Robinson Mechanical Contractors, Inc. d/b/a Robinson Construction Company v. PTC Group Holdings Corp.
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that this Court's September 1, 2017 order is AMENDED. IT IS FURTHER ORDERED that defendant's motion for summary judgment is GRANTED in part and DENIED in part. IT IS FINALLY ORDERED that summary judgment is granted to defendant PTC on Counts V and VI and denied as to all remaining counts. Signed by District Judge Stephen N. Limbaugh, Jr on 9/8/2017. (JMC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
CONTRACTORS INC. d/b/a
ROBINSON CONSTRUCTION CO.,
PTC GROUP HOLDINGS CORP., and
PTC SEAMLESS TUBE CORP.,
Case No. 1:15-CV-77 SNLJ
MEMORANDUM and ORDER
On September 1, 2017, in light of the approaching September 24, 2017 trial date
and the voluminous motions and briefing filed with the Court, this Court denied
defendant PTC’s summary judgment motion (#113) in a Docket Text Order with
memorandum to follow. This memorandum accompanies that Docket Text Order and
amends the September 1 Order to grant summary judgment to PTC on Counts V and VI.
Summary judgment is denied on each of the remaining counts.
The following facts are undisputed except where indicated. PTC Group Holdings
Corp. (“PTC”) is the parent company of its wholly-owned subsidiary PTC Seamless Tube
Corp. (“Seamless”). PTC created Seamless as part of a plan to build a steel pipe
manufacturing plant in Hopkinsville, Kentucky. Seamless was converted from a limited
liability company known as PTC Alliance Pipe Acquisition Company, LLC into a
corporation in 2013. In December 2012, before these companies existed, PTC executed
agreements with Credit Suisse and Wells Fargo to borrow up to $195 million. Seamless
would later become obligated under those agreements upon its creation.
In 2012, PTC’s board authorized PTC to purchase used equipment from a Croatian
plant for $6.5 million. Alliance was created for the purpose of acquiring the Croatian
assets and relocating them to North America. In June 2013, Alliance was converted into
a corporation, and Seamless was formed by issuing $10.00 of capital stock at $0.01 per
share to PTC. Seamless became an obligor under the $195 million in debt at that point.
PTC directed another subsidiary to transfer the real estate for the Hopkinsville, Kentucky
plant project to Seamless. Doug Wilkins, a PTC Vice President, oversaw the
Hopkinsville plant construction.
In early 2013, plaintiff Robinson Mechanical Contractors Inc. d/b/a Robinson
Construction Company (“Robinson”) performed removal work at the Hopkinsville
facility. Robinson entered into a Professional Services Agreement (“PSA”) and
additional statements of work (“SOWs”) with Seamless (or, initially, Alliance), through
which it was agreed that Robinson would be compensated for its work on a time and
materials basis. Robinson’s invoices were to be paid within 30 days of issuance.
Although the parties dispute when exactly the construction project was supposed
to be completed, the construction was ongoing in November 2014. At that time, PTC’s
Wilkins traveled to Robinson’s main office in Perryville, Missouri and met with
Robinson officials. Robinson’s October 17 invoice for $1,749,974 was then past due. By
November 30, Robinson’s October 31 invoice for $2,299,579 would be past due. The
parties continued negotiating into December. Although the negotiations were
complicated, PTC essentially offered to pay the due invoices, but it wanted additional
time to pay and sought 90 days in which to pay all future invoices. Robinson, for its part,
wanted its past-due invoices paid by the start of the year so as not to affect its credit
status with lenders.
The parties began negotiating a “Letter Agreement” between PTC and Robinson
as Robinson’s invoices mounted. Robinson admits that its Vice President, Paul Findlay,
at first wanted a formal written guaranty from PTC stating that PTC would pay
Seamless’s invoices. But Robinson says that PTC representatives said the parties did not
have time to do that because it would require action by the PTC board. Robinson states
(though PTC disagrees) that PTC Chief Financial Officer Thomas Crowley assured
Robinson that PTC would stand behind the payments if Robinson agreed to extend the
payment terms. The final terms of the Letter Agreement included that
As we agreed, you released payment of $1,749,974 on Friday 12-12-14,
receipt of which is hereby acknowledged and we will accept payment of the
balance of $6,190,472.42 on January 2, 2015 by wire transfer in return for
the concessions below. As part of this agreement we would also be willing
to extend your payment terms for all invoices sent after December 1, 2014
to 90 days.
We need you to understand that this extension of credit to PTC does require
the commitment of a significant portion of our available line of credit for
your use and that failure to pay on the part of PTC would be disastrous to
Robinson Construction. As a result our offer is contingent upon the
1) Your acknowledgement that the amount that we have agreed to
postpone receipt of ($6,190,472.42) is due and payable prior to December
31, 2014 per the terms of our existing agreement, and that we have
extended this credit and any future credit by way of payment terms allowed
beyond 30 days expressly in return for the following considerations.
2) Your assurance that Robinson:
a. Will complete Phase 1 construction under the terms of our
existing agreement, except as the payment terms have been modified
by this agreement for invoices sent after December 1, 2014.
b. Robinson will perform the phase 2 project for PTC on the same
terms as we have executed Phase 1 (except as the payment terms
have been modified by this agreement for invoices sent after
December 1, 2014) if PTC elects to construct the Phase 2 portion in
the next 36 months….
3) The burn rate (cost incurred per week) must be reduced effective Jan 1,
2015 to a level below $750K per week and remain at that or below that
level for the duration of both phase 1 and phase 2.
4) Payments made on behalf of PTC Group Holdings Corp. and its
subsidiaries, including PTC Seamless Tube Corp., are paid by PTC Group
Holdings through its central cash management system. It is our intention
that the payment of the remaining amount of $6,190,472.42 will be paid to
Robinson Construction by wire transfer on January 2, 2015.
5) If there is any delay in payment beyond the terms agreed to above
Robinson shall have the right to cease work immediately until the payments
are brought back to terms.
(Letter Agreement at 1-2.) Robinson contends that Crowley replaced Robinson’s request
for a separate written guaranty with the condition shown in Paragraph 4, above, and that
Crowley told Findlay that the language would provide the assurance Findlay needed to
agree to the 90-day extension of credit. By that time (December 16), the December 12
payment had already been made, so there was only one other defined payment due (the
$6,190,472.42 due on January 2). Crowley stated in his deposition that the word
“payments” (plural) in that Paragraph 4 refers to that single $6 million payment, but he
says he does not know why he inserted that provision.
Robinson’s first invoice after the Letter Agreement covered work between
November 23, 2014 and December 6, 2014 and was dated December 12, 2014. Under
the terms of the Letter Agreement, payment was due in 90 days --- on March 12, 2015.
Robinson contends that PTC decided it would put the Hopkinsville project “on
hold,” but PTC allowed Robinson to continue working after making that decision. Then,
Robinson claims, PTC planned to “start a war” to “delay the invoices” according to
PTC’s own documents.
On March 11, one day before Seamless’s payment was due, Seamless sent a letter
to plaintiff advising plaintiff that Seamless disputed plaintiff’s invoice and that it would
not make the payment. The letter did not refer to any particular invoice and did not
explain what Seamless disputed within the invoice. Robinson ceased work and removed
its equipment from the job site on March 12. Since then, neither Seamless nor PTC has
paid Robinson for its work done after November 23, 2014. Seamless applied for
bankruptcy on April 26, 2015 and was dissolved, pursuant to Delaware law, on January
In the meantime, Robinson filed this lawsuit against PTC. PTC moved to dismiss
plaintiff’s first amended complaint for failure to state a claim. The Court partially
granted PTC’s motion on March 31, 2016 --- dismissing three of plaintiff’s claims
including breach of contract, breach of duty of good faith and fair dealing, and quantum
meruit (#27). Plaintiff filed a motion to file a second amended complaint on October 31,
2016, seeking to add Seamless as a defendant, to add a new count to pierce the corporate
veil between Seamless and PTC, and to reassert counts previously dismissed based upon
new allegations in light of facts discovered since the filing of the first amended complaint
(#40). The Court granted the plaintiff’s motion on January 27, 2017 (#65).
Since that time, the Court has denied PTC’s subsequent motion to dismiss.
Further, the Court entered default judgment against Seamless, as Seamless failed to
appear or answer the second amended complaint.
PTC moved for summary judgment. Due to other pending motions and the
impending trial date, the Court initially summarily denied the summary judgment motion
with a memorandum to follow in a Docket Text Order (#153). For the reasons below, the
Court now amends that Order.
Pursuant to Federal Rule of Civil Procedure 56, a district court may grant a motion
for summary judgment if all of the information before the court demonstrates that “there
is no genuine issue as to material fact and the moving party is entitled to judgment as a
matter of law.” Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467 (1962).
The burden is on the moving party. City of Mt. Pleasant, Iowa v. Assoc. Elec. Co-op.,
Inc., 838 F.2d 268, 273 (8th Cir. 1988). After the moving party discharges this burden,
the nonmoving party must do more than show that there is some doubt as to the facts.
Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
Instead, the nonmoving party bears the burden of setting forth specific facts showing that
there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Celotex Corp. v. Catrett, 477 U.S. 317,
In ruling on a motion for summary judgment, the court must review the facts in a
light most favorable to the party opposing the motion and give that party the benefit of
any inferences that logically can be drawn from those facts. Buller v. Buechler, 706 F.2d
844, 846 (8th Cir. 1983). The court is required to resolve all conflicts of evidence in
favor of the nonmoving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541
F.2d 207, 210 (8th Cir. 1976).
Defendant PTC seeks summary judgment on each count against it. Each is
discussed in turn below.
Count I: Breach of Contract
Robinson claims that PTC breached the Letter Agreement by refusing to pay
invoices allegedly owed by Seamless. To prove breach of contract, the plaintiff must
show “(1) the existence and terms of a contract; (2) that plaintiff performed or tendered
performance pursuant to the contract; (3) breach of the contract by defendant; and (4)
damages suffered by plaintiff.” Smith Flooring, Inc. v. Pennsylvania Lumbermens Mut.
Ins. Co., 713 F.3d 933, 941 (8th Cir. 2013) (quoting Keveney v. Missouri Military Acad.,
304 S.W.3d 98, 104 (Mo. banc 2010)). If a contract is ambiguous, the parties may use
parol evidence to determine the intent of the parties. Bank of Kirksville v. Small, 742
S.W.2d 127, 133 (Mo. banc 1987).
As this Court stated in its Memorandum and Order on PTC’s second motion to
dismiss, the Letter Agreement is ambiguous “as to the obligation to make future
payments on the [Hopkinsville] project.” (#103 at 10.) Although there is no express
promise for PTC to pay future invoices, the Letter Agreement refers to “payments”
(plural) and also discusses the extension of credit “to PTC.” The Court further noted that
the parties had competing parol evidence: Robinson’s evidence makes “clear that the
intention of the parties was that PTC was to make the future payments,” and PTC had “its
own parol evidence showing that the intention of the parties was just the opposite.” (Id.)
Now, the parties have filed ample briefs demonstrating just that. Although PTC
picks and chooses from Paul Findlay’s deposition testimony to show that there was no
guaranty, the transcript in fact supports that Findlay believed the opposite. PTC contends
Robinson did not act as though it believed PTC had guaranteed future invoice payments,
but Robinson’s evidence shows otherwise: For example, Robinson cited a February 24,
2015 email to PTC’s Wilkins and Crowley noting that Robinson “provided [PTC] with a
significant extension of credit” and “did this on the assurance that these payments would
be made as agreed to.”
A genuine dispute of material fact exists for trial as to the breach of contract claim.
As a result, summary judgment is denied as to Count I.
Count II: Breach of Duty of Good Faith and Fair Dealing
Robinson contends that PTC breached the implied covenant of good faith by
“plan[ning] not to pay Robinson’s invoice of Dec. 12, 2014 when it became due.” (#47 ¶
69.) “Missouri law implies a covenant of good faith and fair dealing in every contract.”
Kmak v. Am. Cent. Cos., 754 F.3d 513, 516 (8th Cir. 2014) (quotations omitted). PTC
argues that the Letter Agreement did not include a guaranty or promise by PTC to pay
Seamless’s future invoices and that, as such, PTC’s conduct was consistent with the
Agreement and in no way violated the duty of good faith and fair dealing. Because there
is a dispute of fact with respect to whether a guaranty exists, however, this Court cannot
grant summary judgment to PTC on Count II.
Counts III and IV: Fraudulent and Negligent Misrepresentation
Robinson brings claims for fraudulent and negligent misrepresentation against
PTC for PTC’s inducement of Robinson to enter into the Letter Agreement. (#47 ¶ 73, et
First, PTC contends it is entitled to summary judgment on these tort claims
because they are barred by the Economic Loss Doctrine. The economic loss doctrine
bars “recovery of purely pecuniary losses in tort where the injury results from a breach of
a contractual duty.” Dubinsky v. Mermart, LLC, 595 F.3d 812, 819 (8th Cir. 2010). “A
fraud claim independent of the contract is actionable, but it must be based upon a
misrepresentation that was outside of or collateral to the contract, such as many claims of
fraudulent inducement.” AKA Distrib. Co. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th
Cir. 1998). PTC insists that Robinson can point to no actionable misrepresentation
outside the contract and that, as a result, the claims are barred by the Economic Loss
Doctrine. Robinson responds that PTC furnished it with deceptive financial information
regarding its ability to pay Robinson: on December 16, 2014, PTC showed Robinson its
Borrowing Base Certificate, which purported to show that PTC had a net cash availability
of $23.6 million. However, Robinson says that PTC in fact had only $12.3 million
available due to a “fixed charge coverage ratio” under the terms of PTC’s lending
agreement. Robinson says it never would have agreed to the 90-day payment term had it
known that PTC had access to only half the cash it claimed in December. PTC notes that
no one asked it about “covenants affecting PTC’s maximum borrowing capacity,” but
that is, of course, an argument for the jury. Misrepresentations going to one party’s
ability to perform under a contract, so long as not actual contractual terms, do not
implicate the economic loss doctrine. See Web Innovations & Tech. Services, Inc. v.
Bridges to Digital Excellence, Inc., 69 F. Supp. 3d 928, 933 (E.D. Mo. 2014); Superior
Edge, Inc. v. Monsanto Co., 44 F. Supp. 3d 890 (D. Minn. 2014) (applying Missouri
Robinson’s claim here is distinguishable from that relied upon by PTC in Compass
Bank v. Eager Rd. Assocs., LLC, 922 F.Supp.2d 818 (E.D. Mo. 2013). There, the parties’
contract included two conditions precedent --- a $4.15 million “Developer Settlement
Payment” and a “Developer Letter of Credit” for $1.35 million. The plaintiff alleged
defendants had misrepresented that they had $4.15 million in cash and could obtain a
letter of credit for $1.35 million. Because those “misrepresentations” were in fact
contractual terms, this Court dismissed the fraudulent inducement claim under the
economic loss doctrine. Here, however, as in Web Innovations, the “alleged
misrepresentations lack the precise nexus to the contract that was found in Compass
Bank.” 69 F. Supp. 3d at 933.
Robinson also says PTC committed fraud (or was negligent) by continuing to
direct Robinson to work, spending millions of dollars in labor and materials, while
concealing the fact that PTC decided in February 2015 not to pay the invoices Seamless
and PTC continued to receive from Robinson every two weeks. Robinson says it would
not have continued to work on the Hopkinsville project if it had been told the truth in
February 2015. As a result, Robinson worked an additional month before quitting on
March 12, 2015 --- the day after Seamless notified Robinson it would not pay the first
invoice that had just then become due under the Letter Agreement’s new 90-day term.
The Court is satisfied that the Economic Loss Doctrine does not bar plaintiff’s claims.
However, to the extent that Robinson now contends that the events of February 2015
described above constitute an ongoing fraud, the February 2015 events were not pleaded
in Robinson’s Second Amended Complaint, and those events do not have a sufficient
connection to the November and December allegations to constitute an ongoing fraud.
Although the February 2015 events are admissible on other matters, including PTC’s
understanding of the Letter Agreement and the alter ego claims, the connection to the
November and December allegations is too tenuous to call it part of the “ongoing” fraud.
PTC also contends that it is entitled to summary judgment on the merits because
“Robinson does not contend the borrowing base certificate [which showed a net cash
availability of $23.6 million] was false.” (#145 at 16.) Robinson does contend that the
amount was materially misleading because the amount PTC actually had available was
only $12.3 million, which was not enough to comfortably cover the work Robinson was
tasked with over the new 90-day term.
Summary judgment is denied as to Counts III and IV.
Count V: Promissory Estoppel
In Missouri, promissory estoppel permits courts “to enforce a promise on equitable
grounds even if the parties have not entered into a contract.” Reitz v. Nationstar Mortg.,
954 F. Supp. 2d 870, 889 (E.D. Mo. 2013). The elements of a promissory estoppel claim
are “(1) a promise; (2) on which a party relies to his or her detriment; (3) in a way the
promisor expected or should have expected; and (4) resulting in an injustice that only
enforcement of the promise could cure.” Clevenger v. Oliver Ins. Agency, Inc., 237
S.W.3d 588, 590 (Mo. banc 2007). “[T]he promise element cannot be based on
preliminary negotiations and discussions or an agreement to negotiate the terms of a
future contract.” 1861 Grp., L.L.C. v. Wild Oats Mkts., Inc., 728 F. Supp. 2d 1052, 1059–
60 (E.D. Mo. 2010). Further, a party’s reliance on the promise must be reasonable.
Blackburn v. Habitat Dev. Co., 57 S.W.3d 378, 387–88 (Mo. App. 2001).
Robinson argues the evidence shows that Crowley promised PTC would stand
behind future invoice payments if Robinson agreed to extend the payment terms from 30
to 90 days. Robinson extended the credit in reliance on that promise, reliance was
expected, and injustice resulted when Robinson was not paid for its work.
PTC, however, says there is no bona fide dispute that a contract existed between
PTC and Robinson governing the duties between the two parties. PTC argues the
promissory estoppel claim is barred because of that valid contract. PTC also argues that
no reasonable jury could find that PTC made any guaranty in the contract. Thus, PTC
says, it should be granted summary judgment on this claim for alternative relief.
Robinson concedes that a valid contract existed between PTC and Robinson. But
Robinson believes that alternative theories—breach of contract and promissory
estoppel—are proper because this Court found that the Letter Agreement was ambiguous
(#103 at 10). Thus, the jury might find that the Letter Agreement means what Robinson
contends and allow Robinson to recover under the breach of contract theory. Or the jury
might find that the Letter Agreement means what PTC contends but still allow Robinson
to recover under the promissory estoppel theory, based on the promise Crowley made to
Findlay on the phone.
Missouri law does not permit Robinson’s hypothetical. Robinson can recover
under the promissory estoppel theory based only on the promise Crowley made to
Findlay over the phone. But this phone conversation was part of the preliminary
negotiations which culminated in the Letter Agreement. So any promise Crowley made
over the phone was made during preliminary negotiations. This is not allowed under
Missouri law, see 1861 Grp., L.L.C., 728 F. Supp. 2d at 1059–60, and Robinson cannot
establish the promise element. Summary judgment is therefore granted to PTC on Count
Count VI: Quantum Meruit
In Missouri, “[a] quantum meruit claim is based upon a legally implied promise
that a party will pay reasonable compensation for valuable services or materials provided
at the request or with the acquiescence of that party.” Bellon Wrecking & Salvage Co. v.
Rohlfing, 81 S.W.3d 703, 711 (Mo. App. 2002). The implied contract is meant to prevent
unjust enrichment. Id. This quasi-contractual equitable remedy does not apply “if a
‘plaintiff has entered into an express contract for the very subject matter for which he
seeks recovery . . . .’” Affordable Communities of Mo. v. Fed. Nat’l Mortg. Ass’n, 714
F.3d 1069, 1077 (8th Cir. 2013) (quoting Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo.
Robinson alleges that it furnished valuable work and materials for the
Hopkinsville plant. Seamless accepted these benefits without paying for them. Thus,
Robinson claims PTC—which made the implied promise to pay—is liable under a
quantum meruit theory.
PTC argues that the quantum meruit claim fails as a matter of law because valid
contracts governed the duties between Seamless, PTC, and Robinson. Thus, PTC
believes it is entitled to summary judgment.
Robinson counters that the quantum merit claim must be read in the context of the
veil-piercing claim. It also argues that the existence of valid contracts is not fatal because
the jury must interpret the ambiguous contract to determine its scope.
Robinson, however, entered into an express contract for the very subject matter for
which it seeks recovery. Specifically, Robinson seeks damages from unpaid invoices that
it sent to Seamless in connection with the work it did for Seamless. Robinson then
entered into the Letter Agreement with PTC.
Under the terms of the Letter Agreement,
“Payments made on behalf of PTC . . . and its subsidiaries, including [Seamless], are paid
by PTC . . . .” (#115-1 at 6.) Thus, Robinson claims PTC entered into an express
contract for the payments made on behalf of Seamless. Exactly which payments PTC
agreed to make on behalf of Seamless is disputed.
In Affordable Communities of Missouri, the Eighth Circuit reviewed the district
court’s dismissal of plaintiff’s unjust enrichment claim. Affordable Communities of Mo.,
714 F.3d at 1077. The court held that the unjust enrichment claim was properly
dismissed because “plaintiff has entered into an express contract for the very subject
matter for which he seeks recovery,” and “the resolution of this case depends on the
district court’s interpretation of the condemnation provision”—a provision the Eighth
Circuit found ambiguous. Id. at 1076 –77.
Here, as Robinson points out, the jury must interpret the ambiguous contract to
determine its scope; the jury must interpret “payments” as it is used in Paragraph 4 of the
Letter Agreement. Like the dispute in Affordable Communities of Missouri, this dispute
is contractual and hinges on the meaning of an ambiguous contractual provision. See id.
at 1077. Because plaintiff “entered into an express contract for the very subject matter
for which he seeks recovery,” and “the resolution of this case depends on the [jury’s]
interpretation of [‘payments’],” equitable relief is unavailable. Id. at 1077.
Reading the quantum meruit claim in the context of the veil-piercing claim does
not change the analysis—the dispute (the meaning of “payments” in the Letter
Agreement) is still contractual. Quantum meruit would be appropriate if the validity of
the Letter Agreement were disputed. Then, the jury could find that the Letter Agreement
was not enforceable but still allow Robinson to recover under quantum meruit. But that
is not the case here. The dispute over “payments” is contractual, and piercing the
corporate veil would not change the nature of the dispute.1 Thus, summary judgment is
Count VII: Alter Ego
As this Court observed in its June 1 memorandum denying PTC’s motion to
dismiss, “It is a general principle of corporate law deeply ‘ingrained in our economic and
legal systems’ that a parent corporation . . . is not liable for the acts of its subsidiaries.”
If Robinson successfully pierces Seamless’s veil, it can recover from PTC without succeeding
in its quantum meruit claim. This Court entered default judgment against Seamless (#104). If
Robinson successfully pierces the corporate veil, Seamless’s liability from the default judgment
will be imputed to PTC.
U.S. v. Bestfoods, 118 S.Ct. 1876, 1884 (1998) (internal citation omitted). “Limited
liability is the rule, not the exception.” Anderson v. Abbott, 321 U.S. 349, 362 (1944).
The Court also observed, however, “that the corporate veil may be pierced and the
shareholder held liable for the corporation’s conduct when, inter alia, the corporate form
would otherwise be misused to accomplish certain wrongful purposes, most notably
fraud, on the shareholder’s behalf.” Bestfoods, 118 S.Ct. at 62.
Delaware courts consider several factors when deciding whether to disregard the
corporate entity, including: (1) whether the company was adequately capitalized for the
undertaking; (2) whether the company was solvent; (3) whether corporate formalities
were observed; and (4) “whether, in general, the company simply functioned as a facade
for the dominant shareholder.” Doberstein v. G-P Indus., Inc., CV 9995-VCP, 2015 WL
6606484, at *4 (Del. Ch. Oct. 30, 2015) (internal quotation omitted). No single factor is
dispositive, and generally there must be some combination of them, and there must be
“an overall element of injustice or unfairness” present. Id. The injustice, or unfairness,
must “be found in the defendants’ use of the corporate form.” Mobil Oil Corp. v. Linear
Films, Inc., 718 F.Supp. 260, 269 (D. Del. 1989). See also Doberstein, 2015 WL
6606484, at *4 (“[the] wrongful acts must be tied to the manipulation of the corporate
form in order to make veil-piercing justifiable on the grounds of equity.”)
When “assessing whether to disregard the corporate form, Delaware courts
consider whether there has been a showing that the parent/subsidiary relationship would
work an element of fraud, injustice, or inequity.” Fid. Nat’l Info. Services, Inc. v. Plano
Encryption Techs., LLC, CV 15-777-LPS-CJB, 2016 WL 1650763, at *4 (D. Del. Apr.
25, 2016) (citing Mason v. Network of Wilmington, Inc., No. CIV.A. 19434-NC, 2005
WL 1653954, at *3 (Del. Ch. July 1, 2005)). The factors are examined to determine
whether “two entities appear to be legally distinct entities.” Id. If the entities
“effectively operated as one company” then “they must be treated as a single entity to
avoid fraud or a miscarriage of justice.” eCommerce Inds., Inc. v. MWA Intelligence,
Inc., CV 7471-VCP, 2013 WL 5621678, at *28 (Del. Ch. Sept. 30, 2013).
The Court held in the June 1 memorandum and order that Robinson had
adequately pleaded that PTC, through the use of the corporate form, may have
perpetrated an element of fraud, injustice, or inequity through its incorporation and
maintenance of Seamless. PTC contends that Robinson cannot support its alter ego claim
with evidence and that PTC is thus entitled to summary judgment. As shown below, each
of the factors described above presents numerous questions of fact.
Capitalization and insolvency. PTC points out that Seamless was a newly-formed
company with access to tens of millions of dollars in loans and that Robinson knew at the
outset that Seamless could not generate its own revenue until the Hopkinsville plant was
up and running. Further, although Seamless did file for bankruptcy, PTC points out that
it had adequate sources of loans and in fact paid Robinson’s invoices until PTC stepped
in in December.
Robinson characterizes Seamless’s financial status differently and
suggests that it was subject to the whims of PTC, which Robinson says was actually
making all the decisions. PTC, for example, loaned Seamless $63.7 million but also
saddled Seamless with $195 million in debt at its inception. Although PTC states the
$195 million debt is evidence of Seamless’s capitalization, the nature and quantity of the
debt presents a question of fact.
Corporate formalities. The parties dispute whether Seamless ever properly
appointed directors and officers. Instead, it appears that Seamless and PTC shared
offices, (purported) officers, and (purported) directors. Seamless did not hold regular
“board” meetings; its first “board” meeting was two years after its incorporation and
occurred the same day Seamless disputed Robinson’s invoices.
Seamless as a façade. Robinson has set forth evidence that PTC was controlling
and directing every aspect of Seamless’s business, including that Seamless’s business
was discussed at PTC board meetings, that PTC employees controlled day-to-day
operations, and that PTC and not Seamless entered into the Letter Agreement. The
parties dispute whether proper formalities were made with respect to the loans between
the two companies, and PTC points out that Seamless had 19 employees when it filed for
Perpetration of fraud or injustice. Robinson contends that PTC created Seamless,
obliged it to hundreds of millions of dollars in debt, and provided only the capital to pay
bills that PTC chose to pay. Then, Robinson says PTC induced Robinson to extend the
credit terms to 90 days and, when its CEO decided to put the Hopkinsville project on
hold, the 90-day terms allegedly allowed PTC to let Robinson continue working while
PTC prepared for “war” over the invoices. PTC counters that no fraud occurred:
Robinson was paid $22 million for its work, and PTC itself lost $96 million as a
Ultimately, this Court must resolve factual disputes in favor of the non-moving
party. Robert Johnson Grain Co., 541 F.2d at 210. As this Court has stated throughout
this litigation, the disputed facts are ubiquitous, and the Court cannot grant summary
judgment to PTC on this record.
Summary judgment will be granted to defendant PTC on Counts V and VI. As
such, this Court’s docket text order of September 1, 2017 will be amended. Summary
judgment is denied as to the remaining Counts.
IT IS HEREBY ORDERED that this Court’s September 1, 2017 order is
IT IS FURTHER ORDERED that defendant’s motion for summary judgment is
GRANTED in part and DENIED in part.
IT IS FINALLY ORDERED that summary judgment is granted to defendant
PTC on Counts V and VI and denied as to all remaining counts.
Dated this 8th day of September, 2017.
STEPHEN N. LIMBAUGH, JR.
UNITED STATES DISTRICT JUDGE
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