Omni-Wave Electronics Corp. v. Marshall Industries

127 F.R.D. 644, 1989 U.S. Dist. LEXIS 11940, 1989 WL 118992
CourtDistrict Court, D. Massachusetts
DecidedOctober 6, 1989
DocketCiv. A. No. 87-2717-WD
StatusPublished
Cited by17 cases

This text of 127 F.R.D. 644 (Omni-Wave Electronics Corp. v. Marshall Industries) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Omni-Wave Electronics Corp. v. Marshall Industries, 127 F.R.D. 644, 1989 U.S. Dist. LEXIS 11940, 1989 WL 118992 (D. Mass. 1989).

Opinion

[646]*646MEMORANDUM AND ORDER ON PLAINTIFF’S FIRST MOTION TO AMEND COMPLAINT (# 32)

ROBERT B. COLLINGS, United States Magistrate.

The plaintiff, Omni-Wave Electronics Corporation (hereinafter “Omni-Wave”), has filed a motion to amend its complaint in four respects. (#32) The first of these proposed amendments seeks leave to add another defendant, Hyundai Electronics Industries Co., Ltd. (hereinafter, “HEI”). Both of the original defendants, Marshall Industries (hereinafter “Marshall”) and Hyundai Electronics America (hereinafter “HEA”), oppose the proposed amendments and have filed memoranda in opposition. (# # 38, 39) Omni-Wave was granted leave to file a reply memorandum (#41) in response to which HEA submitted a sur-reply. (# 44) After oral argument, the issues raised by the plaintiff’s motion to amend are ripe for resolution.

The claims against the two defendants are somewhat distinct as are the proposed amendments to the claims against each. Accordingly, the proposed amendments to the claims against each defendant will be considered separately.

HEA AND HEI

1. HEI as the alter ego or agent of HEA

The facts with respect to the relationship between Omni-Wave, HEA and HEI are that Omni-Wave contracted with HEA to assemble certain electronic devices called DRAMS using Omni-Wave’s component parts. Approximately 70,000 were assembled; Omni-Wave alleges that 40,000 were assembled in a defective manner.

The actual assembly work was not done by HEA; rather, HEA sent the component parts to Korea to have them assembled there by another corporation, HEI. After assembling the component parts, HEI shipped the completed DRAMS back to the United States for delivery.

Omni-Wave seeks to add HEI as an additional defendant in this litigation under an alter ego or agency theory. Defendant HEA opposes this amendment on the grounds of futility, arguing that the additional allegations fail to state a claim upon which relief can be granted. The law is clear that it lies within the sound discretion of the Court to deny a motion to amend when the proposed claim lacks legal merit and, consequently, would be subject to dismissal under Rule 12(b)(6), Fed.R.Civ.P. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); Demars v. General Dynamics Corporation, 779 F.2d 95, 99 (1 Cir., 1985); Liberty Leather Corporation v. Callum, 653 F.2d 694, 700 (1 Cir., 1981).

Since Omni-Wave is seeking to have the Court apply the corporate disregard doctrine vis-a-vis HEA and HEI, it is incumbent upon the plaintiff to allege the existence of the essential elements or prerequisite conditions of the doctrine in its amended complaint. The two-part test for the alter ego doctrine is as follows:

Under Massachusetts law, a party requesting a court to disregard the corporate form must establish the existence of two conditions. First, the party must allege facts suggesting that representatives of one corporation exercise some type of pervasive control over the activities of another corporation; or that there is a “confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities ...” My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 618-619, 233 N.E.2d 748 (1968). Second, the party must show that piercing of the corporate veil is necessary to defeat fraud or wrong or to prevent gross inequity. Id. at 620, 233 N.E.2d 748. Only in those rare occasions in which these two conditions exist may a' court properly invoke the equitable doctrine of corporate disregard.

NCR Credit Corporation v. Underground Camera, Inc., 581 F.Supp. 609, 612 (D.Mass., 1984).

In the NCR Credit case, Underground sought to bring counterclaims against NCR Credit as the alter ego of NCR Corpora[647]*647tion. The Court concluded that Underground, while alleging facts indicative of a “confused intermingling” of the businesses of NCR Credit and NCR Corporation, failed to demonstrate that it would be grossly inequitable or unduly prejudicial if the corporate veil were not pierced. Id. Finding the application of the corporate disregard doctrine inappropriate in the circumstances of the case, the Court dismissed Underground’s counterclaim against NCR Credit. Id. at 613.

Turning to the substantive allegations in the plaintiff’s proposed first amendment in the instant case in which the plaintiff attempts to allege the corporate disregard doctrine, Omni-Wave seeks to add the following underlined words to paragraph 4 of its complaint:

The defendant Hyundai America is a foreign corporation with a usual place of business at 70 Walnut Street, Wellesley, Massachusetts. The defendant HEI is, upon information and belief, a Korean corporation which does business in the United States through its wholly owned subsidiary Hyundai America. Hyundai is in the trade or business of manufacturing, supplying, and assembling electronic parts, and is a merchant with respect to assembled semiconductor devices. HEI is an agent or alter ego of Hyundai America, and Hyundai America is an agent or alter ego of HEI, in that, among other things, HEI shares responsibility with Hyundai America in performing assembly services under contracts for such services that Hyundai America has with American customers (including the contract at issue in this case), and Hyundai America on behalf of itself and HEI enters into contracts with American customers (including the contract at issue in this case) to provide assembly services that Hyundai America performs in shared responsibility with HEI. For many internal purposes and from all outward appearances in the American market Hyundai America and HEI are the same company.

Plaintiff’s First Motion to Amend (# 32) at pp. Al-1 to Al-2. As is evident on their face, these allegations are inadequate to establish the requirements of an alter ego theory.

While the plaintiff’s proposed amendment sets forth some facts with respect to a “confused intermingling of activity” as between HEA and HEI, the Court need not rule on the sufficiency of these pleadings in meeting the first condition of the corporate disregard doctrine because the plaintiff alleges no facts whatsoever that demonstrate the need to pierce the corporate veil in order to avoid fraud or gross inequity. For example, there are no facts pleaded that would indicate that HEA is a sham or shell corporation. Nor is there any evidence from which it could reasonably be inferred that HEA is without assets or funds to satisfy a judgment against it. In short, Omni-Wave has pleaded no facts which would demonstrate “some fraudulent or injurious consequence of the inter-corporate relationship” between HEA and HEI. My Bread Baking Co. v. Cumberland Farms, 353 Mass. 614, 618-619, 233 N.E.2d 748, 752 (1968).

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Bluebook (online)
127 F.R.D. 644, 1989 U.S. Dist. LEXIS 11940, 1989 WL 118992, Counsel Stack Legal Research, https://law.counselstack.com/opinion/omni-wave-electronics-corp-v-marshall-industries-mad-1989.