KORDEV LLC v. EAGLE HEMP, LLC et al

Filing 60

MEMORANDUM ORDER granting 29 Motion to Dismiss for Failure to State a Claim. KorDev LLC's claim against Trim Life Labs LLC is hereby dismissed with prejudice. Signed by Judge J. Nicholas Ranjan on 1/17/2023. (pak)

Case 2:21-cv-01341-NR Document 60 Filed 01/17/23 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
KORDEV LLC,
Plaintiff,
v.
EAGLE HEMP, LLC and TRIM LIFE
LABS LLC,
Defendants.

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2:21-cv-1341-NR

MEMORANDUM ORDER
Before the Court is Defendants’ motion to dismiss Plaintiff KorDev LLC’s
breach-of-contract claim against Trim Life Labs, LLC. ECF 29.
This is the second time that Defendants have sought dismissal of the claim
against Trim Life. The first time, the Court granted the motion, explaining that
KorDev failed to plead sufficient factual allegations to support its “alter ego” or
“enterprise or single-entity” theories of liability against Trim Life. ECF 25. The
Court instructed KorDev to amend its complaint to make clear its theory of liability
and “plead facts regarding, among other things, unified administrative control,
undercapitalization, similar creditors, absence of corporate records, failure to follow
corporate formalities, substantial intermingling of corporate affairs, and the use of
the corporate form to perpetuate a fraud.” Id. KorDev has now filed its second
amended complaint, and upon a close inspection of the revised allegations, it is clear
that KorDev’s theory of liability against Trim Life is fundamentally flawed.
This dispute arises out of the sale of a company’s (Well Being Labs, LLC) assets
to Defendant Eagle Hemp, LLC.

That transaction was governed by an Asset

Purchase Agreement. ECF 27, ¶¶ 41-42; ECF 27-4. As part of the APA, Eagle Hemp
agreed to enter into an exclusive Master Services Agreement with KorDev to develop
customer service management software for Eagle Hemp. ECF 27, ¶ 42; ECF 27-4, §
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1.02. That’s the contract that KorDev alleges that Defendants breached. ECF 27, ¶¶
59, 92-104. The only parties to the MSA, however, were KorDev and Eagle Hemp—
Trim Life was not a party. ECF 27-4. KorDev agrees with that assessment, as it
must. ECF 32, p. 5 (“KorDev agrees that Trim Life is not an independent party to
the MSA[.]”). So, to establish liability against Trim Life, KorDev claims that it is
entitled to the equitable remedy of veil piercing. The Court disagrees.
The core problem is that KorDev has not, and cannot, articulate a viable veilpiercing theory. KorDev appears to rely on the “single-entity theory.” ECF 32, pp. 35. “Under the enterprise or single-entity theory, two or more business entities under
some level of common ownership or control are treated as a single entity—or common
enterprise—for the purpose of liability.” Seven Springs Mountain Resort, Inc. on

behalf of Sikirica v. Hess, No. 21-6, 2022 WL 1004178, at *4 (W.D. Pa. Apr. 4, 2022)
(Haines, J.). For Eagle Hemp and Trim Life to be treated as a single entity, KorDev
must show “(1) identity of ownership, (2) unified administrative control, (3) similar
or supplementary business functions, (4) involuntary creditors, and (5) insolvency of
the corporation against which the claim lies.” Mortimer v. McCool, 255 A.3d 261, 271
(Pa. 2021) (cleaned up). But this test is only meant to “supplement[], not supplant[],
[Pennsylvania’s] existing piercing standard with additional, context-specific
considerations,” while the “threshold inquiry” remains “the presence of piercingworthy conduct by controlling actors or alter egos.” Id. at 284. KorDev doesn’t clear
this initial hurdle, let alone plead facts to support a finding of the Mortimer factors.
At the outset, KorDev’s problem is that it is trying to pierce the wrong entity.
KorDev alleges, in conclusory fashion, that Trim Life “was and remains
undercapitalized.” ECF 27, ¶ 47. Trim Life’s status is irrelevant, though. Eagle
Hemp is the corporate entity bound by the MSA and the entity that is primarily liable
to KorDev. And KorDev has not alleged any “piercing worthy conduct” by Eagle

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Hemp. 1
Nor has KorDev pled any facts establishing “involuntary creditors” or the
“insolvency” of Eagle Hemp—two of the key Mortimer factors. See Mortimer, 255
A.3d at 271 (explaining that “insolvency of the corporation against whic h the c laim

lies ” is relevant to the analysis for enterprise liability (emphasis added)). Based on
the allegations in the second amended complaint, this Court has no reason to believe
that Eagle Hemp, if it is ultimately found liable, could not satisfy a judgment against
it. So that is the remedy that KorDev must pursue—recovering under a breach-ofcontract theory against Eagle Hemp, the corporate entity that is actually a party to
the subject contract.
KorDev tries to save its claim against Trim Life by arguing it just needs to
engage in some discovery to find the facts that would support its theory of liability.
In support of that argument, KorDev cites to Seven Springs, and points out that the
plaintiff there had “undergone extensive discovery in various prior actions—including
a bankruptcy action that exposed many of the financial maneuverings of the singleenterprise group[.]” ECF 32, p. 4. That’s true, but only highlights the core problem
with KorDev’s claim—Eagle Hemp is no t , at least right now and as pled, insolvent
and incapable of satisfying any judgment against it.

In Seven Springs, the

defendants were accused of abusing the corporate form by draining the liable entity
of all its assets to avoid satisfying the judgment against it while continuing to thrive
in business—a textbook example of piercing-worthy conduct. 2022 WL 1004178, at
*7-9. No similar conduct is alleged here. And KorDev, of course, cannot simply ask
for discovery to see if that might help it find a veil-piercing claim. If KorDev cannot
plead the appropriate facts at the outset to state a veil-piercing claim, that claim must
Although the Court focuses on the “single-enterprise theory” in this order, this
pleading defect identified by the Court is fatal to KorDev’s ability to recover against
Trim Life under any veil-piercing theory.

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be dismissed. Based on the allegations in the second amended complaint, there is no
basis for keeping Trim Life in this case. 2
Because of the fundamental issues outlined above, and the fact that KorDev
has already had two chances to amend its complaint, the Court finds that allowing
KorDev leave to amend would be futile and therefore will dismiss the claim against
Trim Life with prejudice. See Budhun v. Reading Hosp. & Med. Ctr., 765 F.3d 245,
259 (3d Cir. 2014) (although leave to amend should be freely granted “when justice
so requires ... a court may deny leave to amend when such amendment would
be futile” (internal quotations omitted)).
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AND NOW, this 17th day of January, 2023, Defendants’ Motion to Dismiss
is hereby GRANTED.

KorDev’s claim against Trim Life is dismissed with

prejudice.
BY THE COURT:
/s/ J. Nicholas Ranjan
United States District Judge

KorDev’s unsupported argument that its claim against Trim Life is “derivative”
against Eagle Hemp doesn’t save the day. See ECF 32, p. 5. To state a derivative
claim, KorDev must identify and state a distinct cause of action that arises from the
breach-of-contract claim against Eagle Hemp. KorDev has not done so.
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