The CHURCH OF SCIENTOLOGY OF CALIFORNIA, Appellant,
v.
Lionel BLACKMAN, M.D., the Committee For the Protection of Patients' Rights,
and Laraine Shape, Appellees.
No. 81-473.
District Court of Appeal of Florida,
Fourth District.
Feb. 15, 1984.
Rehearing Denied March 26, 1984.
Psychiatrist brought defamation action against an incorporated committee
organized for the protection of patients' rights, the Church of Scientology of
California, and against a minister of the Church of Scientology of Florida and
a member of the committee, arising from demonstration outside hospital in which
psychiatrist worked condemning his use of electro-convulsive therapy. The
Circuit Court, Broward County, William Clayton Johnson, J., entered judgment
for psychiatrist, and the California church timely appealed. The District
Court of Appeal, Hurley, J., held that psychiatrist failed to adduce competent
evidence from which jury could reasonably conclude that the California church
dominated the committee; thus, trial court committed reversible error in
piercing the corporate veil and holding the California church liable for
defamatory remarks made by the committee when it picketed hospital where
plaintiff worked.
Reversed and remanded.
Downey, J., specially concurred and filed opinion.
[1] CORPORATIONS
Total domination of one corporation by another, if established by competent
evidence, will justify piercing a corporate veil.
[2] CORPORATIONS
Normally, question of whether a corporation is an instrumentality or an alter
ego of another corporation is an issue of fact for the jury.
[3] CORPORATIONS
Psychiatrist who established only that incorporators of the committee organized
for the protection of patients' rights, which picketed hospital where
psychiatrist worked, carrying placards and leaflets condemning psychiatrist's
use of electro-convulsive therapy, were members of the Scientologist faith, and
that the California Church of Scientology gave the committee advice on public
relations, use of a hotel's mailing address, was listed as sponsor on some
committee material, and agreed with the committee's opposition to electro-
convulsive therapy for mental illness, failed to adduce competent evidence at
defamation trial from which a jury could reasonably conclude that the
California church dominated the committee; thus, there was no justification
for piercing the corporate veil and holding the California church liable for
actions of the committee.
*190 Terry L. DeMeo of DeMeo & Sherman, P.A., Coral Gables, Sanford M. Katz
and Charlene M. Weinstein of Katz & Weinstein, P.A., and Joel B. Rudin and
Richard Ware Levitt of Rudin & Levitt, New York City, for appellant.
Cone, Wagner, Nugent, Johnson, Hazouri & Roth and Jane Kreusler-Walsh and
Larry Klein, West Palm Beach, for appellee-Lionel Blackman, M.D.
HURLEY, Judge.
This appeal arises from a defamation action. It presents a host of issues,
but we conclude that appellant's threshold contention is both meritorious and
dispositive: the plaintiff below failed to prove that one defendant-
corporation dominated another so as to justify piercing the latter's corporate
veil. Therefore, the judgment entered against the Church of Scientology of
California, Inc., must be reversed.
The plaintiff, Dr. Lionel Blackman, is a psychiatrist who uses electro-
convulsive *191 therapy (ECT or shock treatment). He is affiliated with the
Banyan Psychiatric Institute in Lake Worth, Florida. One of the defendants,
Laraine Shape, is an ordained minister, assistant guardian and president of the
Church of Scientology of Florida, Inc., (The Florida Church). Additionally,
she is a member of an entity known as the Committee for the Protection of
Patients' Rights (CPPR) which was also named as a party-defendant. CPPR
functioned for a period of time as a voluntary association and was incorporated
on May 5, 1978. It opposes the use of electro-convulsive therapy for the
treatment of mental illness. The third defendant, the Church of Scientology of
California, Inc. (the California Church), is an incorporated branch of the
Church of Scientology. Despite the California reference in its title, it
maintains administrative offices in Clearwater, Florida.
The trial below involved two related occurrences. The jury, however,
determined that defamatory statements were made on only one occasion: May 8,
1978, the day on which CPPR staged a demonstration at the Banyan Psychiatric
Institute. On that day, approximately thirteen people picketed outside the
hospital for about an hour. They carried placards, distributed leaflets and
engaged in chanting--all condemnatory of Dr. Blackman's use of electro-
convulsive therapy. [FN1] As a result of this incident, Dr. Blackman
instituted suit against Laraine Shape, CPPR and the Church of Scientology of
California, Inc. [FN2] His theory was that Laraine Shape made or assisted
others in making defamatory statements, that she was an agent of CPPR and that
CPPR, in turn, was an instrumentality or alter ego of the California Church.
The jury accepted this theory and returned an interrogatory in which it
expressly found that Laraine Shape was an agent or employee of the California
Church at the time of the demonstration. Based on this finding, the jury
returned verdicts against Shape, CPPR and the California Church. The trial
court denied repeated motions for a directed verdict and various post-trial
motions and, therefore, the California Church instituted this appeal. [FN3]
FN1. The placards were varied. One stated: "Stop Unethical
Psychiatry!"; another read: "Shock Treatment is Dangerous to Your
Health!" A witness for the plaintiff testified that he saw Dr. Blackman's
picture on one sign and that another said "Fire Dr. Blackman." The same
witness testified that the marchers chanted: "Blackman, murderer, Blackman
murderer," something about shock treatments being inhumane and that Dr.
Blackman should be fired. The printed one-page leaflet was captioned:
"What Goes on Behind the Closed Doors at Banyan Psychiatric
Institute???????" It contained a drawing of a person receiving shock
treatment. The following five statements appeared on single lines under
the drawing: "Coercive Shock Treatment;" "Murder Reported as Suicide;"
"Excessive Drugging;" "Locked 'Quiet Rooms';" "Violation of Patient
Rights." Next, the leaflet contained a picture of Dr. Blackman with this
caption: " 'It would be unreasonable to think that you could pass 170
volts of electricity through the brain without some damage ...' Dr. Lionel
Blackman, Consulting psychiatrist Banyan Psychiatric Inst."
FN2. The second amended complaint named four defendants, but only three
are relevant to this appeal. The fourth defendant was Larry Slatkoff, an
employee of the Church of Scientology of California, Inc. and a member of
CPPR. It is fair to say that Mr. Slatkoff was the central figure in the
trial below. He appeared on a radio program and discussed electro-
convulsive therapy. Dr. Blackman claimed that Mr. Slatkoff defamed him
during the broadcast. The jury, however, found that Mr. Slatkoff's
statements were not defamatory.
FN3. The Church of Scientology of California, Inc. is the only appellant
before the court. Ms. Shape and CPPR also appealed, but both appeals were
dismissed for lack of jurisdiction because they had been untimely filed.
The evidence at trial established that Laraine Shape is an officer of the
Florida Church. The plaintiff, however, adduced no proof to suggest that the
Florida Church is dominated or controlled by the California Church.
Consequently, the jury's finding that Ms. Shape was an agent or employee of the
California Church can be sustained only if the evidence establishes an adequate
legal relationship between Ms. Shape and CPPR and, then, between CPPR and the
California Church. In other words, the California Church's liability in this
case is predicated exclusively on Ms. *192 Shape's activity with CPPR and
upon the premise that CPPR is an instrumentality or alter ego of the California
Church. The record contains abundant evidence to support a finding that Ms.
Shape acted as an agent of CPPR but, as detailed hereafter, there is no
evidence to link CPPR to the California Church.
Viewing the testimony, as we must, in the light most favorable to the
plaintiff, McDaniel v. Great Atlantic & Pacific Tea Co., 327 So.2d 893 (Fla.
3d DCA 1976), we find that Dr. Blackman established the following: (1) CPPR's
incorporators are members of the Scientologist faith and attend the Tampa
Mission in Tampa, Florida. (The record fails to disclose whether the Tampa
Mission is affiliated with the California or the Florida Church or whether it
has a separate corporate existence.) (2) When CPPR was formed, the California
Church offered instruction on how to do public relations. (3) The California
Church is listed as a sponsor on some CPPR material. (4) At one time, CPPR
used a mailing address in a hotel owned by the California Church. (5) The
California Church and CPPR are in "general agreement" in their opposition to
electro-convulsive therapy. The question on appeal is whether the foregoing
catalogue of evidence is legally sufficient to sustain the jury's implied
finding that CPPR is an instrumentality or alter ego of the California Church
so as to justify piercing CPPR's corporate veil.
Dr. Blackman resisted the Church's motion for a directed verdict by citing our
decision in International Union of Operating Engineers, Local 675 v.
Lassitter, 295 So.2d 634 (Fla. 4th DCA 1974), quashed on other grounds, 314
So.2d 761 (Fla.1975). Lassitter upheld a jury's finding that an
international union was responsible for the acts of its local union. In
essence, the jury found that the local union was an instrumentality of the
international. Our affirmance was partially predicated on the fact that the
international's constitution specifically provided for its complete domination
over the local. Without becoming enmeshed in the nuances of labor law and, in
particular, those instances in which an international will be held accountable
for the acts of its local, see generally Carbon Fuel Co. v. United Mine
Workers, 444 U.S. 212, 100 S.Ct. 410, 62 L.Ed.2d 394 (1979), we believe that
Dr. Blackman was correct in suggesting to the trial court that the concept of
domination is critical to the resolution of this case.
[1] Total domination, if established by competent evidence, will justify
piercing a corporate veil. Vantage View, Inc. v. Bali East Development
Corp., 421 So.2d 728 (Fla. 4th DCA 1982). In Dania Jai-Alai Palace, Inc. v.
Sykes, 425 So.2d 594, 598 (Fla. 4th DCA 1982), we held that "when one
corporation controls and dominates another corporation to the extent that the
second corporation becomes the 'mere instrumentality' of the first, the
dominant corporation is liable for the torts of the subservient corporation."
More recently, in Sisk v. General Builders Corp., 438 So.2d 65 (Fla. 4th DCA
1983), we stated that "[t]wo ostensibly separate corporations will be treated
as one when it is established that one of the corporations totally dominates
the other 'to the extent that the subservient corporation manifests no separate
corporate interest of its own and functions solely to achieve the purposes of
the dominant corporation.' " (citation omitted). Thus, appellee is correct;
domination is the central issue in this case.
[2][3] Normally, the question of whether a corporation is an instrumentality
or an alter ego of another corporation is an issue of fact for the jury.
Barnes v. Liebig, 146 Fla. 219, 1 So.2d 247 (1941); Dania Jai-Alai
Palace, Inc. v. Sykes, supra. However, "it is elemental that at the trial the
burden of proof rests on the plaintiff to establish by competent evidence each
material fact essential to recovery and that upon failure to do so it is the
duty of the trial court upon appropriate motion to take the case from the jury
and direct a verdict for the defendant." Smith's Bakery, Inc. v. Jernigan,
134 So.2d 519, 521 (Fla. 1st DCA 1961). Applying these rules to the case at
bar, we hold that Dr. Blackman failed to *193 adduce competent evidence from
which a jury could reasonably conclude that the California Church dominated
CPPR. Indeed, the record is replete with uncontradicted evidence which
suggests a contrary conclusion. Several witnesses testified that although the
California Church agrees with the goals of CPPR, it does not exercise any
actual control over CPPR. Furthermore, they testified that the California
Church does not provide any financial support to CPPR and that CPPR has members
who are not scientologists.
Viewing this evidence in the light most favorable to the plaintiff, we hold
that there was a complete failure of proof on the all-important issue of
domination. In fact, not one of the criteria listed in Dania Jai-Alai was
satisfied. [FN4] Thus, the trial court erred in not granting the church's
motions for a directed verdict. Accordingly, we reverse and remand with
instructions to enter a final judgment in favor of the Church of Scientology of
California, Inc.
FN4. Dania Jai-Alai Palace, Inc. v. Sykes, supra at 599, quotes Fish
v. East, 114 F.2d 177, 191 (10th Cir.1940), and lists some of the criteria
which may be considered in determining whether a subsidiary is a mere
instrumentality or alter ego of a parent corporation:
(1) The parent corporation owns all or majority of the capital stock of the
subsidiary. (2) The parent and subsidiary corporations have common
directors or officers. (3) The parent corporation finances the
subsidiary. (4) The parent corporation subscribes to all the capital stock
of the subsidiary or otherwise causes its incorporation. (5) The
subsidiary has grossly inadequate capital. (6) The parent corporation pays
the salaries or expenses or losses of the subsidiary. (7) The subsidiary
has substantially no business except with the parent corporation or no
assets except those conveyed to it by the parent corporation. (8) In the
papers of the parent corporation, and in the statements of its officers,
"the subsidiary" is referred to as such or as a department or division.
(9) The directors or executives of the subsidiary do not act independently
in the interest of the subsidiary but take direction from the parent
corporation. (10) The formal legal requirements of the subsidiary as a
separate and independent corporation are not observed.
REVERSED and REMANDED.
WALDEN, J., concurs.
DOWNEY, J., concurs specially with opinion.
DOWNEY, Judge, concurring specially:
I concur with both the result and reasoning of the majority opinion, but would
also hold that a directed verdict should have been granted in favor of the
California Church because appellee, a public figure, failed to adduce
sufficient evidence of actual malice on the part of Loraine Shape regarding the
allegedly defamatory statements. Thus, the California Church would not be
liable to plaintiff even if Shape was an agent of CPPR and CPPR was an
instrumentality or alter ego of the California Church. Under the prevailing
view in many jurisdictions, a public figure plaintiff is required to meet the
actual malice standard dictated by New York Times Co. v. Sullivan, 376 U.S.
254, 276-77, 84 S.Ct. 710, 723-24, 11 L.Ed.2d 686 (1964) irrespective of
whether the publisher of the defamatory statement may be described as a media
or non-media defendant. As the court stated in Rodriguez v. Nishiki, 653
P.2d 1145, 1149 (Hawaii 1982), wherein local entertainment personalities sued a
candidate for public office:
Although at one time there was some dispute about whether the actual malice
standard of liability would only be applicable to media defendants, it is now
generally recognized, at least with regard to defamation actions involving
public officials and public figures, that the New York Times standard of
actual malice is applicable to both media and nonmedia defendants.
To like effect are: Avins v. White, 627 F.2d 637 (3d Cir.), cert. denied,
449 U.S. 982, 101 S.Ct. 398, 66 L.Ed.2d 244 (1980) (former law school dean
suing member of accreditation team which investigated the school); Woy v.
Turner, 533 F.Supp. 102 (N.D.Ga.1981) (agent of ball player suing team
owner); Antwerp Diamond Exch. v. Better Bus. Bur., 130 Ariz. 523, 637 P.2d
733 (1981) (corporate seller of precious *194 stones and its president suing
Better Business Bureau and others for statements concerning plaintiff's
operations); Anderson v. Low Rent Housing Comm'n, 304 N.W.2d 239 (Iowa
1981), cert. denied, 454 U.S. 1086, 102 S.Ct. 645, 70 L.Ed.2d 621
(1981) (former city housing official suing city commission and city
officials); Williams v. Pasma, Mont. 656 P.2d 212 (1982), cert. denied,
--- U.S. ----, 103 S.Ct. 2122, 77 L.Ed.2d 1302 (1983) (former senate
candidate suing state democratic committee member); Wheeler v. Green, 286
Or. 99, 593 P.2d 777 (1979) (professional horse trainer suing neophyte
racehorse owners); Wollman v. Graff, 287 N.W.2d 104 (S.D.1980) (police
officer suing candidate for town council); but see Denny v. Mertz, 106
Wis.2d 636, 318 N.W.2d 141, 152-53 (1982). Moreover, requiring a public figure
plaintiff to show actual malice as against a non-media defendant is not
inconsistent with Florida law. See Gibson v. Maloney, 263 So.2d 632 (Fla.
1st DCA 1972).