F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 25 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
KRIS WELLBORN,
Plaintiff-Appellant,
v.
COBRAY FIREARMS, INC., a Georgia
corporation; SW DANIEL, INC., a
No. 96-8120
Georgia corporation; WAYNE DANIEL,
(D.C. No. 95-CV-211)
individually; SYLVIA DANIEL,
(District of Wyoming)
individually; MOUNTAIN
ACCESSORIES CORPORATION, a
Tennessee corporation, also known as
MAC, Inc.; DICK LOFFER, individually,
Defendants-Appellees,
and
MARIETTA PLASTICS, INC., a Georgia
corporation,
Defendant.
ORDER AND JUDGMENT*
Before PORFILIO, MCKAY, and LUCERO, Circuit Judges.
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
When Kris Wellborn pulled the trigger of a flare launcher, a self-loaded flare shell
exploded inside the launcher’s firing chamber, amputating Mr. Wellborn’s hand and part
of his forearm. Mr. Wellborn subsequently filed this action against corporations allegedly
having a role in the design, manufacturing, and marketing of the launcher device, and
against Wayne Daniel and Sylvia Daniel, officers and sole stockholders of those
corporations. The district court found the Daniels were protected by corporate veils and
no grounds existed for piercing those veils. Because Mr. Wellborn failed to present
evidence showing a disputed issue of material fact regarding the Daniels’ individual
liability, the district court granted summary judgment for each. We reverse in part and
affirm in part.1
The parties in this case are alleged to have played different roles, therefore, we
must establish their identities before proceeding further. Mountain Accessories
Corporation (MAC) designed, manufactured, and sold the kind of flare launchers and
“load your own” shell kits involved in this case. MAC also sold Mr. Wellborn the
launcher and shell kit which are alleged to have caused his injuries. Ultra Force, Inc.,
supplied the barrels which were used in the assembly of Mr. Wellborn’s flare launcher.
SW Daniel, Inc., (SWD) and Cobray Firearms, Inc., (Cobray) were Georgia corporations
For clarity’s sake, we will hereafter refer to the Daniels by their first names,
1
Wayne and Sylvia.
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also involved in the design, manufacture, and sale of flare launchers. Cobray frequently
supplied MAC with the flare launchers it sold. Both SWD and Cobray are now defunct.
Dick Loffer is a MAC employee. At the time of trial, Wayne Daniel was the sole
shareholder and president of MAC, and Sylvia Daniel was the sole shareholder of Ultra
Force, Inc.
The launcher and shell kits purchased by Mr. Wellborn contained no warnings and
gave only limited instructions. He claims the kits provided no instructions or warnings
about ingredients which should or should not be used in the shells, the proper proportions
of ingredients, or proper assembly. Mr. Wellborn called MAC’s technical assistance line
and spoke with Dick Loffer who gave Mr. Wellborn some instructions over the phone.
Several months later, Mr. Wellborn loaded his own shells, allegedly following Loffer’s
instructions. Mr. Wellborn attempted to fire a shell through the launcher, but when he
pulled the launcher’s trigger, the shell exploded inside the barrel. Thereafter, claiming
negligence, strict products liability, and breach of express and implied warranties, Mr.
Wellborn brought this action against Loffer, Wayne, and Sylvia, in their individual
capacities, and against MAC, Cobray, and SWD as well.
Before trial, Wayne and Sylvia moved for summary judgment and submitted
affidavits, stating they had never “personally” engaged in the design, manufacture, or sale
of flare launchers or load your own shell kits; had never “personally” had any dealings
with Wellborn; and had, at all times, maintained all formalities necessary to sustain the
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distinction between themselves and the corporations which they owned. The district court
found Wayne and Sylvia were not individually involved in the launcher sale and, as
corporate shareholders, they were shielded from individual liability by their respective
corporate structures. On that basis, the court granted summary judgment in their favor.
At some point before trial began, Mr. Wellborn discovered Cobray and SWD were
defunct corporations. He moved orally to dismiss the two corporations, and the
defendants stipulated to the dismissal. Whether the dismissal should be with or without
prejudice was not discussed. In a subsequent written order, the district court granted the
motion, dismissing Cobray and SWD with prejudice. This appeal ensued.
We review de novo the grant of a motion for summary judgment, applying the
same standard as the district court. Furr v. Seagate Tech., Inc., 82 F.3d 980, 985 (10th
Cir. 1996). Viewing the evidence in the light most favorable to the nonmoving party,
summary judgment must be granted if the record “shows that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c).
We are first called upon to consider whether Wayne and Sylvia were shielded by
the respective corporate veils of MAC and Ultra Force from liability for any actions taken
in their respective corporate capacities as shareholders or directors and whether acts
performed by them in their individual capacities contributed to Mr. Wellborn’s injuries.
Mr. Wellborn argues the corporate veil doctrine does not apply in tort claims, and the
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corporate structures therefore do not shield the Daniels from liability for actions taken by
them in their corporate capacity.
Although not cited by either party, Zimmerman v. First Federal Sav. & Loan
Ass’n, 848 F.2d 1047 (10th Cir. 1988), settles this issue conclusively in favor of Mr.
Wellborn. In Zimmerman, a savings and loan association agreed to lend commercial
developers $2.2 million to finance a project, but, the plaintiffs claimed, the savings and
loan provided only $600,000 and wrongfully foreclosed on the loan. The developers sued
the savings and loan’s directors, alleging the directors breached their duty to supervise the
corporation’s affairs. In determining whether the district court had properly granted the
directors’ motion for a directed verdict, we stated:
Wyoming courts have not spoken on the duty of corporate directors to third
parties. This court has held that an officer of a corporation is liable to a
third party if he or she “directs or participates actively in the commission of
a tortious act....” Lobato v. Pay Less Drug Stores, 261 F.2d 406, 408 (10th
Cir. 1958). However, “[s]pecific direction or sanction of, or active
participation or cooperation in, a positively wrongful act of commission or
omission which operates to the injury or prejudice of the complaining party
is necessary to generate individual liability in damages of an officer or
agent of a corporation for the tort of the corporation.” Id. at 409. We hold
that Wyoming courts would apply the general rule we stated in Lobato.
Zimmerman, 848 F.2d at 1052. In light of this authority, the district court erred to the
extent it relied on the corporate veil doctrine.
The crucial issue in this appeal is whether Wayne and Sylvia are alleged to have
committed any individual acts upon which Mr. Wellborn may base his claims. We
separate discussion of this question into two parts: (1) What is the meaning of
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“individual” acts? and (2) What is Mr. Wellborn’s evidence of Wayne’s and Sylvia’s
individual acts?
Wayne and Sylvia argued none of the activities of which Mr. Wellborn complains
were conducted by them in their “individual capacity.” Wayne’s affidavit in support of
his motion for summary judgment stated: “[e]xcept in my capacity as an employee of
[MAC], I have never personally engaged in the design, manufacture, fabrication,
packaging, preparation, selling, or distribution of” flare launchers or flare canisters.
Sylvia submitted a similar affidavit stating, she had “never personally engaged in the
design manufacture, fabrication, packaging, preparation, selling, or distribution of” flare
launchers or flare canisters. In addition, both Wayne and Sylvia stated they had never
“personally” had any contact with Mr. Wellborn regarding the purchase of flare guns
from MAC or “personally” provided him with instruction or direction regarding the use or
handling of flare launchers. The district court relied heavily on these affidavits and the
corporate veil doctrine in reaching summary judgment for the Daniels. The district court
differentiated between acts committed by Wayne and Sylvia in their individual capacities
and acts committed in their capacities as corporate employees and officers:
The affidavits and exhibit submitted by movants show that there is no issue
of fact that it was a corporation that sold the products to plaintiff and that
they did not act in an individual capacity with regard to the manufacture,
packaging and sale of a product to plaintiff, and that they had no
individual contact with him regarding any product he purchased from any
company. Based upon these facts movants would be entitled to judgment as
a matter of law ... that as corporate shareholders and officers they are
insulated from individual responsibility by the corporate structure.
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We believe the court erred in relying on the premise that Wayne and Sylvia “did not act in
an individual capacity with regard to the manufacture, packaging and sale of a product to
plaintiff.”
If, as Zimmerman instructs, the corporate veil doctrine does not apply to a tort
claim brought by a third party against a corporation’s directors, officers, or shareholders,
the traditional notion of a shield for acts committed in a corporate capacity does not apply
either. Therefore, in determining whether Wayne and Sylvia may be individually liable to
Mr. Wellborn, we do not exclude all conduct performed in their capacities as corporate
officers before looking for individual acts, rather we ask whether Wayne or Sylvia, in
their capacities as corporate officers, specifically directed, sanctioned, or participated in
“a positively wrongful act of commission or omission which operate[d] to the injury or
prejudice of the complaining party.” Zimmerman, 848 F.2d at 1052. The district court
erred in assuming it could ignore all evidence presented by Mr. Wellborn of acts by
Wayne and Sylvia performed in their corporate capacities.
Mr. Wellborn brought claims of negligence, strict liability, and breach of implied
warranties against Wayne and Sylvia. The question before us is whether the record
reveals a genuine issue as to any fact material to these claims.
Wyoming permits claims for strict liability and breach of warranty. See Ogle v.
Caterpillar Tractor Co., 716 P.2d 334, 341-42 (Wyo. 1986) (adopting strict liability as
defined in Restatement (Second) of Torts § 402(a)); Wyoming Statutes, §§ 34-21-231,
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232, 34-21-204 (1977 & as amended) (breach of warranty statutes). These causes of
action, however, apply only to “sellers” or “manufacturers.” In the affidavits
accompanying their motion for summary judgment, Wayne and Sylvia deny selling
anything to Wellborn and deny manufacturing the flare launcher and “load your own”
shell kits at issue in this case. These denials, however, are denials of “personal” sale or
manufacture, and rest on the assumption the distinction between personal acts and acts
within a corporate capacity applies to their conduct.
Given the corporate veil doctrine does not apply, two questions arise. Can Mr.
Wellborn demonstrate the acts of Wayne and Sylvia, as corporate officers, bring them
within the definition of “sellers” or “manufacturers”? Has Mr. Wellborn demonstrated a
genuine issue of material fact regarding whether Wayne and Sylvia, in violation of the
doctrines of strict liability and breach of warranty, specifically directed, sanctioned, or
participated in “a positively wrongful act of commission or omission which operate[d] to
the injury or prejudice of the complaining party”? Zimmerman, 848 F.2d at 1052.
The case against Wayne is relatively clear. At his deposition, Wayne freely
admitted to fabricating, designing, manufacturing, packaging, and selling the flare
launcher, as well as writing the instruction which accompanied the “load your own” shell
kit, in his corporate capacity as president of MAC. When asked whether he sold the
launcher, Wayne responded, “I sold the launcher. When I say ‘I,’ I mean, MAC.”
Because the corporate veil doctrine does not apply, this testimony presents sufficient
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evidence to create a genuine issue of material fact regarding Wayne’s potential liability
under strict liability and breach of warranty.
The case against Sylvia is less clear. Mr. Wellborn claims through her conduct as
president of Ultra Force, Sylvia harmed him by manufacturing and designing the barrels
used in the launcher at issue. In short, Mr. Wellborn contends “[Sylvia’s] components
contributed to a defective product.” However, Mr. Wellborn presents no evidence
indicating the barrel was defective or that Sylvia committed “a positively wrongful act of
commission or omission which operate[d] to the injury or prejudice of the complaining
party.” Zimmerman, 848 F.2d at 1052. Mr. Wellborn has therefore failed to demonstrate
a genuine issue of material fact regarding tortious conduct by Sylvia and her potential
individual liability, even in the absence of the corporate veil doctrine. The district court’s
summary judgment for Sylvia on the strict liability and breach of warranty claims was
therefore appropriate.
Mr. Wellborn also brought negligence claims against Wayne and Sylvia. A
manufacturer owes a duty of care to those who use its product. “[A] manufacturer is
required to exercise reasonable care in the planning, design, and manufacturing of a
product in order to insure that it is reasonably safe to use.” O'Donnell v. City of Casper,
696 P.2d 1278, 1285 (Wyo. 1985). Mr. Wellborn claims Wayne breached this duty of
reasonable care by failing to provide adequate warnings and instructions with the
launcher and the “load your own” shell kits. Wayne’s testimony adequately demonstrates
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Wayne participated directly in packaging the launcher and shell kits and in drafting the
instructions provided with the kits. Mr. Wellborn has demonstrated a genuine issue of
material fact regarding Wayne’s individual conduct and potential liability, and the district
court’s grant of summary judgment for Wayne was therefore error.
However, for the same reasons discussed in relation to the strict liability and
breach of warranty claims, the district court’s grant of summary judgment for Sylvia was
proper. Mr. Wellborn has failed to present evidence indicating any potentially negligent
conduct by Sylvia, either in an individual or corporate capacity. A plaintiff cannot
survive summary judgment on bald allegations. Celotex Corp. v. Catrett, 477 U.S. 317,
324 (1986). The district court’s grant of summary judgment for Sylvia on Wellborn’s
negligence claim must therefore be affirmed.
Mr. Wellborn claims the district court erred by dismissing with prejudice his
claims against SWD and Cobray. He contends because the dismissal was prompted by his
own motion and because it occurred before SWD or Cobray filed an answer or motion for
summary judgment, the dismissal was governed by Rule 41(a)(1). The rule provides
“unless otherwise stated ... dismissal is without prejudice ....”
In response, the Daniels note voluntary dismissal under Rule 41(a)(1) requires the
plaintiff to file a notice of dismissal or file a stipulation of dismissal “signed by all parties
who have appeared in the action.” Mr. Wellborn chose neither procedure, thereby
bringing his motion to dismiss SWD and Cobray within the ambit of Rule 41(a)(2), which
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provides: “Except as provided in [Rule 41(a)(1)], an action shall not be dismissed at the
plaintiff’s instance save upon order of the court and upon such terms and conditions as
the court deems proper.... Unless otherwise specified in the order, a dismissal under this
paragraph is without prejudice.” Fed. R. Civ. P. 41(a)(2). The district court’s order, the
Daniels argue, stated the dismissals were “with prejudice,” and, under Rule 41(a)(2), the
decision to grant a dismissal with or without prejudice is left to the discretion of the court.
Simons v. Southwest Petro-Chem, Inc., 130 F.R.D. 134, 135 (Kan. 1990).
The language of Rule 41(a)(2) is clear: a plaintiff may voluntarily dismiss parties
under the procedures provided in Rule 41(a)(1), and all other dismissals on the plaintiff’s
instance are to be made by the court “upon such terms and conditions as the court deems
proper.” Mr. Wellborn was perfectly free to file a notice or stipulation of dismissal
pursuant to Rule 41(a)(1) and, thereby, insuring a dismissal without prejudice. However,
because he failed to follow the procedures provided in Rule 41(a)(1), he has foreclosed
that possibility and subjected himself and his desire to dismiss Cobray and SWD to the
discretion of the court. We cannot ignore the plain wording of Rule 41(a)(2).
The judgment of the district court granting summary judgment in favor of Sylvia
Daniel is AFFIRMED. The dismissal of the action against Cobray and SWD, with
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prejudice, is AFFIRMED. The judgment granted in favor of Wayne Daniel is
REVERSED, and the matter is REMANDED for further proceedings.
ENTERED FOR THE COURT
John C. Porfilio
Circuit Court
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