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IN THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF ALABAMA

SOUTHERN DIVISION

NICHOLAS STRICKLAND, et al., *

*

 Plaintiffs, *

*

v. * Case Number: 1:06-CV-00682-TFM

*

CHAMPION ENTERPRISES, INC., et al., *

*

 Defendants. *

REPLY TO PLAINTIFFS’ RESPONSE TO SECOND SUPPLEMENT

TO MOTION TO DISMISS

OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT

COMES NOW, Champion Enterprises, Inc. (hereinafter referred to as “CEI”), by and 

through counsel of record, and provides the following as its reply to the Plaintiffs’ response to its 

Second Supplement to the Motion to Dismiss, or in the alternative, Motion for Summary

Judgment (the Second Supplement to the Motion to Dismiss, or in the alternative, Motion for 

Summary Judgment (Doc. No. 39) is hereinafter referred to as the “Second Supplement”, the 

Supplement to Motion to Dismiss, or in the alternative, Motion for Summary Judgment (Doc. 

No. 18) is hereinafter referred to as the “First Supplement” and the original Motion to Dismiss, 

or in the alternative, Motion for Summary Judgment (Doc. No. 5) is hereinafter referred to as the 

“Original Motion”):

A. Plaintiffs Failed to Produce any Evidence To Meet Their Burden

In accordance with United States v. Four Parcels of Real Property in Greene and 

Tuscaloosa Counties in the State of Alabama, 941 F.2d 1428 (11th Cir. 1991), it was Plaintiffs’ 

burden to “make a sufficient showing on an essential element of [their] case with respect to 

which [they have] the burden of proof”. Id. at 1438; citing Celotex Corp. v. Catrett, 477 U.S. 

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317, 323 (1986). In its Second Supplement, CEI references specific parts of the record to 

establish that Sauls could not support the statements in his Affidavit. Not a single reference to 

the record was made by Plaintiffs to contradict anything set for in CEI’s Second Supplement. In 

opposing a motion for summary judgment, Plaintiffs “may not rely on his pleadings to avoid 

judgment against him." Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 

1995); Ryan v. Int'l Union of Operating Eng'rs, Local 675, 794 F.2d 641, 643 (11th Cir.1986); 

Avirgan v. Hull, 932 F.2d at 1577 (holding a nonmoving party “cannot meet the burden of 

coming forth with relevant competent evidence by simply relying on legal conclusions or 

evidence which would be inadmissible at trial.”) (internal citations omitted). “The evidence 

presented cannot consist of conclusory allegations or legal conclusions.” Avirgan v. Hull, 932 

F.2d at 1577, citing First National Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289, 88 

S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968). It is “not a function of the district court to distill every 

potential argument that could be made based upon the materials before it on summary judgment, 

rather the onus is upon the parties to formulate arguments to support their positions ” Lett v. 

Reliable Ruskin, 2006 U.S. Dist. LEXIS 50541, at *32-33 (Ala. M.D. July 24, 2006) (citing

Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995).

Plaintiffs’ claim in their Response to Defendants’ Second Supplement to Motion to 

Dismiss or, in the alternative, Motion for Summary Judgment (hereinafter referred to as

“Plaintiffs’ Response”) that they established “by clear and admissible evidence, eight (8) 

elements of the [‘]Duff Analysis[’].” However, no citation to the record is given to support this 

statement.

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Furthermore, it was brought to Plaintiff’s attention that, in order to defeat CEI’s motion 

for summary judgment, Plaintiffs had the burden of proving each of the three prongs of the alter 

ego theory: 

(1) The dominant party must have complete control and domination of the subservient 

corporation’s finances, policy and business practices so that at the time of the attacked 

transaction the subservient corporation had no separate mind, will, or existence of its 

own;

(2) The control must have been misused by the dominant party. Although fraud or the 

violation of a statutory or other positive legal duty is misuse of control, when it is 

necessary to prevent injustice or inequitable circumstances, misuse of control will be 

presumed.

(3) The misuse of this control must proximately cause the harm or unjust loss complained of.

Messick v. Mooring, 514 So. 2d 892, 894-95 (Ala. 1978). Plaintiffs failed to meet their burden 

on any of these elements. 

B. Plaintiffs Have Failed to Prove Complete Control and Domination

As expressed in the Second Supplement, although Sauls in his Affidavit gave opinions 

such as “The parent corporation finances the subsidiary”; “The subsidiary has grossly

inadequate capital”; “The parent corporation pays the salaries and other expenses or losses of the 

subsidiary”; and “The parent corporation uses the property of the subsidiary as its own”

(emphasis added), Sauls experienced difficulty in definitely stating who was the parent and who 

was the subsidiary. 1 (Sauls Depo., pp. 54-70, generally).

The clear and admissible evidence before this Court establishes that Plaintiffs’ expert, 

Edward Sauls (hereinafter referred to as “Sauls”), affirmatively stated that he completely and 

totally disregarded in his opinions and calculations financial information related to Champion 

Home Builders Co. (hereinafter referred to as “CHB”) as he disregarded the “CHB” column in 

 

1 There are only two defendants in this action, CEI and Champion Home Builders Co., 

improperly named in the Complaint as Champion Home Builders Co., Inc.

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the 10-Ks. (Sauls Depo. pp. 70, 11-23; 71, 1-23; 72, 1-23; 73, 1-23; 74, 1-23: 75, 1; 124, 7-18; 

129, 6-9). 

All of Saul’s opinions related to the “parent” and “subsidiary”, which in this case can 

only refer to CEI and CHB, are flawed since he completely disregarded the financial information 

related to CHB. (Sauls Depo. pp. 70, 11-23; 71, 1-23; 72, 1-23; 73, 1-23; 74, 1-23: 75, 1; 124, 7-

18; 129, 6-9). It is respectfully submitted that because Sauls failed to take into consideration the 

financial information related to CHB in forming his opinions, all opinions are due to be

disregarded in their entirety.

C. Plaintiffs Failed to Prove Misuse of Control

Under the second prong of the alter ego theory, Plaintiffs must prove misuse of control. 

Even after the invitation to produce evidence to meet their burden, Plaintiffs failed to cite to any 

portion of the record in support of their misuse of control argument. Plaintiffs offered no 

evidence in the record that the home in question is defective. Plaintiffs offered no evidence in 

the record that CEI caused CHB to build the home in question, an allegation from their

complaint that they have not supported with evidence. The testimony of Goltz actually

deconstructed any notion of domination and misuse of control as the testimony clearly shows

that CEI does not control the day-to-day operations of CHB as is claimed by Plaintiffs. (Goltz 

Depo., Ex. A to First Supplement, p. 67, 12-18). Plaintiffs failed to offer any evidence that 

Plaintiffs are damaged or that proximate harm resulted from misuse of control. They simply rely 

on conclusory statements, without any factual support. 

D. Plaintiffs Failed to Prove Proximate Harm

Plaintiffs argue that they have “clearly and proximately been damaged,” but again, there 

is no cite to the record and no evidence offered to support their argument. Plaintiffs have failed 

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to produce any evidence of harm or proximate cause of harm. Instead of evidence, Plaintiffs 

make a sweeping statement that the damage is “clear”. (Plaintiffs’ Response, p. 3) This is 

insufficient to meet the burden, placed on Plaintiffs by Federal Rule of Civil Procedure 56 (e), of 

introducing admissible evidence to prove their case.

E. Piercing the Veil of CEI is Against Public Policy

In accordance with SEC regulations, Sarbanes-Oxley requirements and other federal

laws, CEI has formulated guidelines and other documents with regard to its operation. (Goltz 

Depo., Ex. A to First Supplement, p. 42, 16-25; p. 45, 21-25; p. 46, 1-25; p. 55, 2-7; p. 72, 2-25; 

p. 73, 1-12; Strickland00040-Strickland00074). Plaintiffs’ desire to pierce the veil of a publicly 

traded, Sarbanes-Oxley compliant company is outlandish. Plaintiffs cannot show, through

conclusory statements and unverified allegations, that CEI, which is traded on the New York 

Stock Exchange, has so violated corporate formalities so all due process should be disregarded in 

order to manufacture personal jurisdiction over CEI.

Even assuming Plaintiffs, through the unreliable testimony of Sauls, did establish that 

CEI exercised some control over its subsidiary, a point Defendants do not concede, under 

Alabama law, “[m]ere domination or control of a corporation by its stockholders cannot be 

enough to allow a piercing of the corporate veil. There must be the added elements of misuse of 

control and harm or loss resulting from it.” First Health, Inc. v. Blanton, 585 So. 2d 1331, 1335 

(Ala. 1991). Plaintiffs have failed to establish the other two prongs. Plaintiffs have not even 

attempted to produce admissible evidence that the other two prongs can be proven. Plaintiffs 

must offer more than conclusory statements in order to survive this motion for summary

judgment and pierce the corporate formalities of such a well-established corporation.

F. Plaintiffs Failed to Show Sufficient Minimum Contacts.

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Also noticeably absent from Plaintiffs Response is admissible evidence CEI has

sufficient minimum contacts with the state. It is undisputed that CEI does not conduct or 

transact business in the state of Alabama; is not registered or licensed to do business in Alabama; 

did not sell the home to plaintiffs over the internet; has no agents or offices in Alabama; does not 

operate or run the internet site; owns no property in the state; does not sell anything into 

Alabama; has not delivered anything into Alabama; and does not advertise in Alabama. (Goltz 

Depo., Ex. A to First Supplement, p. 84, 1-10; p. 92, 15-25; p. 93, 1-4; Ex. A to Original Motion 

). Therefore, CEI does not have sufficient minimum contacts with the forum state and it would 

offend the traditional notions of fair play and substantial justice for CEI to be required to defend 

this action in Alabama.

WHEREFORE PREMISES CONSIDERED, CEI prays that this Honorable Court will 

grant its motion for summary judgment and for such other or different relief as is just. 

Respectfully Submitted,

RITCHEY & RITCHEY, P.A.

/s/ Gregory S. Ritchey

Gregory S. Ritchey, Esquire {ASB-8193-H68G}

Richard S. Walker, Esquire {ASB-8719-L70R}

Counsel for Champion Home Builders Co. and Champion 

Enterprises, Inc.

OF COUNSEL:

RITCHEY & RITCHEY, P.A.

P.O. Drawer 590069

Birmingham, AL 35259-0069

Telephone: 205.271.3100

Facsimile: 205.271.3111

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CERTIFICATE OF SERVICE

I, the undersigned, do hereby certify that on the 20th day of April, 2007, I electronically 

filed the foregoing with the Clerk of Court using the CM/ECF system which will send

notification of the foregoing upon the following:

Jere L. Beasley, Esquire

W. Daniel Miles, III, Esquire

C. Gibson Vance, Esquire

BEASLEY, ALLEN, CROW, 

METHVIN, PORTIS & MILES, P.C.

Post Office Box 4160

Montgomery, AL 36103

/s/ Gregory S. Ritchey

OF COUNSEL

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