t energy at the pleading stage this dismissal allows d t e energy to escape liability for an environmental mess that it created and then walked away from there are two primary ways in which d t energy can be liable in this case  the st is on its parental guarantee that it's signed of the utility services agreement and the nd is as the alter ego of its subsidiary d t e pontiac north in the interest of time i intend to focus on those two issues from our briefing this morning i'm happy to discuss other issues of the court as questions but otherwise i will leave those issues to our brief the district court heard in dismissing the claims against the t n or g on its parental guarantee by erroneous lee concluding that the utility services agreement which is the agreement that energy agreed to guarantee had somehow terminated after rejection of these integrated agreements there is no dispute in this case that all of the operative agreements here form an integrated whole one contract the primary dispute here is whether the utility services agreement could be terminated separate from those contracts that everybody agrees to be a single integrated contract and i think it's important here that we look at the language the parties chose to put in their agreements when they signed both the utility services agreement and the lease contains specific language about the fact that this is one unified contract and specifically each party acknowledges i'm quoting now and agrees that each project contract is vital to the operation of such transaction and that it would not have entered into any of the project contracts if the other project  not been entered into as well these contracts form an integrated whole and they are essential each one to the overall functioning in the bankruptcy court during g m s bankruptcy d t e forced g m to decide whether to reject or assume these contracts as a whole and said they couldn't do it piecemeal the bankruptcy code to not allow g m to reject some contract excuse me some contracts and assume others and it does not allow now d t e energy to argue that it terminated some and decided to continue with others but that's what the energy asked this court to allow bankruptcy code section three hundred and sixty five h p controls here the district court cited to michigan state law but should have focused on federal law controlled by the with a bankruptcy code when a lease is rejected by a debtor the party in possession has two options one they can leave and treat the leases terminated or two they can stay if they choose to stay to remain on the premises after a lease is rejected they are subject to all of the terms of the leaks it doesn't change the the terms the only issue is where they can look for remedy for the breach of nonperformance of the debtor but it does not change that the lessees obligations under the lease d t e p n remained on the lease after rejection for six years remained on the lease after rejection and therefore elected not to terminate this integrated contract and therefore the utility services agreement did not terminate and d t e energy still has a parental obligation guarantee obligation under that agreement there's absolutely  contract but at that point d t had the option to stay or go and they stayed and the utility services agreement is not only about provision of utilities and services to g m but also about all of the maintenance obligations for this facility and it's exactly the breach of those obligations that causes the harm here they didn't maintain it for six years that's the allegation they allowed the facility to deteriorate for whether to come in and create this environmental mess by choosing to stay they chose to continue to live with those terms they had the option at rejection to leave but they didn't and in fact continued during those six years to take advantage of other things they were allowed to do under the lease to try to market it to try to use it for other other things and so there is no authority for d t s argument that somehow they could decide to terminate the utility services agreement but still maintain the leaks they kept all the benefits of the lease and the bankruptcy law says they have to therefore live with the terms of the entire integrated agreement in fact the council maybe just clarify this that the the service agreement provided the north would guarantee also guarantee that the premises would not deteriorate or is that different the parental guarantee guaranteed that the basically that d t energy would guarantee that the e p a and would point all of its  norse to not maintain the premises but that's correct that's not really necessary if it's guaranteed anyway right i mean that's i guess that's an alternative theory if the all three go theory on that issue is an alternative theory and then it also gets into the fact that d t energy is responsible for other breaches of the lease itself and the court rejected that theory in properly district court did by deciding and again this is a fact bound inquiry that they gauged and even though this is a pleading stage motion the district court decided that we had not pleaded a set of facts that they had that d t energy had improperly abused the corporate for  the the ryan racing case which we decided when a parent directs its subsidiary to breach of contract that's enough to say that there was a wrong way also and i think even more egregious lee have alleged that it's more egregious conduct on behalf of d t e that they specifically requested money from the bankruptcy court in a proof of claim to cover it's the future obligations to maintain the premises they got millions of dollars in the bankruptcy for that and we've alleged that that money was immediately upstream to the energy it wasn't used and what whether this is true or not that would go to summary judgment or iraq and not on them to dismiss based on the flaws ability of the allegations the complaint exactly and that's  it's kind of i think that's your strongest case here this is a trial b six a motion to dismiss and we just we assume everything you've said your complaint is true as long as it's plausible we absolutely agree with that your honor obviously and i think the difficulty here they directed p n the not do the maintenance and then left no money to cover it and left them holding the very large bag and those of liability without any way to cover those specific allegations or paragraphs a th through ninety eight of our amended complaint and there are very few in the district court should not have ignored those allegations at the pleading stage are you claiming that north had no employees and that is the allegation yes and that the only things that were done were done by d t energy again another way and there is no dispute i don't think the district court did not didn't dismiss that claim on the idea that these two entities were not essentially fused but rather on the breaches your honor i think is referring to the serial kinetics case in a couple of other cases that discuss that idea that presumption it's certainly not a hard and fast rule it doesn't mean that you can never pierce the corporate veil and i think several kinetics is instructive on this is well as the pollstar case said in our briefing because it talks about the fact that the question is what could the contract in party have anticipated and in service kinetics they could have anticipated that the party was going to become a supposed to do the d t e energy would essentially require d t p and to breach the agreement and then having done all of that would take all the assets and walk away again those are the allegations that the court has to take it's true at this stage which we think are more than sufficient to overcome any presumption that might exist related to piercing the corporate veil at this stage if the service kinetics will work hard and fast when that can never be overcome then you'd never be able to  over that that hurdle and i think i'd point to the kinetics the court cited the decision the dearborn case for that same proposition but in dearborn the argument was that somebody was hiding the fact that they were a subsidiary and again that's that's different what we have here but again we would have expected and i think that's the key inquiry at this stage is would we have anticipated that the parent would do the things that we've alleged the parent did here and because we could not have them we've alleged enough to pierce the corporate veil and briefly before i had my initial timing expires want to remind the court we also have a request for leave to amend which the appellee has admitted the district court applied a heavy standard heavier standard on that to decide that we should not have mentally given leave to meant we think that the amended complaint as it stands before the court the district court in this court is adequate to allege all of our claims file claims against the energy but if  court disagrees then we ought to be given the opportunity to amend to address those issues because the district court applied an incorrect standard in deciding not to allow us to amend mr philips if we agree with here that your complaint is  adequate at this stage to survive a motion to dismiss is your motion to amend i would say yes because beyond that point the court would would reverse the dismissal one remained for proceedings on the merits of our claims against the energy  all refer to the g e energy services as the parent and d t e pontiac north as the subsidiary for the sake of simplicity capitalising counsel is correct that there are two each of these in turn st piercing the principal issue with the piercing claim is as judge gilman alluded to with his question the presence of the parental guarantee at the time of contracting the predecessor an interest of the apple of the appellant's here general motors very sophisticated major automotive manufacturer dealing with a major utility d t e understood that it was dealing with a special purpose of city area that had been established solely for purposes of this transaction what was this transaction it was for the subsidiary to acquire the boilers and equipment from general motors necessary to operate a utility plant for the pontiac north plant than to lease the property where that equipment was located and then to provide long term utility services to the pontiac norplant basically steam electricity and compressed air on a long term basis but general motors concluded that it was not willing to voluntarily accept the risk of dealing only with the subsidiary and therefore negotiated for at the time of contracting in obtain a limited right of additional recourse to the parent in the form of the parental guarantee not of all of these contracts but only of the utility services agreement general motors could have used in the terms of the guarantee all of the project contracts all the associated agreements or it could have listed all of the contracts that it wanted to guarantee of instead it is utility service agreement the agreement that provides that the premises shall be maintained in the same condition and not allowed to deteriorate the principal obligation in that regard is contained in the lease judge griff n the utility services agreement does contain a number of provisions with respect to the lease property but its its core provisions are that we will provide that the subsidiary will provide long term utility services to the pontiac ok that i mean the key of this case i think is that the claim that the subsidiary allowed the premises to deteriorate that they did not maintain mike my question is is that within the scope of the frontal guarantee or not it's been sort of at this stage drop the sex we should assume that that that d t e energy is is a lot is is subject to that claim anyway subject to that claim unless the utility services agreement has been terminated which it has as a matter of law as well as the rejection of bankruptcy the argument there is because the lease continued and the lease is integrated with the service agreement that the two are the same and therefore they both continue and to me that kind of makes sense that leases only for one dollar right it is n l i assume that that the having possession of the premises is worth more than one dollar and  consideration is not the one dollar but the terms of the service agreement which include the duty to maintain the premises your honor the agreements certainly were integrated in the sense that they were all entered into at the same time and that it was impossible for g m to reject one without rejecting them all and that was certainly the position the subsidiary took in the general motors bankruptcy case but that does not mean that upon rejection of all those agreements that the subsidiary did not have the option to continue the lease without continuing the utility services agreement why because section seven dollars of the lease expressly permits that section seven dollars of the lease expressly permits the subsidiary when utility services agreement is terminated to continue to occupy the lease premises and then sets forth a set of processes and procedures for determining the exact terms of that lease so the actual terms of these integrated contracts themselves expressly contemplate the possibility that the utility services agreement and all of its provisions relating to the lease would be terminated and instead the subsidiary would continue to occupy the primacy s on a triple net basis now that provision of seven dollars of the lease does testify that the parties were supposed to following the terminations of the utility services agreement attempt to negotiate the terms of the triple net lease and they didn't do that instead the subsidiary simply continued to occupy the premises and section seven point two actually addresses that circumstance and says when that happens and the parties have negotiated a replacement lease when the utility services agreement has terminated that the lease itself terminates so it's our position that effectively the subsidiary was effectively a hold over tenet and frankly the appellant's here would have a legitimate claim for hold over ret against the subsidiary what would the hold over rent eight would just be the one would be fair market value hold overhead is always fair market value but it would only be against the subsidy or your honor this is all a matter of trying to impose by curious liability on a parent for matters well beyond the scope of its limited guarantee the utility services agreement was clearly terminated by virtue of the rejection and bankruptcy the apple the appellant's here automat say recite the regular rule that rejection doesn't constitute terminations and that is correct but it is incomplete as the united states supreme court in the mission products case recently held upon rejection it is the option of the non breaching party to treat that rejection as a terminations or to continue the contract here the subsidiary clearly expressed its intention to treat the rejection as a terminations we found the proof of claim in the bankruptcy that indicated that we were excused from offer the performance of that agreement and that means terminations there is no wait even if we had wanted to that we could have continued to perform the utility services agreement there was no pontiac plant there any more to which to provide steam electricity or compressed air there was the only real option here in the case of the utility services agreement rejection by g m and its bankruptcy was for us to treat it as a termination and excuse us for all further obligations there under g m and hence the appellant's here can't have it both ways they can't reject that agreement and avoid their obligations under it but still impose the obligations received some three million dollars for what is that exactly the proof of claim was the subsidiaries proof of claim in the general motors bankruptcy for rejection damages these are damages stemming from the rejection of the agreements from the fact that general motors had said less than two years after entering into all these contracts with us just kidding we're not going to perform these agreements and there were rejection damages that we had to claim in the bankruptcy as a result of that now you're generally only entitled to your pro rata distribution in accordance with the bankruptcy code priorities but we were able to monetize that claim on cents on the dollar by selling it to a rd party that's what that proof of claim was all about but in that proof a claim we made it very clear judge moore that we had taken the position that the rejection was a material breach of the utility services agreement that excused all further performance by d t by the subsidiary and hence by the parent company under its guarantee redevelop the property your honor the whole theory of the election under three hundred and sixty five dollars h one a double why is to permit the lessee upon rejection of the lease and bankruptcy to retain its enrichment interests its possessory interest in the lease property we wanted to retain that to see if we could redevelop the property into a biomass plant solar plant or in some other way and we've spent the next six years trying to do so and failing to tear you're right right well that's the allegation your honor yes but that is not again the only way that that would be an obligation of the parent is if the utility services agreement somehow survived rejection and frankly even if  somehow it did magically survive rejection it the the appellant's here continued to default under it by failing to purchase utility services from us over the six year period but the bottom line is that neither party expected that the utility services agreement survived rejection in bankruptcy why because we didn't perform it we didn't perform it starting starting at the date of rejection the subsidiary ceased to perform all obligations under the utility services agreement and at no point during the ensuing six year period before this case was commenced did the appellant's demand performance under the utility services agree not once so neither party contemplated performance under the utility services agreement after it was rejected in bankruptcy why because it was impossible it was impossible to perform utility services agreement after its rejection of bankruptcy and because under the mission products case before the supreme court it's very clear that the non breaching counterparty has the right upon rejection of its contract to treat the contract either it to continue it and claim damages or to  treated as a terminations we treated it as a terminations and we evidenced that election in our proof a claim that we filed with the bankruptcy court making it very clear that we were excused from all further performance under the utility services agreement as a result of the rejection and you addressed the piercing of the prevail because that's an alternative theory which would that the plaintiff succeed here yes it isn't the principle problem judge moore with the piercing claim is again the presence of the parental guarantee m bargained for this additional limited right of recourse against the parent company under the utility services agreement the appellant's don't like that limited range of recourse and wish that that guarantee covered the entire range of contracts but they don't and so what they're using is piercing law as an attempt to obtain the same result that g m could have bargained for when it negotiate the terms of the parental guarantee but it didn't and we respectfully submit that although the district court did not rely exclusively on the presence of the presell guarantee as a basis for defeating the piercing claimant dismissing it it probably could have and probably should have the rule under michigan law is that there's a presumption even in the absence of this kind of guarantee that when one deals with the subsidiary knowingly that one is improper to pierce the corporate veil and hold the parent liable for the subsidiaries obligations we submit that that is even clear that that presumption should become preclude conclusive in a situation where there is a guarantee that has been negotiated against the parent so the parent has obligations under that guarantee but don't have the obligations that are seeking to be pierced and imposed upon the pair what case establishes that principle well there are a number of cases that cited under michigan law the servo kinetics case recites that very clearly and again it was actually a case in which they held that the presumption was overcome there was no guarantee in that case and there was a whole host of facts basically the subsidiary was acquired by a company after the contract was entered into so the whole corporate structure changed after the date the transaction was done so again the the anticipation the expectations commercially of the parties upon entering into the contract were frustrated by the subsequent events changes in the corporate structure here g m knew what the corporate structure was the corporate structure remained exactly the same and bargained for a limited guarantee just of the utility services agreement not it let me just said that no guarantees so i was asking what is your best case for saying that if there is a limited guarantee that that means you can't pierce the corporate veil i can't i can't cite a case for that proposition your honor i'm simply drawing on the basic law that says if you voluntarily assume the risks of dealing with a subsidiary that there is a presumption against piercing then if there is a guarantee that clearly evidence is that knowledge and understanding and then the party bargains for a limited right of recourse to address that level of risk and is satisfied with that risk it's inappropriate to use piercing law to then expand that level of recourse to effectively rewrite the guarantee for the benefit of parties after the fact and that's a  parent that has been negotiated for with full knowledge by the sophisticated parties here a major automotive manufacturers are major utility they chose with their teams of lawyers to negotiate this narrow additional recourse against the parent that in that circumstance piercing should not be used effectively to expand that guarantee that's what the appellant's are asking here effectively is to say no we don't want the guarantee to cover just to get the terminated utility services agreement we wanted to cover all of these agreements but that's not what the guarantee says and that's not what g m negotiated for on the front end as a result your honor i see my time is up we believe that the district court correctly dismissed each of these claims at the pleading stage simply because any further amendments they had to bite at the apple any further amendment would be futile thank you thank you mr phillips you're about thank you your honor i want to start with the idea that who's asking to have it both ways here related to the terminations the agreement mr party says that it's us who wants it both ways but it was d t e that required that these agreements be rejected or assumed as a group not individually and now he says that his client has the option to decide the effect of that rejection piecemeal on a contract by contract basis and that is simply not the law the case that we've cited the court on this the samaritan alliance case makes clear that when there is an entire contract an integrated agreement and it then is yet there are assumed or rejected as a whole then it the result of that has to be done as a whole as well there is not one piece of authority mr party can cite you for the idea that his client had the option to stay on the property have all the benefits of the lease but also say oh by the way this other agreement we don't like is terminated that is simply not the law you cannot legally terminate some and keep others to get you there in the bankruptcy court make a ruling on th e bankruptcy court simply said that it required that they be rejected as a whole and then said that the rights under three hundred and sixty five dollars h were reserved and didn't make a decision on that any further than that to get around this problem mr party points to section seven dollars of the leas but he's got a real problem there and that is you have to leave read the whole lease he takes it out of context section seven dollars does talk about what happens at the utility services agreement is terminated but there's only one party who's allowed to terminate the utility services agreement and that's g his client has no right under the utility services agreement or the lease to terminate if you look to section seven point two and then also take a look in the utility services agreement section twenty five two it talks about events of terminations there's a schedule eleven to the utility services agreement that lists out the situations in which the utility services agreement can be terminated they are all it is option and when that lists out the results of a breach there's nothing in the contract that gives d t energy the right to terminate as a result of a breach so the fact is they didn't have the right to do this contractually they didn't have the right to do this under the law by staying on the property their their their option here was to either stay or leave and by staying they submitted themselves to all of the terms of all the agreements including the parental guarantee that i've briefly want to talk about alter ego he there is no authority for this ironclad rule that a parental guarantee means you can never pierce the corporate veil it's merely a presumption we're not asking to use the alter ego to expand the scope of the guarantee what we're saying is that energy is responsible for what its subsidiary did or what it directed its subsidiary to do that's the allegation again the allegation is and this is enough to overcome any presumption is that they d t e energy left its subsidiary completely under capitalized holding a big bag a liability with no assets to cover it and that's enough to pierce the corporate veil so for these two reasons all the claims against