he did not attend an accredited driving school. Plaintiffs assert “[i]t strains credulity to argue that it is not foreseeable that knowingly placing an unqualified and incompetent driver (Dhillon) behind the wheel . . . can result in an accident.” (Doc. 83, pgID 1536).

Considering this evidence in light of the legal standard, I conclude that there is a genuine issue of material fact regarding the foreseeability of the accident. I believe that a jury could [*19]  reasonably find that the accident was foreseeable, and it would likewise be reasonable to find that the accident was not foreseeable.

The relevant case law supports my determination. In cases related to negligent hiring, supervision, or training in the context of car accidents, Ohio courts and federal courts interpreting Ohio law have considered a myriad of factors. These factors include whether the driver had been involved in other accidents, whether the driver participated in regular training, whether the driver was properly licensed, whether the driver could speak English, whether the employer conducted a background check of the employee, and whether the employer conducted a reasonable inquiry into the driver’s abilities before hiring. See Terek v. Finkbiner, No. 3:14 CV 1391, 2015 U.S. Dist. LEXIS 124939, 2015 WL 5542535, at *1 (N.D. Ohio) (Knepp, M.J.); Boyd v. Smith, No. 2:12-CV-814, 2014 U.S. Dist. LEXIS 33456, 2014 WL 1050080, at *6 (S.D. Ohio); Ball v. Stark, 2013-Ohio-106, ¶ 77-79; Schlegel v. Li Chen Song, 547 F. Supp. 2d 792, 806-07 (N.D. Ohio 2008) (Katz, J.).

Here, defendants argue, and plaintiffs do not appear to contest, that defendant Dhillon had not been in any accidents prior to the one at issue in this case. That fact cuts in favor of Dhillon. However, that is not the only relevant factor. See Schlegel, supra, 547 F. Supp. 2d at 806 (to only consider driving history would “allow employers to hire unqualified employees to perform work that could place others in danger, so long as the employer was not [*20]  aware of any adverse background facts.”). There is evidence in the record that Dhillon did not understand the federal regulations he was required to follow, that he did not obtain formal or regular training, that his CDL may have been invalid, and that he was not proficient in English. Those are issues of material fact that bear on the ultimate determination of foreseeability.

And while a jury could reasonably find that the accident was foreseeable in light of Dhillon’s potentially questionable qualifications, it could also reasonably find, as Express argues, that those issues had no bearing on Dhillon’s propensity to become involved in an accident.

I therefore deny plaintiffs’ and Express’s motions for summary judgment as to negligent hiring, training, and/or supervision. I also deny defendant Singh’s and Logistics’ motions because there are issues of material fact as to their liability for the actions of Express.

6. Punitive Damages

Plaintiffs next request summary judgment on the issue of punitive damages against defendant Dhillon, defendant Singh, Express, and Logistics. They argue that defendants were reckless and acted with conscious disregard, and therefore, I should allow punitive [*21]  damages.

Defendants respond that this issue is premature, and I should not award punitive damages until there has been an award of compensatory damages. Alternatively, they argue that the facts here do not support an award of punitive damages.

I agree that plaintiffs’ request for punitive damages is premature. There must be a finding of liability before punitive damages can be awarded. See Lawson v. Dutch Heritage Farms, Inc., 502 F. Supp. 2d 698, 712 (N.D. Ohio 2007) (Gallas, M.J.) (declining to award punitive damages before the case proceeded to trial); Cameron v. Children’s Hosp. Med. Ctr., 250 F. Supp. 2d 848, 855 (S.D. Ohio 2002) (the question of punitive damages “is a determination to be made in a damages calculation if and when liability is determined.”). I have not found any of the defendants liable for any of the claims in the Amended Complaint – I have, in large part, left those issues to the jury. Therefore, it would not be appropriate for me to consider punitive damages at this stage.⁴

I deny plaintiffs’ motion for summary judgment on their punitive damages claim and likewise deny defendants’ motions to the extent they ask me to determine that punitive damages are definitively not warranted in this case.

7. Piercing the Corporate Veil/Alter Ego

Plaintiffs argue that I should pierce the corporate veil and hold defendants Dhillon and [*22]  Singh individually liable because they created Logistics “as a chameleon carrier to carry on the busines[s] of Express after that entity shut down as a result of this lawsuit.” (Doc. 66-1, pgID 1191).

Defendants argue that piercing the corporate veil is not an independent cause of action and hinges on there being a judgment on plaintiffs’ claims that goes uncollected. Therefore, resolution of this issue is premature. Alternatively, defendants argue that plaintiffs cannot establish the necessary elements to pierce the corporate veil.

I do not agree with defendants that it is too soon to address the issue of piercing the corporate veil. Courts regularly resolve this issue on summary judgment. See, e.g., Hitachi Med. Sys. Am., Inc. v. Branch, No. 5:09CV01575, 2011 U.S. Dist. LEXIS 100431, 2011 WL 3921718 (N.D. Ohio) (Pearson, J.) (evaluating whether to pierce the corporate veil on summary judgment); Univ. Circle Rsch. Ctr. Corp. v. Galbreath Co., 106 Ohio App. 3d 835, 667 N.E.2d 445 (1995) (same).

Defendants cite MidAmerican Distribution, Inc. v. Clarification Tech., Inc., 807 F. Supp. 2d 646, 683 (E.D. Ky. 2011) in support of their argument. Firstly, that case was governed by Kentucky law, not Ohio law. And the court there did not find that it was premature to address veil piercing on summary judgment; rather, it found that since it dismissed the underlying claims, there could be no liability through veil piercing. Id. Here, I have not dismissed the underlying claims. Therefore, it is [*23]  appropriate for me to consider whether there are issues of material fact related to the veil piercing analysis, and if so, what those issues are.

Plaintiffs discuss both the piercing the corporate veil and alter ego doctrines in their briefs. While plaintiffs somewhat conflate the two concepts, they are, in fact, distinct. Veil piercing “ask[s] a court to hold A vicariously liable for B‘s debt,” while alter ego theory “asserts that A and B are the same entity; liability then is not vicarious but direct.” Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am. v. Aguirre, 410 F.3d 297, 302 (6th Cir. 2005) (emphasis in original).

My understanding of plaintiffs’ arguments is that they seek to pierce the corporate veil and hold defendant Dhillon and defendant Singh personally liable for the debts of Express. Further, they seek to establish that Logistics is the alter ego of Express and therefore liable for its debts.

In Ohio, a court may pierce the corporate veil to hold individual shareholders liable where plaintiffs can show:

(1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an [*24]  illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.

Belvedere Condo. Unit Owners’ Assn. v. R.E. Roark Cos., Inc., 67 Ohio St. 3d 274, 289, 1993 Ohio 119, 617 N.E.2d 1075 (1993).

In Dombroski v. WellPoint, Inc., 119 Ohio St. 3d 506, 513, 2008- Ohio 4827, 895 N.E.2d 538, the Ohio Supreme Court modified and slightly expanded this test, holding that to meet the second prong, a plaintiff must demonstrate “fraud, an illegal act, or similarly unlawful act.” The court explained that this prong is satisfied where plaintiffs can show an “exceptional wrong.” Id. at 514. A straightforward tort does not suffice. Id.

“Because of the delicate judgments involved in assessing the special facts in each case, and ultimately, in deciding whether the corporation has been used to an end subversive to its policy or when it would be unjust not to disregard the corporate entity, piercing the corporate veil is primarily a matter for the trier of fact.” State ex rel. DeWine v. S & R Recycling, Inc., 195 Ohio App. 3d 744, 753, 2011- Ohio 3371, 961 N.E.2d 1153 (2011).

A. Alter Ego

The first prong of the Belvedere veil piercing analysis is essentially a statement of the alter ego doctrine. Id. To succeed on that theory, plaintiffs must show that Express and Logistics are “fundamentally indistinguishable.” Id.

In determining whether a company is the alter ego of another company, “Ohio courts consider factors such as whether (1) corporate formalities [*25]  are observed, (2) corporate records are kept, and (3) the corporation is financially independent.” Est. of Thomson ex rel. Est. of Rakestraw v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 362-63 (6th Cir. 2008).

The Sixth Circuit has proposed the following additional factors:

(1) sharing the same employees and corporate officers; (2) engaging in the same business enterprise; (3) having the same address and phone lines; (4) using the same assets; (5) completing the same jobs; (6) not maintaining separate books, tax returns and financial statements; and (7) exerting control over the daily affairs of another corporation.

Id.

There is evidence of some of these factors in the present case. While defendant Dhillon testified that he maintains records for Logistics, he later admitted that he was unaware of which records he was required to keep. (Doc. 61-1, pgID 667, 670). Further, there is a question of fact as to Logistics’ financial independence. A jury could reasonably infer that Logistics was relying on Express for its necessary capital in light of the fact that Logistics was sub-hauling loads for Express and received $150,000 worth of payments from Express. Additionally, Logistics and Express shared the same address: defendant Dhillon’s home, and while defendant Dhillon was not an employee of both [*26]  companies at the same time, it would not be unreasonable to conclude that he was de facto still working for Express even after he started Logistics. It likewise would not be unreasonable to determine that Express and Logistics were engaging in the same business enterprise, given that Logistics was hauling loads for Express.

Because there is a question of fact as to several of these factors, I decline to grant summary judgment for plaintiffs or defendants on this issue.

B. Veil Piercing

I must next determine whether defendant Singh or defendant Dhillon can be held personally liable for the debts of Express.

I will begin by evaluating whether to pierce the corporate veil between defendant Singh and Express to hold Singh personally liable for its debts. In doing so, I will apply the three Belvedere factors.

The first factor is whether Singh’s control over Express was so complete that the corporation had no separate existence of its own. Relevant to this factor is Singh’s status as the single shareholder and President of the company. (Doc. 77, pgID 1328); Galbreath, 106 Ohio App. 3d at 840 (defendant’s status as the sole shareholder and officer and director of his company is relevant to the first prong). However, this is certainly not [*27]  dispositive.

Other relevant considerations are:

(1) grossly inadequate capitalization, (2) failure to observe corporate formalities, (3) insolvency of the debtor corporation at the time the debt is incurred, (4) shareholders holding themselves out as personally liable for certain corporate obligations, (5) diversion of funds or other property of the company property for personal use, (6) absence of corporate records, and (7) the fact that the corporation was a mere facade for the operations of the dominant shareholder(s).

Taylor Steel, Inc. v. Keeton, 417 F.3d 598, 605 (6th Cir. 2005).

Several of these factors are arguably satisfied here. I have already discussed the absence of corporate records for Express. Further, Express ceased operations mere weeks after this lawsuit was filed. Plaintiffs filed their complaint on July 2, 2019, and Express closed down on July 20, 2019. (Doc. 1; Doc. 77, pgID 1332). Express is therefore now insolvent and unable to pay any debts that it may owe in relation to this lawsuit. Additionally, a jury could conclude that defendant Singh diverted assets in the amount of $150,000 from Express to fund his father’s new company, Logistics.

On the other hand, there is no evidence that defendant Singh held himself out as personally [*28]  liable for corporate obligations or that Express was grossly undercapitalized.

Ultimately, I find that there is sufficient evidence from which a jury could find that defendant Singh and Express were fundamentally indistinguishable, and there are issues of material fact as to the first prong of the Belvedere analysis.

To establish the second prong of the Belvedere analysis, plaintiffs must show that defendant Singh exercised control over Express in such a manner as to commit fraud, an illegal act, or similarly unlawful act against plaintiffs.

Plaintiffs have presented evidence that defendant Singh engaged in potentially unlawful activity. They claim that Singh did not ensure Dhillon had the proper qualifications or training to drive for his company. For example, Singh hired defendant Dhillon despite his lack of proficiency in English and referred him to an allegedly illegitimate driving school where he obtained an arguably invalid CDL. Most significantly, plaintiffs have presented evidence that Express made payments totaling $150,000 to defendant Dhillon after the accident and after Logistics began operations. A jury could conclude that defendant Singh did so not only to avoid paying higher insurance rates [*29]  but also to avoid paying a potential judgment in this case.

I therefore find that summary judgment on the second prong of the Belvedere test is not warranted. See Schlegel, supra, 547 F. Supp. 2d at 804 (denying summary judgment on veil piercing claim where the defendant had potentially used “the shield of the corporate form to evade compliance with the Federal Motor Carrier Safety Act, which evasion tends to show a conscious disregard for the safety of those (such as Plaintiff) who share the road with his truck drivers.”).

The third prong of the Belvedere test is whether plaintiffs sustained an injury or unjust loss as a result of defendant Singh’s actions. There are questions of fact on this prong as well – these actions may have caused Mr. Madera’s physical injury, or they may have caused plaintiffs a financial injury to the extent there are insufficient funds to pay any judgment that is ordered in this case.

Because there are issues of material fact as to each of these three prongs, I find that a jury could reasonably conclude veil piercing is appropriate between Express and defendant Singh.

With respect to Express and defendant Dhillon, however, I find that there is insufficient evidence to support a veil piercing claim. Dhillon did not [*30]  own Express, and there is no evidence that he exercised complete control over the company as is required to hold him personally liable for its debts. Dhillon was simply an employee who drove trucks for the company. Therefore, plaintiffs have failed to meet their burden as to a veil piercing claim between Express and defendant Dhillon.⁵

Conclusion

It is, therefore,

ORDERED THAT

1. Plaintiffs’ motion for summary judgment (Doc. 66) regarding Negligence (Count I) be, and the same hereby is, denied;

2. Plaintiffs’ motion for summary judgment (Doc. 66) regarding Statutory Violations/Negligence Per Se (Count II) be, and the same hereby is, granted;

3. Defendant Dhillon’s motion for summary judgment (Doc. 78) regarding Statutory Violations/Negligence Per Se (Count II) be, and the same hereby is, denied;

4. Plaintiffs’ motion for summary judgment (Doc. 66), defendant Singh’s motion for summary judgment (Doc. 77), and defendant Logistics’ motion for summary judgment (Doc. 79) regarding Respondeat Superior/Vicarious Liability (Count III), be and the same hereby are, denied;

5. Plaintiffs’ motion for summary judgment (Doc. 66) regarding Strict Liability (Count IV) be, and the same hereby is, denied;

6. [*31]  Plaintiffs’ motion for summary judgment (Doc. 66), defendant Singh’s motion for summary judgment (Doc. 77), Express’s motion for summary judgment (Doc. 78), and defendant Logistics’ motion for summary judgment (Doc. 79) regarding Negligent Hiring, Training, and/or Supervision (Count V), be and the same hereby are, denied;

7. Plaintiffs’ motion for summary judgment (Doc. 66), defendant Singh’s motion for summary judgment (Doc. 77), defendant Dhillon’s and Express’s motion for summary judgment (Doc. 78), and defendant Logistics’ motion for summary judgment (Doc. 79) regarding Punitive Damages (Count VI), be and the same hereby are, denied; and

8. Plaintiffs may proceed on their alter ego/veil piercing theories against Logistics and defendant Singh but may not proceed on those theories against defendant Dhillon.

So ordered.

James G. Carr

Sr. U.S. District Judge

End of Document

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¹ Plaintiffs point out that a grand jury in the Eastern District of California indicted two individuals associated with Akal Driving School with various conspiracy charges related to the issuance of fraudulent driver’s licenses. The time period that the indictment covers is June 2012 through August 24, 2016, and defendant Dhillon allegedly attended the school in 2014. See https://www.justice.gov/usao-edca/pr/bakersfield-trucking-school-owner-and-former-dmv-employee-charged-scheme-fraudulently.

² Plaintiffs have already conclusively established duty and breach here, as defendant Dhillon admitted he was at fault for the accident. Their negligence per se claim, then, does not change the result as to liability. It could, however, be relevant to punitive damages.

³ It is unclear what plaintiffs’ theory of strict liability is in this case. The parties do not devote much attention to it in briefing, and plaintiffs’ allegations in the Amended Complaint do not provide additional clarity. Strict liability commonly applies in products liability cases and cases involving abnormally dangerous activities. This case involves neither. But because defendants do not challenge the sufficiency of plaintiffs’ allegations in this regard, I decline to address it further.

⁴ Furthermore, I may not award punitive damages where there has been no award of compensatory damages. Seasons Coal Co. v. City of Cleveland, 10 Ohio St. 3d 77, 82, 10 Ohio B. 408, 461 N.E.2d 1273 (1984). There has been no such award here.

⁵ To the extent plaintiffs seek to pierce the corporate veil between defendant Dhillon and Logistics, I reject that attempt as well. Plaintiffs do not point to any actions on the part of Dhillon that were fraudulent or illegal. They focus on Singh in that regard. Therefore, they cannot satisfy the Belvedere test and hold Dhillon personally liable through a veil piercing theory. He remains potentially liable, however, with respect to the claims for which plaintiffs sued him directly.