68 F.

3d 1451

Prod.Liab.Rep. (CCH) P 14,358

Marianne E. FLETCHER, Nancy L. Bartley, Raphael
Paganelli,
and Charlotte Evans, Plaintiffs-Appellants,
v.
ATEX, INC., Defendant,
EASTMAN KODAK COMPANY, Defendant-Appellee.
and
Jenny L. HERMANSON and Christy Scattarella, PlaintiffsAppellants,
v.
805 MIDDLESEX CORP., f/k/a Atex, Inc., and Apple
Computers,
Inc., Defendants,
Eastman Kodak Company, Defendant-Appellee.
Nos. 1426, 1427, Dockets 94-9080, 94-9120.

United States Court of Appeals,

Second Circuit.
Argued May 26, 1995.
Decided Oct. 5, 1995.

Steven J. Phillips, Levy Phillips & Konigsberg, New York City (Alani
Golanski, Levy Phillips & Konigsberg, New York City, on the brief), for
Plaintiffs-Appellants.
Thomas E. Reidy, Nixon, Hargrave, Devans & Doyle, Rochester, New
York (Henry J. DePippo, Flor M. Ferrer-Colon, Nixon, Hargrave, Devans
& Doyle, Rochester, New York, on the brief), for Defendant-Appellee.
Before: KEARSE, CALABRESI, and CABRANES, Circuit Judges.
JOSE A. CABRANES, Circuit Judge:

This is a consolidated appeal from a final judgment of the United States District
Court for the Southern District of New York (Morris E. Lasker, Judge ),
granting defendant-appellee Eastman Kodak Company's motion for summary
judgment and dismissing all claims against it in two actions, Fletcher v. Atex,
Inc., 92 Civ. 8758 and Hermanson v. 805 Middlesex Corp., Inc., 94 Civ. 1272.
Fletcher v. Atex, Inc., 861 F.Supp. 242 (S.D.N.Y.1994). The plaintiffsappellants filed suit against Atex, Inc. ("Atex") and its parent, Eastman Kodak
Company ("Kodak"), to recover for repetitive stress injuries that they claim
were caused by their use of computer keyboards manufactured by Atex.

Plaintiffs-appellants argue that the district court erred in granting summary

judgment in favor of Kodak on the ground that Kodak could be held liable for
the plaintiffs' alleged injuries. They contend that summary judgment was
inappropriate because genuine issues of material fact existed regarding Kodak's
liability as a defendant under each of the plaintiffs' four theories of liability,
which we describe below.

I. BACKGROUND
3

The Fletcher and Hermanson plaintiffs filed their respective complaints on

December 4, 1992, and February 25, 1994, seeking recovery from Atex and
Kodak, among others, for repetitive stress injuries that they claim were caused
by their use of Atex computer keyboards. From 1981 until December 1992,
Atex was a wholly-owned subsidiary of Kodak. In 1987, Atex's name was
changed to Electronic Pre-Press Systems, Inc., ("EPPS"), but its name was
changed back to Atex in 1990. In December 1992, Atex sold substantially all of
its assets to an independent third party and again changed its name to 805
Middlesex Corp., which holds the proceeds from the sale. Kodak continues to
be the sole shareholder of 805 Middlesex Corp.

After extensive discovery, Kodak moved for summary judgment in Fletcher on

April 21, 1994, and in Hermanson on April 28, 1994. The plaintiffs opposed
Kodak's motion, arguing that genuine issues of material fact existed as to
Kodak's liability under any number of theories, including (1) that Atex was
merely Kodak's alter ego or instrumentality; (2) that Atex was Kodak's agent in
the manufacture and marketing of the keyboards; (3) that Kodak was the
"apparent manufacturer" of the Atex keyboards; and (4) that Kodak acted in
tortious concert with Atex in manufacturing and marketing the allegedly
defective keyboards.

In support of their first theory, the plaintiffs argued that Kodak "dominated and
controlled" Atex by maintaining significant overlap between the boards of

directors of the two companies, "siphoning" off funds from Atex through use of
a cash management system, requiring Kodak's approval for major expenditures,
stock sales, and real estate acquisitions, participating in negotiations involving
the sale of Atex to a third party, and including references to Atex as a "division"
of Kodak and to the "merger" between Atex and Kodak in Atex's promotional
literature and Kodak's Annual Report. Second, the plaintiffs claimed that, at the
very least, the references to Atex in the promotional literature raised a question
of material fact regarding Kodak's intent to confer authority on Atex to act as its
agent in the manufacturing and marketing of computer keyboards. In support of
their third theory, the plaintiffs maintained that the use of Kodak's name in
Atex's advertising, promotional, and packaging materials provided assurances
to consumers that the Kodak name stood behind Atex's products, and Kodak
could thus be held liable as the "apparent manufacturer" of the keyboards.
Finally, they argued that the fact that Kodak was generally aware of the danger
of repetitive stress injuries and the fact that Kodak had tested the ergonomics of
three Atex keyboards in 1990 presented evidence of concerted tortious action
between Atex and Kodak. The Fletcher and Hermanson actions were
consolidated before the district court for the purposes of summary judgment
proceedings.
6

On August 17, 1994, the district court rejected each of the plaintiffs' theories of
Kodak's liability and granted Kodak's motion for summary judgment in both
actions. In its opinion, the court referred to, but did not rely upon, an identical
suit filed against Atex and Kodak in New York state court, King v. Eastman
Kodak Co., No. 23439/92 (N.Y.Sup.Ct. June 9, 1994), in which Kodak's motion
for summary judgment was granted on similar grounds. Fletcher, 861 F.Supp.
at 243.

First, the district court found that Kodak and Atex observed all corporate
formalities and maintained separate corporate existences. It held that Atex's
participation in Kodak's cash management system and Kodak's control over
Atex's major expenditures and asset sales were insufficient to raise an issue of
material fact regarding Kodak's liability under an alter ego theory. Id. at 244-45.
Second, it held that the representations in various advertisements, promotional
literature, and annual reports were similarly insufficient as a matter of law to
find Kodak liable under an agency theory. Id. at 247. Third, the court held that
Kodak was entitled to summary judgment on the plaintiffs' apparent
manufacturer theory because the company was not involved in the sale or
distribution of the keyboards. Id. at 245-46. Finally, the court found that the
plaintiffs' concerted action theory failed as a matter of law because they offered
no evidence indicating that Kodak and Atex had agreed to commit a tortious
act. Id. at 246. This appeal followed.

II. DISCUSSION
A. The Summary Judgment Standard
8

We review a district court's grant of summary judgment de novo to determine

whether there is a genuine issue of material fact and whether the moving party
is entitled to judgment as a matter of law. Healy v. Rich Prods. Corp., 981 F.2d
68, 72 (2d Cir.1992). Summary judgment shall be granted "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together with
the affidavits ... show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law."
FED.R.CIV.P. 56(c). "[T]he mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly supported motion for
summary judgment; the requirement is that there be no genuine issue of
material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106
S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986) (emphasis in original). While the
court must view the inferences to be drawn from the facts in the light most
favorable to the party opposing the motion, Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538
(1986), a party may not "rely on mere speculation or conjecture as to the true
nature of the facts to overcome a motion for summary judgment." Knight v.
U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir.1986), cert. denied, 480 U.S. 932, 107
S.Ct. 1570, 94 L.Ed.2d 762 (1987). The non-moving party may defeat the
summary judgment motion by producing sufficient specific facts to establish
that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett,
477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Finally, "
'mere conclusory allegations or denials' " in legal memoranda or oral argument
are not evidence and cannot by themselves create a genuine issue of material
fact where none would otherwise exist. Quinn v. Syracuse Model
Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980) (quoting SEC v.
Research Automation Corp., 585 F.2d 31, 33 (2d Cir.1978)).

B. Theories of Liability
9

Plaintiffs argue that the district court should have denied Kodak's motion for
summary judgment on the ground that genuine issues of material fact existed
regarding each of the plaintiffs' four theories of liability. We consider the
plaintiffs' arguments on each of these theories in turn.
1. Alter Ego Liability

10

The plaintiffs claim that the district court erred in granting Kodak's motion for

10

summary judgment on their alter ego theory of liability. The plaintiffs offer two
arguments in this regard. First, they contend that the district court was estopped
from granting Kodak's motion for summary judgment because the New York
state court found in King v. Eastman that issues of material fact existed
regarding Kodak's domination of Atex. Second, they argue that even if
collateral estoppel does not apply in the instant case, genuine issues of material
fact remain that preclude a grant of summary judgment in favor of Kodak.

11

The district court correctly noted that "[u]nder New York choice of law
principles, '[t]he law of the state of incorporation determines when the
corporate form will be disregarded and liability will be imposed on
shareholders.' " Fletcher, 861 F.Supp. at 244 (quoting Kalb, Voorhis & Co. v.
American Fin. Corp., 8 F.3d 130, 132 (2d Cir.1993)). Because Atex was a
Delaware corporation, Delaware law determines whether the corporate veil can
be pierced in this instance.

12

Delaware law permits a court to pierce the corporate veil of a company "where
there is fraud or where [it] is in fact a mere instrumentality or alter ego of its
owner." Geyer v. Ingersoll Publications Co., 621 A.2d 784, 793 (Del.Ch.1992).
Although the Delaware Supreme Court has never explicitly adopted an alter ego
theory of parent liability for its subsidiaries, lower Delaware courts have
applied the doctrine on several occasions, as has the United States District
Court for the District of Delaware. See Geyer, 621 A.2d at 793; Mabon, Nugent
& Co. v. Texas Am. Energy Corp., No. CIV.A. 8578, 1990 WL 44267, at * 5,
(Del.Ch. Apr. 12, 1990); Harper v. Delaware Valley Broadcasters, Inc., 743
F.Supp. 1076, 1085 (D.Del.1990), aff'd, 932 F.2d 959 (3d Cir.1991). Thus,
under an alter ego theory, there is no requirement of a showing of fraud. Id. at
1085. To prevail on an alter ego claim under Delaware law, a plaintiff must
show (1) that the parent and the subsidiary "operated as a single economic
entity" and (2) that an "overall element of injustice or unfairness ... [is]
present." Id. (internal quotation marks omitted); see also Mabon, 1990 WL
44267, at * 5; Harco Nat'l Ins. Co. v. Green Farms, Inc., No. CIV.A. 1331,
1989 WL 110537, at * 5, (Del Ch. Sept. 19, 1989).

13

In the New York state action of King v. Eastman, the court granted Kodak's
motion for summary judgment, relying on an erroneous interpretation of
Delaware's alter ego doctrine. The court noted that although the plaintiffs had
raised "ample questions of fact regarding the first element of the piercing
theory--domination," they made "no showing that Kodak used whatever
dominance it had over Atex to perpetrate a fraud or other wrong that
proximately cause[d] injury to them." This was an error; under Delaware law,
the alter ego theory of liability does not require any showing of fraud.

14

a. Collateral Estoppel

15

Although the plaintiffs acknowledge that the New York state court erred in its
interpretation of Delaware law, they argue that the court's treatment of the
question of Kodak's domination over Atex should preclude all further litigation
of that issue. We disagree and hold that the New York court's findings in King
v. Eastman regarding Kodak's domination over Atex do not have collateral
estoppel effect under New York law.

16

The doctrine of collateral estoppel "precludes a party from relitigating in a

subsequent action or proceeding an issue clearly raised in a prior action or
proceeding and decided against that party ... whether or not the tribunals or
causes of action are the same." Ryan v. New York Tel. Co., 62 N.Y.2d 494,
500, 478 N.Y.S.2d 823, 826, 467 N.E.2d 487, 490 (1984) (citing Ripley v.
Storer, 309 N.Y. 506, 517, 132 N.E.2d 87 (1956)). Under New York law, two
conditions must be met to preclude relitigation in the second action: (1) "the
issue must have been material to the first action or proceeding and essential to
the decision rendered therein" and (2) "the party against whom collateral
estoppel is asserted [must have been] afforded a full and fair opportunity in the
prior administrative proceeding to contest the decision now said to be
controlling...." 62 N.Y.2d at 500-01, 478 N.Y.S.2d at 826, 467 N.E.2d at 490.
Neither condition was met in this case.

17

First, the state court's finding of "ample questions of fact" regarding Kodak's
domination of Atex was not essential to its judgment in King. The state court
did not decide the summary judgment motion based on its finding of factual
disputes between the parties. To the contrary, it granted summary judgment to
Kodak on the plaintiffs' alter ego theory of liability based on its erroneous
interpretation of Delaware law. Since the court's finding of domination was not
essential to the judgment, its conclusions should not be accorded preclusive
effect in the present action.

18

The plaintiffs counter that the state court's finding of a factual dispute on the
issue of domination should be given preclusive effect, even though it was not
essential to the judgment, because it was fully litigated by the parties and fully
considered by the court. They rely on Malloy v. Trombley, 50 N.Y.2d 46, 427
N.Y.S.2d 969, 405 N.E.2d 213 (1980), which held that a court's alternative
holding, while not essential to the judgment, could be given conclusive effect.
However, the Malloy court carefully limited its holding: "[W]ithout intending
to enunciate any broad rule, we hold in this instance that the rule of issue
preclusion is applicable notwithstanding that in a precise sense the issue
precluded was the subject of only an alternative determination by the trial

court." 50 N.Y.2d at 52, 427 N.Y.S.2d at 973, 405 N.E.2d at 216. In Malloy,
the trial court articulated a viable alternative ground to support its conclusion, a
ground that the Court of Appeals noted had "validating authenticity" because it
was likely expressed by the trial court to provide another basis for affirmance in
case the other ground was rejected on appeal. 50 N.Y.2d at 52, 427 N.Y.S.2d at
972, 405 N.E.2d at 215. Here, the trial court's finding of a factual dispute on the
issue of domination was not an alternative holding at all. It was at odds with the
court's conclusion that summary judgment was appropriate and certainly did not
provide "validating authenticity" for the court's holding.
19

Second, the court's finding of a factual dispute cannot have collateral estoppel
effect because Kodak did not have a "full and fair opportunity" to litigate the
question that the plaintiffs are asserting against it. Under New York law, a
party has not had a full and fair opportunity to litigate an issue if it has had no
opportunity to appeal the adverse finding. People v. Medina, 208 A.D.2d 771,
617 N.Y.S.2d 491, 493 (2d Dep't 1994); see also Pinkney v. Keane, 737
F.Supp. 187, 195 (E.D.N.Y.) ("Under New York law, a party who has obtained
a final judgment in its favor is not normally precluded from relitigating a
subsidiary issue that was decided against it."), aff'd, 920 F.2d 1090 (2d
Cir.1990), cert. denied, 501 U.S. 1217, 111 S.Ct. 2824, 115 L.Ed.2d 995
(1991). Kodak was in precisely this situation. It could not appeal the trial
court's finding of a material factual dispute, because the final judgment--that is,
the grant of summary judgment--was in Kodak's favor.

20

In sum, the collateral estoppel doctrine does not bar the relitigation of the
question of Kodak's domination over its subsidiary, Atex, because the state
court's finding was not essential to its judgment and because Kodak did not
have a full and fair opportunity to litigate the issue.

21

b. Summary Judgment on the Alter Ego Theory

22

To prevail on an alter ego theory of liability, a plaintiff must show that the two
corporations " 'operated as a single economic entity such that it would be
inequitable ... to uphold a legal distinction between them.' " Harper, 743
F.Supp. at 1085 (quoting Mabon, 1990 WL 44267, at * 5). Among the factors
to be considered in determining whether a subsidiary and parent operate as a
"single economic entity" are:

23
"[W]hether
the corporation was adequately capitalized for the corporate
undertaking; whether the corporation was solvent; whether dividends were paid,
corporate records kept, officers and directors functioned properly, and other
corporate formalities were observed; whether the dominant shareholder siphoned

corporate funds; and whether, in general, the corporation simply functioned as a

facade for the dominant shareholder."
24

Harco, 1989 WL 110537, at * 4 (quoting United States v. Golden Acres, Inc.,

702 F.Supp. 1097, 1104 (D.Del.1988)). As noted above, a showing of fraud or
wrongdoing is not necessary under an alter ego theory, but the plaintiff must
demonstrate an overall element of injustice or unfairness. Harco, 1989 WL
110537, at * 5.

25

A plaintiff seeking to persuade a Delaware court to disregard the corporate

structure faces "a difficult task." Harco, 1989 WL 110537, at * 4. Courts have
made it clear that "[t]he legal entity of a corporation will not be disturbed until
sufficient reason appears." Id. Although the question of domination is generally
one of fact, courts have granted motions to dismiss as well as motions for
summary judgment in favor of defendant parent companies where there has
been a lack of sufficient evidence to place the alter ego issue in dispute. See,
e.g., Akzona, Inc. v. Du Pont, 607 F.Supp. 227, 237 (D.Del.1984) (rejecting
plaintiffs' alter ego theory of liability on a motion to dismiss); Nelson v.
International Paint Co., 734 F.2d 1084, 1092 (5th Cir.1984) ("[I]n the lack of
sufficient evidence to place the alter ego issue in dispute, a corporate defendant
may be entitled to summary judgment."); see also Japan Petroleum Co.
(Nigeria) v. Ashland Oil Inc., 456 F.Supp. 831, 838, 846 (D.Del.1978) (finding
that subsidiary was not instrumentality of parent on a motion for summary
judgment).

26

Kodak has shown that Atex followed corporate formalities, and the plaintiffs
have offered no evidence to the contrary. Significantly, the plaintiffs have not
challenged Kodak's assertions that Atex's board of directors held regular
meetings, that minutes from those meetings were routinely prepared and
maintained in corporate minute books, that appropriate financial records and
other files were maintained by Atex, that Atex filed its own tax returns and paid
its own taxes, and that Atex had its own employees and management executives
who were responsible for the corporation's day-to-day business. The plaintiffs'
primary arguments regarding domination concern (1) the defendant's use of a
cash management system; (2) Kodak's exertion of control over Atex's major
expenditures, stock sales, and the sale of Atex's assets to a third party; (3)
Kodak's "dominating presence" on Atex's board of directors; (4) descriptions of
the relationship between Atex and Kodak in the corporations' advertising,
promotional literature, and annual reports; and (5) Atex's assignment of one of
its former officer's mortgage to Kodak in order to close Atex's asset-purchase
agreement with a third party. The plaintiffs argue that each of these raises a
genuine issue of material fact about Kodak's domination of Atex, and that the

district court therefore erred in granting summary judgment to Kodak on the

plaintiffs' alter ego theory. We find that the district court correctly held that, in
light of the undisputed factors of independence cited by Kodak, "the elements
identified by the plaintiffs ... [were] insufficient as a matter of law to establish
the degree of domination necessary to disregard Atex's corporate identity."
Fletcher, 861 F.Supp. at 245.
27

First, the district court correctly held that "Atex's participation in Kodak's cash
management system is consistent with sound business practice and does not
show undue domination or control." Id. at 244. The parties do not dispute the
mechanics of Kodak's cash management system. Essentially, all of Kodak's
domestic subsidiaries participate in the system and maintain zero-balance bank
accounts. All funds transferred from the subsidiary accounts are recorded as
credits to the subsidiary, and when a subsidiary is in need of funds, a transfer is
made. At all times, a strict accounting is kept of each subsidiary's funds.

28

Courts have generally declined to find alter ego liability based on a parent
corporation's use of a cash management system. See, e.g., In re Acushnet River
& New Bedford Harbor Proceedings, 675 F.Supp. 22, 34 (D.Mass.1987)
(Without "considerably more," "a centralized cash management system ...
where the accounting records always reflect the indebtedness of one entity to
another, is not the equivalent of intermingling funds" and is insufficient to
justify disregarding the corporate form.); United States v. Bliss, 108 F.R.D.
127, 132 (E.D.Mo.1985) (cash management system indicative of the "usual
parent-subsidiary relationship"); Japan Petrol., 456 F.Supp. at 846 (finding
segregation of subsidiary's accounts within parent's cash management system to
be "a function of administrative convenience and economy, rather than a
manifestation of control"). The plaintiffs offer no facts to support their
speculation that Kodak's centralized cash management system was actually a
"complete commingling" of funds or a means by which Kodak sought to
"siphon[ ] all of Atex's revenues into its own account."

29

Second, the district court correctly concluded that it could find no domination
based on the plaintiffs' evidence that Kodak's approval was required for Atex's
real estate leases, major capital expenditures, negotiations for a sale of minority
stock ownership to IBM, or the fact that Kodak played a significant role in the
ultimate sale of Atex's assets to a third party. Again, the parties do not dispute
that Kodak required Atex to seek its approval and/or participation for the above
transactions. However, this evidence, viewed in the light most favorable to the
plaintiffs, does not raise an issue of material fact about whether the two
corporations constituted "a single economic entity." Indeed, this type of
conduct is typical of a majority shareholder or parent corporation. See Phoenix

Canada Oil Co. v. Texaco, 842 F.2d 1466, 1476 (3d Cir.1988) (declining to
pierce the corporate veil where subsidiary required to secure approval from
parent for "large investments and acquisitions or disposals of major assets"),
cert. denied, 488 U.S. 908, 109 S.Ct. 259, 102 L.Ed.2d 247 (1988); Akzona,
607 F.Supp. at 237 (same, where parent approval required for expenditures
exceeding $850,000); Japan Petrol., 456 F.Supp. at 843 (finding no parent
liability where parent approval required for expenditures exceeding $250,000).
In Akzona, the Delaware district court noted that a parent's "general executive
responsibilities" for its subsidiary's operations included approval over major
policy decisions and guaranteeing bank loans, and that that type of oversight
was insufficient to demonstrate domination and control. Akzona, 607 F.Supp.
at 238 (internal quotation marks omitted). Similarly, the district court in the
instant case properly found that the presence of Kodak employees at periodic
meetings with Atex's chief financial officer and comptroller to be "entirely
appropriate." Fletcher, 861 F.Supp. at 245 (citing Akzona, 607 F.Supp. at 238);
see Acushnet, 675 F.Supp. at 34 ("The quarterly and annual reports made [to
the parent] do not represent an untoward intrusion by the owner into the
corporate enterprise. The right of shareholders to remain informed is similarly
recognized in many public and closely held corporations.").
30

The plaintiffs' third argument, that Kodak dominated the Atex board of
directors, also fails. Although a number of Kodak employees have sat on the
Atex board, it is undisputed that between 1981 and 1988, only one director of
Atex was also a director of Kodak. Between 1989 and 1992, Atex and Kodak
had no directors in common. Parents and subsidiaries frequently have
overlapping boards of directors while maintaining separate business operations.
In Japan Petroleum, the Delaware district court held that the fact that a parent
and a subsidiary have common officers and directors does not necessarily
demonstrate that the parent corporation dominates the activities of the
subsidiary. 456 F.Supp. at 841; see Scott-Douglas Corp. v. Greyhound Corp.,
304 A.2d 309, 314 (Del.Super.Ct.1973) (same). Since the overlap is negligible
here, we find this evidence to be entirely insufficient to raise a question of fact
on the issue of domination.

31

Fourth, the district court properly rejected the plaintiffs' argument that the
descriptions of the relationship between Atex and Kodak and the presence of
the Kodak logo in Atex's promotional literature justify piercing the corporate
veil. Fletcher, 861 F.Supp. at 245. The plaintiffs point to several statements in
both Kodak's and Atex's literature to evidence Kodak's domination of its
subsidiary. For example, plaintiffs refer to (1) a promotional pamphlet
produced by EPPS (a/k/a Atex) describing Atex as a business unit of EPPS and
noting that EPPS was an "agent" of Kodak; (2) a document produced by Atex

entitled "An Introduction to Atex Systems," which describes a "merger"

between Kodak and Atex; (3) a statement in Kodak's 1985 and 1986 annual
reports describing Atex as a "recent acquisition[ ]" and a "subsidiar[y] ...
combined in a new division"; and (4) a statement in an Atex/EPPS document,
"Setting Up TPE 6000 on the Sun 3 Workstation," describing Atex as "an
unincorporated division of Electronic Pre-Press Systems, Inc., a Kodak
company." They also refer generally to the fact that Atex's paperwork and
packaging materials frequently displayed the Kodak logo.
32

It is clear from the record that Atex never merged with Kodak or operated as a
Kodak division. The plaintiffs offer no evidence to the contrary, apart from
these statements in Atex and Kodak documents that they claim are indicative of
the true relationship between the two companies. Viewed in the light most
favorable to the plaintiffs, these statements and the use of the Kodak logo are
not evidence that the two companies operated as a "single economic entity."
See Coleman v. Corning Glass Works, 619 F.Supp. 950, 956 (W.D.N.Y.1985)
(upholding corporate form despite "loose language" in annual report about
"merger" and parent's reference to subsidiary as a "division"), aff'd, 818 F.2d
874 (1987); Japan Petrol., 456 F.Supp. at 846 (noting that representations made
by parent in its annual reports that subsidiary serves as an agent "may result
from public relations motives or an attempt at simplification"); American
Trading & Prod. Corp. v. Fischbach & Moore, Inc., 311 F.Supp. 412, 416
(N.D.Ill.1970) ("boastful" advertising and consideration of subsidiaries as
"family" do not prove that corporate identities were ignored).

33

Fifth, the plaintiffs contend that Atex's assignment of its former CEO's
mortgage to Kodak in order to close the sale of Atex's assets to a third party is
evidence of Kodak's domination of Atex. We reject this argument as well. The
evidence is undisputed that Kodak paid Atex the book value of the note and
entered into a formal repayment agreement with the former CEO. Formal
contracts were executed, and the two companies observed all corporate
formalities.

34

Finally, even if the plaintiffs did raise a factual question about Kodak's
domination of Atex, summary judgment would still be appropriate because the
plaintiffs offer no evidence on the second prong of the alter ego analysis. The
plaintiffs have failed to present evidence of an "overall element of injustice or
unfairness" that would result from respecting the two companies' corporate
separateness. See Harper, 743 F.Supp. at 1085 (holding that plaintiff cannot
prevail on alter ego theory "because he has failed to allege any unfairness or
injustice which would justify the court in disregarding the [companies']
separate legal existences"). In the instant case, the plaintiffs offer nothing more

than the bare assertion that Kodak "exploited" Atex "to generate profits but not
to safeguard safety." There is no indication that Kodak sought to defraud
creditors and consumers or to siphon funds from its subsidiary. The plaintiffs'
conclusory assertions, without more, are not evidence, see Quinn, 613 F.2d at
445, and are completely inadequate to support a finding that it would be unjust
to respect Atex's corporate form.
35

For all of the foregoing reasons, the district court's order entering summary
judgment on the plaintiffs' alter ego theory of liability is affirmed.
2. Agency Liability

36

The plaintiffs next contend that a genuine issue of fact was raised as to whether
Kodak could be held liable on an agency theory--that is, whether Kodak, as
principal, could be liable for the tortious acts of Atex, its agent. The plaintiffs
rely on statements in Atex/EPPS literature to support their theory: (1) the
statement in the Atex document "Setting Up TPE 6000 on the Sun 3
Workstation" that "Atex is an unincorporated division of Electronic Pre-Press
Systems, Inc., a Kodak company"; and (2) the statements in the EPPS
promotional pamphlet that "EPPS serves as Kodak's primary agent to supply
electronic pre-press products" and that "Atex is the largest of the EPPS
business units." In granting Kodak's motion for summary judgment, the district
court rejected the plaintiffs' agency theory of liability, finding that there was no
evidence that Kodak authorized the statements. Fletcher, 861 F.Supp. at 247.

37

The plaintiffs contend that the fact that Kodak permitted the use of its logo on
these documents raises a question of fact as to whether Kodak authorized or
appeared to authorize the references to Atex/EPPS as its agent. First, the
plaintiffs' argument fails under a theory of actual authority. The Restatement
(Second) of Agency states: "Authority is the power of the agent to affect the
legal relations of the principal by acts done in accordance with the principal's
manifestations of consent to him." RESTATEMENT (SECOND) OF AGENCY
Sec. 7 (1958). "Manifestation of consent" is "the expression of the will to
another as distinguished from the undisclosed purpose or intention." Id. cmt. b;
see also Greene v. Hellman, 51 N.Y.2d 197, 203-04, 433 N.Y.S.2d 75, 79, 412
N.E.2d 1301, 1305 (1980). A close reading of the record reveals no evidence
that Kodak conferred actual authority upon Atex to act on its behalf. The
plaintiffs have offered no evidence that either document was produced by
Kodak; in fact, it appears that Atex and EPPS published and disseminated the
documents at issue. The presence of a parent's logo on documents created and
distributed by a subsidiary, standing alone, does not confer authority upon the
subsidiary to act as an agent.

38

For similar reasons, plaintiffs' arguments fail under a theory of apparent

authority. New York's Court of Appeals has made it clear that "apparent
authority is dependent upon verbal or other acts by a principal which
reasonably give an appearance of authority to conduct the transaction." Greene,
51 N.Y.2d at 204, 433 N.Y.S.2d at 80, 412 N.E.2d at 1306 (emphasis added)
(citing RESTATEMENT (SECOND) OF AGENCY Sec. 8 cmts. a, c). "Key to
the creation of apparent authority," the court continued, "is that the third
person, accepting the appearance of authority as true, has relied upon it." Id.
The plaintiffs offer no evidence that Kodak authorized or gave the appearance
of having authorized the statements in the Atex/EPPS documents.
Atex's/EPPS's use of the Kodak logo is not a "verbal or other act[ ] by a
principal," but rather, an act by the purported agent. Furthermore, the record
contains no evidence that the plaintiffs relied on the documents at issue. If there
were evidence that the plaintiffs relied on these documents and if there were
evidence that Kodak uttered or authorized them, then there would be an issue of
material fact as to the existence of apparent authority. However, there is neither.
We affirm the district court's order granting summary judgment to the
defendant on the plaintiffs' agency theory of liability.
3. Apparent Manufacturer

39

The plaintiffs' third theory of liability is that Kodak should be held liable as the
"apparent manufacturer" of the Atex keyboards. RESTATEMENT (SECOND)
OF TORTS Sec. 400 (1965). The apparent manufacturer doctrine is set forth in
the Restatement as follows: "One who puts out as his own product a chattel
manufactured by another is subject to the same liability as though he were its
manufacturer." Id. This theory of liability is well-established under New York
law. See Commissioners of State Ins. Fund v. City Chem. Corp., 290 N.Y. 64,
69, 48 N.E.2d 262 (1943); Markel v. Spencer, 5 A.D.2d 400, 171 N.Y.S.2d
770, 780 (4th Dep't 1958), aff'd, 5 N.Y.2d 958, 184 N.Y.S.2d 835, 157 N.E.2d
713 (1959).

40

The district court held that Kodak could not be held liable under the apparent
manufacturer doctrine because "[t]here is no indication in the Restatement [and
in New York case law] that Section 400 was intended to apply to a party which
is not a seller of chattel, or is [not] otherwise involved in the chain of
distribution of a product." Fletcher, 861 F.Supp. at 245. In support of its
holding, the district court cited the New York state court ruling in King v.
Eastman, which held that Kodak was not liable under this section because, inter
alia, it was not involved in the sale or distribution of the allegedly defective
keyboards. Id. at 246. The King court relied on two federal court opinions,
which similarly limited the application of Sec. 400. See Torres v. Goodyear

Tire and Rubber Co., 867 F.2d 1234, 1236 (9th Cir.1989) (parent not liable
under Sec. 400 for subsidiary's product where it was not manufacturer or
seller); Affiliated FM Ins. Co. v. Trane Co., 831 F.2d 153, 156 (7th Cir.1987)
(parent not liable under Sec. 400 in the absence of evidence that it was involved
in manufacture, sale, or installation of product); see also Nelson, 734 F.2d at
1087-88 (section 400 does not apply to one who allows manufacturer to use its
name but was not itself a manufacturer nor a distributor of the product).
41

Kodak argues that the district court's conclusion is supportable on three

different theories. First, Sec. 400 cannot apply because Kodak was neither the
seller nor the distributor of the allegedly defective keyboards. Second, even if
Sec. 400 liability could reach a party who did not sell or distribute the products
in question, it does not apply to Kodak in this instance because the Kodak logo
was not affixed to the keyboards or their packages, only to promotional and
advertising materials. Finally, even if Sec. 400 can apply when a defendant's
name appears only on promotional and packaging materials, the materials
submitted here do not suggest that Kodak, rather than Atex, manufactured the
keyboards. We agree.

42

First, New York courts have only applied the apparent manufacturer doctrine to
sellers of a product or parties otherwise involved in the chain of distribution.
The commentary to the Restatement states:

43 words "one who puts out a chattel" include anyone who supplies it to others for
The
their own use or for the use of third persons, either by sale or lease or by gift or loan.
44

RESTATEMENT (SECOND) OF TORTS Sec. 400 cmt. a (emphasis added).

Although no New York court, with the exception of the King court, has
explicitly declined to apply Sec. 400 where a parent arguably represents itself
as the manufacturer of a product without participating in its sale or distribution,
no New York court has ever extended liability under the doctrine to anyone
other than sellers of products manufactured by third parties. See Willson v.
Faxon, Williams & Faxon, 208 N.Y. 108, 113, 101 N.E. 799 (1913) (finding
seller of laxatives could be held liable under apparent manufacturer doctrine
where seller purchased tablets from manufacturer and affixed its own label to
the product); State Ins. Fund, 290 N.Y. at 69, 48 N.E.2d 262 (finding chemical
vendor could be held liable under earlier version of Sec. 400 where vendor
purchased chemicals from a distributor, removed distributor's label, and affixed
its own); Markel, 171 N.Y.S.2d at 780 (finding defendant Ford Motor
Company liable for malfunctioning brake pedal arm that it sold as a component
part of a Ford automobile); Schwartz v. Macrose Lumber & Trim Co., 50
Misc.2d 547, 270 N.Y.S.2d 875, 889 (Sup.Ct. Queens County 1966) (finding

vendor liable under apparent manufacturer doctrine for defective nail in box
sold by vendor under vendor's name), rev'd on other grounds, 29 A.D.2d 781,
287 N.Y.S.2d 706 (2d Dep't 1968).
45

In support of their argument for Sec. 400 liability, the plaintiffs draw our
attention to several cases in other jurisdictions. All of these cases are
distinguishable. Although they hold that participation in the chain of
distribution is not essential to liability under the apparent manufacturer
doctrine, each involved a licensing agreement in which the defendant allowed
the use of its name in exchange for control over (or involvement in) the
manufacture of the product. See Kasel v. Remington Arms Co., 24 Cal.App.3d
711, 718, 724, 101 Cal.Rptr. 314 (2d Dist.1972) (licensor who retains "right to
inspect and control the quality" of product could be liable as an "integral
component[ ] of the ... enterprise responsible for placing ... products on the
market"); City of Hartford v. Assoc. Constr. Co., 34 Conn.Supp. 204, 384 A.2d
390, 393, 396 (1978) (licensor who "retained and exercised rights of control as
to the quality and the methods and manner of application of the product" could
be held liable under Sec. 400); Connelly v. Uniroyal, Inc., 75 Ill.2d 393, 408,
411, 27 Ill.Dec. 343, 389 N.E.2d 155 (1979) (licensor who remained involved
with "the goods and manufacturing operations" of product liable under Sec. 400
as an "integral part of the marketing enterprise"), cert. denied, 444 U.S. 1060,
100 S.Ct. 992, 62 L.Ed.2d 738 (1980).

46

In the instant case, the plaintiffs have not produced any evidence that Kodak
developed, designed, sold or distributed the allegedly defective keyboards.
Contending otherwise, the plaintiffs point to the fact that Atex, in response to
an interrogatory, listed Kodak among over thirty companies that were
"involved in the design, manufacture, sale, marketing, leasing and/or
installation of Atex keyboards." This interrogatory, however, was amended to
delete Kodak from the list, and defendant's attorney submitted an affirmation
attesting that the inclusion of Kodak was in error. Plaintiffs have submitted no
other evidence of Kodak's actual participation in the manufacturing or
distribution process; nor have they submitted any evidence of a licensing
agreement between Kodak and Atex.

47

Second, even assuming that New York law permits a party that did not sell or
distribute a product to be held liable under the apparent manufacturer doctrine,
the plaintiffs offer no evidence that Kodak held itself out as the manufacturer of
the Atex keyboard. See RESTATEMENT (SECOND) OF TORTS Sec. 400.
There is no question that the keyboards prominently display the name of Atex,
the true manufacturer, and the plaintiffs do not dispute the defendant's assertion
that the Kodak logo was not affixed to the Atex keyboards or their packages.

Under these circumstances, it is difficult to understand how any defendant

could be held liable on an apparent manufacturer theory. Indeed, the cases cited
by the plaintiffs only extend Sec. 400 liability to defendants who placed their
names directly on the product or the product packaging at issue. See Willson,
208 N.Y. at 110, 113, 101 N.E. 799 (defendant could be held liable where vial
containing tablets causing plaintiff's injuries labeled with defendant's name);
State Ins. Fund, 290 N.Y. at 69, 48 N.E.2d 262 (defendant could be held liable
where inscription on label of product bore defendant's name); Markel, 171
N.Y.S.2d at 780 (defendant liable for defective component part where vehicle
marked with defendant's name); Schwartz, 270 N.Y.S.2d at 889 (defendant
liable where plaintiff injured by nail packaged in box labeled with defendant's
name); Forry v. Gulf Oil Corp., 428 Pa. 334, 344, 237 A.2d 593 (1968)
(defendant could be held liable where tire embossed with its name); Carney v.
Sears, Roebuck & Co., 309 F.2d 300, 304 (4th Cir.1962) (defendant could be
held liable where its name appeared on defective product's label as well as in
advertising).
48

Third, even if apparent manufacturer liability could extend to a defendant

whose name appears only on promotional and advertising materials, rather than
on the product itself, the materials offered by the plaintiffs do not suggest that
Kodak manufactured the Atex keyboards. Many of the documents that the
plaintiffs rely on make reference only to Atex computer software, such as the
Atex "Color Imaging System" and the "PC Custom Display Software User
Manual." Furthermore, Atex is repeatedly identified as the manufacturer of the
Atex computer systems in all the documents identified by the plaintiffs. Under
these circumstances, the plaintiffs' argument--that the presence of the Kodak
logo on these documents is sufficient to raise an issue of material fact as to
whether Kodak represented itself as the manufacturer of the keyboards--must
fail.

49

For these reasons, we affirm the district court's order granting summary
judgment for the defendant-appellee on the plaintiffs' apparent manufacturer
theory of liability.
4. Concerted Tortious Action

50

The plaintiffs' final theory of liability is that Kodak acted in tortious concert
with Atex in designing and marketing the allegedly defective keyboards. The
plaintiffs present alternative arguments for Kodak's liability under the so-called
concerted action doctrine. First, they argue that "the evidence of Kodak's direct
participation in the marketing of the defective keyboard equipment" raises an
issue of material fact regarding Kodak's acting in concert with Atex. In the

alternative, they argue that Kodak could be liable under a separate theory of
concerted action under which liability may be premised upon "concerted action
by substantial assistance."
51

Section 876 of the Restatement (Second) of Torts provides that:

52 harm resulting to a third person from the tortious conduct of another, one is
For
subject to liability if he
53

(a) does a tortious act in concert with the other or pursuant to a common design
with him, or

54

(b) knows that the other's conduct constitutes a breach of duty and gives
substantial assistance or encouragement to the other so to conduct himself....

55

It remains an open question under New York law whether concerted action
liability can be premised on a showing of concerted action by "substantial
assistance or encouragement." Although the New York Court of Appeals has
referred to both the traditional "common design" approach as well as the
"substantial assistance" theory of concerted action, see Bichler v. Eli Lilly &
Co., 55 N.Y.2d 571, 580-81, 450 N.Y.S.2d 776, 780, 436 N.E.2d 182, 186
(1982), no cases have ever applied the "substantial assistance" approach. We
find it unnecessary to decide this question of New York law at this time,
because the plaintiffs' claim fails as a matter of law under either theory.

56

Under the first theory of concerted action, New York law "provides for joint
and several liability on the part of all defendants having an understanding,
express or tacit, to participate in a common plan or design to commit a tortious
act." Rastelli v. Goodyear Tire & Rubber Co., 79 N.Y.2d 289, 295, 582
N.Y.S.2d 373, 375, 591 N.E.2d 222, 224 (1992) (internal quotation marks
omitted). The Court of Appeals has held that "[i]t is essential that each
defendant charged with acting in concert have acted tortiously and that one of
the defendants committed an act in pursuance of the agreement which
constitutes a tort." Id. The plaintiffs argue that various statements in the
Atex/EPPS literature and the use of the Kodak logo on certain documents
packaged with Atex products, as well as the fact that Atex's interrogatory
answer initially listed Kodak among the companies "involved in the design,
manufacture, sale, marketing, leasing and/or installation of Atex keyboards,"
demonstrate Kodak's "full collaboration" in the marketing of the keyboards. In
addition, the plaintiffs present various reports and documents on ergonomics1
and repetitive stress injuries that Kodak created for the use of its own

employees as evidence that "Kodak was fully aware of both the hazards
associated with keyboard use and the means of reducing or eliminating those
hazards." Finally, they rely on the Kodak Design Resource Center's evaluation
of the ergonomics of three Atex keyboards in 1990 as evidence that "Kodak
was a full participant with Atex in the deliberations about whether to warn
users of the Kodak/Atex equipment, exactly what such warnings should state,
and what would be the risks of not issuing such warnings."
57

As the district court correctly held, "none of this tends to show that Kodak and
Atex had 'an understanding ... to participate in a common plan or design to
commit a tortious act.' " Fletcher, 861 F.Supp. at 246 (alteration in original)
(quoting Rastelli, 79 N.Y.2d at 295, 582 N.Y.S.2d at 375, 591 N.E.2d at 224).
As noted above, the defendant's attorney submitted an affirmation attesting that
the answer to the interrogatory was an error, and the plaintiffs have offered no
additional evidence that Kodak actually participated in the design or
manufacture of the Atex keyboards. The documents offered by the plaintiffs do
not suggest any "agreement" between Kodak and Atex to act "jointly and
tortiously." They merely refer to general statements about the "merger" between
Atex and Kodak and the "marriage" between the two companies.

58

Furthermore, none of the evidence demonstrates that Kodak's actions were

tortious. The fact that Kodak prepared guidelines for its employees to use in
relation to their own computer workstations does not constitute tortious conduct
with regard to the keyboards developed and sold by Atex. There is no
allegation that Kodak's internal guidelines were ever used in conjunction with
the design or manufacture of the Atex keyboards. Likewise, while it is
undisputed that Atex retained Kodak's Design Resource Center to evaluate the
ergonomics of various Atex keyboards in 1990, nothing contradicts the
evidence in the record that this evaluation occurred only after all of the
keyboards at issue had been designed, developed, and manufactured.
Furthermore, the plaintiffs have offered no shred of evidence to support their
speculation that "Kodak was a full participant with Atex in the deliberations
about whether to warn users of the Kodak/Atex equipment." Nothing
contradicts the defendant's evidence that Atex retained Kodak as an
"independent organization" solely to conduct a single evaluation of three Atex
keyboards. Finally, there is no allegation that Kodak's laboratory performed the
tests on the Atex equipment negligently or provided Atex with false
information about its evaluation of Atex's keyboards.

59

In their second argument, the plaintiffs contend that even if there was no
agreement between the parties to act tortiously, Kodak may be liable under the
concerted action theory by providing "substantial assistance or encouragement"

to Atex in furtherance of its tortious conduct. A "substantial assistance" claim

based on Sec. 876 of the Restatement (Second) of Torts requires evidence that
(1) the defendant knows that the other's conduct constitutes a breach of duty
and (2) the defendant gives substantial assistance or encouragement to the
other's conduct. RESTATEMENT (SECOND) OF TORTS Sec. 876(b).
60

We find that, viewed in the light most favorable to the plaintiffs, Kodak's
general awareness of the hazards of repetitive stress injuries and the Kodak
laboratory's evaluation of the Atex keyboards in 1990 are insufficient to raise a
question of material fact regarding Kodak's knowledge of or substantial
assistance in Atex's allegedly tortious conduct. Kodak's knowledge about
repetitive stress injuries generally cannot be construed as knowledge of the
alleged defective design of the Atex keyboard or Atex's alleged failure to warn
keyboard users of the hazards of repetitive stress injuries. Furthermore, the
plaintiffs have offered no evidence to contradict the defendant's assertions that
Kodak's one-time evaluation of the keyboards in 1990 occurred years after the
keyboards in question were designed and distributed. Finally, the plaintiffs
present no evidence to suggest that Kodak was involved--either before or after
the 1990 evaluation--in the decision to include warnings about repetitive stress
disorders or user guidelines with Atex keyboards. Thus, we find that summary
judgment on this claim was also appropriate.

III. CONCLUSION
To summarize:
61

We affirm the district court's order granting summary judgment for the
defendant on each of the plaintiffs' four theories of liability.

62

1. We agree with the district court's conclusion that the defendant was entitled
to summary judgment on the plaintiffs' alter ego theory of liability. The
collateral estoppel doctrine does not preclude relitigation of the question of
Kodak's domination over Atex because the state court's finding of material facts
in dispute was not essential to its judgment and because the defendant did not
have a full and fair opportunity to litigate the issue. The elements identified by
the plaintiffs were insufficient to raise a material issue of fact regarding
domination, and further, the plaintiffs failed to offer evidence of injustice that
would justify disregarding Atex's corporate form.

63

2. We affirm the district court's conclusion that the defendant was entitled to
summary judgment on the plaintiffs' agency theory of liability because the

plaintiffs offered no evidence that Kodak authorized or appeared to authorize

Atex to act on its behalf in the manufacturing and marketing of keyboards or
that the plaintiffs relied on the documents in question.
64

3. We agree with the district court's conclusion that the defendant was entitled
to summary judgment on the plaintiffs' apparent manufacturer theory of
liability on the ground that, under New York law, a parent cannot be liable as
an apparent manufacturer where it was not the seller or the distributor of the
product.

65

4. Finally, we agree with the district court's conclusion that the defendant was
entitled to summary judgment on the plaintiffs' concerted tortious action theory.
We also affirm the court's finding that the plaintiffs offered no evidence that
Kodak and Atex had an agreement to commit a tortious act. Finally, we find
that there was no evidence to support the plaintiffs' theory that Kodak provided
"substantial assistance or encouragement" to Atex in furtherance of its allegedly
tortious conduct.

"Ergonomics is the study of the design of requirements of work in relation to

the physical and psychological capabilities and limitations of people.... The aim
of the discipline is to prevent the development of occupational disorders and to
reduce the potential for fatigue, error, or unsafe acts through the evaluation and
design of facilities, environments, jobs, tasks, tools, equipment, processes, and
training methods to match the capabilities of specific workers." See 57
Fed.Reg. 34192, 34199 app. A (Aug. 3, 1992) (OSHA advance notice of
proposed rulemaking on ergonomics safety)