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L. Croxton v. Crowley Maritime Corp. (8/30/91), 817 P 2d 460
NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors to
the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order that corrections
may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
LOREN W. CROXTON, Personal )
Representative of the Estate )
of Ruth E. Croxton, )
) File No. S-3512
v. ) 3AN 82 650 CI
CROWLEY MARITIME CORPORATION, ) O P I N I O N
a Delaware corporation, )
Appellee. ) [No. 3743 - August 30, 1991]
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Milton M. Souter, Judge.
Appearances: James D. Rhodes, Michael D.
White, Hartig, White, Rhodes, Norman, Mahoney
& Edwards, Anchorage, for Appellant. David
T. Hunter, Michael K. Nave, Lane Powell &
Barker, Anchorage, for Appellee.
Before: Rabinowitz, Chief Justice, Burke,
Matthews, Compton and Moore, Justices.
This is an appeal from a decision of the superior court
after a bench trial. The Estate of Ruth Croxton (the Estate)
sought to hold Crowley Maritime Corporation (Crowley), the parent
company of Croxton's employer, vicariously liable for the alleged
negligence of Tim Morrison, which it claimed was a cause of the
work-related plane accident that took Croxton's life. The court
agreed with the Estate that Morrison was negligent and that the
negligence was a proximate cause of Croxton's death. The court
also found, however, that Morrison was not an employee of Crowley
Maritime, but rather of the Crowley subsidiary that employed
Croxton. Because the Workers' Compensation Act provides the
exclusive remedy for injuries caused by a fellow employee, the
Estate's complaint was dismissed. The Estate appeals. We
Ruth Croxton died in 1981 when the Beechcraft she was
co-piloting as an employee of Puget Sound Tug and Barge Co.
(PST&B) crashed into a hillside at King Cove. The personal
representative of Croxton's estate sued PST&B and its parent
corporation, Crowley, for wrongful death. After a long series of
preliminary proceedings, including one appearance before this
court, Croxton v. Crowley Maritime Corp., 758 P.2d 97 (Alaska
1988) (Croxton I), the Estate's case finally came to a bench
trial in 1989 with Crowley as the remaining defendant.
The Estate predicated Crowley's liability on the
assertion that Crowley's employee, Tim Morrison, the chief pilot
of the aviation department, was negligent in assigning Ernest
Fife as pilot-in-command of the ill-fated flight without properly
training him first. Although an experienced pilot, Fife had only
recently come with the company, had flown very little during the
preceding couple of years, and was unfamiliar with the
potentially hazardous approach to the King Cove airstrip. One of
Morrison's pilots, who conducted a training flight with Fife
shortly before the accident, told Morrison that Fife was still
rusty as a result of his long layoff from flying. Fife received
minimal training from Crowley before being assigned as pilot-in-
command of the fatal trip.
After hearing all the evidence, the superior court
concluded that Morrison was negligent in assigning Fife to the
flight and that his negligence was a proximate cause of Croxton's
death. It also concluded that the weight of the evidence
indicated that Fife was flying the plane at the time of the crash
and that Croxton was not contributorily negligent. It calculated
damages to be $319,066.
The court went on, however, and held that Morrison was
an employee of PST&B, rather than Crowley, and thus Croxton's co-
Everything that Morrison did
related to flight operations for Puget Sound
Tug & Barge. He was the chief pilot. And as
chief pilot, his duties included making sure
that all the pilots below him were properly
trained, and in conducting--and in the
overall overseeing of flight operations,
deciding who to dispatch when and where. He
did that. Overseeing maintenance operations,
overseeing mechanical repairs. He was in
charge of the flight operations. He was the
chief pilot. And then he reported, as I've
already indicated, to O'Shea and Puget Sound
Tug & Barge.
He, Morrison, received his paycheck
from Crowley Maritime Corporation. And
that's really the only indication that there
is that he was Crowley Maritime Corporation's
employee was the mere fact that he got his
paycheck from there. In every other respect,
what he did, particularly with respect to Mr.
Fyfe [sic] and Miss Croxton, was in
performance of his function as chief pilot
for Puget Sound Tug & Barge. The negligence
that he committed here was committed in the
performance of his duties for Puget Sound Tug
& Barge, irrespective of the fact that his
paycheck for that month, and for the month
before that and for the month after it before
he was terminated, came from Crowley Maritime
Croxton's suit was consequently barred by the exclusive remedies
provision of the Alaska Workers' Compensation Act. AS 23.30.055.1
Judgment was entered in favor of Crowley. The Estate appeals
solely on the question of whether the superior court was correct
in finding Morrison and Croxton to be co-employees.
The superior court concluded that Tim Morrison was the
employee of PST&B rather than of Crowley. In so ruling the court
disregarded the corporate form of Morrison's employment and based
its decision on what it perceived to be the actual substance of
Before exploring the applicable law, it is necessary to
understand Crowley's corporate structure. Crowley Maritime
Corporation, though closely held, is a large organization whose
business is carried out by numerous subsidiaries, which in turn
often operate through their own subsidiaries. PST&B is one of
Crowley's primary subsidiaries and is wholly owned by it.
Crowley is a Delaware corporation with its headquarters in San
Francisco. PST&B is a Washington corporation with its
headquarters in Seattle. The two corporations are registered
separately in Alaska.
Legally, then, Crowley and PST&B have separate identi
ties, which are respected under Alaska law. Elliot v. Brown, 569
P.2d 1323, 1326 (Alaska 1977). As often happens in the parent-
subsidiary context, the legally clear line between one company
and another becomes blurred in practice. In this case, one
source of such blurring comes from the fact that all "salaried,
full-time, permanent, nonunion" employees are carried on
Crowley's payroll. This arrangement was apparently motivated by
various business considerations, including tax and labor
This status, for example, applied to William O'Shea,
Morrison's direct supervisor. Although O'Shea was apparently in
charge of PST&B, he, like Morrison, received a paycheck that
clearly identified his employer as Crowley Maritime Corporation.3
Matters are further complicated by the tendency of Crowley person
nel to refer to PST&B and its various subsidiaries as the
Northwest and Alaska Division of Crowley. Thus, O'Shea attested
in a sworn affidavit that his official title was "Vice President
Arctic, Operations, Northwest & Alaska Division, Crowley Maritime
Corporation." At his deposition O'Shea first stated that he was
employed "[b]y Crowley." When asked whether he was employed by
Crowley or a subsidiary, he replied:
I work for, as my card says, Northwest
and Alaska Division. That has been
rearranged currently at this time what they
call the Pacific Division, which was a
reorganization that took place this year, but
I work for Puget Sound Tug & Barge, APUTCO,
various subsidiaries or operations of
Crowley out of the Seattle area.4
Crowley's brief refers to him as "Vice President of Arctic Opera
tions for PST&B."5 By contrast, Crowley seems to consider
O'Shea's supervisor, Roy Jergenson--who was the senior vice
president and general manager of the Northwest and Alaska
Division--to be a Crowley employee.
The role of the aviation department that Morrison
headed was to service the aviation needs of the Northwest and
Alaska Division--that is, PST&B and its various subsidiaries.
The aviation department was considered a cost center, meaning
that it generated no revenue through its operations; the costs of
its activities were charged to whatever subsidiary made use of
it. Morrison and all the permanent pilots were carried on
Crowley's payroll. Seasonal pilots, including Croxton and Fife,
were carried on the PST&B payroll. At least one pilot was
originally hired by Morrison as a seasonal employee and received
PST&B paychecks, then transferred to the Crowley payroll when he
was given permanent status. Crowley emphasizes in its brief that
the change in status did not involve any change in duties or job
The Flight Training Certification for Ernest Fife had
the Crowley logo at its top, below which was the heading "CROWLEY
MARITIME CORPORATION, AVIATION DIVISION."6 The certification is
signed by Tim Morrison. At the very bottom, printed in small
capital letters, are the words "Northwest and Alaska Division."
The form has no reference to PST&B. Similarly, the "Daily Flight
Record"for the crashed plane has the Crowley logo on it, but no
indication that the plane was legally owned by PST&B, as it
Although the superior court held in favor of Croxton's
estate on issues of liability and damages, it concluded its
decision by observing that Tim Morrison's employment status was
"the critical question for the decision of this case." It held
that the carrying of people like
Morrison and O'Shea on the direct payroll of
Crowley Maritime Corporation does not mean
that they are employees of Crowley Maritime;
that that indeed was done for administrative
purposes, and it appears in this case, from
the record in this case, that it was done for
the purpose of avoiding unionization. . . .
. . . .
. . . Mr. Morrison was acting as an
employee in the course and scope of his em
ployment for Puget Sound Tug & Barge when he
made these fatal errors in overseeing the
training of Fyfe [sic] and in dispatching him
on the fateful day.
As Crowley notes in urging affirmance, the court's holding can be
characterized as a "functional analysis of 'employee' status."
In arriving at this conclusion, the court found persua
sive a similar conclusion made by the Washington Department of
Revenue in an administrative context. In that proceeding,
Crowley appealed a state tax deficiency that had been levied
against it for employees on its payroll whom it claimed were
actually PST&B employees. As in this case, Crowley urged a
functional analysis, claiming there that the payroll structure
was purely a matter of accounting convenience. The
administrative law judge apparently agreed, concluding that "the
payrolling system or program adopted by [Crowley] . . . is a form
over substance cost accounting technique only. The handling of
payroll through a centralized, computerized program for all
subsidiary companies is not dispositive that the employees paid
through this system are the employees of the person who does the
Crowley does not deny that Morrison was formally
employed by Crowley while Croxton was formally employed by PST&B.
Its argument has consistently been that Alaska law requires that
employment status be determined by substance rather than form,
(citing Ruble v. Arctic General, Inc., 598 P.2d 95 (Alaska
1979)). While employment status is a matter of fact in Alaska's
workers' compensation law, the operative question in this case is
what legal effect the fact of a particular corporate form has as
against the corporation that voluntarily chooses that form. The
superior court erred as a matter of law in allowing Crowley to
argue the substance of Morrison's employment status in derogation
of its form. This error stems from overlooking the "general
rule" that "persons who choose to become incorporated may not
evade the consequences of corporateness when that would suit
their convenience." H. Henn & J. Alexander, Laws of Corporations
149, at 357 (3d ed. 1983).
Typically, a party outside the corporation seeks to
disregard the corporate form in order to widen the net of liabili
ty. E.g., Jackson v. General Electric Co., 514 P.2d 1170 (Alaska
1973) (plaintiff sought unsuccessfully to disregard formal sepa
rateness of General Electric and a wholly-owned subsidiary). In
the workers' compensation context, however, the situation is
often reversed: The corporation itself argues that the form
should be disregarded. The corporation's argument may be that a
parent and a subsidiary are substantively one entity in spite of
the corporate form. E.g., Boggs v. Blue Diamond Coal Co., 590
F.2d 655 (6th Cir.), cert. denied, 444 U.S. 836 (1979). Or the
corporation may argue that a worker ostensibly employed by a
subsidiary is actually employed by the parent. E.g., Latham v.
Technar, Inc., 390 F. Supp. 1031 (E.D. Tenn. 1974). The
circumstances of this case are somewhat unique in that Crowley
argues that a worker ostensibly employed by the parent is
actually employed by the subsidiary.7 That variation
notwithstanding, the underlying premise of Crowley's argument is
that the court should, in essence, "pierce"the Crowley corporate
veil and look beyond the formalities of Morrison's employment
We have adopted the general rule that "the veil may be
pierced only if the corporate form is used 'to defeat public
convenience, justify wrong, commit fraud, or defend crime.'"
Elliot v. Brown, 569 P.2d 1323, 1326 (Alaska 1977) (quoting
Jackson, 514 P.2d at 1172-73).9 Common sense dictates that this
rule should preclude Crowley's argument that "functional
analysis" of Morrison's employment is more appropriate than
respect for Crowley's corporate form. Indeed, numerous courts
have rejected similar arguments in analogous situations.
In Boggs, the widows of miners killed in a mine
explosion brought a wrongful death action against the decedents'
employer's parent company, Blue Diamond, alleging negligence on
its part separate from conduct of the subsidiary. Boggs, 590
F.2d at 657. Blue Diamond claimed immunity from tort under
Kentucky's Workmen's Compensation Act on the theory that parent
and subsidiary operated an "integrated business,"and thus were a
joint or single employer. Id. at 658. As does Crowley in this
case, Blue Diamond stressed the importance of substance over
All coal produced by Scotia is sold by
Blue Diamond and shipped as directed by Blue
Diamond. Sales are invoiced to customers by
Blue Diamond and deposited in its bank
accounts. A sale of coal from Scotia is
entered as a credit to Scotia on the
accounting records, but all money is retained
by Blue Diamond and used as it chooses.
Funds needed to pay expenses at Scotia are
furnished by Blue Diamond with an appropriate
entry in the intercompany accounts.
Id. at 657 (quoting Blue Diamond's brief).
The court rejected Blue Diamond's argument, reasoning
that respect for corporate separateness applies as much when the
corporation seeks to disavow it as when a plaintiff seeks to
[A] business enterprise has a range of
choice in controlling its corporate
structure. But reciprocal obligations arise
as a result of the choice it makes. The
owners may take advantage of the benefits of
dividing the business into separate corporate
parts, but principles of reciprocity require
that courts also recognize the separate
identities of the enterprises when sued by an
Id. at 662. This reasoning applies with equal vigor to a
company's decision to designate an individual as the employee of
one entity rather than another. For whatever benefit it derives
from that choice, it incurs reciprocal obligations.
A situation somewhat closer to the present case
occurred in O'Brien v. Grumman Corp., 475 F. Supp. 284 (S.D.N.Y.
1979). A test pilot employed by Grumman American Aerospace
Corporation was killed in the crash of a Grumman Gulfstream II.
His widow and estate brought suit against Grumman American's
parent--Grumman Corporation--and a sibling company--Grumman
Aerospace Corporation for wrongful death and survival damages
based on negligence, strict liability, and breach of warranty.
Id. at 287. In an argument that resembles Crowley's "functional
analysis,"the defendants asserted an exclusive remedy defense on
the ground that the pilot, whose widow had received workers'
compensation benefits from Grumman American, "'should be regarded
as being employed by the Gulfstream II program as an entity whose
components, Grumman [Corp.], Grumman Aerospace and Grumman
American, all stand on equal footing as his "Employer."'" Id. at
291 (quoting Defendants' Memorandum of Law in Support of Summary
The court rejected this argument: "[T]he fact remains
that Mr. O'Brien was employed and paid by Grumman American and
not by Grumman Corp. or Grumman Aerospace or some other nebulous
'economic entity.' As an employee of Grumman American, it must
be presumed that Mr. O'Brien was controlled by that entity and
none other." Id. at 292 (citation omitted). The court suggested
that that presumption would only be overlooked in the context of
allegations that Grumman American was "a mere agent or instrumen
tality of Grumman Corp. or Grumman Aerospace." Id.
Crowley has an inherently stronger position than
Grumman in that it refuses to acknowledge that Morrison was ever
a Crowley employee. Although Crowley did not specifically
distinguish this case or any other in its brief, presumably its
argument would be that no presumption concerning Morrison's
employment status can arise before some test is used to determine
his status in the first place. The proper test, Crowley would
say, is a common-sense, functional analysis using the indicia
discussed in Ruble v. Arctic General, Inc., 598 P.2d 95 (Alaska
1979), where "this Court refused to 'emphasize form over
substance.'" Appellee's Brief at 19 (quoting Ruble, 598 P.2d at
99). The entire point of the corporate veil doctrine, however,
is that form does prevail over substance, except in those limited
circumstances involving fraud or injustice. Thus, the applicable
rule for an employer in Crowley's position is that an employee is
presumed to be controlled by his formal employer and none other,
at least as far as related corporate entities are concerned. See
Boggs, 590 F.2d at 662.
This rule does not contradict Ruble, which involved two
unrelated corporations in a "lent employee"context.10 Id. at 97.
It is, moreover, consistent with this court's previous decisions
placing corporate form over substance. Elliot, 569 P.2d at 1326;
see also State, Dep't of Revenue v. Alaska Pulp America, Inc.,
674 P.2d 268, 275 (Alaska 1983) ("Generally, courts refuse to
look through the corporate veil and consider separate
corporations a single unit even when inter-corporation
transactions are mere bookkeeping entries."). And it accords
with the large number of courts that have refused to allow
corporations to disavow their corporate forms in workers'
compensation contexts, very often citing the reciprocity
rationale presented in Boggs. E.g., Gregory v. Garrett Corp.,
578 F. Supp. 871, 886 (S.D.N.Y. 1983) (attempt to disregard own
corporate form is "a legal theory that has not met with a warm
reception in the courts of most states").11
Crowley quite legitimately chose to put Morrison on the
Crowley payroll and chose to put Croxton and Fife on the PST&B
payroll. It chose to establish aviation operations to support a
large number of incorporated entities without making the aviation
activity either a part of any one of those entities or a separate
legal entity itself. In staffing these aviation operations it
apparently used "employees" of two different corporations.
Crowley's own witness conceded that this form of organization
served various business interests of Crowley. Because Crowley
attained advantage from operating in this manner rather than some
other, simple fairness and the weight of analogous precedent
require it to accept the incidental disadvantage of liability for
its employee's negligence.
Given that Morrison must be considered a Crowley
employee and Croxton a PST&B employee, the exclusive remedy
provision of the Workers' Compensation Act is inapplicable.
There seems no doubt that Morrison was acting within the scope of
his employment in assigning Fife to command the flight, an act
which the superior court has already determined was negligent and
a proximate cause of Ruth Croxton's death. Thus, no further
barrier exists to entering judgment against Crowley, based on its
vicarious liability for Morrison's acts, for the amount of
damages already determined by the superior court.
The decision of the superior court dismissing the
Estate is REVERSED and this case REMANDED for entry of judgment
1. AS 23.30.055 provides:
The liability of an employer prescribed
in AS 23.30.045 is exclusive and in place of
all other liability of the employer and any
fellow employee to the employee, the employ
ee's legal representative, husband or wife,
parents, dependents, next of kin, and anyone
otherwise entitled to recover damages from
the employer or fellow employee at law or in
admiralty on account of the injury or death.
2. In its decision the superior court focused on the
labor relations reasons: "[A] little cheat on the unions is what
it looks like. . . . It would appear that Crowley was -- unless
it had the permission of the unions, that Crowley was doing a
little administrative sl[e]ight of hand to keep its subsidiary
corporations' employees from being subjected to the demands of
unions." The Estate now highlights this finding of an anti-union
motive behind Crowley's corporate structure (without incidentally
alluding to supportive evidence in the record). In response,
Crowley points to evidence in the record suggesting that the use
of subsidiaries was at the request of its unions. The underlying
point, however, is the same: The uncontested fact is that the
payroll structure provided business benefits to Crowley.
3. Morrison and O'Shea's paystubs said at the top, in
small capital letters: "Your employer during the period was 001
Crowley Maritime Corp." Croxton's said: "Your employer during
the period was 043 Puget Sound Tug & Barge Co."
4. O'Shea did not testify at trial, but his
deposition was entered as evidence.
5. At trial Crowley presented the woman who was
personnel manager for the Northwest and Alaska Division at the
time of the crash. This exchange took place during her
THE COURT: Who was O'Shea
WITNESS: Mr. O'Shea was
employed by--under the Northwest and Alaska
Division, he was the VP of Arctic Operations.
She then noted that his Personnel Action Notices were coded "[o]h-
[o]h-one, Crowley Maritime."
The witness was similarly unclear about her own employ
ment status. She identified herself as having been personnel
manager of the Northwest and Alaska Division at the time of the
crash. When asked to explain what she meant by Northwest and
Alaska Division, she said it "is organized under Puget Sound Tug
and Barge Company with the various companies, corporations, joint
ventures, under Puget Sound Tug and Barge Company." Then, on
cross-examination, she twice answered affirmative when directly
asked if she was employed by Crowley Maritime Corporation at the
time of the accident.
6. During Morrison's deposition, Crowley's counsel
asked Croxton's counsel to use the term "aviation operations"
rather than "aviation division,"because "the Northwest and
Alaska division of Crowley is Puget Sound Tug and Barge and its
subsidiaries, and the aviation operations supported all of those
various operations up there, and there is no separate corporate
entity or structure called the aviation division within Crowley
7. Crowley does briefly argue in the alternative that
if Morrison is considered a Crowley employee, then Croxton should
be as well.
8. Crowley's argument that it is not attempting to
pierce its own corporate veil because it does not deny the
existence of any entity takes too narrow a view of the doctrine.
The issue is whether Crowley is trying to "avoid the consequences
of its own corporate structure." Boggs, 590 F.2d at 662.
9. We have also noted that corporate form may be
disregarded where a subsidiary is a "mere instrumentality"of its
parent. Jackson, 514 P.2d at 1173; see also McKibben v. Mohawk
Oil Co., 667 P.2d 1223, 1229 (Alaska 1983). Crowley does not
contend that PST&B was a "mere instrumentality." We have never
suggested that either of these theories is available to the
corporation to pierce its own corporate form. See McKibben, 667
P.2d at 1229-30 (discussing circumstances under which parent
corporation may be held liable in spite of corporate form).
10. A lent employee situation occurs "[w]hen one
employer borrows an employee having an existing employment
relation with another employer." Id. at 97 n.3. Crowley's
argument that Morrison was always a PST&B employee precludes any
direct application of a "lent employee"analysis.
We have suggested elsewhere that Ruble supplies the
test for multiple employer cases in general. Kroll v. Reeser,
655 P.2d 753, 756 (Alaska 1982). Like Ruble, however, Kroll
concerned which of two unrelated employers had an employment
relationship with the injured worker.
11. See also Smith v. Atlantic Richfield Co., 814 F.2d
1481, 1488 (10th Cir. 1987) (court "disapprove[s] any attempt"to
avoid consequences of corporate structure); Love v. Flour Mills
of America, 647 F.2d 1058 (10th Cir. 1981); Boggs, 590 F.2d at
655; Lane v. Kingsport Armature & Electric, 676 F. Supp. 108 (D.
Va. 1988); Porter v. Beloit Corp., 667 F. Supp. 367, 369 (S.D.
Miss. 1987) (subsidiary not entitled to immunity of parent);
Peterson v. Trailways, Inc., 555 F. Supp. 827 (D. Colo. 1983);
Stoddard v. Ling-Temco-Vought, Inc., 513 F. Supp. 314, 325-27 &
nn.3-4 (C.D. Cal. 1980) (citing "vast weight of authority"),
remanded on different issue, 711 F.2d 1431 (9th Cir. 1983);
Choate v. Landis Tool Co., 486 F. Supp. 774 (E.D. Mich. 1980)
(placing corporate form over defendant's assertion of "economic
reality"); O'Brien, 475 F. Supp. at 284; McDaniel v. Johns-
Manville Sales Corp., 487 F. Supp. 714, 716 (N.D. Ill. 1978)
("[d]efendants have uniformly been denied the opportunity to
pierce their own corporate veil in order to avoid liability");
Latham v. Technar, Inc., 390 F. Supp. 1031 (E.D. Tenn. 1974);
Thomas v. Hycon, Inc., 244 F. Supp. 151 (D.D.C. 1965); Gulfstream
Land & Development Corp. v. Wilkerson, 420 So. 2d 587 (Fla.
1982); Lyon v. Barrett, 445 A.2d 1153 (N.J. 1982); Stratman v.
Admiral Beverage Corp., 760 P.2d 974, 984 (Wyo. 1988) ("[W]e will
continue to adhere to the majority rule, that, on issues of
immunity, the separate corporate identity of affiliated
corporations will not be disturbed.").