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George A. Gaïtas Attorney at Law CHALOS & Co, P.C. - Houston Piercing the corporate veil.

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Presentation on theme: "George A. Gaïtas Attorney at Law CHALOS & Co, P.C. - Houston Piercing the corporate veil."— Presentation transcript:

1 George A. Gaïtas Attorney at Law CHALOS & Co, P.C. - Houston Piercing the corporate veil

2 Why? To secure your eventual judgment or arbitration award CHALOS & Co, P.C. - Houston George A. Gaitas

3 When and under what law ? As part of the prejudgment remedy of maritime attachment and garnishment, under Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, before adjudication of the merits of the principal claim.. CHALOS & Co, P.C. - Houston George A. Gaitas

4 Where? In a United States District Court which has jurisdiction over admiralty matters CHALOS & Co, P.C. - Houston George A. Gaitas

5 English biscuit English admiralty court jurisdiction CHALOS & Co, P.C. - Houston George A. Gaitas

6 Texas biscuit U.S. admiralty court jurisdiction CHALOS & Co, P.C. - Houston George A. Gaitas

7 U.S. District Courts have jurisdiction over all admiralty and maritime claims which comprehends all maritime contracts, torts, and injuries. DeLovio v. Boit 7 Fed. Cas. 418, no. 3,776 C.C.D.Mass. (1815) CHALOS & Co, P.C. - Houston George A. Gaitas

8 Conditions for Rule B relief 1) a valid prima facie admiralty claim against the defendant; 2) the defendant cannot be found within the district; 3) the defendant's property may be found within the district; and 4) there is no statutory or maritime law bar to the attachment. Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434 (2nd Cir., 2006) CHALOS & Co, P.C. - Houston George A. Gaitas

9 How ? File suit in admiralty court specifically praying for the related entity corporate separateness to be disregarded. Atlanta Shipping Corp., Inc. v. Chemical Bank 818 F.2d 240, 248 (2d Cir. 1987); Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527,542 (4th Cir., 2013). CHALOS & Co, P.C. - Houston George A. Gaitas

10 In Rule B proceedings a district court can and will pierce the corporate veil "The basis of admiralty's power is to protect its jurisdiction from being thwarted by a fraudulent transfer, and that applies equally whether it is concerned with executing its judgment or authorizing an attachment to secure an independent maritime claim. Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, (1950) CHALOS & Co, P.C. - Houston George A. Gaitas

11 Veil Piercing Grounds Use of the corporate form to commit fraud. Lee v. Thompson, 15 F. Cas F. Cas. 233, 235 (Circuit Court, D. Louisiana 1878); Williamson v. Recovery L.P., 542 F.3d 43, 53(2nd Cir 2008) ); Alter ego relationship (Complete domination of the subsidiary by the parent so that the subsidiary was the agent of the parent; or the two comprised a single business). Lehigh Valley R. Co. v. Dupont, 128 F. 840; Luckenbach S.S. Co. v. W. R. Grace & Co., 267 F. 676, 681 (4th Cir. 1920) THE WILLEM VAN DRIEL 252 F. 35, 1918 U.S. App. LEXIS 2032, ** (4th Cir.1918). CHALOS & Co, P.C. - Houston George A. Gaitas

12 Factual basis for veil piercing Sabine Towing case fact pattern: 1.Common or overlapping stock ownership between the parent and the subsidiary; 2.Common or overlapping directors and officers; 3.Use of Same Corporate Office; 4.Inadequate Capitalization of the Subsidiary; 5.Financing of the subsidiary corporation by the Parent; 6.Whether the Parent existed solely as a Holding company for its subsidiaries; 7.The Parent's use of the subsidiary's property and assets as its Own; CHALOS & Co, P.C. - Houston George A. Gaitas

13 Sabine Towing case fact pattern (cont.): 8. The Nature of Intercorporate LoanTransactions; 9. Incorporation of the Subsidiary being caused by the Parent; 10. Whether the Parent and the Subsidiary file Consolidated Income Tax Returns; 11. Decision-Making for the Subsidiary made by the Parent and its Principals; 12. Whether the Directors of the Subsidiary act Independently in the Interest of the Subsidiary or in the Interest of the Parent; 13. The Making of Contracts between the Parent and the Subsidiary that are more favorable to the Parent; CHALOS & Co, P.C. - Houston George A. Gaitas

14 Sabine Towing case fact pattern (cont.): 14.Observance of Formal Legal Requirements; 15.The Existence of Fraud, wrong-doing or Injustice to Third Parties. Sabine Towing & Transp. Co. v. Merit Ventures, Inc., 575 F. Supp (E. D. Tex., 1983). CHALOS & Co, P.C. - Houston George A. Gaitas

15 Proof in Veil Piercing To obtain the order, and hold on to attachment, : prima facie evidence. Not required to prove the case. Wajilam Exports (Singapore) v. Atl Shipping 475 F.Supp.2d 275, 279 (S.D.N.Y. 2006). To prevail on the merits of the veil piercing suit: preponderance of the evidence. Rose Containerline, Inc. v. Omega Shipping Co. (D.N.J. 2011). CHALOS & Co, P.C. - Houston George A. Gaitas

16 Choice of Law US law applies in all Rule B proceedings in order to maintain uniformity and consistency in the admiralty. Wall Street Traders, Inc. v. Sociedad Espanola, 245 F. Supp. 344, 350 (S.D.N.Y., 1964); SLS Shipbuilding Co. Ltd v. Ionia Mgmt. S.A U.S. Dist. LEXIS 72506, at * 6-7 (S.D. Tex., 2011). U.S. law would apply even if we used multi-factor choice of law test: Blue Whale Corp. v. Grand China Shipping Dev. Co., 722 F.3d 488, (2nd Cir., CHALOS & Co, P.C. - Houston George A. Gaitas

17 Veil Piercing to compel Arbitration Suit to compel alter egos to arbitrate under the Federal Arbitration Act 9 U.S.C.§ 4. Not a Rule B proceeding. Preponderance standard of proof. Result incompatible with Rule B veil piercing claim against the same party. CHALOS & Co, P.C. - Houston George A. Gaitas

18 CHALOS & Co, P.C. - Houston George A. Gaitas The End


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