Sikousis Legacy Inc. v. B-Gas Limited a/k/a Bepalo LPG Shipping Ltd. et al

Filing 66

ORDER by Judge Charles R. Breyer granting 64 Ex Parte Application to Strike Plaintiffs' Improper "Reply" Brief at Dkt. 63, granting 34 MOTION to Vacate Rule B Attachments. (crblc1, COURT STAFF) (Filed on 1/19/2023)

Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 1 of 20

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SIKOUSIS LEGACY INC.,
Plaintiff,

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United States District Court
Northern District of California

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B-GAS LIMITED A/K/A BEPALO LPG
SHIPPING LTD., et al.,

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Defendants.

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ORDER GRANTING MOTION TO
VACATE

v.

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Case No. 22-cv-03273-CRB

Pursuant to Rule B of the Supplemental Rules for Certain Admiralty or Maritime
Claims,1 the Court authorized the attachment of the vessel M/T Berica on June 6, 2022.
On June 28, 2022, Defendant Bergshav Aframax, Ltd. (“Aframax”), owner of the Berica,
made a restricted appearance under Rule E of the Supplemental Rules for Certain
Admiralty or Maritime Claims,2 moving to vacate the attachment of the Berica, as
represented by the substitute security posted for the Berica’s release. See Mot. (dkt. 34);
see also Reply (dkt. 41). Plaintiff Sikousis Legacy Inc. and Plaintiffs-in-Intervention
Bahla Beauty Inc. and K Investments Inc. (collectively “Plaintiffs”) opposed the motion,
arguing that attachment is appropriate in light of the alter ego relationships between
Aframax and a family of related corporate entities in Cyprus and Norway. See generally
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Rule B provides in part that “If a defendant is not found within the district when a
verified complaint praying for attachment and the affidavit required by Rule B(1)(b) are
filed, a verified complaint may contain a prayer for process to attach the defendant’s
tangible or intangible personal property—up to the amount sued for—in the hands of
garnishees named in the process.” Rule B(1)(a).
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Rule E provides in part that “Whenever property is arrested or attached, any person
claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be
required to show why the arrest or attachment should not be vacated or other relief granted
consistent with these rules.” Rule E(4)(f).

Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 2 of 20

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Opp’n (dkt. 39). The Court held a motion hearing on July 29, 2022. See Motion Hearing

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(dkt. 47); Transcript (dkt. 53). At that time, the Court set a continued Rule E hearing for

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November 2022, allowed Plaintiffs to do some “limited discovery in advance of that

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hearing in support of their alter ego claims,” and set a discovery cut-off date of September

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2022. See Order Continuing Hearing, Permitting Discovery, and Setting Briefing

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Schedule (dkt. 48). Plaintiffs were then to file a brief in support of their position, and

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Aframax was permitted to file a response. Id.3
Discovery has now taken place, and the parties have each filed a supplemental brief.

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United States District Court
Northern District of California

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See Plaintiffs’ Sup. Br. (dkt. 58); Aframax Sup. Br. (dkt. 62). In fact, Plaintiffs also filed

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an additional brief, purportedly pursuant to Civil Local Rule 7-3(c), see Plaintiffs’ Sup.

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Reply (dkt. 63), which was not permitted by the Court, see Order Continuing Hearing,

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Permitting Discovery, and Setting Briefing Schedule (allowing “a brief” by Plaintiffs and

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“a response” by Aframax), and which Aframax appropriately moves to strike, see Ex Parte

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Application (dkt. 64) at 1–3 (explaining that Rule 7-3(c) does not apply). The Court

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GRANTS the motion to strike, and now turns to the merits of the motion to vacate.

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I.

BACKGROUND
Defendants in this case— B-Gas Limited a/k/a Bepalo, LPG Shipping Ltd., B-Gas

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A/S, Bergshav Shipping Ltd., B-Gas Holding, Ltd., Bergshav Aframax, Ltd., Bergshav

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Shipholding AS, Bergshav Invest AS, LPG Invest AS, and Atle Bergshaven—“are

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corporate entities established in Norway and Cyprus,” as well as an individual, Atle

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Bergshaven, the chairman of the board of all of the other named corporate defendants, who

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lives in Norway. Compl. (dkt. 1) at 2, ¶¶ 3–44.4 Plaintiffs are arbitration award-creditors

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under three maritime London arbitration awards against award-debtor B-Gas Ltd., now

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known as Bepalo LPG Shipping Ltd.5 Opp’n at 1. The $7.5M arbitration award stems

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from B-Gas Ltd.’s repudiation of a bareboat charter party contract. Id. at 2. According to

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The dates for the close of discovery, briefing, and hearing subsequently changed. See
Joint Stip. (dkt. 57).
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This order uses “Complaint” to mean the Sikousis Complaint.
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This order uses the names “B-Gas Ltd.” and “Bepalo” interchangeably.
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United States District Court
Northern District of California

Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 3 of 20

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the Complaint, in 2019, Sikousis chartered a vessel to B-Gas Ltd.; Sikousis delivered the

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vessel to B-Gas Ltd. and then B-Gas Ltd. demanded a 50% reduction of the charter hire.

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Compl. ¶¶ 13–16. Sikousis rejected the proposal and insisted on being paid as provided in

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the charter agreement. Id. ¶ 17. B-Gas Ltd. breached the agreement, and Sikousis

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initiated, and later prevailed in, arbitration. Id. ¶¶ 18–21. Bepalo subsequently declared

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insolvency. Id. ¶ 22.

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The issue before the Court is whether Plaintiffs can recover from Aframax (the

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entity that owns the Berica and the only defendant to have appeared in this case) when they

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have a judgment against Bepalo (the entity that breached its contract with Plaintiffs).

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Plaintiffs argue that they can, because Aframax and all of the related corporate entities are

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alter egos of each other. Key to understanding the relationship between B-Gas Ltd./Bepalo

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and Aframax is the corporate structure of the Bergshav Group at different times.

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Plaintiffs assert that the organizational structure of the Bergshav Group looked like
this in April and May of 2020:

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Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 4 of 20

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Id. ¶ 32. One can see that B-Gas Ltd. and Aframax were initially both subsidiaries of

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Bergshav Shipping Ltd. Id. In addition, one can see that B-Gas Ltd. owned a number of

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charters, and that Aframax owned the Berica. Id.

United States District Court
Northern District of California

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Plaintiffs allege that Bergshav Shipholding AS incorporated B-Gas Holding Ltd.

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and transferred to B-Gas Holding Ltd. “all of the rights, title and interest in B-Gas

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Limited.” Id. ¶¶ 40–41. Plaintiffs allege that this “gratuitous transfer by Bergshav

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Shipping Ltd. of its controlling interest over B-Gas Limited to the newly-minted B-Gas

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Holding Ltd. corporate entity without any assets, was a sham transaction of no lawful

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economic or financial benefit whatsoever to Bergshav Shipping Ltd. or to B-Gas Holding,

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Ltd.” Id. ¶ 43. Plaintiffs assert that B-Gas Ltd. was removed from the control of its parent

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company, Bergshav Shipping, Ltd., and put under the complete control of B-Gas Holding,

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Ltd., “with a fictitious sale for one US Dollar.” Opp’n at 13 (citing Zambartas Decl. ¶ 11

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and GZ Ex. 3 thereto; id. ¶ 15 and GZ Ex. 5 thereto at 9 and 13; id. ¶ 16 and GZ Ex. 2

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thereto at 21). B-Gas Holding Ltd. was only intended to be a “conduit for the insulation of

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Bergshav Shipping Ltd. from liability to the creditors of B-Gas Limited.” Id. ¶ 45. Atle

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Bergshaven then incorporated a new entity, LPG Invest AS, id. ¶ 46, and transferred to

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LPG Invest AS the entire ownership interest that B-Gas Ltd. had in the vessel B-Gas

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Maud, the “sole trading asset of B-Gas Maud Ltd,” for a fraction of its value. Id. ¶¶ 49,

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51; see also Opp’n at 14 (asserting that the B Gas Champion, B Gas Commander, and B

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Gas Crusader were also sold to LPG Invest AS for “a total price of USD 100,000 and a

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credit of USD 100,000.”).

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At the conclusion of a series of maneuvers, Plaintiffs allege that the Bergshav
Group’s organization looked like this:

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Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 6 of 20

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could not be found in this district, all assets of the defendants presently in the district,

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including the Berica, should be attached and garnished in an amount sufficient to answer

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Sikousis’s claim. Compl. at 28; Mot. for Writ (dkt. 3). The Court issued an Order

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Authorizing Issuance of Process of Maritime Attachment and Garnishment. See Order on

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Writ.
Aframax filed a motion to vacate the attachment. See Mot. After the July 29

United States District Court
Northern District of California

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motion hearing, the Court allowed for some limited discovery and supplemental briefing

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on Plaintiffs’ alter ego allegations. See Order Continuing Hearing, Permitting Discovery,

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and Setting Briefing Schedule. The Court specifically encouraged Plaintiffs to focus on

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“(1) the relationship of B-Gas Limited/Bepalo to Bergshav Shipholding AS; and (2) the

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relationship of Bergshav Aframax to the alleged fraud.” Id.

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II.

LEGAL STANDARD
To obtain pre-judgment attachment under Rule B, a plaintiff must show that (1) it

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“has a valid prima facie admiralty claim against the defendant”; (2) the “defendant cannot

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be found within the district”; (3) “property of the defendant can be found within the

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district”; and (4) “there is no statutory or maritime” bar to attachment. Equatorial Marine

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Fuel Mgmt., 591 F.3d 1208, 1210 (9th Cir. 2010).

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As to alter ego, “[f]ederal courts sitting in admiralty generally apply federal

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common law.” Pacific Gulf Shipping Co. v. Vigorous Shipping & Trading S.A., 992 F.3d

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893, 897 (2021) (citing Chan v. Society Expeditions, Inc., 123 F.3d 1287, 1294 (9th Cir.

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1997)).6 “To satisfy the alter ego exception to the general rule that a subsidiary and the

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Aframax spends some time in its brief arguing that the Court should also look to
Norwegian and Cypriot veil-piercing law because “the United States does not have the
strongest connection to the relevant transaction.” Aframax Sup. Br. at 4. But Aframax
asserts that the bar is “high” to piercing the corporate veil in Norway, and that veil piercing
only occurs in “extremely limited circumstances” in Cyprus, id. at 5, which is not terribly
different from the standard in this country, see, e.g., Dole Food Co. v. Patrickson, 538 U.S.
468, 475 (2003) (“The doctrine of piercing the corporate veil, however, is the rare
exception, applied in the case of fraud or certain other exceptional circumstances”).
Moreover, Aframax goes on to state that “the question of law is of reduced significance
because all potentially applicable law, whether Norwegian, Cypriot, or federal maritime
common law, requires a showing of fraud, and Plaintiffs have expressly admitted that
Aframax was not involved in the underlying fraud which forms the basis of their corporate
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parent are separate entities, the plaintiff must make out a prima facie case ‘(1) that there is

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such unity of interest and ownership that the separate personalities [of the two entities] no

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longer exist and (2) that failure to disregard [their separate identities] would result in fraud

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or injustice.’” Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d

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1122, 1134 (9th Cir. 2003) (quoting Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir.

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2001) (per curiam)).

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United States District Court
Northern District of California

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The Ninth Circuit recently explained:
To pierce the corporate veil, a party must show that (1) the
controlling corporate entity exercise[s] total domination 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.
Pacific Gulf Shipping Co., 992 F.3d at 898 (internal quotation marks and citations
omitted).7 “[S]uperficial indicia of interrelatedness’ such as shared office space and phone
numbers are ‘not dispositive of the [alter-ego] question’”; instead, courts are to look at “a
corporation’s ‘practical operation’ as ‘more instructive.’” Id. (quoting Coastal States
Trading, Inc. v. Zenith Navigation, S.A., 446 F. Supp. 330, 334 (S.D.N.Y. 1977)).
Pursuant to Rule E, the plaintiff has the burden of showing why the attachment
should not be vacated. See Rule E(4)(f). The Ninth Circuit has apparently not articulated
what standard applies, but there is support for the notion that there must be “probable
cause” to attach property. Tefida v. 1,925 Cartons of Crab, No. 2:13-cv-464-RSM, 2013

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veil-piercing theory of liability.” Aframax Sup. Br. at 6.
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See also id. (indicia for piercing 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.”).
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United States District Court
Northern District of California

Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 8 of 20

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WL 4049011, at *3 (W.D. Wash. Aug. 9, 2013) (adding, “[i]n this context, the probable

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cause standard roughly equates to whether plaintiff can make out a prima facie case.”); OS

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Shipping Co. Ltd v. Global Maritime Trust(s), No. 11-cv-377-BR, 2011 WL 1750449, at

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*5 (D. Or. May 6, 2011) (“the prevailing test appears to be a ‘probable cause’ standard that

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requires Plaintiffs to demonstrate the evidence shows a fair or reasonable probability that

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Plaintiffs will prevail on their alter-ego claim.”). The Court’s job is therefore not to

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determine the “ultimate merits of [the] alter-ego claim,” but, “based on the record to date,”

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to “determine whether [Sikousis satisfies] the probable-cause standard by showing [that it

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is] reasonably likely to prevail.” See OS Shipping Co. Ltd, 2011 WL 1750449, at *5. The

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parties did not dispute at the motion hearing that the probable cause standard applied,8

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Transcript at 6:10–11, and the Court will apply it again here.

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III.

DISCUSSION
Plaintiffs took extensive written discovery since the motion hearing and now argue

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that they have met their burden of “show[ing] why the arrest or attachment should not be

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vacated.” See generally Plaintiffs’ Sup. Br.; Rule E(4)(f). Aframax asks the Court to

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envision the many links between Bepalo and Aframax in Table III (replicated above),

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arguing that Plaintiffs’ proof fails in two places: (A) at the first link connecting the two

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companies, because Bepalo is not “dominated and controlled” by the Bergshav Group, and

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(B) at the last link connecting the two companies, because there is no relationship between

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However, in its supplemental brief, Aframax argues that now that there has been
jurisdictional discovery, the Court should apply a preponderance of the evidence standard.
See Aframax Sup. Br. at 6–7. The authority that Aframax cites in support of this point is
two district court cases from outside of the Ninth Circuit. See id. (citing Oldendorff
Carriers GMBH & Co., KG v. Grand China Shipping (Hong Kong) Co., No. 2:12-CV-74,
2013 WL 3937450, at *2 (S.D. Tex. July 30, 2013) and Hawknet Ltd. v. Overseas
Shipping Agencies, No. 07-Civ-5912 (NRB), 2009 WL 1309854, at *2 (S.D. N.Y. May 6,
2009)). But Oldendorff and Hawknet both explicitly applied the preponderance standard
after allowing an evidentiary hearing; this Court has not had an evidentiary hearing.
Moreover, Aframax cites to no authority within the Ninth Circuit applying a
preponderance of the evidence standard, and authority from within the Circuit suggests
that the probable cause standard still applies. See, e.g., OS Shipping Co. v. Glob. Mar.
Tr.(s) Priv. Ltd., No. 11-CV-377-BR, 2011 WL 1750449, at *5 (D. Or. May 6, 2011)
(holding, after depositions and hundreds of pages of exhibits, “the prevailing test appears
to be a ‘probable cause’ standard”).
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Aframax and the alleged fraud. Aframax also addresses (C) Plaintiffs’ additional

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arguments.

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A.

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1.

Previous Briefing

In the motion to vacate, Aframax argued that the evidence establishes that Bepalo is

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a separate and distinct entity from Bergshav Shipholding AS. Mot. at 15. It asserted that:

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 There is an “incomplete unity of ownership” between Bergshav Shipholding
AS and Bepalo;

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 There are formal agreements in place to protect Bepalo’s minority

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United States District Court
Northern District of California

First Link: Bepalo

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shareholders (who own 49% of Bepalo) from unilateral action by B-Gas

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Holding Ltd.9;

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 Two Bepalo board members were appointed by minority shareholders;

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 Supermajority votes, which include at least one minority appointed director,
are necessary to take certain corporate actions;

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 Bepalo was sufficiently capitalized until the pandemic;

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 There is no improper commingling of funds or sharing of property;

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 The daily operations of the companies are kept separate; and

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 There is no sharing of property.

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Id. at 16–17. Aframax pointed to the Shareholders’ Agreement, which lays out various

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actions that require a supermajority, and argued that “if Bergshav Shipholding AS (or Atle

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Bergshaven individually) had intended for Bepalo to merely be an indistinguishable

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extension of its majority-shareholding parent company(s), it would not have agreed to limit

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its control over Bepalo.” Id. at 17–18 (citing Mot. Ex. G-2).
Aframax also relied on the declaration of Andreas Hannevik, deputy CEO of

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Bergshav Shipholding AS, which purports to set out the legitimate “circumstances and

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reasoning involved in first attempting to secure additional liquidity during a time of

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See Hannevik Decl. ¶ 5 (attaching Bepalo Shareholders’ Agreement), Ex. G-2
(Shareholders’ Agreement).
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Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 10 of 20

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economic stress brought on by the global pandemic, and then the unfortunate but necessary

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decision to wind down Bepalo’s business.” Id. at 19 (citing Hannevik Decl. (dkt. 34-7) ¶¶

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10, 11). And it attached Board Meeting Minutes which, it asserted, demonstrate that the

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“decisions to obtain liquidity via sale-leasebacks of its vessels, and later to wind down the

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company, were done according to proper corporate formalities and not simply at the sole

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whim of Atle Bergshaven.” Id. at 19 (citing Mot. Ex. G-4) (meeting minutes from B-Gas

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Ltd.’s Board of Directors meetings on April 6, 2020, May 5, 2020 (which included “Pursue

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legal possibilities on company structure in Cyprus, Norway and Denmark”), May 15, 2020,

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July 3, 2020, August 11, 2020).
Plaintiffs responded that, while Aframax argues that control over B-Gas Limited

United States District Court
Northern District of California

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was exercised by a supermajority under a Shareholders’ Agreement, “there is no proof of

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that.” Opp’n at 18. They went on: “The October 14, 2011 voting agreement of the

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shareholders of B-Gas Limited is private and governed by Norwegian law, and is subject

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to arbitration in Norway. It was not made part of any public corporate record in Cyprus

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where B-Gas Limited was incorporated” and “Cypriot Articles of Incorporation govern

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and prevail over it.” Id. (citing Zambartas Decl. ¶ 6110).
At the time of the motion hearing, the Court found the Hannevik declaration to be

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rather persuasive evidence that Bepalo is not dominated and controlled by Bergshav

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Shipholding AS in its practical operation.

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2.

New Evidence

Given the Court’s suggestion that Plaintiffs focus discovery in part on “the

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relationship of B-Gas Limited/Bepalo to Bergshav Shipholding AS,” see Order Continuing

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Hearing, Permitting Discovery, and Setting Briefing Schedule, the Court expected that

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Zambartas declared: “It is brought to my attention that the shareholders of B-Gas
Limited had, some years ago, entered into a shareholders agreement, and on this basis they
dispute whether the controlling majority shareholder could alone exercise control over
decisions of the shareholders. However, having reviewed the Articles of Association of BGas Limited/Bepalo, I do not find any of the provisions of the shareholders’ agreement
having been incorporated in the Articles. Accordingly, as the reserved matters have not
been incorporated into the Articles[,] the terms in the Articles which regulate the decisionmaking processes and procedures of the shareholders should prevail.” Id.
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United States District Court
Northern District of California

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Plaintiffs would do further discovery on Bepalo. But Plaintiffs apparently chose not to

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take depositions of Bergshav Group representatives, see Aframax Sup. Br. at 2, and did not

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delve into issues of Bepalo’s minority shareholders’ rights in written discovery, id. at 9. In

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fact, Plaintiffs just briefly addressed the issue of Bepalo’s independence in their

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supplemental brief. See Plaintiffs’ Sup. Br. at 4 (stating that “From its inception, B-Gas

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Limited was held by Bergshav Shipping Ltd . . . which owned 51% of its shares. The

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remaining 49% of B-Gas Limited’s shares were held by Lorentzen Skibs AS and Pareto

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Secondary Opportunity Fund AS.”), 5 (“Two (2) Norwegian individuals—Jan Haakon

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Pettersen and Nicolai Eirik Lorentzen—were directors on the board of B-Gas Limited

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appointed by the respective minority shareholders,”). Plaintiffs’ arguments about

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corporate control as to Bepalo were fairly conclusory, see, e.g., id. at 7 (“. . . it is obvious

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that Bergshav Shipholding AS exercised complete control of the corporate entities of its

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Cypriot Arm.”), 19 (“The domination and control of B-Gas Limited by the Bergshaven

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Group, i.e., Bergshav Shipholding AS, is also indisputable. . . .”), and their examples of

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corporate control generally do not pertain to Bepalo itself, see, e.g., id. at 5–6 (example of

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Bergshav Management Co. AS directing Bergshav Shipping Ltd. activity). While

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Plaintiffs describe the Bergshaven Group’s “plan” to strip assets from B-Gas limited, see

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id. at 8–11, they do not address the Bepalo Shareholders’ Agreement and its role. See

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Aframax Sup. Br. at 8 n.8.

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The new evidence pertaining to Bepalo was primarily put into the record by

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Aframax. See Aframax Sup. Br. at 2 (“to ensure that it would be able to adequately defend

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itself with admissible evidence (especially after Aframax learned at the 11th hour that

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Plaintiffs would not be conducting depositions), Aframax also voluntarily produced

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additional materials”). Aframax notes that Bepalo has had two shareholders in addition to

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B-Gas Holding, Ltd. ever since it was incorporated in January 2011: Lorentzen Skibs AS

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(10%) and Pareto Secondary Maritime Opportunity Fund (39%). Id. at 8–9. Nicolai

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Lorentzen, a co-owner of Lorentzen Skibs AS and a director of Bepalo since the

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company’s formation, submitted a declaration. Id. at 9. Lorentzen declares:
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United States District Court
Northern District of California

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 “Because of the relatively small percentage of ownership interest that

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Lorentzen Skibs AS would hold in the company, we insisted that there

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be minority shareholder protections as a condition of our participation in

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the business venture, so as to prevent a situation where the majority

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shareholder (here, B-Gas Holding Ltd.) could exert total and unilateral

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control over the company. We were not interested in merely being a

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blind investor in Bepalo Ltd.” Lorentzen Decl. (dkt. 62-5) ¶ 4.

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 “I participated in negotiating the Shareholder Agreement.” Id. ¶ 5.

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 “The Agreement provides that shareholders holding more than 10% and

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up to 50% of the shares of the Company are entitled to appoint a director

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to the Board of Directors. . . . For certain matters, the Agreement also

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requires a supermajority vote of at least five directors, one of whom

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shall have been nominated by a shareholder other than the majority

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shareholder.” Id. ¶ 6.

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 “In the spring of 2020, the gas market in Europe collapsed as a result of

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the Covid pandemic. As a result, Bepalo’s revenue stream collapsed

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with it. The company’s Board was confronted with an existential crisis

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not of its own making, and decisions had to be made how to address it.

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In June 2020, ultimately the Board decided to sell its shares in subsidiary

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B-Gas Maud Ltd., which owned the gas tanker B GAS MAUD, and

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lease back the vessel from the new owner so that the company could

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continue to maintain control of that asset anticipating that the market

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would eventually return to normalcy. The Board also decided to sell

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three small gas tankers that it owned, which had, more or less, reached

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their service life, and to lease back the tankers, which were still under

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charter to third parties.” Id. ¶ 8.

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 “As a result of these transactions, the company received an immediate
cash injection of USD 1.65 million in June 2020. . . . The goal was to
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weather the pandemic’s financial storm. These negotiations . . . fell

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through resulting in the company having to unilaterally cut charter hire

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payments by one-half to remain afloat. Thereafter, the owners of four of

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the vessels initiated arbitration proceedings, and ultimately the company

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had no choice but to file for insolvency in Cyprus.” Id. ¶ 9.11
 “The decisions described above were made by the board of Bepalo Ltd.

United States District Court
Northern District of California

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on a unanimous basis, after having considered and discussed the

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business realities that existed as a result of the global pandemic, and the

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options that were available. . . . I did not simply defer to the position of

10

Atle Bergshaven or any other board member—I believe that each

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decision reached was appropriate based on my own evaluation of the

12

facts.” Id. ¶ 10.
This declaration supports Aframax’s positions, both about Bepalo’s independence12

13
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and about the specific decisions in Spring and Summer 2020. Given this additional

15

evidence, Plaintiffs have failed to demonstrate that Bepalo is an alter ego of Bergshav

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Shipholding AS such that a judgment against Bepalo can be collected against another

17

entity within that group. “The first and most critical link in the alter-ego chain (i.e., from

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the alleged debtor-obligor Bepalo to its parent company) is therefore missing.” See

19

Aframax Sup. Br. at 11.

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B.

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Last Link: Aframax
1.

Previous Briefing

Also in the motion to vacate, Aframax essentially argued that the evidence did not

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28

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Plaintiffs’ improperly filed Reply disputes that Bepalo ever went into “a judicially
supervised/controlled bankruptcy.” Reply at 13. The Court will not consider this
argument as it has stricken the Reply.
12
Of course, the “general rule” is that parents and subsidiaries are separate. See Harris
Rutsky & Co. Ins. Servs., 328 F.3d at 1134. Absent sufficient allegations of
dominion/control, the Court need not even reach the questions of whether there would be
injustice in failing to pierce the corporate veil and whether the controlling entity had
fraudulent intent. See Pac. Gulf Shipping Co., 992 F.3d at 898 (Ninth Circuit has a
conjunctive test: all three elements must be present).
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demonstrate its culpability. Aframax asserted that, comparing Table I and Table III from

2

the Complaint (replicated above), “no assets of Bergshav Shipping Ltd., Bepalo (B-Gas

3

Limited), or B-Gas AS are shown to have been transferred to [Aframax]—instead, all that

4

is alleged are that assets and entities that were previously owned by Bergshav Shipping Ltd

5

(or its subsidiaries) were ultimately transferred such that they are now owned by Bergshav

6

Invest AS (or its subsidiaries).” Mot. at 10 (emphasis in original). Aframax insisted that

7

“Aframax is completely absent from any relevant chain of ownership.” Id. (emphasis in

8

original); see also Transcript at 11:1–4 (Aframax counsel: “The plaintiffs’ counsel referred

9

to [Aframax] as a receiving entity, that is, a pocket. Well, it never received any monies

10

that—that have been identified in any of the complaints.”); id. at 14:8–10 (Aframax

11

counsel: “There are no factual allegations that—that [Aframax] committed any tort,

12

breached any contract, committed any fraud.”).

13

It is true that in Table I and Table III, Aframax is unchanged: in both tables, it sits

14

below Bergshav Shipping Ltd and it owns the Berica. See Compl. Table I, III. While

15

Table I shows that B-Gas Ltd. (or Bepalo) owns 4 vessels (B Gas Maud, B Gas Crusader,

16

B Gas Commander, and B Gas Champion), Table III shows that B Gas Ltd. (or Bepalo)

17

owns nothing, and that the four B Gas vessels are all now owned by LPG Invest AS, which

18

sits below Bergshav Invest AS. Id. Aframax argued accordingly that “Aframax had no

19

direct connection to the alleged fraud which purportedly justifies piercing the corporate

20

veil”—the “asset stripping” from Bepalo. Mot. at 1.

21

Concerned about this issue at the motion hearing, the Court prompted Plaintiffs:

22

“The argument that I heard the defendants making is what can you point to regarding

23

Aframax that brings it in as—as the alter ego? Because it is the defendant that owns the

24

vessel [Berica], as I understand it.” Transcript at 17:14–17. Plaintiffs responded that they

25

needed discovery. Id. at 18:16–17. In allowing discovery, the Court encouraged Plaintiffs

26

to focus on “the relationship of Bergshav Aframax to the alleged fraud.” Order Continuing

27

Hearing, Permitting Discovery, and Setting Briefing Schedule.

28
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2.

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Northern District of California

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New Evidence

Plaintiffs now point to new evidence of what they allege to be “extensive
commingling of funds between Bergshav Shipholding AS . . . and [Aframax],” “the ad hoc
informality accounting treatment of intercompany transfers,” “the establishment of B-Gas
Holding Ltd., a shell entity admittedly [created] to cabin existing risks of the direct parent
company of [Aframax],” “the fraudulent concealment from Plaintiffs of the sale of all of
the assets of B-Gas Limited to LPG Invest AS,” “the undercapitalization of B-Gas Ltd.,”
“the concentration of valuable assets in LPG Invest AS and [Aframax],” and “the
concentration of liabilities in B-Gas Limited and B-Gas Holding Ltd.” Plaintiffs’ Sup. Br.
at 13–14; see also id. at 4–11.
Some of this evidence relates to Aframax. Specifically, Plaintiffs point to the
Bergshav Group transferring funds to Aframax and dictating how those funds would be
entered in Aframax’s accounting system, bailing Aframax out with injections of funding,
and providing commitments on behalf of Aframax in connection with debts. See id. at 18–
19. Aframax counters that “these transfers do not represent improper ‘commingling’ of
funds,” as the transactions were duly recorded, and that what Plaintiffs deem “‘ad hoc’
informality of intercompany transfers” is “routine in Norway—the transfers need only be
properly recorded for tax, accounting and auditing purposes at years’ end.” Aframax Sup.
Br. at 14. In any case, such evidence only relates to the Ninth Circuit’s requirement that to
pierce the corporate veil, a parent must “exercise[] total domination of the subservient
corporation, to the extent that the subservient corporation manifests no separate corporate
interests of its own.” See Pacific Gulf Shipping Co., 992 F.3d at 898.
Most of Plaintiffs’ new evidence does not relate to Aframax. Aframax did not
establish B-Gas Holding, conceal information from Plaintiffs, undercapitalize B-Gas
Limited, or concentrate liabilities anywhere.13 Plaintiffs do not point to any “concentration
13

There is therefore little evidence in support of the Ninth Circuit’s additional requirement
that “injustice will result from recognizing the [subservient entity] as a separate entity.”
See Pacific Gulf Shipping Co., 992 F.3d at 898. Plaintiffs’ argument that “it would be
inequitable to allow the subservient entity [Aframax], or any subservient entity of
Bergshav Shipholding AS, to be recognized as a separate entity,” Plaintiffs’ Sup. Br. at 20,
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of valuable assets” in Aframax in connection with B-Gas Ltd.; in fact, Plaintiffs explicitly

2

do not contend that Aframax participated in the asset-stripping of B-Gas Ltd. See

3

Plaintiffs’ Sup. Br. at 14. Plaintiffs do point to a number of transactions between April

4

2020 and June 2020 in which Bergshav Shipholding AS can be seen directing the conduct

5

of its subsidiaries, specifically in connection with B-Gas Ltd. See id. at 8–11. These

6

transactions may or may not be above board. See, e.g., id. at 8 (quoting 4/27/20 Hannevik

7

email: “We would like to make a few changes to the legal structure of Bergshav in Cyprus

8

to separate the various assets and risks better.”); id. Ex. 15 (June 3, 2020 Bergshav Group

9

“Notat” re B-Gas Ltd. structure, mentioning “disposal of assets to increase the Company’s

10

liquidity,” and anticipating litigation by Plaintiffs if B-Gas Ltd. reduced bareboat charter

11

hire).14 But they do not involve Aframax.

12

To pierce the corporate veil, “[t]he entity sought to be held liable must be involved

13

in misuse of the corporate form.” d’Amico Dry d.a.c. v. Nikka Fin., Inc., 429 F Supp. 3d

14

1290, 1302 (S.D. Ala. 2019); see also id. (“fraud analysis focuses on ‘whether the

15

corporate form itself was abused and whether the misuse of the corporate form constituted

16

the fraud or injustice complained of in the underlying suit.’”); Pac. Gulf Shipping Co., 992

17

F.3d at 899 (entity to be held liable under an alter-ego theory must itself have been “used .

18

. . for a fraudulent purpose.”). Given Tables I and III, and Plaintiffs’ concession, see

19

Plaintiffs’ Sup. Br. at 14 (“It is not Plaintiffs’ case that [Aframax] participated in the asset-

20

stripping [of] B-Gas Limited.”), it is hard to see how Aframax was involved in the alleged

21

fraud here: the asset-stripping from Bepalo.

22

Plaintiffs argue, though, that they need not demonstrate that Aframax was itself

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24
25
26
27
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is not especially compelling when Aframax played no role in Plaintiffs’ harm. Moreover,
“a creditor’s inability to collect a judgment alone is insufficient to justify piercing the
corporate veil.” Eitzen Chem. (Singapore) PTE, Ltd. v. Carib Petroleum, 749 F. App’x
765, 773 (11th Cir. 2018).
14
Aframax moves to strike Exhibit 15 as untimely. See Ex Parte Mot. to Strike and
Preclude (dkt. 59). The Court denied that motion without prejudice to the parties raising
those issues again at the motion hearing. See Order Denying Ex Parte Mot. to Strike and
Preclude (dkt. 60). The issue did not come up again at the motion hearing. In any case, it
is a document that was generated by the Bergshav Group and therefore may have already
been in Aframax’s possession.
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Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 17 of 20

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used for a fraudulent purpose. Id. at 16. Plaintiffs observe that the Ninth Circuit in Pacific

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Gulf Shipping Co. required that the plaintiffs demonstrate that the alleged alter ego

3

defendants dominated and controlled either the corporate owner of the attached vessel or

4

its holding company, and used the corporate form for a fraudulent purpose. Plaintiffs’

5

Sup. Br. at 16. This is correct, but in Pacific Gulf Shipping Co., 992 F.3d at 895–96, both

6

the vessel owner and the holding company had appeared; in this case, only Aframax, the

7

vessel owner, has appeared. Aframax notes that the court in Pacific Gulf Shipping Co.

8

relied on M/V American Queen v. San Diego Marine Construction Corp., 708 F.2d 1483

9

(9th Cir. 1983), which clarifies the point. See Aframax Sup. Br. at 17 (citing Pacific Gulf

10

Shipping Co., 992 F.3d at 899) (citing M/V American Queen, 708 F.2d at 1490)). In M/V

11

American Queen, 708, F.2d at 1489–90, the Ninth Circuit held:

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15
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To disregard San Diego Marine’s [the subsidiary’s] corporate
existence . . . there must be more than just its control by
Campbell [the parent company]. There must be factors that
indicate a disregard of San Diego Marine’s corporate form. . . .
Further, it must appear that injustice will result from
recognizing San Diego Marine as a separate entity and that
Campbell had a fraudulent intent or an intent to circumvent
statutory or contractual obligations in its control of San Diego
Marine.

17

The court went on to say that if the alter ego theory was correct, “Campbell would be

18

liable only if San Diego Marine were also liable.” Id. at 1490. Thus, the court held that, to

19

pierce the subsidiary’s corporate veil, the parent company had to have a fraudulent intent

20

in its use of the subsidiary. See also Blankenship v. Omni Catering, Inc., 21 F.3d 1111

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(9th Cir. 1994) (unpublished) (“Fraudulent intent may be proved in either of two ways:

22

through evidence of fraudulent intent in the formation of the corporation or through

23

evidence of the subsequent misuse of the corporate form to perpetrate a fraud.”) (citing

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Board of Trustees v. Valley Cabinet & Mfg. Co., 877 F.2d 769, 774 (9th Cir. 1989)).

25

Here, because Plaintiffs do not even allege that Aframax was used to perpetrate a fraud

26

relating to B-Gas Ltd., see Plaintiffs’ Sup. Br. at 14 (“It is not Plaintiffs’ case that

27

[Aframax] participated in the asset-stripping [of] B-Gas Limited.”), they fail to meet the

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requirement that “the controlling entity had a fraudulent intent or an intent to circumvent
17

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1
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statutory or contractual obligations.” See Pacific Gulf Shipping Co., 992 F.3d at 898.
Plaintiffs do make a last ditch claim of having shown that Aframax was “involved

3

in misuse of the corporate form.” See Plaintiffs’ Sup. Br. at 14–15; d’Amico Dry d.a.c.,

4

429 F Supp. 3d at 1302. They argue:

5

“[I]nvolved in the misuse of corporate form” as held in
d’Amico Dry d.a.c. is not co-extensive in meaning with
“participated” as Defendant cites and argues. It is not
Plaintiffs’ case that [Aframax] participated in the asset
stripping [of] B-Gas Limited. But this is not to say that
[Aframax] was not involved in the unjust actions of the
Bergshaven Group in this case. Specifically, Bergshav
Shipping Ltd., the direct parent company of [Aframax],
transferred its controlling interest over B-Gas Limited
(Plaintiffs’ debtor) for the price of $1 in pursuit of a deliberate,
well considered plan to remove the risk of the contemplated
insolvency of B-Gas Limited from Bergshav Shipping Ltd.
(emphasis added). This demonstrates Defendant’s involvement
in the bad acts alleged by Plaintiffs. In the very words of Mr.
Hannevik, the Chief Financial Officer of the Bergshaven
Group, the intent of the restructuring was: “To confine the risk
of [B-Gas Limited] to B Gas Holding Ltd. for USD 1.00.”

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Plaintiffs’ Sup. Br. at 14–15 (emphasis in original); see also id. at 15 (speaking to “the

15

Bergshaven Group’s intent” and to fraudulent actions by “Bergshav Shipping Ltd. and

16

Bergshav Shipholding AS”). The block quote above demonstrates nothing about Aframax.

17

Allegations about what Bergshav Shipping Ltd. did are not allegations about what

18

Aframax did—even if prefaced with the word “Specifically” and sandwiched by assertions

19

that Aframax was involved.

20

Given Plaintiffs’ failure to point to new evidence of Aframax’s involvement in the

21

alleged fraud, Plaintiffs have failed to demonstrate that Aframax’s corporate veil is subject

22

to veil piercing in order to recover for Bepalo’s debt.

23

C.

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Finally, Plaintiffs make two arguments for the first time in their supplemental brief:

Additional Arguments

25

that this Court may “look into an allegedly fraudulent transfer where the question was

26

relevant to execution upon a decree in admiralty,” and that the entire Bergshav Group is a

27

single business enterprise. See Plaintiffs’ Sup. Br. at 21–26. These arguments are

28

unavailing.
18

Case 3:22-cv-03273-CRB Document 66 Filed 01/19/23 Page 19 of 20

Plaintiffs have already conceded that Aframax was not directly involved in the

1

United States District Court
Northern District of California

2

allegedly fraudulent transfers of which they complain. See Plaintiffs’ Sup. Br. at 14.

3

Plaintiffs’ argument under California’s single business enterprise doctrine is also

4

flawed. Federal, not California, law governs the Court’s alter ego analysis. See Pacific

5

Gulf Shipping Co., 992 F.3d at 897. While state law can be used where it is not

6

inconsistent with admiralty principles, see Kite Shipping LLC v. San Juan Nav. Corp. No.

7

11-cv-02694 BTM (WVG), 2012 WL 6720624, at *3 (S.D. Cal. Dec. 26, 2012) (“Courts

8

applying federal common law in an admiralty case ‘can look to state law in situations

9

where there is no admiralty rule on point.’”) (quoting Ost-West-Handel Bruno Bischoff

10

GmbH v. Project Asia Line, Inc., 160 F.3d 170, 174 (4th Cir. 1998)), here, it is

11

inconsistent. Admiralty principles require both domination and control and that the

12

subservient entity be used “for a fraudulent purpose.” See Pacific Gulf Shipping Co., 992

13

F.3d at 899.15
Accordingly, the Court rejects both arguments.16

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In addition, Plaintiffs’ single business enterprise argument is based largely on the expert
report of a forensic accountant named Michael Molder. See Molder Decl. (Plaintiffs’ Sup.
Br. Ex. 28). Aframax moves to strike that declaration as untimely. See Ex Parte Mot. to
Strike and Preclude. Aframax argues that the discovery cut-off was October 31, 2022, but
that some of Plaintiffs’ exhibits, including Exhibit 28, were not produced until November
28, 2022. Id. at 1. Aframax contends that it was prejudiced by the late production and
unable to respond. Id. at 7. This Court denied that motion without prejudice to the parties
raising it again at the motion hearing. See Order Denying Ex Parte Mot. to Strike and
Preclude. It did not come up again at the motion hearing. In any case, the Court would
limit the impact of the Molder report because Molder largely opines on a legal conclusion:
whether the Bergshav Group operates as a single business enterprise. See Molder Decl.
(dkt. 58-28) ¶ 7 (“The interlocking Boards of Directors, shared management and
intercompany transfers dressed up as preferred share transactions indicate that the Group is
actually a single entity.”).
16
For the sake of completeness, the Court addresses a final argument. Plaintiffs argued in
their opposition to the motion to vacate—but did not repeat in their supplemental
briefing—that they can also attach the Berica via reverse veil piercing. Opp’n at 10.
Plaintiffs relied on Pacer Construction Holdings Corp. v. Pelletier, No. 19-cv-1263-MMA
(BGS), 2020 WL 583982, at *4 (S.D. Cal. Feb. 6, 2020), which defined reverse veil
piercing as a tool used “to satisfy the debt of an individual through the assets of an entity
of which the individual is an insider.” See id. at 10–11. Plaintiffs asserted that “[t]he
individual insider in this instance is Atle Bergshaven, 100% owner of Bergshav Aframax
Ltd., through the chain of ownership of this corporate entity as set out in the Verified
Complaints . . . and his own identification as the ‘ultimate controlling party in its financial
statements it filed in Cyprus.” Id. at 11. The problem with this argument is that it relies on
calling Atle Bergshaven the “shareholder debtor,” see id. at 12, but he is not; Bepalo/B19

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