WinCo is a privately owned regional grocery chain based in Idaho with additional stores in Washington, Nevada, California, and Nevada. In 2008, WinCo’s Portland Division maintenance manager, John Weber, began negotiating a floor maintenance contract with Kym Nelson, who was acting as a KD Concrete agent. The parties formed an agreement in January 2010. KD Concrete was to work on three test stores, and if WinCo was satisfied, KD Concrete would do the floor work in other stores on the same terms. Nelson incorporated KDN Management to perform the WinCo contract in February 2010, after the agreement was made. By March 26, 2010, work at the three WinCo test stores was complete. Weber then suggested to Jim Douty, the Boise Division’s maintenance manager, that he should contact Nelson to have KDN do the floor work.
Following Weber’s suggestion, Douty authorized KDN to perform work at certain Boise Division stores under the same terms as the original contract. In November 2011, WinCo refused to pay three invoices citing concerns that KDN had overcharged WinCo. Almost a year later, KDN sued WinCo to recover the outstanding balance on the invoices. WinCo, in turn, filed various counterclaims, alleging KDN had overstated the work performed and that WinCo had actually overpaid KDN.
On February 7, 2014, WinCo filed a motion for summary judgment on its counterclaim. KDN chose not to oppose the motion; it claimed that it had no financial resources or assets to defend against WinCo’s claims. Seeking a wallet to recover from, WinCo filed a new complaint against Nelson, KDN’s sole shareholder, and two of her business entities, SealSource and KD3. The cases were consolidated, and discovery began. Following a bench trial, the court ruled in favor of WinCo, awarding it $2,929,383.31 against the Nelson Parties. The Nelson Parties appealed.
1. What are the legal implications of corporate status?
2. Why were Nelson and her two business entities liable for the KDN corporation?