Foster v. United Continental Holdings, Inc.

• Court: District Court, N.D. California
• Decided: June 25, 2021
• Docket: 3:19-cv-02530
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 NATHANIEL FOSTER, et al., Case No. 3:19-cv-02530-JD

8 Plaintiffs, ORDER RE MOTION TO DISMISS v. 9 Re: Dkt. No. 84 10 UNITED CONTINENTAL HOLDINGS, INC., et al., 11 Defendants.

12 13 Defendant United Airlines Holdings, Inc. (United Holdings), which is the parent company 14 of defendant and operating subsidiary United Airlines, Inc. (United), asks to be dismissed under 15 Federal Rule of Civil Procedure 12(b)(6) on the ground that the Second Amended Complaint 16 (SAC), Dkt. No. 74, did not adequately allege that it is an alter ego or otherwise vicariously liable 17 for the personal injuries sustained by plaintiff Foster while traveling on United. Dkt. No. 84 18 (motion to dismiss). The parties’ familiarity with the record is assumed. United Holdings is 19 dismissed without prejudice to a motion to restore it as a party if warranted by facts obtained 20 during discovery.1 21 To plausibly allege an alter ego relationship, a complaint must present facts showing “‘(1) 22 there is such a unity of interest and ownership that the individuality, or separateness, of the said 23 person and corporation has ceased, and (2) an adherence to the fiction of the separate existence of 24 the corporation…would sanction a fraud or promote injustice.’” Perfect 10, Inc. v. Giganews, 25 Inc., 847 F.3d 657, 677 (9th Cir. 2017) (quoting S.E.C. v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 26

27 1 Because United Holdings brought a motion to dismiss, which goes to the sufficiency of the complaint, the 1 2003) (ellipses in original)); see also Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 300 (1985) 2 (same tests under California state law). 3 The SAC falls short on this score. The allegations about the corporate relationship 4 between United Holdings and United are conclusory, and even then presented on an “information 5 and belief” basis. See Dkt. No. 74 at 7. The SAC says that United Holdings “appears to own 100 6 percent of United Airlines, Inc.’s stock,” id., but that is phrased as a supposition, and in any event 7 the “mere fact of sole ownership and control does not eviscerate the separate corporate identity 8 that is the foundation of corporate law.” Katzir’s Floor & Home Design, Inc. v. M-MLS.com, 394 9 F.3d 1143, 1149 (9th Cir. 2004). The allegation that United Holdings and United have filed 10 consolidated 10-Ks is also of no moment for stating a plausible alter ego allegation. Dkt. No. 74 11 at 6. “[C]onsolidated reporting is standard business practice,” that does not, in itself, warrant 12 disregarding the corporate form. Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 13 549 (2000). So too for the allegation that United’s CEO has a position on the United Holdings 14 board. Some overlap in board officers and management personnel does not undermine the 15 entities’ formal separation. Id. at 548-49; see also Ranza v. Nike, Inc., 793 F.3d 1059, 1074 (9th 16 Cir. 2015); Kramer Motors, Inc. v. British Leyland, Ltd., 628 F.2d 1175, 1177 (9th Cir. 1980). 17 The SAC also acknowledges that United Holdings “is not a Part 121 certified commercial air 18 carrier,” Dkt. No. 74 at 6, which further dilutes the plausibility of an alter ego relationship between 19 the entities. 20 This is enough to find that the SAC did not adequately allege an alter ego claim. It is also 21 worth noting that plaintiffs have not demonstrated that dismissing United Holdings would shield 22 fraud or create an unfair windfall for a defendant. “The injustice that allows a corporate veil to be 23 pierced is not a general notion of injustice; rather, it is the injustice that results only when 24 corporate separateness is illusory.” Katzir’s Floor & Home Design, 394 F.3d at 1149. Nothing in 25 the SAC indicates that maintaining the corporate forms here would result in the denial of 26 meaningful relief to plaintiffs, or otherwise perpetrate a wrong on them. 27 Because this is plaintiffs’ second amended complaint, the Court finds leave to amend is not 1 during discovery give rise to a good-faith basis for seeking to assert alter ego liability against 2 || United Holdings, plaintiffs may file a request to amend under Rule 15. 3 IT IS SO ORDERED. 4 Dated: June 25, 2021 5 JAMES FONATO 6 United States District Judge 7 8 9 10 11 12

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