U.S. Court of Appeals for the Ninth Circuit, Pacific Gulf Shipping Co. v. Vigorous Shipping & Trading S.A., Docket No. 20-35159, for Publication

 

Admiralty

 

Maritime Law

 

Successor-Liability

Corporate Successorship

 

Alter-Ego Liability

To Pierce the Corporate Veil

 

 

The panel unanimously concludes that this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

 

The panel affirmed the district court’s partial dismissal and partial summary judgment in favor of the defendants in an admiralty action alleging successor and alter-ego liability.

 

Pacific Gulf Shipping Co., in possession of an arbitral award against Adamastos Shipping, sought to collect from Vigorous Shipping & Trading S.A. and Blue Wall Shipping Ltd. on the grounds that they were either successors or alter-egos of Adamastos. The district court dismissed the successor-liability claim and granted summary judgment to Vigorous and Blue Wall on the alter-ego claim.

 

The panel held that Pacific Gulf had Article III standing because, even if Adamastos ultimately owed Pacific Gulf no damages, Pacific Gulf at least suffered a concrete, particularized injury in arbitration costs.

 

The panel affirmed the district court’s dismissal for failure to state a claim of Pacific Gulf’s claim based on successor liability. Applying federal common law, and joining other circuits, the panel held that maritime law requires a transfer of all or substantially all of the predecessor’s assets to the alleged successor before successor liability will be imposed on that alleged successor.

 

Affirming the district court’s summary judgment in favor of the defendants on the alter-ego claim, the panel held that to pierce the corporate veil, a party must show that (1) the controlling corporate entity exercises total dominion of the subservient corporation, to the extent that the subservient corporation manifests no separate corporate interests of its own; (2) injustice will result from recognizing the subservient entity as a separate entity; and (3) the controlling entity had a fraudulent intent or an intent to circumvent statutory or contractual obligations. Indicia used to determine whether to pierce the corporate veil include (1) disregarding corporate formalities such as, for example, in issuing stock, electing directors, or keeping corporate records; (2) capitalization that is inadequate to ensure that the business can meet its obligations; (3) putting funds into or taking them out of the corporation for personal, not corporate, purposes; (4) overlap in ownership, directors, officers, and personnel; (5) shared office space, address, or contact information; (6) lack of discretion by the allegedly subservient entity; (7) dealings not at arms-length between the related entities; (8) the holding out by one entity that it is responsible for the debts of another entity; and (9) the use of one entity’s property by another entity as its own.

(…) This list is, of course, nonexhaustive.

 

But the mere presence of some of these indicia is not dispositive, nor is it necessarily enough to survive summary judgment. For example, we held in Chan that, without more, a single person’s common ownership of three corporations was insufficient to prove at trial that the corporations were alter-egos. 123 F.3d at 1294. The Fifth Circuit has held that indirect ownership of all of a corporation’s stock, a “number of common officers and directors,” and “substantial control” over an alleged subservient corporation’s “general policy decisions” were insufficient to “establish a prima facie showing of alter ego” because the entities also observed corporate formalities and there was “no more control than appropriate for a wholly-owned subsidiary.” Adm’rs of Tulane Educ. Fund v. Ipsen, S.A., 450 F. App’x 326, 330–31 (5th Cir. 2011). Courts have also found that “superficial indicia of interrelatedness” such as shared office space and phone numbers are “not dispositive of the alter-ego question,” instead looking to a corporation’s “practical operation” as “more instructive.” E.g., Coastal States Trading, Inc. v. Zenith Navigation, S.A., 446 F. Supp. 330, 334 (S.D.N.Y. 1977).

 

(…) As we stated in American Queen, the Ninth Circuit has a conjunctive test: there must be domination and control and injustice from not piercing the veil and some form of ill intent. 708 F.2d at 1489–90; see also Seymour, 605 F.2d at 1109–13 (first articulating the three requirements to pierce the corporate veil in the context of a labor dispute and applying them conjunctively).

 

Viewing the record as a whole, the panel agreed with the district court that there was insufficient evidence to support a finding that either Blue Wall or Vigorous was operated as an alter-ego of Adamastos.

 

(…) Sitting in admiralty, we apply the federal common law in examining corporate identity. Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1294 (9th Cir. 1997).

 

Secondary Sources: David H. Barber, Piercing the Corporate Veil, 17 Willamette L. Rev. 371, 372–75 (1981).

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, March 29, 2021, Pacific Gulf Shipping Co. v. Vigorous Shipping & Trading S.A., Docket No. 20-35159, for Publication)