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					Case No. G041727


                COURT OF APPEAL, STATE OF CALIFORNIA

            FOURTH APPELLATE DISTRICT, DIVISION THREE




                       DANIELA PIRES OLAUSON, et al.,

                              Plaintiffs and Appellants,

                                         vs.

                                JAMES BALDWIN,

                             Defendant and Respondent.


                   APPEAL FROM THE SUPERIOR COURT OF THE STATE
                    OF CALIFORNIA FOR THE COUNTY OF ORANGE,
                           SUPERIOR COURT NO. 97CC05913
                        THE HONORABLE CHARLES MARGINES




                    APPELLANTS’ OPENING BRIEF




Thomas V. Girardi (SBN 36603)                  Martin N. Buchanan (SBN 124193)
Keith D. Griffin (SBN 204388)                  Niddrie, Fish & Buchanan, LLP
Girardi & Keese                                750 B Street, Suite 2640
1126 Wilshire Boulevard                        San Diego, CA 92101
Los Angeles, CA 90017                          Telephone: (619) 238-2426
Telephone: (213) 977-0211                      Facsimile: (619) 238-6036
Fascimile: (213) 481-1554


            Attorneys for Plaintiffs and Appellants Daniela Pires Olauson,
            Tiffany Olauson, a minor by and through her guardian ad litem
                     Daniela Pires Olauson, and Susan Champion
                                  TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

         A.   History of TR Builder Corporation . . . . . . . . . . . . . . . . . . . . . . 1
         B.   Ownership and Operation of the Cessna T210 . . . . . . . . . . . . . . 3
         C.   Piloting Services of Daniel Neuman . . . . . . . . . . . . . . . . . . . . . 3
         D.   The Plane Crash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         E.   The Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

STATEMENT OF APPEALABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

         I. THERE ARE TRIABLE ISSUES OF MATERIAL FACT
         AS TO JAMES BALDWIN’S ALTER EGO LIABILITY
         AND HE IS NOT ENTITLED TO JUDGMENT AS A
         MATTER OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

                   A. Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

                   B. The Trial Court Erred by Granting Summary
                   Judgment for James Baldwin on Alter Ego Liability . . . . . . 8

         II. THERE ARE ALSO TRIABLE ISSUES OF FACT
         REGARDING TR BUILDER’S LIABILITY FOR THE
         CRASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

                   A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

                   B. TR Builder May Be Held Liable Under Public
                   Utilities Code Section 21404 . . . . . . . . . . . . . . . . . . . . . . . . 13

                   C. TR Builder May Be Held Liable Under the
                   Doctrine of Respondeat Superior . . . . . . . . . . . . . . . . . . . . 13

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16



                                                     i
CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18




                                            ii
                                TABLE OF AUTHORITIES

          CASES

Alexander v. Abbey of the Chimes (1980) 104 Cal.App.3d 39 . . . . . . . 9, 11

Associated Vendors, Inc. v. Oakland Meat Co. (1962)
210 Cal.App.3d 825 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Brunzell Const. Co., Inc. of Nevada v. Harrah’s Club (1964) 225
Cal.App.2d 734 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Claremont Press Publishing Co. v. Barksdale (1960)
187 Cal.App.2d 813 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Cummins v. Sky Cruisers, Inc. (1976) 59 Cal.App.3d 983 . . . . . . . . . . . 13

Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144 . . . . . . . . . . . . . . . 8

Empire Star Mines Co v. California Employment Commission (1946)
28 Cal.2d 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Fraizer v. Velkura (2001) 91 Cal.App.4th 942 . . . . . . . . . . . . . . . . . . . . . 7

Hamilton Murray v. Industrian Accident Commission (1932)
216 Cal. 340 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Hiehle v. Torrance Millworks, Inc. (1954) 126 Cal.App.2d 624 . . . . . . . 11

Jack Farenbaugh & Son v. Belmont Construction, Inc. (1987)
194 Cal.App.3d 1023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Justus v. Atchison (1977) 19 Cal.3d 564 . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290 . . . . . . . . . . 8, 12

Miller v. Department of Corrections (2005) 36 Cal.4th 446 . . . . . . . . . . . 7

Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999)
69 Cal.App.4th 223 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Ochoa v. Superior Court (1985) 39 Cal.3d 159 . . . . . . . . . . . . . . . . . . . . . 7


                                                      iii
PAN Pacific Sash & Door Co. v. Glendale Park, Inc. (1958)
166 Cal.App.2d 652 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

People v. Sims (1982) 32 Cal.3d 468 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Perez v. Van Groningen & Sons, Inc. (1986) 41 Cal.3d 962 . . . . . . . . . . 13

RLH Industries, Inc. v. SBC Communications, Inc. (2005)
133 Cal.App.4th 1277 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989)
48 Cal.3d 341 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Sonora Diamond Corp. v. Superior Court (2000)
83 Cal.App.4th 523 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Sugimoto v. Exportadora De Sal (9th Cir. 1994) 19 F.3d 1309 . . . . . . . . 12

Virtualmagic Asia, Inc. v. Fil-Cartoons, Inc. (2002)
99 Cal.App.4th 228 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Wilson v. Stearns (1954) 123 Cal.App.2d 472 . . . . . . . . . . . . . . . . . . . . . 11


         STATUTES

Code of Civil Procedure section 437c . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Code of Civil Procedure section 904.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Public Utilities Code section 21404 . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13




                                                    iv
                             INTRODUCTION

       This case arises from an airplane crash into the Pacific Ocean.
Plaintiffs and appellants are the survivors of two passengers who perished
in the crash. Their appeal is from a summary judgment ruling and final
judgment in favor of one of the defendants, James Baldwin. For purposes
of the summary judgment motion, Baldwin did not dispute that the crash
was caused by pilot negligence. The determinative issue on appeal is
whether Baldwin may be held liable as the alter ego of TR Builder
Corporation (“TR Builder”), the owner and operator of the airplane.

       The trial court erred in ruling as a matter of law that Baldwin was
not the alter ego of TR Builder. Baldwin was the sole shareholder and
president of TR Builder. According to Baldwin’s own testimony, the sole
function of TR Builder at the time of the crash was to provide an airplane
and pilot for an off-road racing entity operated by the Baldwin family at a
loss “primarily for recreation.” (2 AA 357.) Based on the evidence
presented below, there are triable issues of material fact whether Baldwin
was using TR Builder as a mere conduit to support his family’s recreational
activities. In these circumstances, it would be inequitable to allow Baldwin
to use the corporate structure as a means to escape personal liability.
Accordingly, the judgment in favor of Baldwin should be reversed.

                        STATEMENT OF FACTS

       A. History of TR Builder Corporation

       On December 22, 1986, TR Builder Corporation (“TR Builder”)
was incorporated in California. (1 AA 92.) James Baldwin and his
brother, Alfred Baldwin, each contributed half of a condominium with an
agreed value of $232,000 as a capital asset of TR Builder. On March 26,

                                      1
1987, the corporation issued 500 shares of stock to James Baldwin and 500
shares to Alfred Baldwin. (1 AA 87.)

      From 1986 to 2004, James and Alfred Baldwin were the only
shareholders of TR Builder, the only members of its Board of Directors,
and the highest-ranking officers of the corporation. (1 AA 111-201.) As
of May 2004, James and Alfred Baldwin each still held 50 percent of the
corporation’s stock. (1 AA 111.) Sometime in 2005, prior to the plane
crash, James Baldwin became the sole shareholder and owner of 100
percent of the stock. (1 AA 72, 90, 108; 2 AA 409.) However, there is no
documentation in the board minutes or other corporate records of any sale
or transfer of Alfred Baldwin’s 50 percent share to James Baldwin. (1 AA
92-111.)

      TR Builder’s original purpose was to borrow against the
condominium and invest in real estate development projects with other
Baldwin companies. (1 AA 87.) By the time of the plane crash on
November 19, 2005, however, TR Builder’s sole business function was
owning a Cessna T210 airplane and providing air transportation for
Baldwin Racing LLC, a limited liability corporation owned by James
Baldwin, his two sons, and his son-in-law “primarily for recreation” in off-
road truck racing. (2 AA 356-357, 409.) Baldwin Racing’s expenses far
exceeded its income. It was funded by contributions from James Baldwin
and his family. (2 AA 359-360.)

      After the crash, TR Builder ceased conducting any business. (2 AA
410.) According to James Baldwin, TR Builder “doesn’t do anything” any
longer. TR Builder apparently had no remaining assets after the airplane
crashed into the ocean. (2 AA 356-357.) The board minutes do not reflect
what happened to the condominium. (1 AA 108-147.)

                                     2
        B. Ownership and Operation of the Cessna T210

        In 1986, James Baldwin and R. Daniel Olmstead jointly purchased
the Cessna T210. (1 AA 73, 76.) In 1987, James Baldwin acquired R.
Daniel Olmstead’s interest in the Cessna T210. (1 AA 73, 78.)

        On July 21, 1993, James and Alfred Baldwin purportedly
contributed their interests in four aircraft including the Cessna T210 to TR
Builder. There was no consideration paid for these aircraft. (1 AA 73, 88,
147.)

        On exactly the same date, notwithstanding the purported donation of
the Cessna T210 to TR Builder, James Baldwin transferred ownership of
the Cessna T210 to Village Properties, a Baldwin partnership consisting of
himself, Alfred Baldwin, and a third partner. (1 AA 73.) The Bill of Sale
reflects that there was no consideration paid for the transfer. (1 AA 80.)

        In July 1995, Village Properties transferred ownership of the Cessna
T210 to TR Builder. (1 AA 73.) The Bill of Sale reflects that there was no
consideration paid for the transfer. (1 AA 82.)

        TR Builder owned, maintained, and equipped the Cessna T210. (2
AA 412.) As of November 2005, TR Builder did not own any aircraft
besides the Cessna T210. (2 AA 357.) The corporate records do not
reflect what happened to the other three aircraft that were purportedly
donated to TR Builder on July 21, 1993. (1 AA 92-147.)

        C. Piloting Services of Daniel Neuman

        From 1998 through 2005, TR Builder retained the services of Daniel
Neuman to pilot the Cessna T210. (1 AA 89; 2 AA 254-261, 411.)
Neuman was the only pilot paid by TR Builder between January 2003 and

                                      3
the date of the crash. (2 AA 365-366, 411.) Neuman’s duties included
monitoring and contracting for aircraft maintenance, approving
maintenance bills for payment by TR Builders, and providing piloting
services for the Cessna T210. (1 AA 88-89; 2 AA 411.) TR Builder paid
Neuman at an agreed rate per full or half day of piloting services, and it
reimbursed him for travel expenses, including fuel, landing fees, parking,
food, and lodging. (1 AA 89; 2 AA 304, 371, 412.) The corporation also
paid Neuman overtime compensation on three occasions in 2005. (2 AA
412.) Neuman was required to remain on call and available to fly the
airplane, and he was compensated for remaining on “standby” for TR
Builder on multiple occasions. (2 AA 372, 377-385, 412-413.)

       Neuman flew the Cessna T210 primarily for Baldwin Racing events.
The airplane was used as “an antenna in the sky” during the races. Neuman
also flew the plane for Baldwin family pleasure trips. Neuman did almost
all of his flying for TR Builder. (2 AA 294-295, 311, 361-362, 372.)
There is no evidence that TR Builder ever charged Baldwin Racing or the
Baldwin family for the use of the airplane or the piloting services.

       One of the Baldwin entities was solely responsible for hiring
employees and doing payroll for all the other Baldwin entities, including
TR Builder. (2 AA 365.)

       D. The Plane Crash

       In November 2005, TR Builder arranged to provide air
transportation for Richard Olauson and Jeffrey TenEyck to attend the Baja
1000, a Baldwin Racing event in Mexico. (2 AA 414.) Olauson and
TenEyck were friends of James Baldwin’s son Jason. (2 AA 367.) Jason
was a well-known off-road racer who was competing in the Baja 1000 race.


                                      4
(1 AA 13.) During the race, Olauson helped track lap times and TenEyck
observed the race from the Cessna T210 while maintaining radio
communication with the drivers and crew. (2 AA 367, 414.) Baldwin
Racing paid for a huge block of rooms for the entire crew in Mexico,
including Baldwin Racing employees and friends. (2 AA 369-370, 415.)
There were usually about fifteen “groupies” and “sometimes dozens of
friends that come down to watch the race.” (2 AA 370.)

       On November 19, 2005, Neuman was flying the Cessna T210 back
from the Baja 1000 on behalf of TR Builder when the plane crashed into
the Pacific Ocean. Olauson, TenEyck, Neuman, and Jason Baldwin
perished in the crash. (2 AA 415.)

       E. The Insurance Policy

       At the time of the accident, TR Builder had a “USAIG All-Clear
Aircraft Policy” covering the Cessna T210. TR Builder submitted only two
Coverage Summary pages of the insurance policy to the trial court. (2 AA
263-264.) According to the Coverage Summary, TR Builder’s covered
business was “Real Estate Development.” (2 AA 263.) The summary also
stated that the aggregate coverage limit was $2 million per occurrence. (2
AA 264.)

                      STATEMENT OF THE CASE

       In November 2006, Olauson’s wife and daughter, Daniela Pires
Olauson and Tiffany Olauson, and TenEyck’s mother, Susan Champion,
filed suit alleging wrongful death and survival claims against TR Builder,
James Baldwin, and other defendants. The complaint alleged that the crash
occurred as a result of pilot negligence and negligent failure to maintain,
service, and repair the aircraft. It also alleged that James Baldwin was an

                                      5
alter ego of TR Builder, and that the crash occurred while Neuman was
acting within the course and scope of his employment as a pilot for TR
Builder and James Baldwin. (1 AA 1-26.)

       James Baldwin filed a motion for summary judgment. For purposes
of the motion, Baldwin did not contest that Neuman was negligent in
piloting the airplane. (1 AA 47, fn. 3.) However, Baldwin argued that he
could not be held liable because he did not own or operate the aircraft, he
did not employ Neuman, TR Builder was not his alter ego, and Neuman
was an independent contractor of TR Builder. (1 AA 36-62.)

       In opposition, plaintiffs argued that there were triable issues of fact
whether Baldwin was the alter ego of TR Builder. Plaintiffs also argued
that there were triable issues of fact as to TR Builder’s liability for the
pilot’s negligence as the owner of the airplane and the employer of the
pilot. (2 AA 320-336.)

       The trial court granted Baldwin’s motion for summary judgment. It
found that Baldwin was not the alter ego of TR Builder as a matter of law,
because there was no unity of interest or ownership between them, and no
evidence that an inequitable result would follow if Baldwin were not held
liable. Accordingly, the court did not address any of the theories of liability
asserted against TR Builders. (2 AA 426-439.) The court entered a final
judgment in Baldwin’s favor on January 7, 2009. (2 AA 441-442.)
Appellants filed a timely notice of appeal. (2 AA 452.)

       As of the filing of this brief, the case is still pending in the trial court
as to the other defendants, including TR Builder.

///



                                        6
                  STATEMENT OF APPEALABILITY

       This appeal is from a final judgment in favor of one of the
defendants, James Baldwin. The judgment is appealable pursuant to Code
of Civil Procedure section 904.1(a)(1). An appeal may be taken when the
case involves multiple parties and a judgment is entered which leaves no
issue to be determined as to one party. (Justus v. Atchison (1977) 19
Cal.3d 564, 568, overruled on other grounds in Ochoa v. Superior Court
(1985) 39 Cal.3d 159, 171.)

                               ARGUMENT

                                      I.

       THERE ARE TRIABLE ISSUES OF MATERIAL FACT
       AS TO JAMES BALDWIN’S ALTER EGO LIABILITY
       AND HE IS NOT ENTITLED TO JUDGMENT AS A
       MATTER OF LAW

       A. Standard of Review

       “On appeal from the granting of a motion for summary judgment, we
examine the record de novo, liberally construing the evidence in support of
the party opposing summary judgment and resolving doubts concerning the
evidence in favor of that party.” (Miller v. Department of Corrections
(2005) 36 Cal.4th 446, 460.) Only uncontradicted facts may be accepted as
true, and all reasonable inferences must be drawn against the moving party.
(Fraizer v. Velkura (2001) 91 Cal.App.4th 942, 945.)
       Summary judgment on alter ego liability must be denied if the
defendant has failed to establish the absence of triable issues of material
fact or if he is not entitled to judgment as a matter of law. (Code Civ.
Proc., § 437c, subd. (c); RLH Industries, Inc. v. SBC Communications, Inc.
(2005) 133 Cal.App.4th 1277, 1287-1288.) If the material facts are in


                                      7
dispute, summary judgment is an “improper vehicle” for determining alter
ego liability. (Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 148.)
       B. The Trial Court Erred by Granting Summary
       Judgment for James Baldwin on Alter Ego Liability
       The trial court ruled that James Baldwin was not the alter ego of TR
Builder as a matter of law. It found insufficient evidence of a unity of
interest or ownership, and no evidence that an inequitable result would
result if James Baldwin were not held liable. This ruling was erroneous.
Viewing the record in the light most favorable to the plaintiffs, there are
triable issues of material fact on the alter ego theory of liability against
James Baldwin and he is not entitled to judgment as a matter of law.

       “The alter ego doctrine arises when a plaintiff comes into court
claiming that an opposing party is using the corporate form unjustly and in
derogation of the plaintiff’s interests.” (Mesler v. Bragg Management Co.
(1985) 39 Cal.3d 290, 300.) “In California, two conditions must be met
before the alter ego doctrine will be invoked. First, there must be such a
unity of interest and ownership between the corporation and its equitable
owner that the separate personalities of the corporation and the shareholder
do not in reality exist. Second, there must be an inequitable result if the
acts in question are treated as those of the corporation alone.” (Sonora
Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.)
       Courts consider a host of factors in determining unity of interest and
ownership. Some of the relevant factors include: (1) commingling of funds
and other assets and/or unauthorized diversion of corporate funds or assets
to non-corporate uses; (2) the treatment by an individual of the assets of the
corporation as his own; (3) sole ownership of all of the stock in a
corporation by one individual or the members of a family; (4) failure to
adequately capitalize a corporation or absence of corporate assets; (5) use


                                        8
of a corporation as a mere shell, instrumentality, or conduit for the business
of an individual or another corporation; (6) concealment of personal
business activities; (7) disregard of legal formalities and failure to maintain
arm’s length relationships among related entities; (8) use of the corporate
entity to procure services for another person or entity; and (9) the use of a
corporation to transfer to it the existing liability of another person or entity.
(Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69
Cal.App.4th 223, 249-250, citing Associated Vendors, Inc. v. Oakland
Meat Co. (1962) 210 Cal.App.3d 825, 838-840.)
        “[T]he determination of whether a corporation is an alter ego of an
individual is ordinarily a question of fact.” (Alexander v. Abbey of the
Chimes (1980) 104 Cal.App.3d 39, 46.) “No single factor is determinative,
and instead a court must examine all the circumstances to determine
whether to apply the doctrine.” (Virtualmagic Asia, Inc. v. Fil-Cartoons,
Inc. (2002) 99 Cal.App.4th 228, 245.)
        Applying the relevant factors, there are triable issues of material fact
as to James Baldwin’s alter ego liability. By the time of the accident in
November 2005, James Baldwin was the sole shareholder and president of
TR Builder. (1 AA 72.) TR Builder’s only remaining business activity
was to provide air transportation for the Baldwin family’s recreational off-
road racing company, Baldwin Racing. (2 AA 356-357, 409.) Baldwin
Racing’s expenses far exceeded its income, and it was funded primarily by
contributions from James Baldwin. (2 AA 359-360.) Thus, TR Builder’s
sole corporate function was to provide a free airplane and free pilot for use
by James Baldwin and his family in a recreational activity that operated at a
loss.
        “Under our law where one person owns all of the stock of a
corporation and uses the corporation as a mere conduit for the transaction


                                        9
of his own business, the corporation is regarded as his ‘alter ego.’”
(Brunzell Const. Co., Inc. of Nevada v. Harrah’s Club (1964) 225
Cal.App.2d 734, 744.) As described above, James Baldwin owned all of
the stock of TR Builder and used the corporation as a mere conduit for his
family’s recreational off-road racing. Thus, there was a complete unity of
interest and ownership between James Baldwin and TR Builder.
       Other factors also support a finding of unity of interest. James
Baldwin donated the Cessna T210 to TR Builder without payment of any
consideration. (1 AA 73, 82, 88, 147.) After donating the airplane, James
Baldwin continued to treat it as his own by using it almost exclusively for
his own family’s off-road racing and pleasure trips. (2 AA 311, 356-361.)
He also used TR Builder as a means to procure Neuman’s piloting services
for his recreational off-road racing company. (2 AA 362-363, 371-372.)
There is no evidence that the Baldwin family or Baldwin Racing ever paid
TR Builder for the use of the airplane or Neuman’s piloting services. TR
Builder had no assets other than the Cessna T210 and it ceased doing
business after the accident. (2 AA 356-357, 410.) Further, TR Builder and
Baldwin Racing apparently had no legitimate business purpose other than
to shield the Baldwins from personal liability in their recreational activities.
       In these circumstances, it would be inequitable to treat the acts in
question as those of TR Builder alone. “Since the separate personality of a
corporation is but a statutory privilege it must not be employed as a cloak
for evasion of obligations.” (PAN Pacific Sash & Door Co. v. Glendale
Park, Inc. (1958) 166 Cal.App.2d 652, 659.) If TR Builder were to be
recognized as a separate personality, it would allow James Baldwin to use
the corporate structure as a means of evading liability for his family’s own
recreational activities. California cases applying the alter ego doctrine have
recognized that it is inequitable to allow a corporation to be used as a


                                      10
vehicle to evade personal liability. (See, e.g., Claremont Press Publishing
Co. v. Barksdale (1960) 187 Cal.App.2d 813, 817; Hiehle v. Torrance
Millworks, Inc. (1954) 126 Cal.App.2d 624, 628-629; Wilson v. Stearns
(1954) 123 Cal.App.2d 472, 486.)
       It would also be inequitable not to apply the alter ego doctrine
because TR Builder had no assets other than the Cessna T210 and is now a
“hollow shell” without means to satisfy any judgment. California courts
recognize that this is also a valid basis for applying the alter ego doctrine.
(See, e.g., Jack Farenbaugh & Son v. Belmont Construction, Inc. (1987)
194 Cal.App.3d 1023, 1034; Alexander v. Abbey of the Chimes (1980) 104
Cal.App.3d 39, 47.)
       In the trial court, James Baldwin argued that no inequity would
result because TR Builder had a $2 million insurance policy on the Cessna
T210. However, the defense failed to establish that the policy would
provide any coverage for this accident. The defense submitted only two
Coverage Summary pages of the policy. These pages identified TR
Builder’s business as “Real Estate Development.” (1 AA 263-264.)
Nothing in the record establishes that the policy would cover a crash that
occurred while the airplane was being used for a Baldwin family
“recreational” business in off-road racing. Nor does the record indicate
what other limitations of coverage or exclusions might apply.
       For all these reasons, there is substantial evidence in the record to
support a finding of alter ego liability. It is a question of fact whether
James Baldwin used TR Builder as a mere conduit to support his family’s
recreational activities.
///
///
///


                                       11
                                     II.

       THERE ARE ALSO TRIABLE ISSUES OF FACT
       REGARDING TR BUILDER’S LIABILITY FOR THE
       CRASH

       A. Introduction

       Under the alter ego doctrine, an individual shareholder may be held
personally liable for the obligations of the corporation. (Mesler v. Bragg
Management Co. (1985) 39 Cal.3d 290, 300.) If the alter ego doctrine
applies, it follows that James Baldwin may be held personally liable for any
judgment rendered against TR Builder in this action.
       In the trial court, the parties briefed whether TR Builder could be
held liable for the crash. Appellants argued that TR Builder could be held
vicariously liable for the pilot’s negligence under Public Utilities Code
section 21404 or under the doctrine of respondeat superior.1 The trial court
did not decide these issues in ruling on James Baldwin’s summary
judgment motion, because it found that James Baldwin was not the alter
ego of TR Builder as a matter of law.
       Appellants submit that this Court need not necessarily decide these
issues either. TR Builder is a named defendant in this action and has not
been dismissed from the case below. If liability is imposed against TR
Builder on any theory, the alter ego doctrine would allow the jury to pierce
the corporate veil and impose individual liability against James Baldwin as
well. Out of an abundance of caution, however, appellants will brief the
two main theories of liability against TR Builder.

///

       1
        Appellants also argued that TR Builder could be held liable under
the holding of Sugimoto v. Exportadora De Sal (9th Cir. 1994) 19 F.3d
1309, 1311-1312.

                                     12
       B. TR Builder May Be Held Liable Under Public Utilities
       Code Section 21404
       Public Utilities Code section 21404 provides: “Liability of the
owner or pilot of an aircraft carrying passengers for injury or death to the
passengers is determined by the rules of law applicable to torts on the land
or waters of this state, arising out of similar relationships. Every owner of
an aircraft is liable and responsible for death or injury to person or property
resulting from a negligent or wrongful act or omission in the operation of
the aircraft, in the business of the owner or otherwise, by any person using
or operating the same with the permission, express or implied, of the
owner.”

       This statute “manifests a legislative intent to impose vicarious
liability for permissive use on the owner of an aircraft to the same extent
that such liability is imposed on owners of automobiles or watercraft.”
(Cummins v. Sky Cruisers, Inc. (1976) 59 Cal.App.3d 983, 985.) In the
trial court, James Baldwin did not dispute that TR Builders was the owner
of the Cessna T210 within the meaning of Public Utilities Code section
21404. Accordingly, TR Builders may be held vicariously liable for
Neuman’s negligence as a permissive user of the aircraft under section
21404.
       C. TR Builder May Be Held Liable Under the Doctrine
       of Respondeat Superior

       “Under the doctrine of respondeat superior, an employer is
vicariously liable for his employee’s torts committed within the scope of
employment.” (Perez v. Van Groningen & Sons, Inc. (1986) 41 Cal.3d 962,
967.) In the trial court, James Baldwin argued that this theory of vicarious
liability did not apply because Neuman was an independent contractor of
TR Builder, not an employee. However, there are triable issues of fact on


                                      13
this issue.
       “In determining whether one who performs services for another is
an employee or an independent contractor, the most important factor is the
right to control the manner and means of accomplishing the result desired.
If the employer has the authority to exercise complete control, whether or
not that right is exercised with respect to all details, an employer-employee
relationship exists.” (Empire Star Mines Co v. California Employment
Commission (1946) 28 Cal.2d 33, 43, overruled on another ground in
People v. Sims (1982) 32 Cal.3d 468, 479-480, fn. 8.)
       “Other factors to be taken into consideration are (a) whether or not
the one performing services is engaged in a distinct occupation or business;
(b) the kind of occupation, with reference to whether, in the locality, the
work is usually done under the direction of the principal or by a specialist
without supervision; (c) the skill required in the particular occupation; (d)
whether the principal or the workman supplies the instrumentalities, tools
and the place of work for the person doing the work; (e) the length of time
for which the services are to be performed; (f) the method of payment,
whether by the time or by the job; (g) whether or not the work is a part of
the regular business of the principal; and (h) whether or not the parties
believe they are creating the relationship of employer-employee.” (Empire
Star Mines Co., supra, 28 Cal.2d at pp. 43-44.)
       Applying these factors, it is a triable issue of fact whether Neuman
was an employee of TR Builder. TR Builder had the right to control the
manner and means by which Neuman accomplished his work. TR Builder
owned the airplane and had complete control over its use. (1 AA 88-89; 2
AA 412.) TR Builder and the Baldwins dictated when and where Neuman
flew the airplane, which passengers he transported, and when he returned.
(1 AA 88-89; 2 AA 293-295, 357-375.) TR Builder also dictated


                                      14
Neuman’s use of the airplane as an “antenna in the sky” during off-road
races. (2 AA 362, 372.) Based on TR Builder’s right of control alone,
there is sufficient evidence to establish an employment relationship.
(Hamilton Murray v. Industrian Accident Commission (1932) 216 Cal.
340, 345-348 [sufficient evidence of employment relationship where
purchaser of airplane hired pilot to fly it from a plant in Missouri to his
home in California for actual expenses of $5 per day].)
       Other relevant factors also support the existence of an employment
relationship. Neumann was paid by the amount of time he devoted to TR
Builder, not by the job, and he was reimbursed for expenses. (1 AA 89; 2
AA 304, 371, 412.) TR Builder supplied the airplane and liability
insurance. (1 AA 88-89, 263-264; 2 AA 412.) Neuman had worked as a
pilot for TR Builder continuously for seven years, and TR Builder had
retained him for an indefinite period of time, not for a limited scope or
duration. (1 AA 89, 254-261; 2 AA 411.) Neumann billed TR Builder for
piloting services on 79 days between January 31 and November 19, 2005.
(2 AA 379-385.) He was “on call” for TR Builder and was compensated to
remain on “standby” on multiple occasions. (2 AA 372, 377-385, 412-
413.) On three different dates in 2005, Neuman was paid overtime for his
piloting services. (2 AA 379-385, 412.) Moreover, Neuman’s ongoing
services as a pilot were essential to TR Builder’s sole function – to provide
air transportation to Baldwin Racing and the Baldwins. (2 AA 356-357.)
       Taken in its totality, this evidence is more than sufficient to create a
triable issue of fact whether Neuman was an employee or an independent
contractor of TR Builder. “The determination of employee or independent-
contractor status is one of fact if dependent upon the resolution of disputed
evidence or inferences ....” (S.G. Borello & Sons, Inc. v. Department of
Industrial Relations (1989) 48 Cal.3d 341, 349.)


                                      15
                               CONCLUSION
       The trial court erred in ruling that James Baldwin was not the alter
ego of TR Builder as a matter of law. There are triable issues of material
fact on the alter ego theory of liability. If TR Builder is held liable for the
pilot’s negligence, the alter ego doctrine would allow the jury to pierce the
corporate veil and impose individual liability against James Baldwin as
well. Accordingly, the summary judgment order and judgment in favor of
James Baldwin should be reversed.
Dated: May     , 2009               NIDDRIE, FISH & BUCHANAN LLP




                                    By: ______________________________
                                          Martin N. Buchanan
                                          Attorney for Appellants




                                       16
                  CERTIFICATE OF COMPLIANCE
      Pursuant to rule 8.204(c) of the California Rules of Court, I certify
that the foregoing Appellants’ Opening Brief was produced on a computer
in 13-point type. The word count, including footnotes, as calculated by the
word processing program used to generate the brief is 4,396 words,
exclusive of the matters that may be omitted under subdivision (c)(3).


Dated: May     , 2009             NIDDRIE, FISH & BUCHANAN, LLP


                                  By: ______________________________
                                        Martin N. Buchanan
                                        Attorney for Appellants




                                     17
                      CERTIFICATE OF SERVICE
       I, Martin N. Buchanan, am employed in the County of San Diego,
California. I am over the age of 18 years and not a party to the within
action. My business address is 750 B Street, Suite 2640, San Diego,
California 92101. On May ___, 2009, I served the APPELLANTS’
OPENING BRIEF by mailing a copy by first class mail to the following
addresses:


Peter P. Brotzen
Gregory L. Anderson
Dwyer, Daly, Brotzen & Bruno LLP
550 South Hope Street, Suite 1900
Los Angeles, CA 90071-2632
       (Attorneys for Respondent James Baldwin)

Clerk of Court
California Supreme Court
350 McAllister Street
San Francisco, CA 94012
       (4 copies)

Hon. Charles Margines
Orange County Superior Court
700 Civic Center Drive West
Santa Ana, CA 92701

       I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct. Executed on May         ,
2009, at San Diego, California.



                                          __________________________
                                                Martin N. Buchanan




                                     18

				
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