Richard S. Arnold

“ The whole purpose of asking whether a subsidiary is "properly capitalized," is precisely to determine its "financial responsibility." If the subsidiary is financially responsible, whether by means of insurance or otherwise, the policy behind the second part of the Collet test is met. ”

“ Moreover, having race on one's mind is not the same thing as acting because of race. At any rate, the single reference in the school board's press release is not sufficient to sustain the jury verdict on the race discrimination claims. Because Lacks has produced insufficient evidence that the school board's decision to terminate her was motivated by [p726] race, the judgment in Lacks's favor on her race discrimination claims cannot stand. On this record, the inference that the school board acted because of Lacks's race is wholly unreasonable. ”

“ Lacks' class demonstrates a serious and extreme lack of direction from the teacher. Teachers do not have the right to abdicate their responsibility to set standards under the guise of creativity. The content of the video is a violation of our black community; it is a violation of our white community; it is a violation of the values within our community and it is a violation of the ethical teaching standards practiced by all educational professionals. Most importantly, it is a violation of the students in the class. ”

“ It is common ground among all parties that Telecom, as such, has had no contact [p307] with Missouri. If it is subject to jurisdiction over its person in Missouri courts, it is only because of the conduct of Contrux, its subsidiary. So the issue of jurisdiction over the person depends on whether the corporate veil of Contrux can be pierced to bring Telecom into the case. As it happens, this is also the question upon which Telecom's substantive liability depends. (We assume for present purposes that Contrux is liable - this has not yet been proved.) ”

“ A flat prohibition on profanity in the classroom is reasonably related to the legitimate pedagogical concern of promoting generally acceptable social standards. The Supreme Court has told us that "schools must teach by example the shared values of a civilized social order." Fraser, 478 U.S. at 683. The school board itself, in its opinion terminating Lacks's employment with the school district, wrote that the purpose of the board's disciplinary policies is "to establish, to foster, and to reflect the norms and standards of the community its serves." ”

“ There is no evidence that Telecom or Contrux knew that the insurance company was going to become insolvent, and no reason, indeed, that we can think of why anyone would want to buy insurance from a company that he thought would become insolvent.
The dissent, post at 15-16, raises certain specific questions about the adequacy of the insurance coverage purchased by Contrux. In our view, a careful reading of the record does not bear out the contentions made. ”

“ The school board also appeals a jury verdict in favor of Lacks on First Amendment and race discrimination claims. We reverse and remand for the entry of judgment in favor of the defendant school district. We hold, among other things, that a school district does not violate the First Amendment when it disciplines a teacher for allowing students to use profanity repetitiously and egregiously in their written work. ”

“ There are instances in which an injured person may "pierce the corporate veil," that is, reach the assets of one or more of the shareholders of the corporation whose conduct has created liability. In the present case, the plaintiff seeks to hold Telecom Corporation liable for the conduct of an employee of its wholly owned subsidiary, Contrux, Inc. ”

“ Telecom raised the issue by filing a notion to dismiss the complaint for lack of jurisdiction under Fed. R. Civ. P. 12 (b) (2) and for failure to state a claim under 12 (b) (6) . The parties have treated the matter as one of jurisdiction, and so will we, but in fact the underlying issue is the same: is Telecom liable for what Contrux did? [2]
Initially, the District Court granted Telecom's motion to dismiss on the ground that the first element of the Collet formulation, control, had not been met. ”

“ The Student Discipline Code clearly prohibits profanity and obscene gestures, and it contains no exception for creative activities. Appellant's App. at 251. Moreover, Lacks's principal, Vernon Mitchell, testified at trial, as he did at the school board hearing, that he informed Lacks that the use of profanity by the students was not permitted in the student newspaper, one form of creative activity. Mitchell told Lacks: "There is no way I would allow profanity in the newspaper." ”

“ The shareholders of the corporation, including, if there is one, its parent corporation, are not responsible This is a conscious decision made by the law of every state to encourage business in the corporate form. ”

“ The improper-conduct or motivation portion of the Collet test cannot be met. Here, it is beyond dispute that Contrux had insurance, and that it was considered financially responsible under the applicable federal regulations. We see nothing sinister in the fact that the insurance was purchased through an agency wholly owned by Telecom. This is a common business practice. The assertion that a reduced premium was paid is wholly without support in the record. ”

“ Given the school's need to be able to impose disciplinary sanctions for a wide range of unanticipated conduct disruptive of the educational process, the school disciplinary rules need not be as detailed as a criminal code which imposes criminal sanctions. ”

“ To satisfy this second element, plaintiff cites no direct evidence of improper motivation or violation of law on Telecom's part. He argues, instead, that Contrux was undercapitalized.
Undercapitalizing a subsidiary, which we take to mean creating it and putting it in business without a reasonably sufficient supply of money, has become a sort of proxy under Missouri law for the second Collet element. On the prior appeal, for example, we said that "Missouri courts will disregard the existence of a corporate entity that is operated while undercapitalized 891 F.2d at 674. ”

“ She also alleged that the school board violated her due process rights under the United States and Missouri Constitutions, violated her rights under the First Amendment and 42 U.S.C. § 1983 (1994) , and discriminated against her on the basis of race in violation of Missouri law and Title VII of the federal Civil Rights Act. The school board removed the entire case to the District Court pursuant to 28 U.S.C. § 1441 (1994) . ”

“ The District Court rejected this argument. Undercapitalization is undercapitalization, it reasoned, regardless of insurance. The Court said:
The federal regulation does not speak to what constitutes a properly capitalized motor carrier company. Rather, the regulation speaks to what constitutes an appropriate level of financial responsibility.
Konrad Radaszewski v. Contrux, Inc., No. 88-0445-CV-W-1 (W.D. Mo. Oct. 26, 1990) , slip op. 7 n.6 (emphasis in original) . This distinction escapes us. ”

“ In fact, Lacks received more notice than has been required in other cases. In Bethel School District No. 403 v. Fraser, 478 U.S. 675, 92 L. Ed. 2d 549, 106 S.C.t. 3159 (1986) , a student was disciplined for using sexually suggestive language in a speech before a high school assembly. ”