*1 Second, jurisdiction Werline court of our merits. rea in this interlocutory ap- peal. soned that the order directing vacatur a
rehearing
subject
interlocutory
re
Conclusion
effect,
was, in
a
view because it
denial of
confirmation,
denial of
and the
confirma
affirm
We
the probate court’s order va-
may
tion
be
under
appealed
section cating the arbitration award.
171.098(a)(3). Werline,
71. The same true here. pro is not appointment
bate separate court’s order only
does thing: appoints one a new Thus, appointment
arbitrator. order be, exactly
is what it purports and what
it purports to be not an order is from appeal may which an be interlocutory had ENTERPRISES, INC., TRYCO Sharon 171.098(a). under section We decline to Dixon, Dixon, C. James Crown Staff- interlocutory extend Werline to authorize ing, Inc., Troy Dixon, Ap- Keith appeals separate appointing from a order a pellants Instead, new ju arbitrator. because our v.
risdiction in interlocutory appeal this is ROBINSON, Appellee. James A. 171.098(a) endowed ap section and the pointment among order not orders No. 01-10-00710-CV. listed in that from which party section Texas, Appeals Court of appeal, can on rehearing we conclude Dist.). (1st Houston we are not statutorily authorized to consid er complaints regarding ap Dianna’s Sept. pointment. See TEX.CIV.PRAC.&REM.CODE 171.098(a)(1)-(5); CMH Homes ANN. cf. Perez, (Tex. 453-54
2011) (observing appointing order ar subject
bitrator to mandamus rev
iew).7
Accordingly, not reach we do Dianna’s
second issue scope because it is outside the Homes, petition original
7. We jurisdic- note that in CMH the Texas invokes this Court’s id.; Supreme appellant that an Family, Court held who tion. See see re D & KW also In L.P., 01-11-00276-CV, appeal unappealable filed an an order No. 2012 WL appeal (Tex.App.-Houston was nevertheless to have its at *4 [1st entitled Dist.] 9, 2012, (mem. petition Aug. orig. treated as a for writ proceeding) op.). of mandamus Dianna, however, appellant specifically requested original because the did invoke our requiring jurisdiction request mandamus relief and because did not because she —in appellant separate original briefing to file response document entitled either her or in her Harold, Susanna, "petition for writ of mandamus” would "un- John’s motion for necessarily rehearing challenging parties’ ap- waste the time and further her issue —that judicial pointment resources.” S.W.3d at 543. of a new arbitrator be construed as Thus, case, may request appropriate we treat an relief should mandamus mandamus, appeal petition writ Court determine that the issue is outside the appellant specifically requests scope jurisdiction interlocutory and an who of our in this appeal appeal. that her be treated as a mandamus
against Tryco in the FLSA suit under Texas Tax Code section 171.255. We reverse the judgment of the trial Troy court as to Dixon Keith and render nothing by Robinson take his claims him. We affirm the Shea, Maryellen James Thomas Dixon, as to Tryco, Sharon Tatem, McBride, David Garrett Jackson Dixon, Staffing. James and Crown LLP, TX, Houston, Appellants. Walker Sr., E. McKamie Law Reginald Office Background Sr., PC, Houston, E. Reginald McKamie operated Tryco, Dixons owned and TX, Appellee. temporary staffing company, their family business. Sharon and Dixon James KEYES, Panel consists of Justices *5 served as vice president president, and HIGLEY, and MASSENGALE. respectively, company, of the son and their an Troy employee. worked there as From OPINION 2000, Tryco employed 1996 to Robinson as 2000, a van In leaving Tryco, driver. KEYES, V. Justice. EVELYN in Tryco Robinson sued the FLSA suit. brought by an appellee, This is action alleged Tryco He that and the Dixons had Robinson, judg- James A. to enforce the the Fair Act violated Labor Standards ment in his favor in entered Robinson (“FLSA”) by pay him failing to substantial Tryco and Texas Commission Workforce amounts of time in ex- money for worked Inc., 2000-32376, in the Enterprises, No. forty week per cess of hours and that County, 113th District Court of Harris had him refusing Dixons feed for to return suit”). (“the Appellants, Texas FLSA copies logs of travel that he had made to (“Tryco”), Tryco Enterprises, Inc. Sharon regulatory substantiate his claims. The Dixon, Dixon, Staffing, C. James Crown pro- scheme under which Robinson sued (“Crown Staffing”), Troy Inc. and Keith vides, part, employer in relevant that an Dixon, trial appeal judgment provisions who violates the of the FLSA holding severally jointly court them and held for viola- accountable such liable for the owed to Robinson amounts attorney’s damages, an action tions for by Tryco in the and permitting FLSA suit fees, any in federal or state and costs judgment against enforcement that (Lexis- §§ court. 29 U.S.C.S. 201-19 appellants. assets of all 2010). Nexis issues, appellants argue three 2003, 13, on August On after a trial (1) the trial court in piercing erred: claim, a jury merits of his FLSA returned corporate jointly veil when it held them in favor Robinson. a verdict severally using corporate liable for 2003, later, 22, days August Nine on paying judgment form to avoid in Tryco privileges forfeited its (2) suit; admitting in the prior FLSA testi- tax. failure to its franchise mony witness in the trial of the given of a 2003, 11, court September the trial showing FLSA suit without a On (3) judgment against Tryco to on testify; signed witness was unavailable statutory in suit in verdict the FLSA holding per- Sharon and James Dixon $58,349 unpaid sonally judgment damages, including for the previous liable owner/manager was the true $58,349 for viola- “James Dixon wages, willful overtime FLSA, $16,558.75 attorney’s Enterprises, of both Inc. and Crown Tryco tion of the costs, alterna- argued, in ex- Inc.” Robinson fees, Staffing, and $603 court $457 $134,316.75, orga- plus pre- Dixon tively, for a total of that Sharon James penses, $30,853.06. Tryco nized both and Crown judgment operated interest enter- part single of a business Staffing as later, year September on One James Dixon was the true prise and that in this action to appellants Robinson sued owner/manager Tryco of both and Crown suit, FLSA enforce trial Staffing. asked its Tryco forfeited alleging Dixon indi- James and Sharon find fraudulently its charter and transferred vidually they liable “because were officers paying assets avoid Tryco Inc. Enterprises, of Defendant who that, alleged awarded him. Robinson August corporate privileges forfeited August 2003—the date on prior Septem- prior Judgment char- Tryco which forfeited “[fjorfeiture He ber 2003.” stated that Dixon ter —Sharon and James transferred corporate privileges results assets of employees officers” Tax under Code Staffing, they which had also Crown 171.255(a). section and for also formed served president, “effectively president vice 27, 2006, September On trial of this ac- emp- Inc. as leaving Enterprises *6 judgment tion to the in the FLSA enforce ty defrauding shell and its He creditors.” taking to of suit resumed. Prior the testi- that contended the Dixons’ transfer of em- mony, court presented Robinson to the the Tryco and to ployees assets Crown (1) following September exhibits: the a the Staffing rights “was fraud of in the suit and an judgment FLSA Robinson, Judgment James Defendant January judgment abstract of that dated creditor, the Debtors because transfer was 2004; (2) Tryco card for Birt business hinder, the delay, made with intent to Edison, Tryco showed was that similarly defraud Plaintiff and situated “temporary help that Edison service” and creditors.” Manager was Industrial and its Office 23, 2006, On March the instant action which contact information for provided During to the ensuing was called trial. (3) Tryco; Tryco’s tax forfeiture of trial, began to present bench 22, 2003, August privileges dated Tryco’s of regarding piercing evidence cor- Tryco’s certifying managerial that officers objected veil. porate Appellants on Dixon, YP, were James and Sharon C. and grounds surprise. of lack of notice (4) Dixon, P/S/T; and a determination of sixty-day The court ordered recess Tryco’s charter by forfeiture of amend his pleadings allow Robinson to State, Secretary Texas of office of the allege ego piercing alter and 22, 2003, stating Tryco dated that August rate veil. had privileges forfeited and days, second had them within 120 pleading, his amended filed on not revived that alter of Accounts had Comptroller March Robinson asserted an Public have theory Tryco determined that “does not as- ego judgment suit, tax, Tryco any alleging the FLSA that and its sets from which officers, Dixons, organized penalty, imposed or court costs under operat- through Troy, Chapter their 171 of the Code Staffing, [Texas Tax] ed Crown son satisfied,” and that is therefore as a mere tool or business conduit and that be “[i]t charter or certificate of reading. ordered that Counsel made objec- [the] no further authority entity for- the testimony of the referenced tions to permitted judicial testimony feited without ascertainment be read. Appellants’ counsel entry however, did, be made proper upon object that to Robinson’s subse- entity quent testimony files and records of such permanent the same matters on show such as of the date ground forfeiture testimony Edison’s on that hereof.” subject already was in evidence. suit, that, FLSA Edison testified prior to December judgment,
abstract and Edison’s manager he worked as a at Tryco, Tryco were ad- business card offered and where his immediate supervisor was Stacy Wilson, mitted into objection. Tryco’s evidence without one of presidents. vice evidence, Before the reported close of the trial Wilson to Tryco’s president, judicial took notice tax forfei- Dixon. At James the time of his testimo- suit, ny ture James and Sharon Dixon’s status in the FLSA Edison worked for managerial Tryco.1 Staffing officers Crown as its industrial manager. supervisor Wilson, His immediate still witness, As his for- first Robinson called then Staffing’s one Crown vice presi- manager mer Staffing and Crown dents. reported Wilson to Crown Staff- reading Birthol Edison into the record Dixon, ing’s president, James who had also testimony Edison in the given president. been Tryco’s Edison also testi- Appellants’ objected FLSA suit. counsel fied that Crown used Staffing the same testimony admission of this as hear- telephone numbers and the same business say. replied Edi- Robinson’s counsel that, location as at Crown Staff- Tryco’s corporate representative, son ing, provided staffing he several of the same counsel had represented companies same at Tryco. as he had At suit, parties each FLSA testimony, close Edison’s *7 subject that Edison had been to cross- that, counsel out pointed time of the therefore, proceeding; examination in that suit, FLSA Edison worked for Crown testimony his was admissible as an admis- that he Staffing repre- and testified as opponent. of a party sion of sentative Crown as well as Staffing Try- counsel out pointed also that Edison’s tes- co. Appellants’ object counsel did not to timony in the suit had given FLSA been repre- characterization of Edison as a court, open agreed and counsel appellants’ of either Tryco sentative or Crown Staff- Tryco’s repre- that Edison was ing. sentative in trial proceeding. that testimony court admitted conditionally also Robinson testified instant subject appellants’ briefing to submitting proceeding to enforce the from showing why that, testimony Edison’s from the FLSA suit. He testified his ended, FLSA suit employment Tryco was not admissible. The court with he called permitted testimony to read Tryco’s telephone Robinson one of numbers and into the appellants’ general record over spoke Tryco with one of his former co- objection later, that it of- hearsay, it was and About six to weeks workers. seven appellants’ opportunity Tryco fered counsel the Robinson went to the where location specific objections to make during operated had its business and saw that the (providing judicial accuracy reasonably Tex.R. Evid. 201 for whose sources cannot 803(8) adjudicative notice "capable questioned”); (public of facts accu- of rec- Tex.R. Evid. rule). rate ready exception and determination to hearsay resort ords as to testimony from the had Edison’s recorded at that location of the business name Staffing. They At this contend that Edison’s changed FLSA suit. been to Crown had location, two vans he testimony he saw the same was inadmissible under prior many also saw Tryco, and he driven Texas Rule of Evidence 801 because was Tryco 801(d) had worked for people who the same (defining hearsay. See Tex.R. Evid. people. new Robinson well as few as that They argue further hearsay). that, new name of than the testified other exception not fall within an testimony did new employees, a few company Rules hearsay to the rule under Texas location had about the business nothing 804(a) (b)(1) Robin- Evidence because was changed. He also testified evidence that present any son failed to business, that James family Dixons’ unavailable, he had made Edison was father, Troy was Dixon’s Dixon Edison, or that good-faith effort locate Troy employee had been an opportunity an and similar appellants had currently Staffing’s manager. Crown cross-examine Edison motive to evidence, Robinson At the close of the suit, required testimony from FLSA counsel and the agreed appellants’ as an ex- qualify a former proceeding his that he had abandoned trial hearsay See Tex.R. ception to rule. claims, only his leaving fraudulent transfer (b)(1) 804(a), admissibility (governing Evid. (1) and James Dixon claims that Sharon wit- testimony from unavailable former Tryco’s judgment were liable him ness). responds that Edison’s under alter from the FLSA suit debt hearsay was not but instead testimony enterprise theory single ego business party-oppo- constituted an admission because, Tryco, they had as officers of nent, excluded the definition which is corporation’s charter forfeited and, therefore, satisfy not hearsay need Staff- employees Crown transferred as an ex- requirements admission fiction using of Crown ing, hearsay ception to the rule. Staffing as a mere conduit fraud (2) liabilities, hearsay objection as officers Appellants’ avoid and, therefore, were Tryco, preserved presents and James Dixon Sharon Tryco, including liable for debts of reversing court’s ad ground for the trial suit, in the FLSA his favor testimony. Edison’s Texas mission of 171.255, Tax under Code section requires Appellate Rule of Procedure 38.1 *8 personal provides that, to a com prerequisite presenting as a the corporation rate officers for debts of the plaint appeal, on record must show of its charter.2 incurred forfeiture complaint that made to the trial “the was timely request, objection, or by court a 15, 2010, a July following hearing, On ... stated grounds motion that the final the trial court entered ruling complaining sought party that appellants, holding jointly them against specific trial court with sufficient severally liable for amounts trial ity to make the court aware to awarded complaint” and that “the trial court ... the FLSA judgment rendered in suit. objection ex ruled the ... ... either on Hearsay ... refused pressly implicitly; or or to ..., object complaining party rule issue, appellants their contend second Tex.R.App. P. by ed to refusal.” 33.1. admitting the trial erred that court (Vernon 2008). 171.255 Tax Code 2. Tex. Ann.
505
Likewise, Rule of Evidence
He did not
object
specificity, despite
predicat
“error
provides
so;
that
not
the trial court’s invitation to him to do
or
upon ruling
ed
excludes
admits
nor did he
obtain
definitive adverse rul
objection
... a timely
evidence unless
or
ing while the
court
in a proper
trial
was
record,
appears of
stating
motion to strike
change
to
position
ruling
conditional
objection,
if the
specific ground
admissibility
posi
and Robinson was
specific ground
apparent
was not
from the
tion to offer
to
testimony
subpoe
other
or
Thus,
pre
context.” Tex.R. Evid. 103.
to
testify.
Campbell,
na Edison to
appeal,
party
serve
error
must
Thus, appellants
S.W.3d at 185.
did not
timely, specific objection
have made a
at preserve
hearsay objection,
their
and that
possible opportunity.
earliest
See objection presents
ground
no
for disre
Oyster
Corp.
Creek Fin.
v. Richwood garding
testimony.
Edison’s
See TEX.R.
(Tex.
II, Inc., 176
Invs.
103;
Tex.R.App.
33.1;
P.
Campbell,
EVID.
2004, pet.
App.-Houston [1st
de
Dist.]
Here,
clarant’s statement
is not
only
counsel made
a
appellants’
hearsay
is
to admit the
general hearsay objection
exception
to the admission
needed
804(b)(1)
statement,
irrelevant.
Rule
is
testimony
Edison’s
from the FLSA suit.
and
(cid:127)
that, Tryco.
stated that
Corp.,
prior
at
Edison
Creek Fin.
S.W.3d
Oyster
Staffing
316-17.'
the same busi-
Crown
continued
Tryco
as
providing temporary
ness of
staff
801(e)(2),
admis
Under Rule
the
the
same em-
using
at
same location
the
the
exclusion from
sion-by-party-opponent
ployees
managers.
the same
Edi-
under
hearsay,
by par
statements
a
definition
confirms
son’s
business card further
if
hearsay
they are
ty opponent are not
previously employed
that Edison was
are
against party
party’s
offered
the
at
Robin-
manager
Tryco;
industrial
in either an individual or a
own statements
Edison
testimony
son’s
confirms that
was
representative
capacity.
EVID.
TEX.R.
employed
managerial position
in a
801(e)(2); Oyster
Corp.,
Fin.
Creek
at the
at the
Staffing
Crown
same location
Butler,
317;
Worley
S.W.3d at
testimony
time
his
in the FLSA
gave
he
(Tex.App.-Corpus Christi
suit. Robinson’s counsel also character-
writ).
1990, no
statement
Specifically, “[a]
representative
ized
of both
Edison as
hearsay
...
is not
if
statement
[t]he
Staffing,
appellants’
Crown
and is ...
party
offered
a state
object
not
characteriza-
counsel did
by
party’s agent
ment
or servant con
excerpt
tion.
conclude that
We
cerning
scope
a matter within the
of the
testimony
FLSA
Edison’s
from the
suit
agency
employment,
during
or
made
”
in the instant
admitted
enforcement action
existence of
relationship....
Tex.R.
by
party’s agent
was
“a statement
thus
801(e)(2)(D).
show
To
that a state
Evid.
concerning
or servant
a matter within the
ment is an
a party-opponent
admission
scope
agency
employment,
made
801(e)(2)(D),
under Rule
the existence of
during
relationship.”
existence of
agency
or employment relationship
801(e)(2)(D).
See Tex.R. Evid.
established,
must be
but there
re
is no
quirement
agency
relationship
be We hold that Edison’s recorded testimo-
independent
established with
corroborat
suit,
ny
from the FLSA
See,
ing
e.g.,
evidence.
Tucker’s Bever which
seeks
enforce in this
ages,
Fopay,
Inc. v.
145 S.W.3d
768- action;
under
properly
was
admitted
Rule
(Tex.App.-Texarkana
no pet.).
801(e)(2)(D)
party-
as the
of a
admission
statement,
Any
including
and, thus,
former
hearsay
opponent,
appellants’
testimony, may be admitted under one of objection
Oyster
is irrelevant. See
Creek
admission-by-party-opponent
exclu Fin. Corp.,
Here, jointly severally judg- and liable for the Edison testified in the suit FLSA ment in the FLSA suit. managing employee corporate as and, issue, representative appellants With to this con- Staffing respect both Crown (1) Supreme tend the Texas Court has a contractual obligation of the corpo single enterprise abolished here, the business as, ration —such the judgment aris theory the piercing as a means ing from Tryeo’s breach statutory of its (2) veil; presented rate Robinson no evi- and obligation contractual to Robinson dence an support ego theory alter for wages in compliance with the FLSA —if (3) veil; corporate piercing the Robin- owner the the “was alter the ego of corpo son his transfer abandoned fraudulent the- ration” and corporation “caused the to be ory and no other pled theory support used for purpose of perpetrating and piercing corporate veil. perpetrate did on an actual fraud obli- gee primarily for the direct personal bene argues that appellants are here, fit of the ... the fraud of jointly severally liable him under owner”— incorporating Staffing, Crown forfeiting single enterprise theory or business alter charter, ego and transfer theory judgment in the FLSA ring Tryco’s Staffing assets to Crown suit because the Dixons used avoid execution of judgment forms of Staffing and Crown as a against Tryco. mere paying conduit of fraud to avoid TEX. BUS. ORGS.CODE (Vernon (b) 21.223(a)(2), § judgment against Tryco. Supp.2010); awarded to him see Gladstrong He also SSP Partners v. appellants’ forfeiting contends Invs. actions— (USA) Tryco’s corporate non-payment Corp., 444, charter for 456 & n. 57 (Tex.2008) (quoting franchise taxes after the verdict was terms of former article discussing delivered in the FLSA suit and before the 2.21 and legislative history). its entered, transferring Try- 21.223 provides, Section relevant co’s Staffing assets to on that same Crown part: day, leaving Tryco without assets to (a) shares, A holder of of any owner pay the judgment -justify piercing the — shares, beneficial interest in or a sub- holding appellants joint- veil and scriber for shares subscription whose ly severally liable for accepted, has been any or affiliate of the FLSA suit under former article 2.21 of holder, owner, such a or subscriber or Act, Corporations Texas Business now corporation, may not be held section of the 21.223 Texas Business Or- corporation obligees liable to the itsor Code,3 ganizations appellants because used respect perpetrate fiction to a fraud. Organizations Business section Code (2)
21.223, predecessor, 2.21, any obligation contractual of the like its article provides corporation, corporation any relating that an owner of matter arising obligation such as to or from the Tryco, be held liable to the holder, corporation obligees judg basis beneficial —such owner, subscriber, ment any creditors —for contractual obli or affiliate is or gation arising ego or matter was the alter expired January reorganization governing Article 2.21 effective statutes busi- 2.21(a) 1, 2006, 2010. Article has been codified in January ness entities effective were substantially same form in Texas Business substantially recodified in form in similar Tex. Organizations Code section 21.223. SSP 2.223, 21.224-.225, Orgs.Code §§ Bus. (USA) Gladstrong Corp., Partners v. Invs. 29, 2003, (citing May respectively”) Act of (Tex.2008) (discuss- &456 n. 57 1-2, R.S., Leg., §§ 78th ch. 2003 Tex. ing stating, former article 2.21 and "Sections 595). Gen. Laws article, A legislative and B of
508 plies unity or con- when there is such between
or the basis of actual fraud, perpe- corporation sepa a individual that the structive sham and fraud, theory; corporation or similar of ceased and trate a rateness the has
holding only corporation liable would the injustice.” in Id. “It from result is shown (a)(2) (b) or prevent does not Subsection and dealings corporation the total of the holder, a liability limit of beneficial the individual, including degree to subscriber, owner, or if the affiliate fol corporate which formalities have been holder, obligee demonstrates that proper lowed and and individual corporate owner, subscriber, affili- or beneficial ty kept separately, have been the amount corporation used ate caused the to be interest, financial and control ownership of of purpose perpetrating corpora the individual maintains over the an fraud on the perpetrate did actual tion, has been whether per- obligee primarily the direct personal purposes.” Id. holder, used sonal beneficial benefit subscriber, owner, or affiliate. not, however, jointly are Parties 21.223(a)(2), TEX. BUS. ANN. ORGS.CODE corporation’s obligations liable (b). by “Actual fraud” as defined article part “merely single because were of a dishonesty purpose 2.21 “involves i.e., “merely because enterprise,” business intent deceive.” Solutioneers Consult control, purposes, mutual centralized Partners, Greyhound Ltd. ing, v. Gulf Partners, and shared finances.” SSP 275 Ltd., (Tex.App.-Hous 237 S.W.3d 387 Rather, “[disregard S.W.3d. at 455. (holding, no pet.) ton [14th Dist.] corporate ing structure involves two 2.21, corpo context of article that owner of (1) relationship “the be considerations”: corporate sponsorship ration that solicited (2) tween two entities” “whether [the] ego its alter for clients was not owner’s entities’ limited liability use of enjoyed absent evidence that owner direct illegitimate.” Id. at 455. fraud). resulting personal benefits normally pierce corporate To corporate “The form veil and shareholders, officers, impose liability theory insulates and di under an alter ego liability Partners, liability pursuant rectors from obli to SSP ” (1) Branscum, gations Castleberry plaintiff persons .... v. must show: (Tex.1986); Part he impose S.W.2d see SSP or entities on whom seeks to ners, However, debtor, liability egos at 451 n. are S.W.3d 29. alter (2) pierced veil on an that the fiction was used for ego theory illegitimate alter “where is purpose, an satisfaction organized operated requirements a mere tool article 2.21—now business conduit of another....” Business section Organizations Castle Code 21.223(a) (b).4 272. at berry, ego ap “Alter See id. 456 & n. 57. Branscum, 2.21, Castleberry supreme superseded In had been article showing approach disregarding court that a had held of constructive “takes stricter illegiti- enough fraud 455. It demonstrate structure.” S.W.3d at single enterprise mate limited lia- use of the afforded held "the business single theory corporations bility fundamentally under a business enter- inconsistent prise theory liability. approach Legislature with the 721 S.W.2d taken Partners, sum, (Tex.1986); 2.21.” In see also SSP article Id. at 456. the court Partners, corporations at 455. narrowed held that the mere fact that SSP two control, Castleberry prior holding, recognizing purposes, share "centralized mutual *12 with prongs both of the test sets to Staffing, We address Crown had they respect this case. previously incorporated. Staffing Crown had the same officers as Tryco, including Appellants Egos as Alter of Each A. Dixon, president; James it took over Other location; the offices at the of same To consider satisfy the first used telephone Try- the same numbers as veil— piercing corporate ation in co; it common employees Try- shared with sought the persons whether or entities to co; it performed the same temporary charged egos are of alter staffing for essentially services the same relationship be primary debtor —the companies; and it managed by was. corporate assessed tween entities can be same managers. using factors such as: Furthermore, the evidence showed (cid:127) whether the entities a com- shared James Dixon and Sharon abso- exercised name, offices, mon business common ownership lute and control over cor- both employees, common or centralized porations, very maintained a significant accounting; personal financial interest in both corpora- (cid:127) entity wages one paid whether tions, them personal and used pur- entity’s the other employees; poses. they Specifically, neglected the (cid:127) entity’s whether one ren- employees formality paying Tryco’s fran- dered services on behalf of the other chise Tryco’s tax and transferred all of entity; Staffing purpose assets to Crown (cid:127) entity whether one undocu- made avoiding payment judgment mented transfers of the oth- funds to FLSA suit. entity; er (cid:127) The profits foregoing whether allocation of un-refuted evidence es- between Staffing
losses
the entities is un-
tablishes that
and Crown
clear.
egos
were both alter
Sharon
part
James
a single
Dixon
business
Id. at 450-51.
enterprise
purposes
piercing
Here,
evidence,
there is uncontroverted
corporate veil under former Business Cor-
Edison, Robinson,
and the
rec-
public
porations
article 2.21
Act
and under
judicial
ords of which the trial court took
current provision,
Organizations
Business
notice, that James and Sharon Dixon were
therefore,
hold,
Code
21.223.
section
We
than
Tryco.
owners and officers of
Rather
that Robinson satisfied the
prong
first
tax,
paying Tryco’s corporate franchise
finding
appellants joint-
the test for
these
unpaid
which was due and
time the
ly
severally
judgment
liable for the
verdict was reached and the
en-
the FLSA suit.
suit,
tered in the FLSA
forfeit-
the Dixons
Tryco’s corporate
ed
charter. The same
Corporate
B.
Use of
Fiction
day
forfeited
charter— Perpetrate
a Fraud
returned,
verdict
but before
was entered on it—James
al
foregoing
factors “are
and Sharon Dixon
entirely
transferred
as- most
irrelevant” to the second
2.21,.
pierce
enough
perpetrate
and shared finances”
is not
a fraud under article
now
veil and hold the officers liable.
Organizations
Business
Code
21.223.
section
Rather,
Id',
party
Id. at
must also
at 455-56.
show that the
form
used to
*13
determining
in
wheth
equity”
on
determining personal
focusing
lia
in
consideration
pierced.
veil should be
corporate
er the
the
21.223—whether
bility under section
273; see also
Castleberry, 721
S.W.2d
illegitimate. Id.
liability
limited
was
use of
(Tex.
Davis, 305
Wilson v.
S.W.3d
is made
determination
at 455. That
pet.).
App.-Houston [1st Dist.]
poli
evaluation of the
on a careful
“based
of
lia
limited
supporting
principle
cies
the
conclude,
the
of the evi-
on
basis
We
Therefore, we
look to
Id.
must
bility.”
case,
the criteria
this
that five of
dence in
to see
Castleberry
and
SSP Partners
finding
and
corporate
the
form
piercing
fiction was used as
corporate
whether the
severally
and
liable
appellants jointly
an actual fraud
“perpetrating]
means of
in the FLSA
against Tryco
the judgment
obligee
primarily for the
on the
[Robinson]
(1) the
fiction
corporate
suit are satisfied:
of the ... own
personal benefit
direct
Tryco
to
and
respect
was
both
used
Staffing, the
of
and Crown
er[s]”
defrauding
Staffing as a means of
Crown
Dixons.
ANN.
BUS. ORGS.CODE
to
TEX.
Tryco of assets
by depriving
Robinson
21.223(b).
it in the
pay
judgment
awarded
the
(2)
suit;
Staffing
orga-
FLSA
Crown
court observed
supreme
tool or busi-
operated
nized and
as mere
the
“disregard
Partners that courts
SSP
Tryco’s
ness
and James
conduit of
fiction,
though corporate
even
corporate
busi-
temporary staffing
Sharon Dixon’s
corpo
formalities have been observed and
ness;
(3)
Tryco’s
the Dixons forfeited
have been
property
rate and individual
charter,
Staffing, and
organized Crown
corporate
the
form
kept separately, when
a means
Tryco’s assets to it as
transferred
basically
unfair
part
has been used as
of
legal
pay
to
evading Tryco’s
obligation
of
inequitable
device to achieve an
result.”
(4)
suit;
in the
the
judgment
the
FLSA
courts
Specifically,
ployed perpetrate to achieve or mo- illegitimate- fiction used nopoly; Dixon, Tryco, Sharon ly James and (5) where fiction is used of the second Staffing Crown violation statute; piercing the test for prong circumvent a article imposing veil and under (6) where fiction is relied sec- Organizations 2.21 or Business Code upon protection as a of crime or to tion 21.223. justify wrong. produced has (quoting Castleberry,
Id. at We hold that Robinson 271-72). that Crown disregarding the cor evidence sufficient establish “Because doctrine, as the mere tool or Staffing fiction an Tex was used porate equitable is Tryco and of James fact-specific takes a business conduit of approach flexible
5H Justice, KEYES, Sharon Dixon for the EVELYN purpose V. by avoiding payment concurring. a fraud perpetrating against Tryco entered majority Because the opinion’s holding Thus, FLSA has suit. borne appellants’ dispositive first issue is producing proof his burden of sufficient to appeal, unnecessary address
justify piercing veil under the Dixons’ third issue concerning their Organizations article 2.21 or Business liability for personal in judgment holding Tryco, section 21.223 and Code FLSA suit under Tax Code section Dixon, James and Sharon and Crown However, 171.255. because the dissent Staffing personally liable to him as alter specifically par addresses this issue and egos payment of each other for of the tially accepts arguments, Dixons’ I judgment. unusual, unprecedented, take but not step authoring separate concurring hold, however, We also that Robinson opinion to arguments address dissent’s by failed has to show more than scintilla See, on this e.g., issue. v. G & Mosqueda Troy of evidence that Dixon owned or con- Inc., Mfg., H 223 S.W.3d Diversified Tryco Staffing trolled either or Crown or 584 (Tex.App.-Houston [14th Dist.] the corporate illegitimately; used fiction denied) J., pet. (Seymore, concurring) therefore, has proved Troy Robinson not (“Like me, I jurists other before take ‘the personal liability Dixon’s to him under sec- unusual, unprecedented, but not step of 21.223. tion concurring my own in opinion order to appellants’ We overrule first issue as to ”) add some (quoting further observations.’ Dixon, Tryco, James and Sharon State, Thurman v. S.W.2d Staffing, and we sustain it as to Crown (Tex.App.-Houston [1st Dist.] Troy Dixon.5 J., (Cohen, pet.) concurring)); Alvarado Enters., Wingfoot Conclusion 2001) (Tex.App.-Houston (Taft, [1st Dist.] J., rev’d, (Tex. concurring), We judgment reverse the trial 2003). it, I to reach Were I would over appellant Troy court as to Keith Dixon and rule the third entirety. Dixons’ issue in its judgment that take render Robinson noth- issue, In their third and Sharon James by ing his claims him. We affirm argue they Dixon personally are not judgment appellants Tryco En- as liable under Tax Code 171.255 section Inc., Dixon, terprises, Sharon C. James judgment against Tryco entered Dixon, Staffing, and Crown Inc. They argue, FLSA suit. “Texas courts consistently have held that individual lia- KEYES, concurring. Justice bility corporations on the officers of MASSENGALE, concurring Justice privileges the forfeiture of their corporate dissenting part part. does not to debts into apply brought exis- issue, that, therefore, appellants argue their third der section 171.255 Robinson’s enforce the suit to personally cannot be liable to Robinson under predicated FLSA suit is on the claim that either that of the Tax Code or section Busi- perpetrated James and Dixon Sharon fraud Organizations ness 21.223. Code section Be- violated Code Tax section 171.255 holding appellants' respect cause our forfeiting Tryco’s charter before the dispositive, first issue we find unneces- Appellants argue Dix- entered. that the sary appellants’ to reach third issue. illegal wrongful ons’ actions were un- verdict, from, jury awarding him arising on a tence, by, resulting based caused damages ongoing violations statutory forfeiture.” occurring before out of actions that, “relation- officers of the FLSA contend under They doctrine, Tryco’s Tryco’s corpo- Robinson debt to entered after forfeiture of back” having “occurred” or charter and transfer of its assets. be counted rate must 171.255, the officers of a when the actions on section been “created” Under oc- liable for their FLSA was based be held suit wrong- in a namely, wrongful each time that resulted debt own acts curred — overtime in incurred after forfeiture fully failed to They argue the FLSA. charter. violation of that occurred in actions were actions these points *15 that forfeited Robinson out business, Tryco’s ordinary course of the by failing pay fran- corporate charter the forfeiture of its long before 22, 2003, August chise taxes on immediate- charter; that the on which dam- “debt” ly after the was reached the verdict was, ages were entered 13, 2003, on and August shortly FLSA suit therefore, a debt of the pre-existing judgment the entered on Sep- before forfeiture; that the ration incurred before 11, 2003. contends tember Robinson that entered after in the FLSA suit judgment fraudulently and Sharon Dixon for- James merely the forfeiture memorialized this Tryco’s Try- feited charter and transferred debt; that, under pre-existing avoid Staffing pay- co’s assets to Crown 171.255, construing Texas law section FLSA suit. ing judgment in the He the debt for which Robinson was date of that, law, argues established under damages back” to each awarded “relates suit judgment debt in the FLSA falls Tryco incurred ex- of the dates on which of a squarely within the definition “debt” overtime; unpaid penses a defunct for which the corporation of therefore, that, they cannot be held and corporation’s officers and directors personally judgment liable entered personally held liable under Tax Code sec- those debts under Tax section on Code agree 171.255. I with Robinson. tion 171.255, applies only to debts provides: Tax section 171.255 Code corporation incurred after forfeiture accepts charter. The dissent (a) a corporate privileges If the cor- argument hold the this would Dixons are poration forfeited for failure to only part liable for that personally ... a each pay penalty, tax or director judgment that does not reflect Robinson’s officer of is liable corporation or overtime, namely, recovery unpaid corporation each debt of fees, costs, in- attorney’s expenses, is created or incurred this state terest, statutory damages liquidated report, after the date on which the violation the Fair Labor for “willful tax, before penalty or is due and Act.” See Dissent at 583-34. Standards corporate privileges are revived. The any liability liability for tax includes Robinson, hand, argues on the other chapter penalty imposed by the Dixons misread section 171.255 corporation due that becomes argues the case law it. He applying payable after the date of forfei- he is not that the debt seeks to collect a ture. wages of debts for unpaid series incurred (b) a director or officer ordinary Tryco’s in the course of business (cid:127) time, debt, in the manner and to the period same over but statutorily extent as if or offi- the director suit for damages, same mandated at- fees, costs, torney’s partner corpora- were a and the interest was a cer “legally obligation enforceable were a measured partnership. tion money” a certain amount of payable by (c) A director or officer is not liable for Tryco to within a specified time if debt of the the di- period or on demand. I agree further or officer shows the debt rector legally-enforceable obligation for a sum created or incurred: certain by Tryco was incurred only when (1) over the objection; director’s the trial court entered (2) knowledge without the director’s statutory form damages jury on the that the exercise of reasonable verdict in the FLSA suit had diligence acquainted to become with failed to pay franchise taxes for- and had affairs of the would feited its charter. Taylor, have revealed the intention to Tax (quoting former create the debt. 171.109(a)(3)). Thus, Code section (Vernon 171.255 not, debt at issue here was Tex. Tax Code Ann. as the Dixons 2008). argue, created failures to *16 wages. overtime There was no
Thus, corporate
directors
officers and
contract
employment
between
may
personally
not be held
liable under
provided
payment
Robinson that
of
lawfully
section 171.255 for
contracted
money
jury
the sums of
the
found were
pri-
the
debts of
that occurred
wrongfully
withheld
Robinson under
or
forfeiture of the
charter or
Rather,
jury
the FLSA.
the
found that
incurred after
forfeiture without
their
Tryco’s corporate
intentionally
officers
knowledge
approval.
But
statutorily
withheld from Robinson
man-
personally
be held
liable for “debt” created
wages.
dated overtime
To
paying
avoid
or incurred after forfeiture of the
verdict,
any judgment entered on the jury
rate charter.
immediately
the
Tryco’s
Dixons
forfeited
171.255(a)
in
A “debt” as used
section
“is
charter
transferred
‘any
as
legally
defined
enforceable obli
Staffing.
assets to
The trial court
Crown
gation measured in a certain
of
amount
jury
then
on the
entered
verdict
money
performed
paid
which must be
or
in
against Tryco
the FLSA
suit
period
within
ascertainable
time or
“$58,349,000
wages
amount
for unpaid
” Taylor
Cmty.
on demand.’
v. First
Cred
$58,349.00for willful
the
[and]
violation of
Union,
863,
(Tex.App.
816 S.W.3d
Fair
in
precisely
Labor Standards Act”—
2010,
(quot
pet.)
[14th Dist.]
Houston
no
FLSA,
the
permits
accordance with
which
30, 1987,
R.S.,
May
Leg.,
ing Act
70th
recovery by employees
employers
whose
324,
1,
1734,
§
ch.
1987 Tex. Gen. Laws
the
“in
have violated
Act
the
amount
(defining
chapter
“debt” as
in
used
unpaid
...
compensation
their
overtime
formerly
as
codified in Tax Code sec
...
as
equal
and in an additional
amount
171.109(a)(3)),repealed
May
tion
Act of
216(b)
damages.”
§
liquidated
U.S.C.S.
C.S.,
§
Leg.,
79th
3rd
ch.
2010).
(LexisNexis
The court also award-
State,
1, 23);
2006 Tex. Gen. Laws
Cain
fees,
costs,
attorney’s
ed Robinson
515, 516
1 (Tex.App.-Austin
n.
interest,
the
expenses,
permitted by
as
writ).
1994, no
Thus,
legally
same
statute.
enforceable
judg-
with
in
agree
obligation
I
Robinson that
measurable
a sum certain
against Tryco
judg-
ment
in
FLSA
when the trial court entered
entered
created
Cir.1990).
statutory
duty
dam-
This
made discretion-
awarding
ment
however,
Act,
ages.
ary,
by section 260 of the
provides:
unique
The dissent draws a distinction
any
unpaid
...
action ...
to recover
jurisprudence
to section 171.255
between
liquidated
or
compensation,
overtime
compensation
liqui-
as
unpaid
awarded
[FLSA],
damages,
if the em-
under
of the
damages
dated
under section 216
ployer shows to the satisfaction
amount,
doubling
FLSA and
of that
giving
court that
the act
omission
rise
damages under
liquidated
also awarded as
good
to such action was
faith and that
FLSA,
that same section of
grounds
believing
he had
reasonable
FLSA. It
employer’s willful violation of the
that his
omission
not a viola-
act or
damages
by the
construes the
awarded
may,
tion of the
...
the court
[FLSA]
statutorily
jury for
withheld
wrongfully
discretion,
liquidated
its sound
award
mandated
as a series of law-
compensation
damages
any
or award
thereof
amount
ful debts of the
incurred in
not to
specified
exceed
amount
ordinary
Tryco’s operations
course
section [216].
merely
in the post-forfeiture
renewed
judgment.
doubling
It then construes the
(LexisNexis 2010) (em-
29 U.S.C.S.
damages
jury
award
Míreles,
added);
1414-
phasis
899 F.2d at
violations,
willfulness of the
in accordance
liqui-
15. To be relieved of
statute,
with the
a new
terms
216, an em-
damages
dated
under section
disagree
debt incurred after forfeiture.
I
ployer
liable under
found
section
reasoning
dissent’s
and its conclu-
bur-
207 of
FLSA has
“substantial
*17
sion.
proving
den” of
to the satisfaction of the
giving
trial court both that its acts
rise to
“Liquidated damages” awarded for vio-
employees’
good
the
suit were in
faith and
merely
lations of
the
the FLSA are not
grounds
that it had
believ-
reasonable
for
pre-exist-
memorialization of accumulated
Míreles,
ing
violating
it was
the
not
FLSA.
ing
is set
29
debts. The FLSA
out in Title
forfeiture
(Tex.Civ.App.-
“a
enforceable
465
legally
dorf,
421
were not reduced
S.W.2d
n.r.e.)
amount of
in a certain
obligation
(recognizing
measured
writ ref'd
Tyler
legal
or
in
of a
money”
part
the form
partner
joint
venture to
liability
forfeiture. See Silber-
until after
penalty
nership
partnership
termination
stein,
(distinguishing
at
S.W.2d
They are thus ac
purpose).
fraudulent
corporation “incurred
debts of defunct
Dixon
tions for which James and Sharon
of the business of
regular
course
may
under Tax
personally
be held
liable
and di-
which officers
corporation,” for
See
section 171.255.
Code
Tax Code
Tex.
liable,
personally
be held
rectors cannot
171.255(b).
§
Ann.
“no
and debts incurred
argue,
The
also
dissent
Dixons
business,” right to do
longer has the
wrongful
agrees,
each
failure
personal
“the
of officers
which
wages
overtime
“re-
...
limited
those debts
directors
separate
back” to the date of the
late[s]
and,
they
knowledge
which
have
violation,
specific statutory
all of which
thereby,
they
opportunity afforded
The
occurred before forfeiture.
Dixons
approved”);
have
consented
contend that
“individual liabili-
because
Schwab,
(discussing
81-82
S.W.2d
corporations after
ty of the officers of
debt);
Beesley
nature of
see also
corporate privileges
forfeiture of their
Inc.,
Separation,
Hydrocarbon
v.
brought
to debts
into exis-
apply
does
7 (Tex.App.-Dal-
& n.
S.W.3d
422-23
tence,
from,
by, resulting
or arising
caused
(distinguishing
between
pet.)
las
forfeiture,”
occurring
out of actions
before
types of debts courts have examined
severally
liable for
jointly
are not
context).
Tryco.
judgment against
may be
Corporate officers and directors
dam
personally
liquidated
held
liable
Rogers
contend that
Dixons
assessed,
awarded,
in a
penalties
ages
Adler,
(Tex.App.-Dallas
a result of
post-forfeiture judgment as
n.r.e.),
1985, writ
other section
ref'd
ei
wrongful
their own
acts that occurred
support
argument.
171.255
their
cases
before or after
to the same
ther
forfeiture
however,
is,
sharply
This case
different
partner
partnership
in a
extent
those
171.255
to which
section
cases
acts.
held liable for his own
Tex. Tax
have
the Texas courts
held the “relation-
171.255(b) (“The liability
Ann.
Code
applies.
belongs,
in
back” doctrine
It
or officer is in the same manner
director
stead,
to the well-established line
cases
if
and to the same extent as
the director
*19
in which
courts
held that the
Texas
have
corporation
partner
officer were a
the
apply.
does
relation-back doctrine
not
Silberstein,
partnership”);
were a
see also
“Broadly
relation-back
speaking,
the
(quoting predecessor
(applying relation-back
car-
tract
out of breach of
have revealed the intention
incur
arising
claims
that,
Williams,
42;
for
at
see
agreement
holding
rental
debt.
S.W.3d
441—
171.255,
171.255(c).
§
purposes
contractual Tex.
Tax
of section
Ann.
Code
debt
incurred
date of
court held that section 171.255
not be
was created or
could
contract,
liability
personal
not date on used to
to an
impute
execution of rental
judgment,
corporation
was
officer or
of
for a
which debt
reduced
director
a
forfeiture).
which occurred after
Both
debt when the debt
is a tort
Leasing, like
McKinney
Curry
judgment
negligence
Auto
based on the
of the
Williams,
Rogers,
of a
442.
corporation.
were cases for
collection
74 S.W.3d at
debt
a
corporation
due on contract
As
the case with the contract claims
McKinney,
into
it forfeited its
in
long
Rogers,
Curry
entered
before
issue
charter,
Leasing, negligence,
and in neither case was Auto
unlike
breach
fiduciary
fraud,
or
fiducia-
an
allegation
duty
fraud
breach of
is not
intention-
ry duty
corporation’s
partner might
sustained
al tort for which a
held
partnership,
officers.
liable
the acts of a
required
liability
under section 171.255.
Adams,
Similarly,
Williams
171.255(b);
§
See Tex. Tax
Tex.
Code Ann.
437 (Tex.App.-Corpus
S.W.3d
Christi
Orgs.Code
(Vernon
§§
Bus.
152.204
Ann.
denied),
pet.
judgment
attempt
a
creditor
2011)
(stating partner’s
partner-
duties
corpora
ed to
officers
collect
two
(Vernon
ship
partners),
other
152.210
negligence
personal
tion a
2011) (stating
partnership
remedies of
injuries
plaintiff
con
had suffered on
partners);
see also Tex. Tax Code Ann.
premises
corpora
dominium
owned
171.255(c) (“A
director or officer is not
tion,
against the
five
rendered
liable for
debt of
if the
months after
of its
forfeiture
charter
director or officer
that the
shows
debt
failure to
franchise taxes.
at 438-
Id.
created or incurred ... without
di-
Williams,
Although,
the debt —a
rector’s knowledge and that the exercise of
judgment for
negligence
corpora
diligence
reasonable
... would not have
of the
tion—was incurred after forfeiture
debt”).
revealed
intention
to create the
corporate charter
not
and was
a debt owed
Cain,
pursuant
case,
contrast,
to a
pre-existing
lawful
contrac
This
like
falls
obligation
corporation,
tual
it also squarely
scope
within the
of acts for which
any wrong
was not incurred
result of
as a
officer or
of a
director
defunct
ful
corporation’s
corporation may
act of the
officers or di
personally
be held
liable
Schwab, Silberstein,
knowledge
rectors or
prog-
incurred
their
under
and their
441;
and approval.
eny,
Id. at
see also Silber
which
the relation-back doc-
stein,
915-16; Schwab,
the trial
owner
its former
before
obligations to
breached its contractual
423. The
forfeiture. 358 S.W.3d at
title to
by failing
good
to provide
lender
drew a
between the
explicitly
distinction
dealership
vehicles
sold to
the motor
(penalty
incurred in
“costs
debts
Cain
assigned
under the contracts
its customers
oil
offi-
plugging
wells”
committing
other
to the lender
obligated by
plug)
law to
cers were
Id.
similar acts.
The dealer’s actions
(damages
“breaches of warran-
Taylor
obligations
the vehi-
breached its
to both
ty
provide good
and failure to
title to
provided
and the
cle-purchaser
lender
automobiles”)
not be “meas-
could
—which
vehicle-purchaser
with a defense
money”
certain
at the
ured in a
amount
against the lender as the holder
in-
contracting
time of
debts
—and
agreement.
The cor-
(losses
retail installment
Id.
Rogers
due to breach of
curred
poration’s
revoked for fail-
privileges
long
were
contract entered into
before
purchase
required
report.
forfeiture),
ure to file a
franchise tax
Leasing (corporate
Curry Auto
sued,
corporation’s
Id. The lender
and the
to adhere to
arising from failure
debts
contract),
sought
application
leasing
officer-director
the case at hand in
(breach
protect
Beesley
employment
relation-back doctrine to
himself
itself
“specified
entered
both
agreement)
of which
—each
due, so that at
in favor
Id.
the amount and the date
against him
of the lender.
a ‘debt’ was ‘creat-
contracting,
the time of
*23
Id. at
purposes
statutory
ed’ for
section 171.255.”
in concluding
violations
relation-
n. 7.
422-23 &
back doctrine did not apply). Robinson
for
Tryco
statutory
sued
damages under
Beesley
in
The distinction drawn
be-
the
jury
FLSA.
the
When
delivered a ver-
tween
of debt to which
relation-
types
the
damages
dict for
in favor of Robinson
apply
back doctrine does and does not
also
against
violations,
for
Tryco
its statutory
applies
places
judgment
here and
Sharon
James
Dixon
for-
immediately
Tryco
against
squarely
category
in the
feited
charter for failure
debts to
the relation-back doctrine
pay
to
the franchise tax then due and
apply.
damages
does not
The amount of
fraudulently transferred the corporate as-
Robinson for Tryco’s
due to
violation of
sets of
to
leaving
Crown Staffing,
not,
be,
was
speci-
the FLSA
and could not
empty
shell unable
to
fied at the time Robinson
his em-
entered
judgment that was
against
entered
it two
Indeed,
ployment contract with Tryco.
and one-half weeks later
reduced
of the
debt
amount
enforceable
damages
Robinson’s
to a sum certain.
not,
be,
could not
until
determined
I, therefore,
case
was tried and
trial
specifically disagree with
court had determined that the FSLA had the dissent’s construction of
require-
violated, that
been
the violations resulted ments of section 171.255
imposition
for the
certain payable
a sum
to Robinson in of personal liability on corporate officers
unpaid
form of
overtime
compensation,
the debt of a
corporation,
defunct
willful,
and that
violation was
so that which goes
beyond
even
arguments
Tryco was not
good
entitled to the
faith made
appellants. The
to
instant suit
pay,
statutorily
defense but must
as
man-
judgment
enforce the
in the FLSA
suit
damages,
not,
dated
double
it,
the amount of com-
as the dissent would have
a suit
pensation wrongfully
See 29
withheld.
recover “unpaid
compensation”
overtime
207, 216,260; Míreles,
§§
U.S.C.A.
899 that
a legally
became
obli-
enforceable
F.2d at 1414-15.
gation
respective
or,
“on each
payday
respect
overtime that Robinson
Cain,
Like the
in Taylor,
defendants
during
worked
the last
period,
work
Skrepnek,
Dixon,
James and Sharon
date
after
shortly
his termination” —an
as
officers of Tryco, committed
clearly
amount that was
not a determined
they
acts for which
if
could be held liable
prior
sum certain
to the FSLA lawsuit.
partners
they
partnership.
were
in a
See
Dissent at
It
is a
suit to enforce
171.255(b);
Tex. Tax Code Ann.
Tex. Bus.
against
officers
corpora-
of a defunct
Orgs.Code
152.204,152.210.
§§
They
Ann.
damages
tion a
liquidated
a fiduciary duty
perform
had both
their
only
available
under a
federal statute
in good
functions
officers
acts of
wrongful
judg-
those officers—a
faith and
act
best interest
immediately
ment
entered
corporation,
statutory
duty
had a
rate
corpora-
charter
forfeited and the
that Tryco paid
ensure
Robinson in
tion
of its
denuded
assets
those same
require-
accordance with federal FLSA
ad-
officers
wake of the
They
ments.
breached those common-law
jury
verse
verdict on which the judgment
manner,
statutory
duties
an ongoing
was rendered.
they retaliatorily
fired
taking
logs
on which
over-
unpaid
foregoing
his
I would
that the
hold
actions
Jonnet,
time was
satisfy
requirements
per-
recorded.
for imposing
524 (citing ongoing
S.W.2d at
nature of
sonal
on James
Dixon
and Sharon
(Tex.1986),
Supreme
Court
Tryco in
entered
“comprehensively
Tax
sec-
reviewed the
pursuant to
Code
of Texas
the FLSA suit
*24
law.
the
imposing liability despite
under
for
cor
171.255
well-established
bases
tion
171.255(a)-(b).
§§
Partners v. Glad
porate
structure.” SSP
Tex. Tax Code Ann.
(USA)
Corp.,
Invs.
strong
issue,
third
I would overrule the Dixons’
(Tex.2009).
for
grounds
The six
disre
judg-
affirm
trial court’s
and I would
the
corporate
the
fiction identified in
garding
Dixon
James
Sharon
holding
ment
Castleberry were:
personally liable under Tax Code section
(1)
the
used as a means
to Robin-
when
fiction is
damages
for all
awarded
171.255
fraud;
Tryco
perpetrating
judgment
against
son in the
entered
FLSA suit.
(2)
organized
a
is
corporation
where
operated as a mere tool or business
MASSENGALE, Justice,
MICHAEL
corporation;
conduit
another
dissenting.
(3)
is
corporate
where the
fiction
resort-
the
respectfully
part
dissent in
I
evading
to as a
an exist-
ed
means of
pre-
evidence
majority’s judgment. The
ing legal obligation;
justify piercing
case
sented
does not
(4)
the
fiction is
corporate
where
em-
veil,
the Dix-
corporate
and therefore
ployed
perpetrate
achieve or
mo-
not be held
Staffing
ons and Crown
should
nopoly;
judgment
liable on that basis for the
(5)
is
corporate
where
fiction
used
Thus,
Tryco.
I
reverse the
would
statute; and
to circumvent a
judgment
respect
Troy
with
Dixon and
(6) where the
fiction is
corporate
relied
Staffing.
Crown
upon as a
of crime
protection
or to
to James
respect
The
with
justify wrong.
partially supported
Dixon is
and Sharon
(footnotes
Castleberry, 721
at 272
are
ground
different
fact that
—the
omitted).
for
responsible under
Texas Tax Code
after the
those
liabilities incurred
majority
Castleberry’s
The
theo
treats
report
failed to
franchise
corporate
file a
support disregarding
ries to
or
a franchise tax
that was
penalty
“criteria,”
fiction as
and it concludes that
due. These liabilities include
holding
favor
five
“criteria”
James
against Tryco
liquidated dam-
claims
Staffing
and Sharon
Dixon
Crown
fees,
attorney’s
and court
ages,
expenses,
jointly
severally
judg
liable for
I would
affirm
partially
costs.
therefore
Majority
ment.
at 510. That
op.
ap
with
to James and
respect
is
proach
Castleberry,
inconsistent
Dixon,
only
Sharon
but
for those elements
specifically
that the use of the
noted
damages
owed
to Robinson.
corporate
perpetrate
fiction as a sham to
separate
grounds
imposing
fraud is a
Piercing
I.
veil
liability, apart
allegation
from the
that a
issue,
“mere
appellants
In their first
assert
has been used as a
tool
entity,
single-business-enterprise theory
that the
business conduit” of another
also
longer
recovery
ego” theory.
is
a viable
as the
theory
in known
“alter
Castle
(“The
evi
basis
They
berry,
Texas.
also contend that
rather are theories theory A. Single-business-enterprise must be independently analyzed. majority The acknowledges that the sin
This
and other
of appeals
court
courts
gle-business-enterprise
theory is
a via
have
Castleberry
understood the six
bases
theory
impose
ble
under Texas law to
one
separate, independent
theories
dis-
corporation’s obligations on another. SSP
corporate
regarding the
fiction.1 Because Partners, 275 S.W.3d at
Accordingly,
456.
Castleberry
each
basis for disregarding the
theory
this
is not a
which
upon
basis
corporate
is an independent ground
fiction
court
affirm the judgment ordering
each
recovery,
specifically
one must be
Staffing
Dixons and Crown
are
case,
pleaded or
is
In this
severally
waived.2
jointly
and
liable for
pleading,
live
second
Big
debts owed to Robinson.3 See
Easy
1.See,
fiction,
e.g.,
Corp. Tampi
garding
entirely sepa
Hideca Petroleum
v.
is
Ltd.,
838,
Int'l,
(Tex.
ego theory.”).
mex Oil
740 S.W.2d
843
rate from the alter
1987, writ) (“The
App.-Houston [1st
no
Dist.]
Branscum,
270,
ego’
separate'
Castleberry
doctrine of 'alter
is a
and dis
2.
v.
721 S.W.2d
1986);
(Tex.
Astroworld,
theory
tinct
is
and
not to be confused with
275 n. 5
Villanueva v.
Inc.,
690,
disregarding
other
reasons
(Tex.App.-Houston
866 S.W.2d
695
fiction.");
164,
1993,
denied);
Carey,
S.W.3d
Transp.,
[1st
Schlueter v.
112
writ
W F
Dist.]
&
2003,
denied)
Wilhelm,
32,
(Tex.App.-Fort
pet.
168
Worth
Inc. v.
208
47 n. 16
S.W.3d
("Alter
2006,
ego
perpetrate
(Tex.App.-Houston
pet.);
and sham to
a fraud
[14th
Dist.]
Adame,
307,
separate
disregarding
corpo
are
bases for
Schott Glas v.
178
at
314
S.W.3d
fiction,
2005,
pleaded
rate
each
sepa
(Tex.App.-Houston
pet.
and
must be
[14th
de-
Dist.]
Servs.,
nied); Schlueter,
rately.”); Stewart & Stevenson
Inc. v.
Cajun Corp. corporation’s obligations jointly liable for (Tex.App.-Dallas S.W.3d denied) “merely part single Partners were of a (observing that SSP because pet. single-business-enter “merely because enterprise” “invalidated” business se reversing judgment control, prise theory, purposes, mutual centralized Therefore, theory). Partners, upon that cured finances.” SSP shared theory upon the trial only remaining doctrine Invoking 455. hold could have based (1) “the rela- involves two considerations: Staffing liable and Crown ing (2) Dixons two tionship between entities” [the] Part theory. SSP alter-ego was the liabili- the entities’ use limited “whether ners, (noting at 454 that Cast Id. at The fac- illegitimate.” ty “where a leberry’s reference “are relevant to the first consideration tors as a organized operated determi- entirely almost irrelevant” to the *26 of another mere tool or business conduit consideration, which nation of the second alter-ego corresponds to the corporation” of on a careful evaluation “must based theory). lim- principle policies supporting liability.” Id. ited theory Alter-ego B. presented The to the trial court evidence Relationship between the entities support insufficient legally fic corporate judgment disregarding the first identi- Regarding the consideration alter-ego theory. Texas upon tion based Partners, theory re- in SSP alter-ego fied separate corporations law presumes particular relationship between quires Belgi BMC are distinct entities. Software entity two entities or an- and an individual Marchand, um, 789, 83 798 N.V. v. S.W.3d disregard corporate form: in order (Tex.2002). Because the form corporation organized operated is officers, shareholders, normally insulates as a “mere tool or business conduit” and directors from corporation another or individual. Castle- Partners, 275 at obligations, SSP S.W.3d 721 at 272. differ- berry, S.W.2d Stated 29, legal presumption n. the same 451 is ently, ego applies when there “[a]lter corporation in separateness applies unity corporation between and indi- such relation to its officers and shareholders. separateness vidual McKee, Ins. v. 943 Grain Dealers Mut. Co. only has holding ration ceased 455, (Tex.1997); Tri-State S.W.2d 458 injus- corporation liable would result Sys., v.
Bldg. Specialties, Bldg. Inc. NCI Id. Nat’l (citing tice.” First Bank Can- L.P., 242, 250 (Tex.App.-Hous 184 S.W.3d Gamble, 112, v. 134 Tex. 132 S.W.2d yon 2005, pet.). no The burden [1st ton Dist.] (1939)). 100, Castleberry Court presumption proof rests overcome that a of whether stated determination the cor party seeking disregard on the unity exists “is shown from level Szelc, separateness. v. porate Torregrossa dealings” corporation, total 803, (Tex.1980); Capital 603 S.W.2d listed several relevant indicators: v. Sinopec Fin. & Commerce AG Overseas (cid:127) (Tex. Gas, Ltd., 67, to which for- degree & Oil 2008, cor- pet.). no malities have been followed and App.-Houston Dist.] [1st disagree. veil-piercing analysis, respectfully I enterprise theory any application retains in a porate property represented have and individual would financially been kept separately; Tryco, back or that the Dixons used or its (cid:127) personal purposes. assets for interest, the amount of financial own- Heritage, Am. 259 S.W.3d 830. There ership, and control maintained was evidence that James and Sharon Dix- corporation; over the owned managed the compa- (cid:127) the use of for per- ny. However, that an proving individual is purposes. sonal majority or sole shareholder and serves Id. a managerial capacity is insufficient to Tryco’s relationship a. to the Dixons support an alter-ego finding. See Grain In determining unity whether exists be- Dealers, 458; 943 S.W.2d at Am. Heritage, individual, tween a we 830; 259 S.W.3d at Penhollow Custom following look to the nonexclusive factors: Homes, Kim, 366, LLC v. 320 S.W.3d 373- (cid:127) payment of alleged debts 2010, 74 (Tex.App.-El pet.); Paso Nich- personal or other checks com- Lin, Tseng ols v. Hsiang 282 S.W.3d funds; mingling of 747 (Tex.App.-Dallas no pet.); Mor- (cid:127) Powell, (Tex. ris v. representations 150 S.W.3d individual App.-San no pet.); Antonio financially corporation;
will Goldstein back Mortenson, 781-82 (cid:127) profits diversion of company *27 2003, (Tex.App.-Austin no pet.). use; individual’s personal (cid:127) inadequate capitalization; and The on majority relies evidence that (cid:127) keep corporate other failures to and James and Dixon “neglected Sharon personal separate. assets corporate formality paying Tryco’s cor- Casino, Heritage, Am. Inc. Nev. & porate Majority v. Gold franchise tax.” op. at 509. Inc., 816, 259 S.W.3d is (Tex.App.-Hous- questionable 830 It whether the failure to 2008, majority [1st ton no observe pet.). “corporate Dist.] formalities” is a factor supports alter-ego concludes that “the evidence showed that finding. that It was James Sharon Dixon exercised abso- mentioned in Castleberry, factor see ownership 272, over 721 Legislature lute and control both cor- S.W.2d at but porations, very significant subsequently maintained a a statute protect enacted to financial in both personal corpora- “any interest individuals from obli- tions, for personal pur- used them of the on gation corporation the basis of However, poses.” Majority op. corporation at 509. failure of to observe majority any no corporate formality.” identifies evidence that Tex. Bus. ORGS. 21.223(a)(3) (West 2011). Sharon and Dixon used James for Code Ann. purposes,” “personal including record con- Several courts of appeals, this one, provision’s tains none. There no evidence have prede- relied on this cessor, personal the Dixons their commingled substantially which contained iden- property Tryco’s property, language, tical that the conclude observ- debts, paid personal Dixons’ that the is no longer ance formalities debts, paid Tryco’s Dixons that the alter-ego analysis.4 Dixons relevant factor in the 212, 2004, Corp., (Tex.App.-San See Howell 4. v. Hilton Hotels 84 S.W.3d S.W.3d 220 Antonio 708, Schlueter, 170; 2002, (Tex.App.-Houston pet.); 714 no [1st 112 S.W.3d at Dom- Dist.] denied) pet. (op. rehearing); Sparks inguez Payne, v. v. 112 S.W.3d 869 n. 2 Booth, (Tex.App.- (Tex.App.-Corpus pet.); 232 S.W.3d 868-69 no Christi Pine- Powell, pet.); Props., Prop. v. Dallas Morris brook Ltd. v. Brookhaven Lake Staffing, With the cor- respect evidence established Crown holding that the approach Castleberry’s alter to follow and James Dixon were rect is Sharon majority example also observed and consider several nonexclusive egos Tryco, all of assets “transferred factors to whether two cor- determine Staffing purpose of avoid- separate to Crown not maintained as porations were FLSA ing entities, payment including: op. suit.” at Majority (cid:127) employees; common claim at his fraudulent-transfer abandoned (cid:127) offices; common majority’s trial. if the factual obser- Even (cid:127) accounting; centralized true, does not vation is demonstrate (cid:127) by one payment wages corporation relationship between the Dix- type corporation’s employees; another alter Tryco necessary ons establish degree unity ego, is defined as which (cid:127) name; common business high separateness so that the between (cid:127) by the employees services rendered corporation has ceased. individual and of one on behalf of an- S.W.2d 272. The Castleberry, at corporation; other by the more perceived majority situation (cid:127) transfers of be- undocumented funds typical perpe- with a “sham to consonant corporations; and tween theory, trate a fraud” the Castleber- (cid:127) profits loss- unclear allocation ry applying Court described as when: corporations. es between closely held owes unwant- Partners, 450-51, SSP siphons ed off obligations; revenues, listed (referencing approving off much of factors sells Corp. assets, Taylor acts Petroleum or does other to hinder Paramount (Tex. Ctr., Rental and its on-going ability business *28 1986, debts; App.-Houston Dist.] writ ref'd [14th off a new then starts its business n.r.e.)). up basically a that is continuation many
old with of the same business The majority following considers evi- officers, shareholders, and directors. establishing Staffing dence as that Crown However, Id. at not 275. Robinson did Tryco: was an Staff- ego alter “Crown plead perpetrate “sham to a fraud” Tryco, ing had same officers as includ- theory. The fact Dixons Dixon, ing president; it took James Tryco’s have transferred assets Crown Tryco at the over offices of same loca- in order to avoid a does Staffing tion; telephone it numbers used the same prove theory not ego, alter that Robin- Tryco; employees it shared common (“[A] plead. son did See id. at sham to Tryco; performed tempo- same fraud, separate perpetrate a is from alter rary essentially staffing services ego.”). same and it was companies; managed Tryco’s relationship
b. to Crown Majority the same at 509. managers.” op. Staffing Assuming that all of the evidence that Ass’n, (Tex.App.- is Owners 77 S.W.3d serve formalities not alone denied); pet. Texarkana N. Am. Van enough ego, especially imply alter when Emmons,
Lines, Inc. v. 119 n. S.W.3d closely held” "ob- is because denied); pet. (Tex.App.-Beaumont see servance formalities now is Mancorp, Culpepper, also 226, v. Inc. 802 S.W.2d statute even a factor to be considered in not J., (Tex.1990) (Hecht, dissenting) ego”). determining alter (noting corporation's that "a failure to ob- admissible, presented Tire-Arlington, such Harwood Inc. Young, evidence did tend to show these facts. 885-86 (Tex.App.-Fort 1998, pet. by agr.). Worth dism’d It is However, majority overlooks the ab- impossible Crown Staffing served as any sence of evidence that ego Tryco, versa, the alter or vice if Staffing ever and operated Crown existed they did not and operate exist at the same fact, simultaneously. the available evi- time. dence tends to show the At opposite.
time of
testimony regarding
Edison’s
his
previous
at
he
employment
Tryco, worked
The majority has impermissibly “blurred
Staffing.
testify
Crown
He did not
among
the distinction”
the various theories
employed
that he
both compa-
was ever
at
liability
identified in Castleberry by
simultaneously.
nies
Robinson testified
treating each
synonym
basis “as a
that when he called Tryco’s telephone
entire doctrine
disregarding
number,
spoke
he
to someone who identi-
rate fiction.” See Castleberry, 721 S.W.2d
fied
as working
himself
for Crown Staff-
only
at 272.
Castleberry
valid
basis
ing.
testify
employee
He did not
that the
pleaded
alter-ego
that Robinson
theo-
indicated that he was a common employee
ry.
I would hold that
the evidence was
of both
further
companies. Robinson
tes-
legally insufficient to
type
demonstrate the
tified that
he
when
visited
business
relationship
Tryco,
between
James and
location, he saw that
name
had
Dixon,
Sharon
Staffing
and Crown
changed.
He did not indicate that
alter-ego
Thus,
theory requires.
the evi-
presence
also advertised a
at that location.
support
dence does
finding
not
that a
In the
of a
that two
showing
absence
cor-
relationship
disregard Tryco’s
sufficient to
porations
going
at the
are
concerns
same
corporate structure
existed. See SSP
time, the evidence does not show that “a
Partners, 275
455.
organized
operated
as a
mere tool or business conduit of another
Illegitimate
2.
use of limited
corporation.” Castleberry, 721 S.W.2d at
appellate
Furthermore,
When
courts
found suf-
majority
have
has
iden-
ficient
to support
alter-ego
legally
evidence
tified
support
sufficient evidence to
finding as
two corporations,
between
the second consideration in disregarding
*29
evidence demonstrated that the two corpo-
corporate
structure:
the en-
“whether
See,
operated simultaneously.
e.g.,
rations
illegiti-
tities’ use of limited
was
Hideca
Corp. Tampimex
majority
Petroleum
Oil mate.” Id. The
recognizes that
Ltd.,
(Tex.
838, 843-44
proved
740 S.W.2d
actual fraud
be
order
must
to
Inti
1987,
writ);
App.-Houston
disregard
Majority
[1st
fiction.5
Dist.]
R.S.,
182, 1,
Castleberry, legislation
Leg.,
§
5. After
was enacted to
ch.
2003 Tex. Gen. Laws
267,
(current
Orgs.
provide
showing
that a
of constructive fraud
version at
Bus.
Tex.
2.223);
disregard
does
§
not suffice to
SSP Partners v. Glad
Code Ann.
444,
(USA)
accomplished by
strong
Corp.,
structure. This was
enact
Invs.
(Tex.2009)
ing
recodification).
(discussing
former Article 2.21 of the Texas Business
& n. 57
Act,
statute,
Corporation
been
has since
recodi
Under that
fiction
disregarded
plaintiff
fied as
21.223 of
Section
the Texas Business
if the
that a
shows
12, 1989,
Organizations
May
corporation
Code.
purpose
See Act of
was "used for the
R.S.,
Leg.,
perpetrating
perpetrate
71st
ch.
Tex.
did
an
Gen.
and
actual
(amended 1993, 1997,
Laws
974-75
plaintiff,
fraud” on the
and such actual fraud
(former
2007)
Corporations
"primarily
personal
was
Business
direct
bene
2.21);
29, 2003,
Act
May
corporation’s
Article
Act of
78th
fit” of the
owner or affiliate.
had
a
Texan Transfer
suggests that the
contract that
majority
op.
The
at 510.
and then
obtained
company,
case was “the fraud
furniture
fraud in this
actual
forfeiting
the same con-
Staffing,
for the third
incorporating Crown
charter,
jury
and transfer-
Id.
The
found that
tract.
at 274-75.
Staffing to
ring Tryco’s assets to Crown
co-owner had used Tex-
Branscum and his
perpetrate
avoid execution
to
a
an Transfer as a sham
Majority op. at 507.
against Tryco.”
Castleberry,
on
and the
fraud
trial
However,
assuming
facts
that these
even
that Branscum and
rendered
Castleberry demonstrates
proved,
were
Byboth
personally liable for the
were
do
constitute
circumstances
not
these
at 271.
promissory note. Id.
justify piercing
actual fraud to
Texas
The
Court of
held
Supreme
alter-ego theory.
rate
an
veil under
fraud,
fraud,
actual
just
constructive
not
Tex-
Castleberry,
called
adequate
disregard the corporate
to
by Castleberry,
an
was formed
Transfer
fiction.
id. at 272-73.
Court
Branscum,
Byboth
purpose
explained the difference between the two
moving
a furniture
business.
operating
types of fraud as follows:
at
Each indi-
Castleberry, 721 S.W.2d
Transfer’s
one third
Texan
vidual owned
usually
dishonesty
Actual fraud
involves
thereafter, Branscum
shares.
Id. Soon
deceive,
purpose
or intent to
whereas
Elite
competing
business called
formed
the breach
constructive fraud is
of some
Castleberry
Id.
and Branscum
Moving.
which,
legal
equitable duty
irrespec-
Elite
falling
had
out over
creation of
tive of
the law
guilt,
moral
declares
Castleberry
sold his stock
Moving,
tendency
fraudulent' because of its
in exchange
Transfer
for a
back to Texan
others,
confidence,
deceive
to violate
After
promissory
making
note.
Id.
one
injure public
interests.
note,
payment on the
Texan Transfer de-
Griffith,
at 273
Archer v.
(quoting
Id.
remaining
on the
balance. Id.
faulted
(Tex.1964)).
Turning
occasions,
On at least three
Branscum
evidence,
stated:
Court
told
he would
Texan
deplete
others that
some
of a
We hold that this is
evidence
Transfer of its assets
ensure
Cast-
jury
a fraud. A
paid
perpetrate
sham to
leberry
promissory
Byboth
could
Branscum
buy-out,
274-75. After the
find
note.
Id. at
corporation,
manipulated
closely-held
Moving took more
more of Tex-
Elite
Transfer,
formed competing
Id.
274. The
Texan
Transfer’s business.
Castleberry
ensure that
operated
two
out of the same
businesses to
companies
location,
Castleberry
did not
little
get paid.
Texan Transfer allowed Elite
had
back
despite
lack of
choice but to sell his shares
Moving to use its trucks
*30
this
corporation. While
evidence
agreement
rental
or other rec-
written
fraud,
be no
of intentional
con-
Moving
ords
much Elite
owed
evidence
to show how
fraud,
fraud,
not intentional
Castleberry
for
Id. After
filed
structive
usage.
such
suit,
disregarding
for
Byboth
formed a third
standard
Branscum
of a
rate fiction on the basis
sham to
operated
which also
out of the
location,
perpetrate a fraud.
major
same
terminated
21.223(b).
Orgs.Code
§
Ann.
Tex. Bus.
FRAUD,
REQUIRED
THE
IS
TO DISREGARD
CORPORATE
This
275 S.W.3d at 455.
form. SSP
CASTLEBERRY
Partners,
HAS ABROGATED
STATUTORY PROVISION
FRAUD, NOT CONSTRUCTIVE
INSOFAR THAT ACTUAL
Thus, although
Castleberry
Id. at 275.
actual fraud was done “primarily for the
questioned whether
“intentional
personal
Court
direct
benefit” of the corporate
affiliate).
established,
fraud” had been
it affirmed
owner or
majority
The
does
court’s
basis of
the trial
on the
address what evidence it
rele-
believes is
fraud. Id. at
requirement
constructive
277.
vant to this
for disregarding
corporate
fiction. The record contains
Castleberry
abrogated
has been
such
benefit,
no
concerning
evidence
what
if
no
suffices
longer
that constructive fraud
any,
alleged
provided
transaction
corporate
to demonstrate that use of the
Staffing,
Dixons or Crown
as a
such
illegitimate.
structure was
Part-
See SSP
transfer
a personal
of assets to
account
ners,
Nevertheless,
Staffing, forfeiting Tryco’s
char-
majority
“subjec-
The
has substituted a
ter,
transferring Tryco’s
assets to
unfairness,”
tive perception of
SSP Part-
Staffing to
Crown
avoid execution Rob-
ners,
275 S.W.3d at
showing
judgment against
Majori-
Tryco.”
inson’s
Legislature
and the Supreme
ty
op. at
These acts mirror those
require
Court of Texas
in order to disre-
Castleberry, where two businessmen creat-
gard
fiction: actual fraud
separate corporations
ed
as-
and diverted
perpetrated
primarily
personal
a direct
sets
business to those
corporations
benefit.
I would hold that the
evidence
paying
order to avoid
a debt
of their
to one
legally
this case is
insufficient to
support
partners.
majority
former business
finding that assets and business were
to distinguish Castleberry
has failed
from
Staffing
transferred from
to Crown
this case.
purpose
perpetrating
an actual
legally
The evidence is also
insufficient
against Robinson
primarily
fraud
prove
the “actual
in this
fraud”
benefit
personal
direct
Dixons
case,
be,
it may
whatever
was undertaken
Staffing.
Crown
primarily
personal
direct
benefit of
the Dixons
Crown
See Tex.
I
Staffing.
legal-
would hold
the evidence was
Orgs.Code
21.223(b)
(permit-
ly
Bus.
insufficient
hold the
Dixons
Ann.
disregard
ting
when
Staffing
fiction
Crown
liable for
debts
Co.,
benefit);
v.
personal
6. See Gollin Hoard Gainer
No.
Indus.
mitted for his direct
Soluti
01-03-00435-CV,
110374, at
2005 WL
*4-5
Consulting,
Greyhound
oneers
Ltd. v. Gulf
20, 2005,
(Tex.App.-Houston
Jan
[1st Dist.]
Ltd.,
Partners,
(Tex.
388-89
denied) (mem.
pet.
op.) (holding that evidence
App.-Houston
pet.)
[14th Dist.]
salary
company
that CEO's
increased after
(holding that because record did not show
accepted merchandise on credit was not le
corporation’s
money
what
owner did with
gally
personal
sufficient evidence of direct
corporation, "including,
advanced
his
Walden,
transaction);
benefit
Shook
money]
example,
deposited
he
whether
*31
[the
604,
(Tex.App.-Austin
368
2012,
621-22
personal
into his
account or used them
filed)
pet.
(holding that evidence that
purchase personal
pay personal
items or to
primary
individual was
LLC and
investor in
debts,”
legally
the evidence was
insufficient
only one of two members
infer
did not raise
benefit).
alleged
finding
support
personal
ence that LLC's
actual
was com
fraud
of direct
before
years
to three
at least two
Accord-
curred
theory.
veil-piercing
forfeited.”
were
corporate privileges
the
the first issue.
sustain
ingly, I would
“in
that
argues
Robinson
response,
privileges
II. Loss of
in
penalties
matter
the debts
this
majority
addressed
Although not
scheme
statutory
of a
part
were
curred
their resolution
because of
opinion
permissive,
imposed was
penalty
and the
claim,
separate
there was
veil-piercing
judgment
until
thus no debt existed
to hold James
alleged at trial
basis
He re
the forfeiture.”
entered after
judgment
(Tex.
State,
liable for
Sharon Dixon
531 writ) 1987, pro- Schwab, 171.255 the Tax no (citing Section Code Dist.] 198 81). Moreover, in relevant part: vides S.W.2d at it is Robinson’s prove burden to that the debts for which corpora- the corporate privileges If of a he seeks hold James and Sharon Dixon file tion are forfeited for the failure to liable under Section 171.255 were created report or tax or each pay penalty, or incurred after the date the event of the corporation director or officer is occasioning forfeiture corpo hable for each of the corporation debt privileges. State, rate See Wilburn 824 is created or incurred this state 755, 1992, S.W.2d 763 (Tex.App.-Austin no tax, after the date which report, on writ). penalty or is due and before the privileges
rate are revived. original The judgment reflects that Rob- $58,349.00 inson was awarded unpaid 171.255(a). § In this Tax Tex. Code Ann. $58,349.00 wages, for “willful violation of meaning provision, the of “create” is “to Act,” $16,558.75 the Fair Labor Standards bring into something existence which did fees, attorney’s expenses, $603.00 exist,” while “incurred” means for costs of court. $457.00 Because on,” “occasioned,” “brought or “caused.” each of these amounts was assessed for a Schlumberger Survey See Schwab v. Well purpose, different each must be considered 379, Corp., 79, ing 145 Tex. 198 81 S.W.2d separately to determine dates upon (1946) statute). predecessor (interpreting which met all the conditions of a debt At all times during employ a corporate which director or officer Tryco through entry ment may be held liable under Section 171.255. suit, original the Tax part Each the award became a debt for chapter Code’s on franchise taxes defined purposes of Section 171.255 when it “any legally “debt” as obli enforceable (1) (2) a certain amount of money gation measured in certain amount of (3) created or incurred a legally en- money performed paid which must be or (4) obligation forceable which must be per- period within an ascertainable of time or paid formed or within pe- an ascertainable 30, 1987, May on demand.” Act of 70th riod of time or on demand. R.S., 324, 1,§ Leg., Tex. Tax. ch. 1987 Tex. Gen. 171.255; § May 30,1987, ofAct 1734, 1735, Code Ann. Laws repealed by May Act of R.S., 324, 1,§ Leg., 70th ch. 1987 Tex. 2006, C.S., 1, 5,§ 79th 3d ch. Leg., 1734,1735. Gen. Laws (effective Tex. Gen. Laws Jan. 2008); Taylor Cmty. see also v. First Tryco’s liability to Robinson arose out of (Tex. Union, Credit to pay its failure him overtime compensa- App.-Houston pet.) [14th Dist.] pursuant tion to the federal Fair Labor (applying foregoing definition of “debt” 207(a)(2) Standards Act. See 29 U.S.C. Cain, 171.255); Section S.W.2d at (providing non-exempt employee (same). n. 1 “In determining whether a longer working per than 40 hours week incurred, debt has been created “compensation shall receive for his em- strictly should construe this lan statutory ployment in specified excess of [40 hours] guage protect individuals whom at a rate not less than one one-half recovery of such quasi-penal damages regular times the rate at which he is em- Anderson, sought.” McKinney v. ployed”). “penalties” section of the 173, 174 (Tex.App.-Houston provides, part: [1st FLSA in relevant required report director or officer to file a a tax or due). starts after penalty the date that was *33 hours number of overtime equal to the is the [over- who violates employer Any by his multiplied worked title shall that Robinson of this pay provision] time af- one and employees multiplied or rate” “regular employee to the liable 207(a)(2)(C); unpaid § their ... 29 U.S.C. in the amount half times. See fected an ... and in a “certain compensation § 778.107. This was overtime 29 C.F.R. 30, liquidated amount as equal May Act of money,” additional see amount of to recover R.S., An action damages.... § ch. Leg., 70th pre- in either of liability prescribed 1734, 1735, though even Tex. Gen. Laws maintained may be ceding sentences com- of overtime at the amount to arrive (including public any employer against one needs to to Robinson owed pensation court of any Federal or State agency) when he worked facts about know or by any one jurisdiction competent Dae rate was. Won regular his what Cf. and in behalf employees for more (remanding Choe, at 743-44 employ- and other or themselves himself fact action to determine 171.255 Section The court similarly situated.... ees of debt amount question regarding shall, any in addition to action such con- a services incurred on plaintiff to the awarded tax). of franchise non-payment tract attorney’s reasonable allow a plaintiffs, Furthermore, that [a] well settled is “[i]t defendant, and by the paid to be fee com- action for overtime separate cause of of the action. costs regular payday at each accrues pensation 216(b). interpreting § 29 U.S.C. period work immediately following the the relevant we follow provisions, FLSA’s rendered services were during which the Supreme States of the United precedents compensation which the overtime and for Texas, Supreme Court Court Drug Hodgson v. Behrens is claimed.” precedents to the may also look and we Cir.1973) (in- (5th Co., 475 F.2d Penrod guidance. courts for other federal omitted); also marks see quotation ternal Williams, 868 S.W.2d v. Drilling Corp. Inc., Vegas, Las v. Dent Cox Commc’ns (Tex.1993). 294, 296 Cir.2007) (“A (9th 1141, 1144 502 F.3d compensation Unpaid overtime A. pay- accrues at each of action new cause period work immediately following the day $58,349.00 unpaid award As to the owed.”); compensation for which judg- original compensation, overtime Columbus, 579, 581 19 F.3d Knight parties apparently implies ment —and Cir.1994) (“Each (11th over- failure to Robinson, who worked as assume—that violation of constitutes a new time non-exempt Tryco, was a van driver FLSA.”). ac- of action If a new cause the overtime from employee who benefited Robinson was payday that crued on each of the FLSA.9 provisions compensation owed compensation overtime paid due compensation” “unpaid overtime paydays he 216(b), him, that on such § it follows FLSA, see 29 U.S.C. under the provision, he empt FLSA’s overtime employees from the provides for classes 9. The FLSA recovery under pay provi had no basis for exempt the overtime would have who are 213(a), (b) (listing compensation. U.S.C. unpaid See 29 sion. overtime the FLSA v. In exempt employees); Cowart Cowart, (finding classes 213 F.3d at Inc., 213 F.3d galls Shipbuilding, ex employees were administrative salaried (5th Cir.2000) (recognizing ex that FLSA provi compensation empt from the overtime working in bona employees empts salaried affirming summary judgment sion administrative, executive, professional fide them). employee ex capacity). Were Robinson *34 “legally obligation” damages enforceable to the acquired equal unpaid amount of the “on See Act payable that was demand.” compensation. overtime See 29 U.S.C. R.S., 30, 1987, 324, 216(b). ch. May Leg., § 70th liquidated Such damages are 1, 1734, § Tex. Gen. 1987 Laws 1735. the norm and have been characterized as See, “mandatory.” e.g., Martin Ind. v. statute, required By Tryeo state was Co., (6th 574, Mich. Power 381 F.3d 584 pay non-exempt employees like Robinson Cir.2004); Martin v. Cooper Supply Elec. at a month. least twice See Tex. Lab.Code Co., (3rd Cir.1991). 896, 940 F.2d 907 61.011(b) (West 2006); Igal § also see Ann. However, “Congress provided has Inc., Brightstar Grp., v. Tech. 250 Info. courts with some discretion to limit (Tex.2008) (observing 81-82 S.W.3d Martin, deny liquidated damages.” 381 employ- law payday “requires private that 260); (citing F.3d at § 584 29 see U.S.C. types wages ers of all and sizes to also Lee v. Cnty., Coahoma 937 F.2d full, time, employees in owed to on and on (5th Cir.1991) 227 if (observing that “even (footnotes paydays” scheduled regularly the district court determines em- that the omitted)). Robinson’s last should payment ployer’s good actions were in faith made after days have been either six grounds, based on reasonable court employment date that his or not ended liquidated has discretion award dam- regularly later than the next scheduled ages”). Section 260 of provides: the FLSA § See Tex. 61.014. payday. Lab.Code Ann. Thus, Tryeo first incurred the debt for employer [I]f shows to the satisfac- each unpaid compensation overtime on re- tion of the that the act or omission or, payday spective respect with giving good rise such action inwas during that overtime Robinson worked his faith that he had reasonable period, shortly on a last work date grounds for believing that his act or his termination. The fact that those debts omission was not a violation Fair of the aggregated to a were later and reduced Labor Standards Act of as amend- Tryeo does not “in- mean that ed, may, in the court its sound discre- $58,349.00 wages curred” the unpaid tion, liquidated award no damages of the judgment. McKinney, the date Cf. any award amount thereof not to exceed corpora- at 175 (holding S.W.2d that specified the amount in section 216 of equip- tion incurred debts on the date that title. though ment lease was even lease executed 260. provision U.S.C. This means installments). payable Because that the district court finds “[i]f [the] Tryeo incurred the debt employer’s which action violated the FLSA unpaid compensation overtime before the faith, good faith good was taken in event occasioning date of the the forfeiture supported grounds reasonable privileges, I would hold believing that complied the actions not James Sharon Dixon are lia- FLSA, may choose not to award Section ble under 171.255 for Robinson’s Lee, liquidated damages.” at 937 F.2d unpaid wages. overtime Martin, 226-27; accord 381 F.3d at Liquidated damages B. con- Although strictly Section 171.255 is $58,349.00 Robinson’s other award of Dixon strued favor James and Sharon officers, willful Tryco’s corporate was “for violation of the Fair Labor see McKin- Act.” employers Standards For violate ney, apparent it is S.W.2d the FLSA’s overtime Sec- requirements, liqui- the trial court’s discretion to award prescribes liquidated damages tion 216 additional dated means that damages such Bath, Ltd., 176 money Elegant Uphoff amount of sues. were not a “certain Cir.1999). (7th Thus, the Tay- judgment. F.3d until date lor, fees, costs (holding expenses, that dam- amount and other at 869 was entitled did by corporation for breach to which Robinson ages incurred money” until amount of become “certain amount of contract were not “certain *35 money” judgment that the contract was the date was entered —a on the date forfei- money occasioning then owed date after the event executed because no State, occurred); See Tryco’s corporate privileges. v. ture of nor had breach Jonnet 869; Jonnet, Taylor, 316 (Tex.App.-Austin 523-24 denied) I would Consequently, that “unlike S.W.2d at 523-24. (observing writ are of a writ- hold that James and Sharon Dixon situations in which the execution 171.255 specific transaction liable under Section for Robinson’s ten instrument or attorney’s fees, costs. duty pay expenses, and court obligation creates agreement, the obli- later breach of the statutory penalty gation [for I would sustain James Dixon and Sharon failing only inactive plug wells] oil issue, judg- insofar Dixon’s as the third actually if penalty arises and when a they ment orders are liable for Robin- assessed.”). Thus, judg- that the date I unpaid compensation. son’s overtime awarding ment was rendered re- would overrule their issue in all other $58,349.00 was the liquidated damages spects, insofar that orders particu- date on which incurred that they liqui- liable for are ren- lar debt. Because the fees, damages, attorney’s expenses, dated occasioning event the for- dered and court costs. corporate privileges,
feiture of I would Dixon are hold James Sharon part
liable under Section 171.255for this
the award. Attorney’s
C. fees other costs fees, attorney’s
As to the expenses, Robinson,
other costs awarded to provides recovery pre- FLSA such BUILDERS, Sonny SCS INC. and 216(b) vailing employee. See U.S.C. Appellants Spoon, Calvin (“The court in action shall ... allow a such reasonable fee v. attorney’s paid to be action.”). defendant, and costs of the SEARCY, Appellee. Sherri contrast the FLSA’s authorization No. 11-11-00033-CV. liquidated damages, type of award is truly mandatory. Prugh, Sahyers v. Texas, Appeals of Court of Karatinos, P.L., Holliday & 603 F.3d Eastland. (11th Cir.2010); City & n. 1 Singer 18, 2012. Oct. Waco, (5th 324 F.3d 829 n. 10 Cir.2003); Med. Small v. Richard Wolf (7th Corp., Instruments F.3d
Cir.2001). However, the trial court has
“wide in determining latitude” these
amounts because factual is- involve