Picture of John Day

§37.2 Parent Inducing Wholly-Owned Subsidiary

§37.2 Parent Inducing Wholly-Owned Subsidiary

The Case: Waste Conversion Systems v. Greenstone Industries , Inc., 33 S.W.3d 779 (Tenn. 2000).

The Basic Facts: Plaintiff, the seller of waste paper, brought a federal claim against a buyer's parent corporation asserting the parent corporation willfully and maliciously induced the subsidiary to breach a contract between Plaintiff and the subsidiary.

The Bottom Line:

  • "(1) Can a parent corporation be held liable under Tenn. Code Ann. § 47‑50‑109 or under Tennessee law for inducing a subsidiary to breach a contract with another party?

    (2) Can a parent corporation be held liable for inducing its subsidiary to breach a contract when the parent was acting on behalf of the subsidiary or acting to further the subsidiary's interests? If so, which party bears the burden of pleading and proving whether the parent was acting on behalf of, or to further the interests of, the subsidiary?

    (3) For a parent corporation to be held liable for inducing its subsidiary to breach a contract, must the parent induce the breach by wrongful means? If so, what constitutes wrongful means, and which party has the burden of pleading and proving existence of wrongful means?" 33 S.W.3d at 781.
  • "Based on the certified questions posed to this Court, we hold that a parent corporation is privileged to interfere in the contractual relations of a wholly-owned subsidiary and that it is immune from liability for inducing to breach a contract with another party. This privilege, however, can be lost either by acting contrary to such subsidiary's economic interests or by using wrongful means. For this purpose, the definition of wrongful means includes fraud, misrepresentation, threats, violence, defamation, trespass, restraint of trade, intimidation, molestation, or any other wrongful act recognized by statute or common law. Once it is established that the defendant corporation owns 100 percent of the stock of the subsidiary in question, the plaintiff bears the burden of proof to demonstrate that the defendant has lost its privilege by acting contrary to its wholly-owned subsidiary's economic interests or by employing wrongful means in inducing its wholly-owned subsidiary to breach a contract." Id.at 784.

Other Sources of Note: Freeman Management Corp. v. Shurgard Storage Centers, LLC , 461 F.Supp.2d 629, 638 (M.D. Tenn. 2006) (holding that a parent company did not demonstrate a sufficient unity of interest under Waste Conversion to warrant the parent-subsidiary privilege); Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785, 792 (Tenn. 2006) (declining to extend Waste Conversion and holding that "the privilege of a parent corporation to interfere with the contractual relations of a subsidiary corporation does not apply when the parent owns less than 100% of its subsidiary.").

After an accident, many injury victims and their families want more information on the accident and their legal rights. Consequently, many of them have found their way to these pages. While we are happy you are here, please understand Day on Torts: Leading Cases in Tennessee Tort Law was written to be a quick, invaluable reference for Tennessee tort lawyers. While the book provides the leading case for more than 300 tort law subjects and thousands of related case citations, it is not a substitute for personalized legal advice from a qualified lawyer.

Rather than researching these legal issues alone, we urge you to contact one of our award-winning lawyers who can sit down with you, review your case, answer your questions and clearly explain your rights and your options in a no-cost, no-obligation consultation. Our experienced attorneys handle all personal injury and wrongful death cases on a contingency basis, so we only get paid if we win. If for any reason you are unable to come to our office, we will gladly come to you.

To schedule an appointment, contact us online or call us at 615-742-4880 or toll-free at 866.812.8787.



The foregoing is an excerpt from Day on Torts: Leading Cases in Tennessee Tort Law, published by John A. Day, Civil Trial Specialist, Fellow in the American College of Trial Lawyers, recipient of Best Lawyers in America recognition, Martindale-Hubbell AV® Preeminent™ rated attorney, and Top 100 Tennessee Mid-South Super Lawyers designee. Read John’s full bio here.

To order a copy of the book, visit www.dayontortsbook.com. John also blogs regularly on key issues for tort lawyers. To subscribe to the Day on Torts blog, visit www.dayontorts.com.

Client Reviews
★★★★★
Everything was great. You guys are a great representative. I was satisfied with everything. Truly appreciate John Day and his hard-working staff. Jamar Gibson
★★★★★
We thought that you did an excellent job in representing us in our lawsuit. We would recommend you to anyone. Mitch Deese
★★★★★
The Law Offices of John Day is, without a doubt, the best in Nashville! They treated me with the utmost respect and tended to my every need. No question went unanswered. I was always kept informed of every step in the process. I received phenomenal results; I couldn't ask for more. I would definitely hire the Law Offices of John Day again. Anthony Santiago
★★★★★
I would definitely recommend to anyone to hire John Day's law firm because everyone was helpful, made everything clear and got the job done. I am satisfied with how my case was handled. June Keomahavong
★★★★★
It's been a long battle but this firm has been very efficient and has done a remarkable job for me! I highly recommend them to anyone needing legal assistance. Everyone has always been very kind and kept me informed of all actions promptly. Linda Bush
★★★★★
I had a great experience with the Law Offices of John Day. The staff was very accommodating, and my phone calls/emails were always responded to in a timely manner. They made the entire process very easy and stress-free for me, and I had confidence that my case was in good hands. I am very happy with the results, and I highly recommend! Casey Hutchinson