SHUMAN v. LAUREN KIM, INC. et al

Filing 56

OPINION. Signed by Judge Robert B. Kugler on 3/30/2015. (tf, )

NOT FOR PUBLICATION

(Doc. No. 36)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
_________________________________________
:
KEVIN SHUMAN,
:
:
Plaintiff,
:
Civil No. 14-251 (RBK/JS)
:
v.
:
:
OPINION
LAUREN KIM, INC. et al.,
:
:
Defendants.
:
_________________________________________ :
KUGLER, United States District Judge:
This matter arises out of the alleged injury to Plaintiff Kevin Shuman (“Plaintiff”)
while working as a seaman and crew member on a fishing vessel. Presently before the
Court is the motion of Defendants Lauren Kim, Inc., Gary Osmundsen, Roy Osmundsen,
and The F/V Miss Laurie Louise (collectively “Defendants”) to dismiss the fourth cause
of action of Plaintiff’s Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6). For the
reasons expressed herein, Defendants’ motion will be GRANTED.
I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Plaintiff alleges that he suffered an injury in October 2011 while working as a

seaman onboard the commercial fishing vessel, Miss Laurie Louise. (Am. Compl. ¶ 24.)
Miss Laurie Louise is apparently owned by Lauren Kim, Inc, whose President is Gary
Osmundsen. (Am. Compl. ¶¶ 4-5.) On April 18, 2013, Debbie Flo, Inc., the vessel’s
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operator and Plaintiff’s employer, filed a declaratory judgment action in this Court
seeking to terminate its obligation to pay maintenance and cure for Plaintiff’s injuries.
(See Civ. No. 13-2650, Doc. No. 1.)1 On January 13, 2014, Plaintiff filed his Complaint
in this matter against Lauren Kim, Gary Osmundsen, Roy Osmundsen, and Miss Laurie
Louise,2 alleging negligence and unseaworthiness, maintenance and cure, punitive
damages, and a claim for “piercing of the corporate veil.” (Doc. No. 1.) Defendants
moved to dismiss the fourth cause of action, piercing of the corporate veil, and Plaintiff
cross-moved for leave to amend his Complaint. (Doc. Nos. 17, 23). Oral argument was
heard on August 18, 2014, and Plaintiff’s motion to amend his Complaint was granted.
(Doc. No. 28.) Plaintiff filed his Amended Complaint that same day, with most
amendments pertaining to the fourth cause of action.3 (Doc. No. 27.) Defendants now
move to dismiss this cause of action from Plaintiff’s Amended Complaint. (Doc. No.
36.)
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss an action for

failure to state a claim upon which relief can be granted. When evaluating a motion to
dismiss, “courts accept all factual allegations as true, construe the complaint in the light
most favorable to the plaintiff, and determine whether, under any reasonable reading of

1

The present action has been consolidated with the declaratory judgment action for discovery and case
management purposes only. (See Doc. No. 7.)
2

The original and Amended Complaints also include John Does and Doe Corporations as defendants.

3

The Amended Complaint also removes the early paragraphs naming Roy Osmundsen as a defendant and
describing his role in various businesses, yet refers to Roy Osmundsen as a defendant under the veilpiercing cause of action. The Court thus treats Roy Osmundsen as a defendant in this case.

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the complaint, the plaintiff may be entitled to relief.” Fowler v. UPMC Shadyside, 578
F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233
(3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it contains
sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007).
To make this determination, a court conducts a three-part analysis. Santiago v.
Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must “tak[e] note of
the elements a plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S. at 675).
Second, the court should identify allegations that, “because they are no more than
conclusions, are not entitled to the assumption of truth.” Id. at 131 (quoting Iqbal, 556
U.S. at 680). Finally, “where there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they plausibly give rise to an
entitlement for relief.” Id. (quoting Iqbal, 556 U.S. at 680). This plausibility
determination is a “context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Iqbal, 556 U.S. at 679. A complaint cannot
survive where a court can only infer that a claim is merely possible rather than plausible.
Id.4

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In considering a Rule 12(b)(6) motion to dismiss, a court may consider only the allegations of the
complaint, documents attached or specifically referenced in the complaint if the claims are based on those
documents, and matters of public record. In re Bayside Prison Litig., 190 F. Supp. 2d 755, 760 (D.N.J.
2002). The Court notes that Plaintiff has included the declaration of attorney Jacob Shisha in his
Opposition. Mr. Shisha’s declaration references attached exhibits, some of which, but not all of which, are
matters of public record. To the extent that it relies on these exhibits at all, the Court will only consider
those documents that are matters of public record. In addition, Mr. Shisha’s declaration is rife with legal
conclusions and statements not within his personal knowledge. Local Rule 7.2(a) provides that
declarations “shall be restricted to statements of fact within the personal knowledge of the signatory.
Arguments of the facts and the law shall not be contained in such documents. Legal arguments and

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III.

DISCUSSION
The Court begins from the premise that business entities are formed for the very

purpose of insulating individual owners and related companies from liability. See New
Jersey Dept. of Env. Protection v. Ventron Corp., 94 N.J. 473, 500 (N.J. 1983). Under
New Jersey law, a plaintiff may state a claim for piercing the corporate veil by showing:
“(1) one corporation is organized and operated as to make it a mere instrumentality of
another corporation, and (2) the dominant corporation is using the subservient
corporation to perpetrate fraud, to accomplish injustice, or to circumvent the law.” Bd. of
Trs. of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 171–72 (3d
Cir. 2002) (citing Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145, 149 (3d Cir.
1988)). To survive a motion to dismiss, a plaintiff must allege that the parent
“completely dominate[s] the finances, policy, and business practice with respect to the
subject transaction” to such a degree that the subsidiary has “no separate mind, will, or
existence of its own.” Craig, 843 F.2d at 150.5 The relevant factors in this inquiry
include:
gross undercapitalization ... failure to observe corporate formalities, non-payment
of dividends, the insolvency of the debtor corporation at the time, siphoning of the
funds of the corporation by the dominant stockholder, non-functioning of other
officers or directors, absence of corporate records, and the fact that the
corporation is merely a façade for the operations of the dominant stockholder or
stockholders.

summations in such documents will be disregarded by the Court….” To the extent that Mr. Shisha’s
declaration contains legal conclusions, these portions will be ignored. Only factual matters within his
personal knowledge shall be considered by this Court.
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Liability under a veil-piercing theory is not limited to a parent-subsidiary relationship. Bd. of Trs. of
Teamsters Local 863 Pension Fund, 296 F.3d at 172 n.9 (citing In re Bldgs. by Jamie, Inc., 230 B.R. 36, 42
(D.N.J. 1998)) (“[T]here appears to be no reason to limit the application of the rule to parent-subsidiary
relationships.”)

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Id. (quoting Am. Bell, Inc. v. Fed'n of Tel. Workers, 736 F.2d 879, 886 (3d Cir. 1984)).
“With respect to the second element, a plaintiff need not prove common law fraud but
instead must demonstrate that the defendants, via the corporate form, perpetrated a fraud,
injustice, or the like, a less exacting standard.” State Capital Title & Abstract Co. v.
Pappas Bus. Servs., LLC, 646 F. Supp. 2d 668, 679 (D.N.J. 2009) (internal quotations
omitted). Even in instances where one individual shareholder or director dominates the
corporate entity, “liability generally is imposed only when the [dominant party] has
abused the privilege of incorporation by using the [corporate form] to perpetrate a fraud
or injustice, or otherwise to circumvent the law.” Ventron, 94 N.J. at 501.
Here, Plaintiff has not sufficiently pled facts to support the elements of piercing
the corporate veil. With respect to the first element, Plaintiff asserts that Debbie Flo and
Defendant Lauren Kim “combined and operated their affairs in such a way as to lose the
protection of separate corporate and individual entities. . . .” 6 Am. Compl. ¶ 37. Plaintiff
has dutifully included allegations that “[t]he named corporate entities failed, to keep
proper corporate records, hold shareholder meets (sic), pay dividend (sic).” Am. Compl.
¶ 43. Plaintiff also alleges that the assets of the defendant corporations have been
“commingled.” Am. Comp. ¶ 38. Plaintiff further claims that the defendant corporations

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The Court notes that Debbie Flo is not a Defendant in this action. Moreover, as noted above, see supra
note 3, no facts are alleged in the Amended Complaint regarding Roy Osmundsen’s official role relating to
a specific defendant or company. Rather, in the Amended Complaint, Plaintiff asserts generally that Roy
and Gary Osmundsen “are officers and director (sic) of all the . . . defendants and Debbie Flo.” Am. Compl.
¶ 44. It can only be gleaned through the parties’ submissions that Roy Osmundsen is the President of
Debbie Flo. The Court fails to see how Roy Osmundsen could be liable on a theory of corporate veilpiercing when the corporation that would need its veil pierced is not a party to this litigation. In the related
matter, Plaintiff asserts a counter-claim against Debbie Flo for piercing the corporate veil, see Civ. No. 132650, Doc. No. 44, but these cases have been consolidated for the purposes of discovery and case
management only; the current motion before the Court relates only to Shuman v. Lauren Kim, Civ. No. 14251.

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are “undercapitalized,” Id.; but the only fact regarding undercapitalization concerns
Debbie Flo and the allegation that it has no assets in effect, because its only assets are the
scallops that they catch and then immediately sell, Am. Compl. ¶ 39. It is possible that
these allegations, if true, could support a bare-bones showing that one company was the
instrumentality of the other.
However, the Court need not conclusively determine that these allegations
support the first element of veil-piercing liability because it finds the Complaint lacks any
factual allegations to support the second element of the claim. The only assertion of
fraud or wrongdoing in the Amended Complaint is Plaintiff’s allegation that Roy and
Gary Osmundsen “have created the . . . entities to avoid their legal obligations, to avoid
creditors, to shield assets from potential liability to plaintiff and others which was done to
defeat the interests of justice.” Am. Compl. ¶ 44. Plaintiff does not plead a single fact in
support of this conclusory allegation. The solitary contention that the Osmundsens
“withdrew funds” from Debbie Flo “so that they would deprive plaintiff the ability to
collect the sums owed him,” Am. Compl. ¶42, does not satisfy the plausibility standard
by which this Court must judge a Rule 12(b)(6) motion to dismiss, and moreover offers
yet another mere conclusion. “[A] complaint must do more than allege the plaintiff’s
entitlement to relief. A complaint has to ‘show’ such an entitlement with its facts.”
Fowler, 578 F.3d at 211. This the Amended Complaint does not do. Therefore, dismissal
is appropriate.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss Plaintiff’s fourth cause

of action, piercing of the corporate veil, will be GRANTED. Plaintiff may file a motion
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for leave to amend his Complaint to cure the deficiencies noted herein within the
requisite time period stated in the Order accompanying this Opinion. See Alston v.
Parker, 363 F.3d 229, 235 (3d Cir. 2004) (“[E]ven when a plaintiff does not seek leave to
amend, if a complaint is vulnerable to 12(b)(6) dismissal, a District Court must permit a
curative amendment, unless an amendment would be inequitable or futile.”) (emphasis
added); see also Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 657 n.3 (3d Cir. 2004)
(“The fact that a complainant has had ‘three bites at the apple’ is not itself a justification
for dismissing a complaint with prejudice.”) An accompanying Order shall issue.

Dated:

3/30/2015

s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge

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