When dealing with potential liability for a car accident, not only can a driver of a vehicle be held responsible, but also the owners of the vehicle that was involved in the accident may be liable. Claims of negligent supervision, negligent training, or basic liability as an employer can all arise. A recent case before the Georgia Court of Appeals looks at whether such liability can be expanded even further, allowing both owners and their alter egos to be held responsible for accidents that occur.
This recent case arose out of an automobile accident between the plaintiff and a defendant driving a truck on behalf of Yellow Ribbon Tree Experts. The driver was arrested after the accident and charged with multiple traffic violations. Shortly thereafter, the plaintiffs sued Yellow Ribbon on various negligence theories, including negligent hiring and supervision. The plaintiffs also named a separate company, Cobra 4, as a defendant in the action. Cobra 4 owned the truck that was involved in the accident and was owned by the same individual who owned Yellow Ribbon Tree Experts. The plaintiffs argued that Cobra 4 was liable under three different theories: (1) that Cobra 4 was an alter ego of Yellow Ribbon; (2) that Cobra 4 was engaged in a joint venture with Yellow Ribbon; and (3) that Cobra 4 negligently entrusted its vehicle to Yellow Ribbon. The court rejected the second argument but held that there was sufficient evidence to deny a motion of summary judgment as to the other two claims. Cobra 4 appealed, arguing that neither argument could be upheld in court.
The appeals court, reviewing the evidence, noted that one individual was the sole owner of both Yellow Ribbon and Cobra 4. He used Cobra 4 to purchase vehicles and then leased them to Yellow Ribbon. The court determined that it was undisputed that this arrangement was used so that the owner could protect his assets from judgments against Yellow Ribbon. However, it also noted that the owner kept the two businesses entirely separate, did not intermingle funds, and generally operated the two entities separately. Furthermore, once Cobra 4’s vehicles were leased to Yellow Ribbon, Cobra 4 ceased to have any control over them, and only Yellow Ribbon provided insurance for the vehicles.
In light of this information, the appeals court held that the trial court was wrong to hold that there was sufficient evidence to show that Cobra 4 was possibly an alter ego of Yellow Ribbon. The alter ego doctrine is a legal doctrine that allows courts to look past distinct and separate corporate structures to determine that one business is acting as a mere alter ego of another and can be held liable for the other’s actions. This generally requires some evidence that an individual is treating the two businesses as one entity, rather than as two separate legal corporate forms. For instance, the owner may commingle funds, use the assets of one company for the benefit of the other, or interchangeably rely on the two businesses to perform corporate functions. When such evidence does not exist, a question of alter ego should not be presented to a jury.
Here, the appellate court determined that when two corporate entities are sibling corporations but are distinct and separate in their structure and their function, the alter ego doctrine does not apply. The two companies were not used interchangeably, the assets were not commingled, and Cobra 4 did not reserve the right to continue to control the vehicles that it leased to Yellow Ribbon. While overlap certainly existed in their operations, the court determined that it was not the kind of overlap necessary to justify the existence of an alter ego. Accordingly, it reversed the trial court’s finding on this argument and granted summary judgment. Likewise, since there was no evidence that Cobra 4 continued to control the vehicles operated by Yellow Ribbon, the appellate court also reversed the trial court on the finding of negligent entrustment. The court then remanded for further proceedings.
When considering potential negligence claims against corporate entities that may own or control vehicles involved in your accident, it is important to carefully research the structure and nature of any businesses to determine if they are appropriate defendants. Stephen M. Ozcomert is an Atlanta car accident attorney with over 20 years of experience handling car and truck accident cases and vehicle ownership disputes, representing individuals who have been involved or injured in accidents in Atlanta and throughout Georgia. Call us today at (404) 370-1000 to schedule a free initial consultation, or you can reach us through our website.
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