Ackison Surveying, LLC v. Focus Fiber Solutions, LLC et al
ORDER granting 22 Motion to Dismiss for Failure to State a Claim. FTE is hereby DISMISSED from the case. Signed by Judge Algenon L. Marbley on 3/13/2017. (cw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
ACKISON SURVEYING, LLC,
FOCUS FIBER SOLUTIONS, LLC, et al.,
Case No. 2:15-CV-2044
JUDGE ALGENON L. MARBLEY
Magistrate Judge Kemp
OPINION & ORDER
This matter is before the Court on Defendant FTE Networks, Inc. (“FTE”)’s motion to
dismiss for failure to state a claim. (Doc. 22.) FTE is the parent company of Defendant Focus
Fiber Solutions, LLC (“Focus”). (Doc. 1 at ¶ 3.) Plaintiff Ackison Surveying, LLC (“Ackison”)
brought a variety of claims against Focus, and included FTE in an alter ego/veil piercing claim.
(Id. at ¶¶ 14-49.) For the following reasons, FTE’s motion to dismiss Ackison’s alter ego/veil
piercing claim is GRANTED, and Ackison’s related motion to amend its complaint is DENIED.
In 2012, Focus engaged Ackison as a subcontractor to provide engineering services on a
telecommunications project (the “SOVA project”). (Doc. 1 at ¶¶ 6-8.) Ackison performed under
the contract, and invoiced Focus for its services. (Id. at ¶¶ 6-12.) Focus failed to pay all of
Ackison’s invoices, and Focus now owes Ackison $269,631.36. (Id. at ¶ 13.)
On May 15, 2015, Ackison sued Focus and FTE. (Doc. 1.) Ackison named Focus in
Counts I through V for breach of contract, action on account, violation of Ohio’s Prompt Pay
Act, unjust enrichment, and fraudulent transfer. (Id. at ¶¶ 14-46.) In Count VI for alter ego/veil
piercing, Ackison also seeks to hold FTE, Focus’s parent company, liable for Counts I through
V. (Id. at ¶¶ 3, 47-49.)
Three paragraphs of the complaint address the alleged alter ego relationship between
Focus and FTE:
FTE exercises complete control over its subsidiary entities, including Focus,
forming them and merging them out of existence at will, and managing their dayto-day activities. As further alleged herein, FTE is the alter ego of Focus, controls
it, and dominates it entirely. There is no meaningful distinction between Focus
and FTE when it comes to carrying out its operations and dealing with third
parties such as Ackison. (Id. at ¶ 3.)
FTE has ultimate responsibility for each of the actions alleged herein. FTE has
exercised and continues to exercise complete control over Focus, including in
connection with the facilitation of fraudulent, illegal, and unlawful acts, including
by preventing Focus from paying Ackison what it is owed and by causing Focus
to fraudulently transfer and conceal funds to which Ackison is entitled. (Id. at
Focus has no separate mind, will, or existence, and is dominated and controlled
solely by FTE. As alleged herein, FTE treats itself and Focus as one and the same
company, and carries out Focus business through FTE, and vice versa. Because
FTE is merely the alter ego of Focus, Ackison is entitled to “pierce the veil”
between them and hold Focus and FTE jointly and severally liable for the
damages alleged herein. (Id. at ¶ 49.)
FTE moved to dismiss Count VI for failure to state a claim for alter ego/veil piercing.
(Doc. 22.) In response, Ackison argues that its complaint, as a whole, sufficiently states a claim
as to Count VI. (Doc. 27 at 3-8.) Specifically, Ackison argues that the foregoing allegations are
not conclusory, and that its allegations in the fraudulent transfer claim push the veil piercing
claim into the realm of plausibility. (Id. at 5-7.) Alternatively, Ackison seeks to amend its
complaint to include “additional allegations that would cure any purported deficiencies raised by
FTE as to Plaintiff’s veil piercing claim.” (Id. at 9.) Ackison’s proposed First Amended
Complaint adds two allegations “upon information and belief,” and explains financial hardships
it has suffered as a result of “Defendants’ pattern of defrauding subcontractors, including the
failure to pay Ackison in full[.]” (Id. at ¶¶ 3, 16, 51-52.) The allegations “upon information and
belief” are: (a) “Defendants share the same executives, officers, and managers, and carry on
business from the same accounts” (id. at ¶ 3); and (b) “Defendants engage[ ] in . . . a pattern of
defrauding subcontractors whereby Defendants fraudulently string along subcontractors . . .
promising to make payments they had no intention to make. Numerous times . . ., officers and
agents of both Focus and FTE affirmed the companies’ obligations to Ackison and promised to
pay Ackison what it is owed, but full payment was never made.” (Id. at ¶ 16; see also id. at ¶
On October 12, 2016, FTE filed a reply in support of its motion to dismiss and in
opposition to Ackison’s motion in the alternative to amend its complaint. (Doc. 31.) The
motions are ripe for review.
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), the Court may dismiss a cause of action
for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Such a
motion “is a test of the plaintiff’s cause of action as stated in the complaint, not a challenge to the
plaintiff’s factual allegations.” Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir.
2005). Thus, the Court “must construe the complaint in the light most favorable to the plaintiff”
and “accept all well-pled factual allegations as true[.]” Ouwinga v. Benistar 419 Plan Servs.,
Inc., 694 F.3d 783, 790 (6th Cir. 2012). If more than one inference may be drawn from an
allegation, the Court must resolve the conflict in favor of the plaintiff. Mayer v. Mylod, 988 F.2d
635, 638 (6th Cir. 1993). The Court cannot dismiss a complaint for failure to state a claim
“unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.” Id.
Generally, a complaint must contain a “short and plain statement of the claim showing
that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The allegations need not be
detailed but must “give the defendant fair notice of what the claim is, and the grounds upon
which it rests.” Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir. 2008) (quoting Erickson v.
Pardus, 551 U.S. 89, 93 (2007)). A complaint’s factual allegations “must be enough to raise a
right to relief above the speculative level,” and must contain “enough facts to state a claim to
relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570
(2007). A claim is plausible when it contains “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). The Court is not required to accept as true mere legal conclusions
unsupported by factual allegations. Id. (citing Twombly, 550 U.S. at 555).
Because Ackison’s alter ego/veil piercing claim sounds in fraud, these allegations must
also satisfy Federal Rule of Civil Procedure 9(b), which requires that “the circumstances
constituting fraud … be stated with particularity.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559,
563 (6th Cir. 2003) (citing Fed. R. Civ. P. 9(b)); MedChoice Financial, LLC v. ADS Alliance
Data Systems, Inc., 857 F.Supp.2d 665, 676 (S.D. Ohio 2012) (“When a cause of action seeks to
pierce the corporate veil on the basis of fraud, it is subject to the heightened pleading
requirements of Rule 9(b).”). This particularity requirement “reflects the rulemakers’ additional
understanding that, in cases involving fraud and mistake, a more specific form of notice is
necessary to permit a defendant to draft a responsive pleading.” United States ex rel. SNAPP,
Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th Cir. 2008) (internal quotation marks omitted).
To satisfy Rule 9(b), a plaintiff must “allege the time, place, and content of the alleged
misrepresentation” as well as “the fraudulent scheme; the fraudulent intent of the defendants; and
the injury resulting from the fraud.” Bennett v. MIS Corp., 607 F.3d 1076, 1100 (6th Cir. 2010)
(internal citations omitted).
Under Ohio law, the Court may disregard the corporate form only when: “(1) control
over the corporation by those to be held liable was so complete that the corporation has no
separate mind, will, or existence of its own, (2) control over the corporation by those to be held
liable was exercised in such a manner as to commit fraud or an illegal act [or a similarly
unlawful act] against the person seeking to disregard the corporate entity, and (3) injury or unjust
loss resulted to the plaintiff from such control and wrong.” Belvedere Condominium Unit
Owners’ Assn. v. R.E. Roark Cos., Inc., 617 N.E.2d 1075, 1086 (Ohio 1993); Dombroski v.
WellPoint, Inc., 895 N.E.2d 538, 545 (Ohio 2008). Each of these bases “is an independent
ground of recovery that must be specifically pleaded. As such, each element of the Belvedere
test must be sufficiently well-pleaded ‘showing that the pleader is entitled to relief’[.]” Cap City
Dental Lab, LLC v. Ladd, No. 2:15-cv-2407, 2016 WL 4573993, *11 (S.D. Ohio Sept. 1, 2016)
(internal citation omitted). Generally, a parent company is not liable for the acts of its
subsidiaries. In re Gas Natural, Inc., No. 1:13-cv-02805, 2015 WL 3557207, at *15 (N.D. Ohio
June 4, 2015) (citing United States v. Bestfoods, 524 U.S. 51, 61 (1998)).
A. Ackison has Failed to Allege FTE’s Control Over Focus
The first prong of the Belvedere-Dombroski test is “a restatement of the alter-ego
doctrine,” which requires that plaintiff show that the parent and the subsidiary are
“fundamentally indistinguishable.” Taylor Steel, Inc. v. Keeton, 417 F.3d 598, 605 (6th Cir.
2005). To make this determination, Ohio courts have considered a range of factors, such as:
(1) grossly inadequate capitalization, (2) failure to observe corporate formalities,
(3) insolvency of the debtor corporation at the time the debt is incurred, (4) [the
parent] holding [itself] out as personally liable for certain corporate obligations,
(5) diversion of funds or other property of the company property [ ], (6) absence
of corporate records, and (7) the fact that the corporation was a mere facade for
the operations of the [parent company].
Id. The Court does not accept as true allegations that state legal conclusions, such as
‘[Defendant] is the alter ego of [its parent]’ and ‘[the parent’s] control of [Defendant] was so
complete that [Defendant] had no separate mind, will, or existence of its own’[.]” Cleveland
Thermal Steam Distribution, LLC v. Carlyle Leader, LLC, No. 1:14–CV–02709, 2015 WL
2066550, at *3 (N.D. Ohio May 4, 2015); Cap City Dental Lab, 2016 WL 4573993 at *12
(“Similarly, the ‘information and belief’ allegations that the Ladds ‘exercised total dominion and
control over the corporate defendants’ and that the corporate defendants ‘operated as the alter
ego of the individual defendants’ . . . are wholly unsupported by any concrete factual allegations,
and are thus little more than conclusory statements. As such, these allegations are not sufficient
to plausibly support an inference of the requisite level of control.”)
Ackison’s veil piercing claim is rife with such legal conclusions. In fact, in neither the
complaint nor the proposed amended complaint has Ackison pointed to a single fact supporting
these conclusions. The closest Ackison comes to stating a fact is the allegation in its proposed
amended complaint that, “upon information and belief, . . . [n]umerous times . . ., officers and
agents of both Focus and FTE affirmed the companies’ obligations to Ackison and promised to
pay Ackison what it is owed, but full payment was never made.” (Doc. 27-1 at ¶ 16.) Because
this allegation goes to Ackison’s claimed “pattern of defrauding subcontractors…”, Federal Rule
of Civil Procedure 9(b) requires that it be pled with particularity. Ackison has not met this
burden, because it has alleged neither “the time, place, and content of the alleged
misrepresentation” nor “the fraudulent scheme; the fraudulent intent of the defendants; and the
injury resulting from the fraud.” Bennett, 607 F.3d at 1100.
Ackison has failed to meet prong one of the Belvedere-Dombroski test.
B. Ackison has Failed to Allege an Underlying Illegal, Unlawful, or Similar Act
Likewise, Ackison has failed to allege facts sufficient to meet the second prong of the
Belvedere-Dombroski test: that FTE’s control over Focus was exercised so as to commit any
illegal, fraudulent, or similar act. Dombroski, 895 N.E.2d at 545.
Ackison’s claims—that Ackison provided services to Focus and that Focus failed to pay
all of Ackison’s invoices—are premised on a breach of contract. (Doc. 1; Doc. 27-1.) Breach of
contract claims, without more, cannot satisfy prong two. Transition Healthcare Associates, Inc.
v. Tri-State Health Investors, LLC, 306 F. Appx. 273, 282 (6th Cir. 2009) (“Mere breach of
contract is insufficient to satisfy prong two, and that is the most that Transition has presented.”);1
Ragen v. Hancor, Inc., 920 F.Supp.2d 810, 825–26 (N.D. Ohio 2013) (“Mr. Ragen points to
several cases to support his position, but none stands for the concept that the extreme remedy of
piercing the corporate veil can follow complete shareholder control combined with a contract
Ackison argues that its fraudulent transfer allegations are “inseparable from the
allegations surrounding the contract dispute” and that it has “satisfie[d] its obligations at this
stage by including a well-plead claim for fraudulent transfer under the Ohio Uniform Transfer
Act[.]” (Doc. 27 at 6-7.)
Ackison is mistaken. First, Ackison’s fraudulent transfer claim contains no reference to
FTE; it includes FTE only by way of the alter ego claim contained in Count VI. (Doc. 1 at ¶¶
Ackison attempts to distinguish Transition Healthcare by pointing out that Transition Healthcare was in
the posture of summary judgment. (Doc. 27 at 6-7.) No matter the posture, however, breaches of
contract alone do not satisfy prong two of the Belvedere-Dombroski test.
42-49; Doc. 27-1 at 45-53.) Second, Ohio’s Fraudulent Transfer Statute (Ohio Revised Code
Section 1336.04) “sets a high bar of proving that a transfer was made with either the intent to
avoid a creditor or the knowledge that it would leave the company without sufficient assets for a
current or upcoming transaction.” Ragen, 920 F.Supp.2d at 826. Ackison has pointed to no
specific facts, as opposed to conclusory allegations, that a transfer was even made, let alone with
the intent to avoid creditors.2
Moreover, because Ackison’s fraudulent transfer claim alleges “actual intent to hinder,
delay, or defraud creditors[,]” it must meet the particularity requirements of Federal Rule of Civil
Procedure 9(b). Cap City Dental Lab, 2016 WL 4573993 at *13. Accordingly, Ackison must
“provide more than a mere recitation of the statutory elements” and “identify the set of facts
upon which [it] seeks to recover.” Id. It must, at the very minimum, “reasonably identify the
types of transfers sought to be avoided[.]” Id. (internal quotation omitted).
Ackison has failed to do this. The meat of Ackison’s fraudulent transfer claim contains
no facts: “Upon information and belief, Focus transferred the funds it received to an insider or
third party with actual intent to defraud Ackison and delay or avoid payment to him, or without
receiving a reasonably equivalent value for the funds.” (Doc. 1 at ¶ 45; Doc. 27-1 at ¶ 48.)
Consequently, Ackison “has not met the standard for piercing the corporate veil by showing a
fraudulent transfer.” See Ragen, 920 F.Supp.2d at 826 (granting summary judgment to
defendant where dispute “sounds in a contract dispute, and the elements of a fraudulent transfer
(and the elements of Belvedere) are not met.”); In re Regional Diagnostics, 372 B.R. 3, 17-18
(N.D. Ohio 2007) (finding fraudulent transfer allegations not to meet Rule 9(b) standard when
plaintiff has failed to make any “concise statement of any misrepresentation, how the statement
Ackison makes no allegation that any hypothetical transfer left Focus without sufficient assets for a
current or upcoming transaction.
was false, to whom it was made and the time and place that the misrepresentation occurred[,]” or
even to “identify the transactions alleged to be fraudulent.”)
C. The Court need not Address Resulting Injury or Unjust Loss
Because Ackison has failed to meet the first two elements of the Belvedere—Dombroski
test, the Court need not address this third factor.
D. Allowing Ackison to Amend its Complaint would be Futile
Ackison seeks to amend its complaint to “cure any purported deficiencies raised by FTE
as to Plaintiff’s veil piercing claim.” (Doc. 27 at 9.) Ackison’s proposed amended complaint is
attached to Ackison’s opposition to FTE’s motion to dismiss. (Doc. 27-1.) Because the Court
determined that even Ackison’s proposed amended complaint fails to state a veil piercing claim,
allowing Ackison to submit its proposed amended complaint would be futile. As such, the Court
DENIES Ackison’s motion to amend its complaint. See Herhold v. Green Tree Servicing, LLC,
608 F. Appx. 328, 335 (6th Cir. 2015) (“the district court did not err by denying Herhold’s
motion to amend her complaint on the basis of futility.”)
For the above reasons, FTE’s Motion to Dismiss Ackison’s veil piercing claim (Count
VI) is GRANTED. (Doc. 22.) Because, without the veil piercing claim, Ackison has no claims
against FTE, FTE is hereby DISMISSED from the case.
IT IS SO ORDERED.
/s/ Algenon L. Marbley___
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: March 13, 2017
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