Canadian National Railway Co. v. Waltman
94 So. 3d 1111
| Miss. | 2012Background
- Kitchens, Jr. and wife Mary L. Kitchens died in a railroad crossing collision with Illinois Central trains.
- Administratrix and wrongful-death beneficiaries sued multiple defendants, including Canadian National Railway Company (Canadian National).
- CN, a foreign corporation, moved to dismiss for lack of jurisdiction and failure to state a claim; trial court granted discovery to pierce the veil and reserved ruling.
- Plaintiffs alleged Illinois Central was CN’s alter ego/mere instrumentality and undercapitalized based on 2008 net worth of -$145 million.
- Court granted interlocutory appeal; CN’s remaining proceedings in the trial court were stayed pending disposition; Mississippi Rule 12(b)(2) is the central issue.
- Mississippi appellate court ultimately held the plaintiffs failed to plead particularized facts to pierce the veil and reversed the discovery plan, remanding for dismissal without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs alleged particularized facts to pierce the veil for jurisdiction | Kitchens contends Illinois Central is CN’s alter ego. | CN contends no sufficient particularized facts; undercapitalization alone is insufficient. | No; plaintiffs failed to allege sufficient particularized facts to pierce the veil. |
| Whether undercapitalization alone justifies piercing the corporate veil | Undercapitalization shown by negative net worth supports alter ego. | Undercapitalization alone is insufficient under Mississippi law. | Undercapitalization alone does not justify piercing; 2008 negative net worth is insufficient. |
| Whether consolidation of financials or other practices show flagrant disregard of corporate formalities | Consolidated reports and cross-affiliations show disregard of formalities. | Consolidation is standard accounting practice and not per se flagrant disregard. | Consolidation evidence does not constitute particularized allegations of fraud or misfeasance. |
Key Cases Cited
- Ratliff, 954 So.2d 427 (Miss. 2007) (three-factor test for piercing; fraud/misfeasance required)
- Inland Shoe Mfg. Co. v. Nat’l Office Sys., 592 F.Supp. 875 (N.D. Miss. 1984) (when facts are insufficient, do not pierce on mere pleadings; need particularized facts)
- R.C. Construction Co. v. Nat’l Office Sys., 622 So.2d 1253 (Miss. 1993) (use live testimony/affidavits to resolve inherent factual questions on Rule 12(b)(2) motions)
- Buchanan v. Ameristar Casino Vicksburg, Inc., 957 So.2d 969 (Miss. 2007) (Mississippi favors corporate entity; piercing not routine)
- Stanley v. Mississippi State Pilots of Gulfport, Inc., 951 So.2d 535 (Miss. 2006) (undercapitalization alone not sufficient to pierce under current rule)
- Henson v. Ross-King-Walker, Inc., 672 So.2d 1188 (Miss. 1996) (punitive damages factors; net worth not sole determinant)
- Johnson & Higgins of Miss., Inc. v. Comm’r of Ins., 321 So.2d 281 (Miss. 1975) (earlier articulation of piercing standards)
- Ross-King-Walker, Inc. v. Henson, 672 So.2d 1188 (Miss. 1996) (punitive damages interplay with corporate form critique)