STATE of Maine, et al., v. L.V.I. GROUP.
Supreme Judicial Court of Maine.
Decided Feb. 18, 1997.
1997 ME 25 | 690 A.2d 960
WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, DANA, and LIPEZ, JJ.
CLIFFORD, Justice.
[¶ 1] Lehigh Valley Group, Inc. (LVI) appeals from the judgment entered in the Superior Court (Kennebec County, Perkins, A.R.J.) in favor of the plaintiffs, the Director of the Bureau of Labor Standards and the State of Maine, in the State‘s action pursuant to
[¶ 2] From 1967 until June 1985, Dori Shoe designed and manufactured women‘s footwear at its plant in Lewiston. LVI owned 100 percent of the stock of HMD Shoes, Inc., a holding company that in turn owned 100 percent of the stock of Dori Shoe until June 1985. LVI largely controlled all financial matters related to Dori Shoe and also influenced the company‘s hiring and licensing agreement decisions. In May of 1985, HMD entered into an option agreement with Poco Industries that allowed Poco to purchase fifty percent of Dori Shoe‘s stock. Dori Shoe began a series of employee layoffs in mid-June 1985. On June 28, 1985, Poco exercised its option to purchase fifty percent of Dori Shoe‘s stock from HMD.
[¶ 3] By mid-August 1985, the entire Dori Shoe manufacturing work force, save for fourteen employees, had been terminated from employment. In November 1985, LVI directed Dori Shoe‘s comptroller to prepare a severance pay calculation in order to determine the amount of pay owed the employees due to the plant‘s closing. The amount calculated then was communicated to LVI in December 1985, but no severance pay ever was disbursed. In January 1986, LVI obtained permission from the Department of Commerce, which held a lien on Dori Shoe‘s plant and equipment following LVI‘s default on a government loan, to auction off the plant and equipment. On April 11, 1986, LVI auctioned off the plant and closed its doors.
[¶ 4] LVI also had a similar relationship with another shoe company, Loree Footwear Corporation, a shoe manufacturing operation located in Freeport that closed in 1980. Loree was a wholly-owned subsidiary of Lehigh Footwear, Inc., that was in turn wholly-owned by LVI. When Loree ceased to operate, its employees brought an action against Loree, Lehigh, and LVI to recover severance pay pursuant to
[¶ 5] In the meantime, employees of Dori Shoe, those on whose behalf this suit is brought, brought suit against LVI. See Bernier v. Dori Shoe, et al., No. CV-86-244 (And.Cty.Sup.Ct.1986). Subsequent to the decision in Curtis, the trial court, on a M.R.Civ.P. 41(a) motion of the plaintiff employees, dismissed the action without prejudice.
[¶ 6] In 1989, the Legislature amended the definition of “employer” in the statute to read:
“Employer” means any person who directly or indirectly owns and operates a covered establishment. For purposes of this definition, a parent corporation is considered the indirect owner and operator of any covered establishment that is directly owned and operated by its corporate subsidiary.
[The amendment] includes parent corporations within the definition of “employer” for the entire severance pay law and makes the bill retroactive to October 1, 1975, the date on which the severance pay law took effect. This is done to clarify the original legislative intent of the law, which was incorrectly construed by the Law Court in Curtis v. Lehigh Footwear, Inc., 516 A.2d 558 (Me.1986), to exclude parent corporations from the definition of “employer.”
Comm.Amend.A to L.D. 1891, Statement of Fact (114th Legis.1990).
[¶ 7] In November 1990, the State brought the present action to recover severance pay on behalf of former Dori Shoe employees pursuant to the 1989 amendment.2 LVI moved for a summary judgment, contending that the retroactive application of the amendment is violative of the due process clauses of the Maine and United States Constitutions,
[¶ 8] Legislative enactments are presumed constitutional. LVI bears the burden of proving that no conceivable state of facts exists to support the statute. Spare-Time Recreation, Inc. v. State, 666 A.2d 81, 82 (Me.1995). When possible, we will construe a statute to preserve its constitutionality. Maine Milk Producers, Inc. v. Commissioner of Agric., 483 A.2d 1213, 1218 (Me.1984).
[¶ 9] In Norton v. C.P. Blouin, Inc., 511 A.2d 1056, 1060 n. 5 (Me.1986), we clarified the proper analysis concerning the retroactive application of statutes:
If the Legislature intends a retroactive application, the statute must be so applied unless the Legislature is prohibited from regulating conduct in the intended manner, and such a limitation upon the Legislature‘s power can only arise from the United States Constitution or the Maine Constitution.
A three-part test governs analysis under the due process clause of the Maine Constitution,
- The object of the exercise must be to provide for the public welfare.
- The legislative means employed must be appropriate to the achievement of the ends sought.
- The manner of exercising the power must not be unduly arbitrary or capricious.
Tompkins v. Wade & Searway Const. Corp., 612 A.2d 874, 878 n. 2 (Me.1992) (citing State v. Eaton, 577 A.2d 1162, 1165-66 (Me.1990)) (emphasis in original) (citation omitted). This test is substantially similar to the analysis governing the United States Constitution. Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 878 n. 2; see General Motors Corp. v. Romein, 503 U.S. 181, 191 (1992). We have summarized the applicable standard as follows: “[T]he retroactive aspects of economic legislation meet the requirements of the due process clause if enacted to further a legitimate legislative purpose by rational means.” Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 877 (citing General Motors Corp. v. Romein, 503 U.S. at 191; Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729 (1984)).
[¶ 10] LVI contends that due process considerations prohibit the Legislature from enacting a retroactive law that creates a new obligation, debt, or liability. LVI‘s challenge is made not to the general validity of the statute but, rather, to the amendment enacted by the Legislature following our holding in Curtis. LVI argues that although it was adjudicated in Curtis to be free of severance pay liability under the pre-amendment language of the statute, it now unfairly faces renewed liability due to the retroactive application of the amendment.4 We have held previously, although in a different context, that section 625-B does not violate due process even though it imposes liability based in part on past acts. Director of Bureau of Labor Standards v. Fort Halifax Packing Co., 510 A.2d 1054, 1062-63 (Me.1986) (application of statute would not result in unconstitutional impairment of contractual obligations and imposition of liability without due process), aff‘d on other grounds sub nom. Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987). “[L]egislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations ... even though the effect of the legislation is to impose a new duty or liability based on past acts.” Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 877 (quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16 (1976)).
[¶ 11] In enacting the amendment to
[¶ 12] Through the amendment‘s plain language, the Legislature has expressed its determination that a parent corporation is to be considered an “employer” for purposes of severance pay liability. The Legislature rationally could determine that a parent corporation should be responsible for severance pay regarding its subsidiary employees and that such pay retroactively should be available to all employees who have been laid off from the date of the law‘s original enactment. Such a determination could have been, in the Legislature‘s judgment, the best method of furthering the statute‘s original purpose.5 Spare-Time Recreation, Inc. v. State, 666 A.2d 81, 82 (Me.1995).
[¶ 13] As noted by the trial court, the retroactivity provision allows employees, terminated both before and after the Curtis decision, to benefit from the Legislature‘s view of the proper interpretation of the severance pay law. “[The Legislature], of course, has the power to amend a statute that it believes we have misconstrued. It may even, within broad constitutional bounds, make such a change retroactive and thereby undo what it perceives to be the undesirable past consequences of a misinterpretation of its work product.” Rivers v. Roadway Express, Inc., 511 U.S. 298, 313 (1994).6 The statute does not violate the due process clause because it furthers the legitimate legislative purpose of correcting an unexpected construction of section 625-B(1)(C), and does so by rational means. Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 877 (citing General Motors Corp. v. Romein, 503 U.S. at 191).
[¶ 14] LVI‘s contentions that the amendment of section 625-B violates the Takings Clause of either the
[¶ 15] The statute does not contravene the Declaration of Rights provision of the Maine Constitution. The gravamen of that contention is really due process, that the Maine Constitution forbids interference with vested rights or the retroactive creation of new obligations. Statutory retroactivity clauses have been analyzed under the due process clauses of the Maine and United States Constitutions. See Tompkins v. Wade & Searway Const. Corp., 612 A.2d 874 (Me.1992); General Motors Corp. v. Romein, 503 U.S. 181 (1992).
[¶ 16] LVI also contends that because the retroactivity provision lacks a rational nexus to a valid public purpose and is arbitrary and capricious, it violates the Public Purpose Clause of the Maine Constitution. We disagree. The Public Purpose Clause states in relevant part that “[t]he Legislature ... shall have full power to make and establish all reasonable laws and regulations for the defense and benefit of the people of this State, not repugnant to this Constitution, nor to that of the United States.”
[¶ 17] Additional contentions of LVI, that LVI is not a parent corporation of Dori Shoe within the meaning of section 625-B, that the court erred in its determination of severance pay, and that LVI is not liable for severance pay because Dori Shoe terminated its operation due to a physical calamity as defined in section 625-B(1)(E), are without substantial merit.
The entry is:
Judgment affirmed.
GLASSMAN, RUDMAN, and DANA, JJ., dissent.
GLASSMAN, Justice, with whom RUDMAN and DANA, JJ., join, dissenting.
[¶ 18] Because I agree with LVI that the amendment to section 625-B(1)(C), enacted in 1989 (effective July 1, 1990) violates the Maine and United States Constitutions, I respectfully dissent.
[¶ 19] As noted by the Court, the principle has long been established at common law that in the absence of fraud or bad faith shareholders are not liable for corporate debts. In Atlantic Oceanic Kampgrounds v. Camden Nat. Bank, 473 A.2d 884, 886 (Me.1984), we reaffirmed an equally well-established principle clearly articulated over a half century ago in Palmer v. Town of Sumner, 133 Me. 337 (1935), that
[i]t is not to be presumed that the Legislature intended to abrogate or modify a rule of the common law by the enactment of a statute upon the same subject; it is rather to be presumed that no change in the common law was intended, unless the language employed clearly indicates such an intention.... The rules of common law are not to be changed by doubtful implication, nor overturned except by clear and unambiguous language.
Id. at 340 (citations omitted). The Court properly relied on these two well-established principles when it determined in Curtis v. Lehigh Footwear, Inc., et al., 516 A.2d 558 (Me.1986), that the language of
[¶ 20] Absent the 1989 legislation, the record in this case would not support a determination that LVI as a stock owner of H.M.D. is responsible for Dori‘s liabilities.8
[¶ 21] An analysis of the cases relied on by the Court to support the 1989 legislation discloses that in each case the constitutional challenges arose in the context of the existing and uncontroverted legal relationship between the parties of employer and employee, and the challenged statute was determined to be a lawful adjustment of the rights and burdens existing in that relationship. In the instant case, the 1989 enactment of the amendment to section 625-B(1)(C) created a new employer-employee relationship and, by P.L. 1989, ch. 667, § 2, made that newly created relationship retroactive to October 1, 1975, and imposed a previously nonexistent liability on that newly created relationship.
[¶ 22] The law is well established in Maine that “[t]here can be no doubt that Legislatures have the power to pass retrospective statutes, if they affect remedies only.... But they have no constitutional power to enact retrospective laws which impair vested rights or create personal liabilities.” Coffin v. Rich, 45 Me. 507, 514 (1858). See Thut v. Grant, 281 A.2d 1, 6 n. 8 (Me.1971) (“This aspect of the law was not questioned or adversely affected by the holding in Hawthorne v. Calef, [69 U.S. (2 Wall.) 10, 17 (1864)].“) A “curative statute ... clearly designed to have retrospective application ... must be carefully construed so as not to violate constitutional requirements.” Sabasteanski v. Pagurko, 232 A.2d 524, 525 (Me.1967) (citing Coffin and setting forth the above-quoted principle in that case).
[¶ 23] Pursuant to section 625-B(1)(C), the liability, if any, for the remedy of severance pay to all eligible employees of Dori attached on the date Dori ceased its manufacturing operations in August 1985. Director of Bureau of Labor Standards v. Fort Halifax Packing Co., 510 A.2d at 1063, aff‘d, 482 U.S. 1 (1987). It is undisputed that the complaint in Bernier v. Dori Shoe, et al. filed in the Superior Court on June 13, 1986, failed to state a claim against LVI on which any relief could be granted. By its present complaint filed in December 1990, the plaintiff seeks relief from LVI for the statutory remedy of severance pay based on the amendment to section 625-B(1)(C). This curative, retrospective amendment cannot be construed to affect the remedy only of eligible employees—the remedy remains as it was prior to July 14, 1990, i.e., one week‘s pay for each year of employment, as provided in section 625-B(2). It can only be construed as creating the personal liability of a stockholder for the unchanged remedy. Applying the required legal principles to section 625-B(1)(C), it is apparent that the Legislature violated the constitutional limitations placed on it when enacting retrospective legislation.
[¶ 24] The taking clause of the Fifth Amendment of the United States Constitution made applicable to the states by the Fourteenth Amendment and set forth in
[¶ 25] Nor do I agree with the Court that our decision in Shapiro Bros. Shoe Co. v. Lewiston-Auburn Shoeworkers Assoc., 320 A.2d 247 (Me.1974), is determinative of LVI‘s contention that section 625-B(1)(C) is unconstitutionally vague. In Shapiro, the plaintiff shoe company by a written notice posted on the company‘s bulletin board announced to its employees that it was “voluntarily going out of business and shall conclude all of its activities in the manufacture of shoes on February 22, 1973.” In fact, the company ceased operations on February 5, 1973. On report ordered by the trial court, we addressed Shapiro‘s action seeking, inter alia, a declaratory judgment that the phrases (1) “going out of business” and, (2) “he shall give one month‘s prior notice” contained in paragraph two of
A statute is void for vagueness when it sets guidelines which would force men of general intelligence to guess at its meaning, leaving them without assurance that their behavior complies with legal requirements and forcing courts to be uncertain in their interpretation of the law. (Citation omitted). Such an unacceptable statute would often be ‘so vague and indefinite as really to be no rule or standard at all.’ A.B. Small Co. v. Am. Sugar Ref. Co., 267 U.S. 233, 239 (1925).
[¶ 26] LVI specifically contends, as it did before the trial court, that the phrase “parent corporation” used in the 1989 amendment to section 625-B(1)(C) is unconstitutionally vague. I agree. That it does not meet the test set forth in Shapiro is clearly demonstrated by a review of the record. In the trial court‘s decision denying LVI‘s motion for a summary judgment, the court (Mead, J.), in response to LVI‘s contention that it was not a “parent corporation” because at the time Dori closed H.M.D. it owned only 50 percent of Dori stock, ruled that “the standard to determine whether a corporation is a ‘parent’ of another is whether the former has working control of the latter by virtue of stock ownership.” When presented with the same contention at the time of the trial of this matter, the court (Perkins, A.R.J.) ruled, “This subsection defines an employer as including a parent corporation. A parent corporation, however, need not exercise control over its subsidiary.... An indirect owner and operator need not exercise direct control over a facility; the source of its liability is its ownership of the subsidiary ... the court finds that the amount of control exercised by the parent may be minimal in order for it to be found to be an indirect owner and operator.” The court further stated that “[a]s for Poco‘s purchase of half of Dori‘s shares, the court finds that this eleventh hour purchase does not change LVI‘s role as a parent corporation of Dori.”
[¶ 27] The Court‘s summary dismissal of this issue by stating that “persons of ‘general intelligence [do not have] to guess at its meaning without assurance that their behav-
If stock ownership is the key, how much is enough? Is direct ownership in the putative subsidiary required? ... In this case were LVI and Poco both parents when the Lewiston facility closed because each held fifty percent of HMD? [If] ownership were divided three or more ways, would all be parents? Could a corporation avoid being deemed a parent by remaining passive while other stockholders, individual or corporate, actively participate in business affairs? [H]ow can the ordinary person determine what constitutes “working control” or “minimal” control?
coupled with the confusion demonstrated by the different definitions articulated by the trial court when presented with the issue, bring in focus that the challenged phrase is “so vague and indefinite as really to be no rule or standard at all.” Shapiro, 320 A.2d at 253.
[¶ 28] I would vacate the judgment and remand this case for the entry of a judgment in favor of LVI.
Notes
1.....
A. “Covered establishment” means any industrial or commercial facility or part thereof which employs or has employed at any time in the preceding 12-month period 100 or more persons.
....
C. “Employer” means any person who directly or indirectly owns and operates a covered establishment. For purposes of this definition, a parent corporation is considered the indirect owner and operator of any covered establishment that is directly owned and operated by its corporate subsidiary.
....
E. “Physical calamity” means any calamity such as fire, flood or other natural disaster, or the final order of any federal, state or local governmental agency including adjudicated bankruptcy.
....
2. Liability for severance pay. Any employer who closes a covered establishment shall be liable to his employees for severance pay at the rate of one week‘s pay for each year of employment by the employee in that establishment. The severance pay to eligible employees shall be in addition to any final wage payment to the employee and shall be paid within one regular pay period after the employee‘s last full day of work, notwithstanding any other provisions of law.
(Emphasis added.)
No person shall be deprived of life, liberty or property without due process of law,....
[N]or shall any State deprive any person of life, liberty, or property, without due process of law;....