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Recent Developments in Federal Court Regarding Ascending Liability

A federal appeals court has provided a useful list of factors to consider in determining whether or not a "parent" corporation is legally responsible for the liabilities and obligations of a "subsidiary" or affiliate.

Federal
State:
Key point. Denominational agencies and churches are not automatically responsible for the acts and obligations of "subsidiary" or affiliated organizations. There must be a legal basis for imputing liability to the "parent" organization, and this is a very difficult task.

A federal appeals court has provided a useful list of factors to consider in determining whether or not a "parent" corporation is legally responsible for the liabilities and obligations of a "subsidiary" or affiliate. While this case involved a parent and subsidiary business corporations, the court's conclusion will be directly relevant to churches and denominational agencies that are sued as a result of liabilities of subsidiary or affiliated corporations. Here is the list of 12 factors to be considered:

(1) the parent corporation owns all or a majority of the stock of the subsidiary;

(2) the corporations have common ...

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Posted:
  • January 1, 1998

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