IN THE SUPREME COURT OF
SSP Partners and Metro Novelties, Inc., Petitioners,
Gladstrong Investments (
On Petition for Review from the
Court of Appeals for the Thirteenth District of
Argued March 20, 2007
Justice Hecht delivered the opinion of the Court.
The parents of a five-year-old boy
killed in a house fire sued SSP Partners and Gladstrong
Investments (U.S.A.) Corp. on a claim of product liability, alleging that the
fire was started by a WAX-brand disposable butane lighter with a defective
child-resistant mechanism, sold by SSP and designed, manufactured, and marketed
• Regarding statutory indemnity:
• Is an entity liable as a manufacturer if it is part of a “single business enterprise” with a manufacturer?
• Is an apparent manufacturer of a product a “manufacturer” as defined by statute?
• Regarding common law indemnity:
• Must upstream sellers indemnify downstream sellers for product liability?
The record establishes the following
facts. WAX lighters are made in
Hong Kong owns Gladstrong
After the child’s death, Gladstrong USA sent out safety recall notices to purchasers of WAX lighters, stating that the “Consumer Product Safety Commission has tested these lighters and found they violate federal regulations pertaining to child safety [and] found the child safety mechanism in these lighters to be ineffective.” No one else sent recall notices regarding WAX lighters. Gladstrong Hong Kong paid for the recall.
The trial court granted Gladstrong
SSP and Gladstrong
We first consider whether Gladstrong
Although a seller of a defective and unreasonably dangerous product may be liable, along with the manufacturer, for physical harm caused to the consumer, chapter 82 requires the manufacturer to indemnify an innocent seller against losses arising out of a products liability action. Section 82.002(a) imposes that obligation only on manufacturers, not on other sellers. As already noted, a manufacturer is defined by section 82.001(4) as “a designer, formulator, constructor, rebuilder, fabricator, producer, compounder, processor, or assembler” of a product, while a seller is defined by section 82.001(3) as someone who commercially distributes a product. Thus, as we have previously observed, “all manufacturers are also sellers, but not all sellers are manufacturers.”
SSP argues that because Gladstrong
SSP argues that the Federal Consumer Product Safety Act defines a “manufacturer” to include an importer, reflecting a common commercial understanding, and so should section 82.001(4). But the purpose of that Act is to protect consumer safety, not to adjust liabilities among distributors. Imposing safety standards on everyone that introduces a product into the American marketplace, importers and manufacturers alike, is obviously important to consumer safety. Imposing a no-fault indemnity obligation only on importers and not other sellers is certainly not essential to a fair allocation of responsibility. The fact that Congress has chosen to impose product safety requirements on importers in no way suggests that the Legislature has chosen to require importers to indemnify other sellers from products liability actions. As different as the two statutory schemes are, the federal Act’s treatment of importers as manufacturers suggests nothing about the scope of the indemnity obligation under chapter 82.
SSP argues that even if Gladstrong
[W]hen corporations are not operated as separate entities but rather integrate their resources to achieve a common business purpose, each constituent corporation may be held liable for debts incurred in pursuit of that business purpose. Factors to be considered in determining whether the constituent corporations have not been maintained as separate entities include but are not limited to the following: common employees; common offices; centralized accounting; payment of wages by one corporation to another corporation’s employees; common business name; services rendered by the employees of one corporation on behalf of another corporation; undocumented transfers of funds between corporations; and unclear allocation of profits and losses between corporations.
SSP asserts that it offered evidence of all these factors.
SSP does not contend that Gladstrong USA and Gladstrong Hong Kong are jointly liable as participants in what Texas law calls a joint venture or joint enterprise (not to be confused with single business enterprise), the essential elements of which are an agreement, a common purpose, a community of pecuniary interest, and an equal right of control. Nor does SSP contend that liability should be imposed on Gladstrong USA by disregarding its structure as a separate corporation — that is, by piercing the corporate veil or holding it to be the alter ego of Gladstrong Hong Kong. We have held that the limitation on liability afforded by the corporate structure can be ignored only “when the corporate form has been used as part of a basically unfair device to achieve an inequitable result”. Examples are when the corporate structure has been abused to perpetrate a fraud, evade an existing obligation, achieve or perpetrate a monopoly, circumvent a statute, protect a crime, or justify wrong. In some instances, the imposition of liability is limited by statute to situations involving actual fraud.
The “single business enterprise” liability
theory on which SSP relies does not entail the level of agreement required for
joint enterprise liability or the abuse required before the law disregards the
corporate structure to impose liability. The theory SSP advocates applies
whenever two corporations coordinate operations and combine resources in
pursuit of the same business purpose. We have never approved of imposing joint
liability on separate entities merely because they were part of a single
and we have pointed out that an issue exists “whether a theory of ‘single
business enterprise’ is a necessary addition to
As the only authority for its single business enterprise liability theory, the Paramount Petroleum court cited two cases, Murphy Bros. Chevrolet Co. v. East Oakland Auto Auction and Allright Texas, Inc. v. Simons. In Murphy Bros., the court of civil appeals held that the plaintiff had established the liability of the defendant corporation as opposed to the defendant’s predecessor, and that in any event the two corporations were engaged in a joint venture and thus jointly liable. This was sufficient to affirm the trial court’s judgment, but the court digressed. Citing our opinion in State v. Lone Star Gas Co. for the “well settled [rule] that courts will look through the forms to the realities of the relationship between two or more corporations to determine whether each is a separate entity or corporation, or what their relationship might be”, the court then quoted from our opinion:
The fact that separate corporate entities were formed which represent different departments of the integrated but single business enterprise does not affect the question, because the court must look beyond the corporate form to the purpose of the unified organization and to the officials who are identified with that purpose.
This statement, true on its face, was taken out of context. “The question” to which we referred in Lone Star was not whether two entities engaged in a single business enterprise were jointly liable for each other’s obligations, but whether a natural gas pipeline company whose business was integrated with local distribution companies serving Texas cities was subject to regulation by the Railroad Commission even though the pipeline cut across Oklahoma on its way from Texas gas fields to Texas consumers. We concluded, not surprisingly, that the pipeline could not use the interstate aspect of its business to shield its affiliates’ intrastate operations from regulation. In any event, we said, the companies’ business affiliations were immaterial because the pipeline company was not engaged in interstate commerce. We went on to explain in Lone Star that corporations could be operated in such a way that they could no longer be regarded as distinct entities, but we did not suggest that unity of enterprise would alone justify disregarding corporate structures.
In Allright, the other case on which the Paramount Petroleum court relied, the plaintiff sued two corporations with “Allright” in their names and obtained a judgment against both for personal property taken from his car, which he had parked at an Allright parking lot. On appeal, the defendants argued for the first time that the trial court’s judgment failed to distinguish between them. The court of civil appeals held that their complaint had not been preserved for appeal but went on to reject it. Based on evidence that the defendants did business under the same Allright trade style and assumed name, and that they and three other corporations shared bookkeeping services and employees and had all guaranteed payment of the judgment (for $1,444.05), the appellate court concluded that “the trial court was justified in looking beyond corporate form and in determining, as a matter of law, that the relationship between the corporations constituted in reality a single business enterprise.” The only authority the court cited was Murphy Bros.
In Paramount Petroleum, the
plaintiff rented equipment to a business that identified itself as “
The same shareholder owned all of the stock in both
companies. The two companies operated from the same
The evidence also shows that the corporations shared the goal of restoring the [ship]. Petroleum funded the bank account from which the restoration expenditures were paid. Petroleum’s employees performed the accounting for the restoration. Steamship’s employees performed the actual reconditioning work and hired subcontractors.
The court held that the judgment against Paramount Petroleum could also be based on the theory of partnership by estoppel, noting that the two Paramounts had made no effort to distinguish themselves in renting equipment from the plaintiff.
The bare mention of single business enterprise liability in Murphy Bros. and Allright was inadequate to support the multi-factored theory set out in Paramount Petroleum, and while other courts have applied the theory, none to our knowledge has found sound jurisprudential footing for the theory. Importantly, in this Court’s opinion in Castleberry v. Branscom, decided shortly after Paramount Petroleum, we comprehensively reviewed the bases for imposing liability despite the corporate structure and did not include single business enterprise among them:
We disregard the corporate fiction, even though corporate formalities have been observed and corporate and individual property have been kept separately, when the corporate form has been used as part of a basically unfair device to achieve an inequitable result. Specifically, we disregard the corporate fiction:
(1) when the fiction is used as a means of perpetrating fraud;
(2) where a corporation is organized and operated as a mere tool or business conduit of another corporation;
(3) where the corporate fiction is resorted to as a means of evading an existing legal obligation;
(4) where the corporate fiction is employed to achieve or perpetrate monopoly;
(5) where the corporate fiction is used to circumvent a statute; and
(6) where the corporate fiction is relied upon as a protection of crime or to justify wrong.
Each example involved an element of abuse of the corporate structure, including example (2), alter ego; in that situation, we specifically stated, “holding only the corporation liable would result in injustice.” Abuse and injustice are not components of the single business enterprise theory stated in Paramount Petroleum. The theory applies to corporations that engage in any sharing of names, offices, accounting, employees, services, and finances. There is nothing abusive or unjust about any of these practices in the abstract. Different entities may coordinate their activities without joint liability.
Creation of affiliated corporations to limit liability while pursuing common goals lies firmly within the law and is commonplace. We have never held corporations liable for each other’s obligations merely because of centralized control, mutual purposes, and shared finances. There must also be evidence of abuse, or as we said in Castleberry, injustice and inequity. By “injustice” and “inequity” we do not mean a subjective perception of unfairness by an individual judge or juror; rather, these words are used in Castleberry as shorthand references for the kinds of abuse, specifically identified, that the corporate structure should not shield — fraud, evasion of existing obligations, circumvention of statutes, monopolization, criminal conduct, and the like. Such abuse is necessary before disregarding the existence of a corporation as a separate entity. Any other rule would seriously compromise what we have called a “bedrock principle of corporate law” — that a legitimate purpose for forming a corporation is to limit individual liability for the corporation’s obligations.
Disregarding the corporate structure involves two considerations. One is the relationship between two entities, which can be assessed using factors like those listed by the court in Paramount Petroleum. The other consideration is whether the entities’ use of limited liability was illegitimate. On this issue the Paramount Petroleum factors are almost entirely irrelevant. That determination must be based on a careful evaluation of the policies supporting the principle of limited liability.
In Castleberry, we held that the corporate structure could be disregarded on a showing of constructive fraud, even without actual fraud. The Legislature has since rejected that view in certain cases. Article 2.21 of the Texas Business Corporation Act takes a stricter approach to disregarding the corporate structure:
A. A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate thereof or of the corporation, shall be under no obligation to the corporation or to its obligees with respect to:
* * *
(2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, owner, subscriber, or affiliate is or was the alter ego of the corporation, or on the basis of actual fraud or constructive fraud, a sham to perpetrate a fraud, or other similar theory, unless the obligee demonstrates that the holder, owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, owner, subscriber, or affiliate; or
(3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including without limitation: (a) the failure to comply with any requirement of this Act or of the articles of incorporation or bylaws of the corporation; or (b) the failure to observe any requirement prescribed by this Act or by the articles of incorporation or bylaws for acts to be taken by the corporation, its board of directors, or its shareholders.
B. The liability of a holder, owner, or subscriber of shares of a corporation or any affiliate thereof or of the corporation for an obligation that is limited by Section A of this article is exclusive and preempts any other liability imposed on a holder, owner, or subscriber of shares of a corporation or any affiliate thereof or of the corporation for that obligation under common law or otherwise, except that nothing contained in this article shall limit the obligation of a holder, owner, subscriber, or affiliate to an obligee of the corporation when:
(1) the holder, owner, subscriber, or affiliate has expressly assumed, guaranteed, or agreed to be personally liable to the obligee for the obligation; or
(2) the holder, owner, subscriber, or affiliate is otherwise liable to the obligee for the obligation under this Act or another applicable statute.
The single business enterprise liability theory is fundamentally inconsistent with the approach taken by the Legislature in article 2.21.
Accordingly, we hold that the single
business enterprise liability theory set out in Paramount Petroleum will
not support the imposition of one corporation’s obligations on another.
Finally, SSP argues that even if Gladstrong
We have never considered whether
section 400 correctly states the law of
Because the parties have confined their arguments regarding section 400 to statutory indemnity claims, we disapprove of the court of appeals’ discussion of the applicability of section 400 to common law indemnity claims.
We next consider whether Gladstrong
By its terms, chapter 82 is “in
addition to any duty to indemnify established by law, contract, or otherwise” and thus does not preclude common law
indemnity. The common law requires a manufacturer who is liable for a product
defect to indemnify a seller who is not independently culpable against any
liability the seller incurs.
SSP argues that an upstream seller owes the same obligation to innocent
downstream sellers that a manufacturer does. For this reason, SSP contends, it
is entitled to indemnity from Gladstrong
But a manufacturer’s indemnity obligation is based on its responsibility for the product defect. A seller is also responsible for injuries to the consumer, just as the manufacturer is, but the seller’s liability is not based on fault; it is imputed by law. SSP would impose an indemnity obligation on an innocent upstream seller. This would be at odds with what we have called “the fundamental principle underlying indemnity law”, that:
[g]enerally speaking, a person who, without personal fault, has become subject to tort liability for the unauthorized and wrongful conduct of another, is entitled to full indemnity from the other for expenditures properly made to discharge the liability. We noted in City of San Antonio v. Talerico, 98 Tex. 151, 81 S.W. 518, 520 (1904), that it is a “general principle[ ] of law [that an] active wrongdoer may be made to indemnify one who has been subjected to, or is sought to be held liable for, damage through his wrong.”
This principle does not support the imposition of an indemnity obligation on someone innocent of wrongdoing. SSP argues that an importer of a defective product is at fault for facilitating entry of the product into this country. But even if we assume this is true, any such fault is not the kind of actionable wrongdoing on which common law indemnity is predicated.
Accordingly, SSP is not entitled to
common law indemnity without proof that Gladstrong
USA was responsible for the defective condition of the WAX lighters. SSP did
not establish such responsibility as a matter of law, but Gladstrong
* * *
Though we do not entirely agree with the court of appeals’ reasoning, we do agree that Gladstrong USA was entitled to summary judgment on SSP’s claim for statutory indemnity but not on SSP’s claim for common law indemnity. Accordingly, the court of appeals’ judgment remanding the case to the trial court for further proceedings is affirmed.
Nathan L. Hecht
Opinion delivered: November 14, 2008
 Tex. Civ. Prac. & Rem. Code § 82.002(a) (“A manufacturer shall indemnify and hold harmless a seller against loss arising out of a products liability action, except for any loss caused by the seller’s negligence, intentional misconduct, or other act or omission, such as negligently modifying or altering the product, for which the seller is independently liable.”).
 Aviation Office of Am., Inc. v. Alexander & Alexander of Tex., Inc., 751 S.W.2d 179, 180 (Tex. 1988) (per curiam) (“The only remaining vestiges of common law indemnity involve purely vicarious liability or the innocent product retailer situation.”); Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 432 (Tex. 1984) (“Comparative causation does not affect the right of a retailer or other member of the marketing chain to receive indemnity from the manufacturer of the defective product when the retailer or other member of the marketing chain is merely a conduit for the defective product and is not independently culpable.”); Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 819 (Tex. 1984) (“An . . . indemnity right survives in products liability cases to protect the innocent retailer in the chain of distribution.”).
169 S.W.3d 27 (
 Tex. Civ. Prac. & Rem. Code § 82.002(a).
SSP also sued
 The court of appeals mentioned both arguments but addressed neither. 169 S.W.3d at 36; id. at 42 (op. on reh’g).
 Id at 42.
 E.g., Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334-335 (Tex. 1998) (“This Court has adopted the products liability standard set forth in section 402A of the Restatement (Second) of Torts. Section 402A states: (1) one who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.”).
 Tex. Civ. Prac. & Rem. Code § 82.002(a).
 Id. § 82.001(4) (“‘Manufacturer’ means a person who is a designer, formulator, constructor, rebuilder, fabricator, producer, compounder, processor, or assembler of any product or any component part thereof and who places the product or any component part thereof in the stream of commerce.”).
 Id. § 82.001(3) (“‘Seller’ means a person who is engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component part thereof.”).
General Motors Corp. v. Hudiburg Chevrolet, Inc.
199 S.W.3d 249, 256 (
 Tex. Civ. Prac. & Rem. Code § 82.001(4).
 See Hilco Elec. Coop. v. Midlothian Butane Gas Co., 111 S.W.3d 75, 81 (Tex. 2003) (“[T]he rule of ejusdem generis . . . provides that when words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation.”).
 15 U.S.C. § 2052(a)(11) (2006) (“The term ‘manufacturer’ means any person who manufactures or imports a consumer product.”).
 Id. § 2051(b) (“The purposes of this chapter are (1) to protect the public against unreasonable risks of injury associated with consumer products; (2) to assist consumers in evaluating the comparative safety of consumer products; (3) to develop uniform safety standards for consumer products and to minimize conflicting State and local regulations; and (4) to promote research and investigation into the causes and prevention of product-related deaths, illnesses, and injuries.”).
 712 S.W.2d 534 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).
SSP summarizes its evidence as follows. Kin Chung Li and his wife and daughter
own Gladstrong Hong Kong, which owns Gladstrong
The court of appeals stated that Gladstrong USA held
itself out as the manufacturer of WAX lighters. 169 S.W.3d at 38-39. Gladstrong
Able, 35 S.W.3d at 613; Blount v. Bordens,
Inc., 910 S.W.2d 931, 933 (
 See, e.g., Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006) (“A bedrock principle of corporate law is that an individual can incorporate a business and thereby normally shield himself from personal liability for the corporation’s contractual obligations.”); Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex. 1986) (“The corporate form normally insulates shareholders, officers, and directors from liability for corporate obligations . . . .”).
 Castleberry, 721 S.W.2d at 271.
 Tex. Bus. Corp. Act art. 2.21 (expires Jan. 1, 2010); Tex. Bus. Orgs. Code § 21.223 (effective Jan. 1, 2006).
 National Plan Adm’rs, Inc. v. National Health Ins. Co., 235 S.W.3d 695, 704 (Tex. 2007) (“We do not reach the question of, and express no opinion on, whether the single-business enterprise theory is a viable doctrine to pierce the corporate veil of a party . . . .”); PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 173 (Tex. 2007) (referring to single business enterprise as “a theory we have never endorsed”); Southern Union Co. v. City of Edinburg, 129 S.W.3d 74, 86 (Tex. 2003) (noting that this Court “has never considered the ‘single business enterprise’ concept in any detail”).
 Southern Union Co., 129 S.W.3d at 87.
 437 S.W.2d 272 (Tex. Civ. App.— El Paso, 1969, writ ref’d n.r.e.).
 501 S.W.2d 145 (Tex. Civ. App.—Houston [1st Dist.] 1973, writ ref’d n.r.e.).
 437 S.W.2d at 275.
86 S.W.2d 484 (Tex. Civ. App.—Austin 1935, writ ref’d), rev’d and
remanded, 304 U.S. 224 (1938), op. on remand, 129 S.W.2d 1164 (Tex. Civ. App.—Austin 1939), rev’d
and remanded, 153 S.W.2d 681 (
 Murphy Bros. Chevrolet Co., 437 S.W.2d at 276.
 86 S.W.2d at 490.
 501 S.W.2d 145, 146-147 (Tex. Civ. App.—Houston [1st Dist.] 1973, writ ref’d n.r.e.).
 712 S.W.2d 534, 535 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).
721 S.W.2d 270 (
Willis v. Donnelly, 199 S.W.3d 262, 271 (
 721 S.W.2d at 273.
 Tex. Bus. Corp. Act art. 2.21 (expires Jan. 1, 2010). Sections A and B of this article, after a legislative reorganization of the statutes governing business entities effective January 1, 2006, were recodified in substantially similar form in Tex. Bus. Orgs. Code § 2.223, and §§ 21.224-.225, respectively. Act of May 29, 2003, 78th Leg., R.S., ch. 182, §§ 1, 2, 2003 Tex. Gen. Laws 267, 427, 595.
 Restatement (Second) of Torts § 400 (1965); see also Restatement (Third) of Torts: Products Liability § 14 (1998) (“One engaged in the business of selling or otherwise distributing products who sells or distributes as its own a product manufactured by another is subject to the same liability as though the seller or distributor were the product’s manufacturer.”).
 Tex. Civ. Prac. & Rem. Code § 82.002(e)(2).
General Motors Corp. v. Hudiburg Chevrolet, Inc.,
199 S.W.3d 249, 255 (
 Owens & Minor, Inc. v. Ansell Healthcare Prods., Inc., 251 S.W.3d 481, 486 (Tex. 2008) (“The rationale behind the common law concept of indemnification is that a party exposed to liability solely due to the wrongful act of another should be permitted to recover from the wrongdoer.”).
 McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, 789 (Tex. 1967) (“The rule . . . of strict liability [makes] the seller subject to liability to the user or consumer even though he has exercised all possible care in the preparation and sale of the product.” (quoting Restatement (Second) of Torts § 402A, cmt. a (1965)).
Humana Hosp. Corp. v. American Med. Sys., Inc., 785 S.W.2d 144, 145 (