Antaeus Enterprises et al. v. Davidson

2011 DNH 050
CourtDistrict Court, D. New Hampshire
DecidedMarch 29, 2011
DocketCV-10-126-JL
StatusPublished

This text of 2011 DNH 050 (Antaeus Enterprises et al. v. Davidson) is published on Counsel Stack Legal Research, covering District Court, D. New Hampshire primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Antaeus Enterprises et al. v. Davidson, 2011 DNH 050 (D.N.H. 2011).

Opinion

Antaeus Enterprises et a l . v . Davidson CV-10-126-JL 3/29/11 P

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Antaeus Enterprises, Inc. and James H . Rand

v. Civil N o . 10-cv-126-JL Opinion N o . 2011 DNH 050 L . John Davidson

MEMORANDUM ORDER

The question in this case is whether judgment creditors of a

limited liability company can hold the company’s owner personally

liable for the judgment by “piercing the corporate veil.”

Plaintiffs Antaeus Enterprises, Inc. and James H . Rand recently

obtained a default judgment against SD-Barn Real Estate, LLC for

damages allegedly caused by its failure to timely pay them money

due under certain promissory notes. See Antaeus Enters., Inc. v .

SD-Barn Real Estate, LLC, N o . 05-6396 (S.D.N.Y. Apr. 1 1 , 2007).

Unable to collect the judgment from SD-Barn, an admitted “shell

corporation” with no assets or business activities, they brought

this suit against SD-Barn’s sole member, defendant L . John

Davidson, seeking to pierce the corporate veil and recover the

judgment from him personally. This court has subject-matter

jurisdiction under 28 U.S.C. § 1332(a)(1) (diversity).

Plaintiffs have now moved for summary judgment, see Fed. R.

Civ. P. 5 6 , arguing that they can pierce the corporate veil as a

matter of law because the record shows that Davidson used SD-Barn to perpetrate a fraud and injustice, diverting to himself money

that SD-Barn owed to them. See, e.g., LaMontagne Builders, Inc.

v . Bowman Brook Purchase Group, 150 N.H. 2 7 0 , 275 (2003) (courts

“will pierce the corporate veil and assess individual liability

. . . where the corporate identity has been used to promote an

injustice or fraud”). 1 After hearing oral argument, this court

denies the motion. Davidson has offered a competing explanation

for his conduct that, while not fully compliant with SD-Barn’s

obligations under the promissory notes, could be construed as

neither fraudulent nor unjust. Because material facts thus

remain in dispute, plaintiffs’ veil-piercing claim cannot be

resolved on summary judgment.

I. Applicable legal standard

Summary judgment is appropriate where “the pleadings, the

discovery and disclosure materials on file, and any affidavits

show that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(c)(2). An issue is “genuine” if it could

1 Both parties agree that the veil-piercing claim is governed by New Hampshire law, since that is the state where SD-Barn is registered. See, e.g., Archdiocese of San Salvador v . FM Int’l, LLC, 2006 DNH 1 0 2 , 18 n.13 (DiClerico, D.J.) (citing Goya Foods, Inc. v . Unanue, 233 F.3d 3 8 , 43 n . 4 (1st Cir. 2000), and 1 William Meade Fletcher, Fletcher Cyclopedia of Private Corporations § 41.90, at 696-97 (rev. ed. 1999)).

2 reasonably be resolved in either party’s favor at trial, and

“material” if it could sway the outcome under applicable law.

Estrada v . Rhode Island, 594 F.3d 5 6 , 62 (1st Cir. 2010). Where,

as here, plaintiffs seek “summary judgment on claims for which

they, as plaintiffs, would bear the burden of proof at trial,”

they “cannot attain summary judgment unless the evidence that

they provide is conclusive.” Zimmerman v . Puccio, 613 F.3d 6 0 ,

70 (1st Cir. 2010); see also Village Press, Inc. v . Stephen

Edward Co., 120 N.H. 469, 471 (1980) (stating that plaintiffs

bear the burden of proof on veil-piercing claims under New

Hampshire l a w ) .

In evaluating a summary judgment motion, the court must

“view[] all facts and draw[] all reasonable inferences in the

light most favorable to the nonmoving party.” Estrada, 594 F.3d

at 6 2 . Nevertheless, plaintiffs argue that this court must

accept their version of the facts because Davidson, who is

appearing pro s e , did not submit any affidavits or other properly

authenticated evidence with his objection. See L.R. 7.2(b)(2).

But in the earlier case that resulted in the default judgment

against SD-Barn, where Davidson had counsel, he submitted an

affidavit and deposition testimony that set forth his own version

of the facts. This court will consider those materials in

evaluating plaintiffs’ motion. See, e.g., Dutil v . Murphy, 550

F.3d 1 5 4 , 158 (1st Cir. 2008) (noting that courts “endeavor,

3 within reasonable limits, to guard against the loss of pro se

claims due to technical defects”); Gilroy v . Kasper, 654 F. Supp.

2d 4 4 , 46 n.2 (D.N.H. 2009) (accepting late-filed affidavit

because of party’s pro se status). 2

II. Background

In the early 1990s, having enjoyed a successful career in

real estate development, Davidson embarked on a new business

venture seeking to develop and market a technique for

pasteurizing chicken eggs. He initially conducted the venture as

a limited partnership, Pasteurized Eggs L P . In 2001, hoping to

raise additional funds, he formed a new corporation, Pasteurized

Eggs Corporation (“PEC”), of which he became the president, chief

executive officer, and chairman of the board of directors, as

well as the largest shareholder. PEC struggled financially,

however, and Davidson lasted only nine months in his management

role before the board (on which plaintiffs Antaeus and Rand each

had a seat) removed him. Nevertheless, Davidson remained the

company’s largest shareholder.

By fall of 2002, PEC was exploring the possibility of filing

a petition for reorganization under Chapter 11 of the United

2 This court need not rule on plaintiffs’ objections to the other materials that Davidson submitted with his summary judgment briefs, because the court did not rely on those materials in ruling on the motion.

4 States Bankruptcy Code, which it eventually did. See In re

Pasteurized Eggs Corp., N o . 02-13086 (Bankr. D.N.H. Oct. 5 ,

2002). Davidson met with PEC’s board to discuss financing

options. They agreed that PEC would take out a $700,000 debtor-

in-possession (“DIP”) loan, with half of the money coming from

Davidson3 and the other half coming from Antaeus, Rand, and two

other investors (one of whom is now deceased, and the other

incapacitated). SD-Barn, a limited liability company that

Davidson had formed several years earlier but had never used,

served as a conduit for the loan. The investors loaned the money

to SD-Barn (in exchange for promissory notes), which in turn

loaned the money to PEC (in exchange for a separate note).

By Davidson’s own admission, SD-Barn was merely a “shell

corporation,” with no assets, no employees, no regular meetings,

and no business activities other than serving as a conduit for

the DIP loan. Davidson was its sole member and the only person

responsible for its activities. If he needed assistance in

carrying out those activities (e.g., accounting), he relied on

the employees of his other businesses. Davidson claims that the

other DIP lenders were “fully aware of the status and

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