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Under New Jersey law the corporate veil of a parent corporation may not be pierced unless the parent so dominated the subsidiary that it had no separate existence but was merely a conduit for the parent.
Appellees, employee and his wife, brought a personal injury action in Pennsylvania state court against asbestos manufacturers and suppliers for injuries suffered as a result of exposure to asbestos fibers. A defendant impleaded appellant holding company and its subsidiaries as third-party defendants upon removal to federal court. All original defendants settled with appellees and a district court found that appellant was liable for the tort obligations of its subsidiary based on a piercing the corporate veil theory. Appellant holding company challenged the decision.
Could the appellant holding company be held liable for the tort obligations of its subsidiary based on a piercing the corporate veil theory?
On appeal, the court reversed and remanded, holding that appellant was not involved in the affairs of the subsidiary on a constant or day-to-day basis necessary to rise to the high degree of domination required by New Jersey state law to pierce the corporate veil. The court found that appellant and its subsidiary maintained separate financial and managerial operations and affairs. The court concluded that merely the potential for control was insufficient, especially if appellant's actual amount of control was not enough.