IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

 

MLEA, INC., : 

 : CIVIL ACTION 

 Plaintiff, : 

 : 

 v. : No. 02-CV-4393 

 : 

ATLANTIC RECYCLED RUBBER : 

INC., RECOVERY TECHNOLOGIES : 

GROUP INC., AND CASELLA : 

WASTE SYSTEMS, INC. : 

 : 

 Defendants. :

DEFENDANT RECOVERY TECHNOLOGIES GROUP, INC.’S 

MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY 

JUDGMENT, OR, ALTERNATIVELY FOR PARTIAL SUMMARY JUDGMENT

I. INTRODUCTION

 Plaintiff MLEA, Inc. (“MLEA” or “Plaintiff”) brought this action to recover damages for 

Defendant Atlantic Recycled Rubber, Inc.’s (“ARR’s”) alleged breach of contract, promissory 

estoppel and unjust enrichment. Plaintiff obtained three purchase orders from ARR, and when it 

obtained those purchase orders, knew that it was contracting with ARR as opposed to RTG 

(Ex. D,Timberlake at 18, 157, 159-60, Ex. B, DelGaizo at 28-29, 101-102)1 and was then fully 

aware that ARR was a wholly-owned subsidiary of another company. (Ex. D, Timberlake at 

178-79). At no time prior to ARR’s issuance of the three purchase orders did Plaintiff ever 

believe that ARR’s ultimate corporate parent was going to guarantee ARR’s performance of the 

contract. (Ex. D, Timberlake at 151, 178-79). It is undisputed that Plaintiff never entered into 

any agreement with RTG for either the purchase of equipment or the provision of any 

 

1 The uncontested facts stated herein are taken from documents produced in this matter, excerpts from deposition 

transcripts and sworn declarations provided in this matter. These materials are included in the Appendix of Exhibits 

in Support of Defendants Atlantic Recycled Rubber, Inc.’s and Recovery Technologies Group, Inc.’s Motions for 

Summary Judgment which has been filed simultaneously herewith. Citations to the Appendix are to “Ex. _____.” 

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 1 of 14
engineering services. (Ex. B, DelGaizo at 34, 39-40, 94, 101). Nevertheless, Plaintiff’s 

Complaint asks this Court to pierce the corporate veil and hold Defendant RTG liable for ARR’s

alleged breach of contract based solely on Plaintiff’s easily-made assertion that “[o]n information 

and belief, . . .[RTG] controlled and/or directed the acts and/or omissions of its wholly-owned 

subsidiary,” ARR. (Complaint, ¶ 5). 

The undisputed facts do not support Plaintiff’s request.2 The undisputed evidence, 

including deposition testimony, documents and declarations, establishes that ARR is a whollyowned subsidiary of Recovery Technologies (Canada), Inc. (“RTI-Canada”), which is not a party 

to this action. RTI-Canada, in turn, is a wholly-owned subsidiary of Defendant RTG. Plaintiff 

has not produced any evidence that RTG interacts with RTI-Canada, which in turn, interacts with

ARR in any way other than the typical manner in which any parent corporation interacts with its

wholly-owned subsidiary. Plaintiff has not made any showing that RTG exerted undue control 

over ARR, or that RTG acted to defraud Plaintiff. As such, there are no genuine issues of

material fact with regard to whether the corporate veil should be pierced, and RTG is entitled to 

judgment as a matter of law on all of ARR’s claims against it. In the alternative, RTG joins in 

and incorporates here by reference, the Motion for Summary Judgment of Defendant ARR. 

II. STATEMENT OF UNCONTESTED FACTS

RTG hereby incorporates the Statement of Uncontested Facts set forth in the Motion for

Summary Judgment of Defendant ARR and all exhibits thereto. 

 

2 Contrary to Plaintiff’s allegation, ARR is not a wholly-owned subsidiary of Defendant RTG. 

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Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 2 of 14
III. ARGUMENT

A. Legal Standard 

Under Fed. R. Civ. P. 56, this Court must grant summary judgment "against a party who 

fails to make a showing sufficient to establish the existence of an element essential to that party's 

case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 

477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986). If Plaintiff is unable to prove even one 

element of its claim against RTG, then there can be no genuine issue as to any material fact, and 

summary judgment in RTG’s favor is appropriate. Id. at 322-23, 106 S. Ct. at 2552. 

The party seeking summary judgment bears the initial burden of showing that the 

pleadings, admissions, answers to interrogatories and affidavits establish the absence of a general 

issue of material fact. Id. at 323, 106 S. Ct. at 2553. If the moving party carries its burden under

Rule 56(c) "the non-moving party must come forward with 'specific facts showing that there is a 

genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 

106 S. Ct. 1348, 1356 (1986) (first emphasis added) (Fed. R. Civ. P. 56(e)).3

In opposing this motion, Plaintiff cannot rest on its pleadings or merely reassert its 

previous allegations. It is insufficient for Plaintiff to "simply show that there is some 

metaphysical doubt as to the material facts." Id. at 586, 106 S. Ct. at 1356. Instead, Rule 56(e) 

requires Plaintiff to go beyond the pleadings and present affirmative evidence in support of its 

position. Celotex, 477 U.S. at 324, 106 S. Ct. at 2553; Diamond State Ins. Co. v. Ranger Ins. 

Co., 47 F. Supp. 2d 579, 582-83 (E.D. Pa. 1999). 

 

3 If the trial could have but one result with respect to the issue of whether to pierce the corporate veil, then it is 

appropriate for the trial court to enter summary judgment. In re Silicone Gel Breast Implants Products Liability, 837 

F. Supp. 1128, 1133 (N.D. Ala. 1993).

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Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 3 of 14
An issue of fact is genuine “only if there is sufficient evidence to permit a reasonable fact 

finder to return a verdict for the non-moving party. An issue of fact is material only if it might

affect the outcome of the suit under the governing law.” Leo v. State Farm Mut. Auto. Ins. Co., 

939 F. Supp. 1186, 1187 (E.D. Pa. 1996) (citations omitted), aff'd without published opinion, 

116 F.3d 468 (3d Cir. 1997). Thus, summary judgment can only be defeated if, with respect to 

each element essential to Plaintiff case, and for which it will bear the burden of proof at trial,

Plaintiff presents evidence from which the jury could reasonably find in its favor. Celotex Corp. 

v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548 (1986). 

B. Plaintiff Cannot Pierce RTG’s Corporate Veil Without Proof That RTG and 

RTG’s Wholly-Owned Subsidiary, RTI-Canada, Both Exerted Such 

Pervasive Control Over ARR Such That ARR Was A Mere Sham and Which

Resulted in Fraud Or Injustice. 

Plaintiff’s Complaint asks this Court to pierce the corporate veil and hold Defendant 

RTG liable for ARR’s alleged breach of contract, promissory estoppel and unjust enrichment 

based solely on Plaintiff’s easily-made, boiler-plate assertion that “[o]n information and belief, 

. . [RTG] controlled and/or directed the acts and/or omissions of its wholly-owned subsidiary,”

ARR. (Complaint, ¶ 5; emphasis added). Plaintiff has conducted extensive discovery and 

depositions of the defendants and has failed to produce any evidence of the extraordinary

domination and control necessary to pierce the corporate veil. 

1. The Corporate Form Should Not Be Disregarded Lightly. 

The general rule in Pennsylvania is that the corporate entity should be recognized and 

upheld absent compelling reasons to disregard the theory of the corporate entity and the limited 

 

4

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 4 of 14
liability of their shareholders.4 Jiffy Lube International, Inc. v. Jiffy Lube of Pennsylvania, Inc., 

848 F. Supp. 569, 580 (E.D. Pa. 1994). Pennsylvania requires a very high showing of 

domination and control in order to establish alter ego or instrumentality liability. Id. To hold 

that one corporation is a mere instrumentality or alter ego of another corporation, Pennsylvania 

law requires a party seeking to pierce the corporate veil to establish that the controlling 

corporation wholly ignored the separate status of the controlled corporation and so dominated the 

affairs of the controlled corporation that its existence was a mere sham. Id. Moreover, as a 

threshold, plaintiff must establish "that the controlling corporation wholly ignored the separate 

status of the controlled corporation and so dominated and controlled its affairs that its separate

existence was a mere sham," or that "the controlled corporation acted robot- or puppet-like in 

mechanical response to the controller's tugs." Garden State Tanning, Inc. v. Mitchell 

Manufacturing Group, Inc., 55 F. Supp. 2d 337, 344-45 (E.D. Pa. 1999) 

Indeed, the corporate form was created to allow shareholders to invest without incurring 

personal liability for the acts of the corporation. See Pearson v Component Technology 

Corporation, 247 F.3d 471 (3rd Cir. 2001). These principles are equally applicable when the

shareholder is, in fact, another corporation, and hence, mere ownership of a subsidiary does not 

justify the imposition of liability on the parent. See Id. Under Pennsylvania law, a subsidiary is 

generally regarded as a "separate and independent entity" from the parent corporation. 

Commonwealth v. Vienna Health Prods., Inc., 726 A.2d 432, 434 (Pa. Commw. 1999). 

Accordingly, a parent corporation is not generally liable for the contractual obligations of a 

subsidiary, even if the parent wholly owns the subsidiary. Quandel Group v. Chamberlin Co., 

 

4 Piercing of the corporate veil is an extraordinary remedy, as “[t]here is a strong presumption in Pennsylvania 

against piercing the corporate veil.” Miners v. Alpine Equipment Corporation, 722 A.2d 691, 694 (Pa. Super.

1998); Lumax Industries, Inc. v. Aultman, 669 A.2d 893, 895 (Pa. 1995). 

5

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 5 of 14
Inc., 1999 WL 386602, at *2 n. 1 (E.D. Pa. June 14, 1999) (citing Botwinick v. Credit Exch., 

Inc., 213 A.2d 349, 353 (Pa. 1965)). 

The Pennsylvania Supreme Court has always recognized that "complex corporate entities 

. . . often conduct business through subsidiaries to protect the parent from the financial, 

contractual and tort liabilities of its subordinate units. . . . [C]ourts will disregard the corporate 

entity only in limited circumstances when used to defeat public convenience, justify wrong, 

protect fraud or defend crime." Kiel v. Action Mfg Co., 517 Pa. 183, 190, 535 A.2d 571, 574 

(1987); Sams v. Redevelopment Authority, 431 Pa. 240, 244, 244 A.2d 779, 781 (1968). 

Additionally, the law recognizes that the corporate veil should be more readily pierced 

when involuntary creditors are involved than where the claims of voluntary creditors are at stake.

See, e.g., Miners, Inc. v. Alpine Equip. Corp., 722 A.2d 691, 695 (Pa. Super. 1998) (recognizing 

this distinction between voluntary and involuntary creditors), alloc. denied, 745 A.2d 1223 (Pa. 

1999). An example of an involuntary creditor of a corporation is someone who has a tort claim 

against the company as the result of having been injured by the company's allegedly negligent 

business practices. For example, someone who is injured in a collision with a truck would 

qualify as an involuntary creditor of the trucking company. An example of a voluntary creditor, 

by contrast, is someone who voluntarily agrees to enter into a contractual relationship with that 

trucking company. Such a voluntary creditor has the option to choose both whether and with 

whom to contract, and voluntary creditors can require that a debtor provide security for the debt.

MLEA is undoubtedly a voluntary creditor in this case. 

Here, Plaintiff's theory asks this Court to "pierce the corporate veil" between ARR and 

RTG, while skipping a critical link in that corporate chain – RTI-Canada, which is a whollyowned subsidiary of RTG as well as the corporate parent of ARR. Plaintiffs' attempt to leap 

6

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 6 of 14
from ARR to RTG is nothing more than a poorly disguised effort to ignore well-settled law 

recognizing the separate existence of corporate entities. In order to establish liability against 

ARR, Plaintiff must therefore make two separate showings of complete domination and control: 

one to pierce the corporate veil between ARR and its parent, RTI-Canada, and yet a second 

showing to then pierce the corporate veil between RTI-Canada and its parent, RTG. Plaintiff has 

not pleaded the later and cannot prove the former. Plaintiff has utterly failed to adduce any 

evidence that RTG or any other corporate entity so dominated and controlled ARR as to make

RTG liable under an "alter ego" theory. See Craig v. Charter Consolidated, 843 F.2d 145 (3d 

Cir. 1988); Nazarwych v. Bell Asbestos, 898 F.2d 13 (3d Cir. 1990). 

Nor has Plaintiff alleged any wrongful conduct on the part of RTG relating to Plaintiff’s 

contract with ARR, and, “where a party enters into a contract with a corporation, no action will 

lie against the shareholders of that corporation individually for a breach of that contract.” First 

Realvest, Inc. v. Avery Builders, 600 A.2d 601, 603 (Pa. Super. 1991) (quoting Loeffler v. 

McShane, 539 A.2d 876, 879 (Pa. Super. 1988) (“The breach of the contract is the breach of a

promise made by the corporation, and not the breach of any promise extended by the corporate 

officer.”)). The reluctance to disregard the corporate form is particularly strong in contract cases,

such as this one, where Plaintiff chose the party with which it contracted and could have 

negotiated guarantees or other security arrangements with the parent corporation. AG 

Worldwide v. Red Cube Int’l AG, 2002 U.S. Dist. LEXIS 4398, at *9-10 (S.D.N.Y. March 15, 

2002); Huard v. Shreveport Pirates, Inc., 147 F.3d 406, 409 (5th Cir. 1998). 

The principal issue presented in this case could not be more straightforward. In the fall 

of 2000, Plaintiff attempted to enter into a turnkey contract with ARR. (See Ex.B, DelGaizo at 

28-29, 101, 104). The proposed contract provided that MLEA would design and manufacture a 

7

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 7 of 14
liquid nitrogen manufacturing facility for ARR in Truro, Nova Scotia, and recited the payments

that would be due from ARR. Additionally, Plaintiff, although aware that Recovery 

Technologies, and possibly Casella, were located up the corporate ladder, chose to contract with 

ARR. (Ex. D, Timberlake at 178-79 (admitted that he knew that ARR and Recovery 

Technologies were wholly-owned subsidiaries of Casella, and that Casella did not guarantee any 

action by ARR or RTG)). Further, MLEA accepted the purchase orders from ARR alone on two 

separate occasions, and did not request a guarantee from RTG. Id. 

At the time MLEA was negotiating the proposed turnkey contract with ARR, a separate

company known as RTI-Canada owned one hundred percent of ARR's stock. (See Ex A, Bohlig

at 23). And at that same time, defendant Recovery Technologies Group, Inc. owned one hundred 

percent of the stock of RTI-Canada. Id. Thus, RTG and Casella were respectively two and three

rungs up the corporate ladder from ARR. Plaintiff voluntarily chose to accept the purchase 

orders from ARR, and Plaintiff obtained in return no security from RTG, let alone RTI-Canada, 

to ensure payment of ARR's obligations to it. (See Exs. O and Q; see also Ex.D, Timberlake at 

178-79). A plaintiff who has voluntarily entered into contractual relations with one company 

cannot be permitted to hold that company's parent or grandparent corporations liable without 

having demonstrated any evidence whatsoever to justify piercing the corporate veil of that

corporation. 

Pennsylvania law does not permit Plaintiff to hold RTG liable simply because its

corporate grandchild, ARR, may have owed money to the Plaintiff. No facts warrant piercing 

the corporate veil to reach RTG. Accordingly, this Court should grant RTG's motion for

summary judgment and dismiss MLEA's claims against defendant RTG in their entirety. 

8

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 8 of 14
C. Plaintiff Has Defaulted On the $150,000 Promissory Notes 

RTG has counterclaimed against Plaintiff for breach of contract based on Plaintiff’s 

default on two promissory notes with a collective face amount of $150,000. The facts of record

– as acknowledged by Plaintiff’s President and CEO, Mr. DelGaizo, who himself is an 

attorney – indisputably establish that RTG is entitled to summary judgment on its Counterclaim

for breach of contract. 

Plaintiff’s President, Mr. DelGaizo at his deposition admitted, under oath, the 

following: 

1. He is a licensed attorney and a graduate of Temple University School of 

Law. (Ex. B, DelGaizo at18). 

2. In the Summer of 2001, RTG lent $150,000.00 to Plaintiff so that Plaintiff 

could use that money for various business obligations. (Id. at 66-67). 

3. Plaintiff received the loan proceeds, which it then deposited into 

Plaintiff’s bank account. (Id. at 67). 

4. Plaintiff executed two Promissory Notes for $75,000 each and a related 

Security Agreement. The total principal amount of the Notes was $150,000.00. (Id. at 66-68 & 

Ex. Z.) 

5. Under the Notes, Plaintiff promised to pay the sum of $150,000.00 at the 

interest rate of 8% to RTG “on demand” or in the “Event of Default.” (Id.)

6. An “Event of Default” is defined as including DelGaizo’s failure to 

deliver a personal guarantee of the Notes to RTG by September 5, 2001. (See Note, Ex. Z). 

7. DelGaizo failed to provide RTG with his personal guarantee of those

Notes. (Ex. B, DelGaizo at 67). 

9

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 9 of 14
The Notes provided that an “Event of Default” also occurs if Plaintiff “is unable to pay its 

debts generally as they mature. (See Note, Ex. Z). Plaintiff has been unable to pay its debts 

generally as they mature. (Ex. C, Menendez at 56-58). Upon an Event of Default, the Notes are

due and payable. (See Note, Ex. Z). Plaintiff has not paid back all or any portion of the 

$150.000.00 that RTG lent to it. (See generally Plaintiff’s Reply to RTG’s Counterclaim, ¶¶ 6-

7).5 As a result of Plaintiff’s default under the Notes, Plaintiff is liable to RTG in the amount of 

$150,000.00, together with interest in the amount of $28,999.95,6 together with RTG’s counsel 

fees. 

Thus, the undisputed facts of record – all from the Promissory Notes and the sworn 

deposition testimony of Plaintiff – indisputably establish that Plaintiff is in default under the 

Notes. Consequently, this Court should grant RTG’s motion for summary judgment on RTG’s 

Counterclaim; and enter judgment in favor of RTG and against Plaintiff, in the amount of

$178,999.95, together with RTG’s attorneys fees incurred in connection with this lawsuit. 

VI. CONCLUSION

For the foregoing reasons, this Court should grant Defendant Recovery Technologies 

Group, Inc.’s, Motion for Summary Judgment, dismiss Plaintiff’s Complaint against it with 

prejudice in its entirety and find that Plaintiff is liable for damages on RTG’s Counterclaim for 

Plaintiff’s default on the $150,000 Promissory Notes. 

 

5 Upon resolution of the liability issue, RTG will present the fact-finder with a bill of costs and fees in connection

with its efforts to collect on the Notes. 

6 The Notes were payable as of September 5, 2001, the date on which DelGaizo failed to deliver his personal

guarantee. As set forth in the following calculation, the interest due, from September 5, 2001 to today, February 10, 

2004 at the stated interest rate of eight percent per annum is $ 28,999.95: (29/12) x (.08) x ($150,000.00) =

$28,999.95.

10

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 10 of 14
Dated: February 10, 2003 Respectfully submitted, 

 ECKERT SEAMANS CHERIN 

 & MELLOTT, LLC 

 By:_______________________________ 

 John F. O’Riordan, Esquire 

 Heather E. Rennie, Esquire 

 Attorney I.D. Nos. 59311 & 69715 

 1515 Market Street, Ninth Floor 

 Philadelphia, PA 19102 

 (215) 851-8400 

 Attorneys for Defendants Recovery Technologies 

 Group, Inc. 

11

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 11 of 14
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

 

MLEA, INC., : 

 : CIVIL ACTION 

 Plaintiff, :

 :

 v. : No. 02-CV-4393 

 :

ATLANTIC RECYCLED RUBBER : 

INC., RECOVERY TECHNOLOGIES : 

GROUP INC., AND CASELLA : 

WASTE SYSTEMS, INC. : 

 :

 Defendants. :

ORDER

AND NOW, this ____ day of February 2004, upon consideration of Defendant Recovery 

Technologies Group, Inc.’s Motion for Summary Judgment it is hereby ORDERED that such 

Motion is GRANTED. It is further ORDERED as follows: 

1. Judgment is entered in favor of Defendant RTG and against Plaintiff on all counts 

of Plaintiff’s Complaint; and 

2. Judgment is entered in favor of Defendant RTG and against Plaintiff on RTG’s 

Counterclaim in the amount of ____________. 

 

, J. 

12

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 12 of 14
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

 

MLEA, INC., : 

 : CIVIL ACTION 

 Plaintiff, :

 :

 v. : No. 02-CV-4393 

 :

ATLANTIC RECYCLED RUBBER : 

INC., RECOVERY TECHNOLOGIES : 

GROUP INC., AND CASELLA : 

WASTE SYSTEMS, INC. : 

 :

 Defendants. :

DEFENDANT RECOVERY TECHNOLOGIES GROUP, INC.’S

MOTION FOR SUMMARY JUDGMENT, OR, 

ALTERNATIVELY FOR PARTIAL SUMMARY JUDGMENT

Defendant Recovery Technologies Group, Inc. (“RTG”), by and through its undersigned 

counsel, hereby submits this Motion for Summary Judgment, or, alternatively for partial 

summary judgment for the reasons set forth in the accompanying Memorandum of Law. 

Dated: February 10, 2003 Respectfully submitted, 

 ECKERT SEAMANS CHERIN 

 & MELLOTT, LLC 

 By:

 John F. O’Riordan, Esquire 

 Heather E. Rennie, Esquire 

Attorney I.D. Nos. 59311 & 69715 

 1515 Market Street, Ninth Floor 

 Philadelphia, PA 19102 

 (215) 851-8400 

 Attorneys for Defendant 

 Recovery Technologies Group, Inc. 

13

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 13 of 14
14

CERTIFICATE OF SERVICE

I hereby certify that on this 10th day of February, 2004 a true and correct copy of the 

foregoing Defendant Recovery Technologies Group, Inc.’s Motion for Summary Judgment, or 

Alternatively for Partial Summary Judgment and accompanying Memorandum of Law in 

Support was served via first class mail upon the following counsel of record: 

Philip J. Katauskas, Esquire 

Pepper Hamilton LLP 

3000 Two Logan Square 

18th and Arch Streets 

Philadelphia, PA 19103-2799 

Attorney for Plaintiff MLEA, Inc. 

Antoinette R. Stone, Esquire 

Brian J. McCormick, Jr., Esquire 

Buchanan Ingersoll, P.C. 

Eleven Penn Center 

1835 Market Street, 14th Floor 

Philadelphia, PA 19103-2985 

Attorneys for Defendant Casella Waste Systems, Inc. 

 

 Heather E. Rennie 

Case 2:02-cv-04393-JS Document 21 Filed 02/10/2004 Page 14 of 14