In 1995, two Maintenance Mechanics and long time friends were on their lunch break at the Clark Blue Island Oil Refinery when untrained co-workers accidentally opened a valve releasing flammable materials and causing an explosion and fire. The two workers were trapped in the lunch room and died. It was first thought, as is often the case, that the only remedy for their families would be the limited death benefits awarded under the Workers Compensation Act, because the fire that led to their deaths was caused by co-workers.However, later investigation revealed that another entity may also have been involved – Clark USA, Inc., the parent corporation of the owner of the refinery, Clark Refining & Marketing.
Healy Scanlon Law Firm represented one of the worker’s family in a lawsuit against Clark USA, arguing that it should be held responsible for the fatal fire. But Clark USA argued, and the trial judge agreed, that Clark USA could not be held liable, because it was just a parent corporation, was not involved in the actual operations of the refinery, and was shielded by corporate and workers’ compensation immunities.
Healy Scanlon Law Firm pursued an appeal to the Appellate Court of Illinois. The Appellate Court reversed the Circuit Court. Clark USA then appealed the matter to the Illinois Supreme Court.
Last month in a unanimous decision, the Supreme Court reversed the decision of the Circuit Court and sided with Healy Scanlon Law Firm’s argument that Clark USA could be held liable for the death of the two workers. The Court found that Clark USA may have directly and wrongly implemented severe budget cuts at the refinery which led to the fatal fire. The case was argued in the Supreme Court by Martin Healy, Jr. of Healy Scanlon Law Firm and Edward Willer of Corboy & Demetrio. The Supreme Court’s opinion and the Appellate Court’s opinion which preceded it, are the first decisions in Illinois to adopt this “direct participation” theory of liability and join only a handful of cases nationwide which have adopted and applied the theory to hold a parent corporation liable for its direct involvement in causing an injury.
Often, large corporations, such as oil companies, will organize themselves as more than one company – a parent and one or more subsidiaries – for a variety of tax, employment and other reasons. Even though these companies are comprised of the exact same individuals, the law recognizes each of these companies as distinct, and will not, without more, hold one responsible for the wrongs committed by another. Typically, a parent company is not an operations company, but usually just a holding company. In this case, Healy Scanlon Law Firm argued that the parent company exceeded this role as a holding company or mere investor, and directly participated in the operations of the refinery.
Testimony in the case indicated that Clark USA ordered a drastic 25% reduction in operating expenses in order to achieve a $200 million cash surplus for the parent company. Clark Refining employees showed that such a reduction was impossible, because 80% of the budget was uncontrollable costs such as utilities and raw materials that could not be reduced. The only area of the budget that could be reduced was the other 20% consisting of employee wages, benefits, education, training, repairs, and equipment maintenance. Even though excessive budget cuts in this area would affect safety at the refinery, the cuts were made.
Following the reduction in safety, training and maintenance, conditions at the refinery rapidly deteriorated, prompting one employee to testify the refinery was “falling apart” and another that it was, “an accident waiting to happen.” It was this deterioration that led to the fatal fire.
The Supreme Court’s decision that this type of interference may result in civil liability brings some solace to the family and friends of these two workers, but the decision also represents a potential victory for injured workers throughout Illinois. This decision allows an injured worker to recover from a wrongdoer who is responsible for a dangerous condition, even if it is a parent corporation. More importantly, this decision should improve workplace safety. Civil lawsuits are aimed not just at compensating an injured person, but also at deterring wrongful conduct that may cause injury. Employers and their parent companies are now on notice that they will no longer be able to hide from the fatal effects of wrongful business conduct. The decision is especially important in businesses with hazardous activities, such as oil refining, which when poorly operated can result in extreme danger to all of those at or near the premises.