*The Honorable Jed S. Rakoff, of the United States District Court for the Southern District of New York, sitting by designation. 10-3510-cv Teitelbaum v. Lin & Mochdar



### UNITED STATES COURT OF APPEALS **FOR THE SECOND CIRCUIT**



## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C**  **ITATION TO A SUMMARY ORDER FILED**
**ON OR AFTER J** **ANUARY 1,**  **2007, IS PERMITTED AND IS GOVERNED BY**  **F EDERAL**  **R ULE OF**  **A PPELLATE**  **P ROCEDURE**  **32.1 AND THIS COURT**  **’ S**  **L OCAL**  **R ULE**  **32.1.1. W**  **HEN CITING A SUMMARY ORDER IN A**
**DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER THE F** **EDERAL A** **PPENDIX OR AN**
**ELECTRONIC DATABASE (**  **WITH THE NOTATION “**  **SUMMARY ORDER ”).**  **A PARTY CITING A SUMMARY ORDER MUST** 
**SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL .** 
**At a stated term of the United States Court of Appeals** 1 **for the Second Circuit, held at the Daniel Patrick Moynihan** 2 **United States Courthouse, 500 Pearl Street, in the City of** 3 **New York, on the 3 rd** **day of June, two thousand eleven.** 4 5 **PRESENT: DENNIS JACOBS,** 6 **Chief Judge ,**  7 **DEBRA ANN LIVINGSTON,** 8 **Circuit Judge ,**  9 **JED S. RAKOFF,** 10 **District Judge**

**.** * 11 12 - - - - - - - - - - - - - - - - - - - -X 13 **WILLIAM A. TEITELBAUM,** 14 **Plaintiff-Counter-Defendant** 15 **Appellant ,**  16 17 **-v.- 10-3510-cv** 18 19 **LAY SIOK LIN,** 20 **Cross-Claimant-Counter** 21 **Claimant-Appellee ,**  22 23 **AZIZ MOCHDAR,** 24 **Cross-Claimant-Appellee ,**  25 26 **BRUCE MABEY, PLATINUM TOO, LLC,** 27 **Defendants-Cross-Defendants**

**.** 28
- - - - - - - - - - - - - - - - - - - -X 292 1 **FOR APPELLANT:** Anton J. Borovina, Melville, New York. 2 3 **FOR APPELLEES:** Matthew N. Metz, Metz Law Group, PLLC, 4 Seattle, Washington (Levy, Ehrlich & 5 Petriello, P.C., Newark, New Jersey, on 6 the brief ). 7 8 Appeal from a judgment of the United States District 9 Court for the Eastern District of New York (Wexler, J. ). 10 11 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 12 **AND DECREED**that the judgment of the district court be 13
**AFFIRMED**

. 14 15 William Teitelbaum appeals from portions of the 16 judgment of the United States District Court for the Eastern 17 District of New York (Wexler, J. ) finding that Platinum Too, 18 LLC, breached its obligation to repay two investors, Lay 19 Siok Lin and Aziz Mochdar, in connection with promissory 20 notes issued by the company and holding Teitelbaum 21 personally liable for the breach under an alter ego theory 22 of liability. We assume the parties’ familiarity with the 23 underlying facts, the procedural history, and the issues 24 presented for review. 25 26 The district court’s legal conclusion that Platinum Too 27 was the alter ego of Teitelbaum is reviewed de novo , but we 28 defer to factual findings of the district court unless they 29 are clearly erroneous. United States v. Funds Held in the 30 Name or for the Benefit of Wetterer , 210 F.3d 96, 106 (2d 31 Cir. 2000); see alsoFed. R. Civ. P. 52(a)(6) . The parties’ 32 assumption that Utah law controls the alter ego analysis “is 33 sufficient to establish choice of law.” Motorola Credit 34 Corp. v. Uzan , 388 F.3d 39, 61 (2d Cir. 2004) (internal 35 quotation marks omitted). 36 37 Under Utah law, “[o]rdinarily, a corporation is 38 regarded as a separate and distinct legal entity . . . .” 39 Colman v. Colman , 743 P.2d 782, 786 (Utah Ct. App. 1987) 40 (internal quotation marks omitted). Although “there is 41 little case law discussing veil piercing theories outside 42 the corporate context,” the doctrine has been applied to 43 limited liability companies such as Platinum Too. Ditty v. 44 CheckRite, Ltd. , 973 F. Supp. 1320, 1335 (D. Utah 1997); see 45 alsod’Elia v. Rice Dev., Inc. , 147 P.3d 515, 521 n.5 (Utah 463 Ct. App. 2006). In order to disregard the corporate entity 1 under the alter ego doctrine, the court must find: 2 3 (1) [s]uch a unity of interest and ownership that 4 the separate personalities of the corporation and 5 the individual no longer exist, but the 6 corporation is, instead, the alter ego of one or a 7 few individuals; and (2) if observed, the 8 corporate form would sanction a fraud, promote 9 injustice, or result in an inequity. . . . It is 10 not necessary that the plaintiff prove actual 11 fraud, but must only show that failure to pierce 12 the corporate veil would result in an injustice. 13 14 Colman , 743 P.2d at 786. Utah courts look to a list of 15 “factors which are deemed significant, although not 16 conclusive,” id. , in evaluating whether the alter ego test 17 is satisfied: 18 19 (1) undercapitalization of a one-man corporation; 20 (2) failure to observe corporate formalities; (3) 21 nonpayment of dividends; (4) siphoning of 22 corporate funds by the dominant stockholder; (5) 23 nonfunctioning of other officers or directors; (6) 24 absence of corporate records; (7) the use of the 25 corporation as a facade for operations of the 26 dominant stockholder or stockholders; and (8) the 27 use of the corporate entity in promoting injustice 28 or fraud. 29 30 Id. (internal footnotes omitted). For substantially the 31 reasons stated by the district court, we affirm the district 32 court’s ruling that Platinum Too was Teitelbaum’s alter ego. 33 34 Teitelbaum invokes Utah Revised Limited Liability 35 Company Act, Utah Code Ann. § 48-2c-605 (the “Revised Act”), 36 which provides that the “failure of a company to maintain 37 records, to hold meetings, or to observe any 38 formalities . . . is not a ground for imposing personal 39 liability on any member, manager, or employee for any debt, 40 obligation, or liability of the company.” Teitelbaum argues 41 that it was therefore legal error to hold him personally 42 liable to Lay Siok Lin and Mochdar. “No Utah state court or 43 federal court has explicitly decided whether the veil of an 44 LLC can be pierced under the Revised Act. In the absence of 45 controlling state authority, we must predict as best we can 46 what the Utah Supreme Court would do in these 474 circumstances.” TFH Props., LLC v. MCM Dev., LLC , No. CV1 09-8050-PCT-FJM, 2010 WL 2720843, at *6 (D. Ariz. July 9, 2 2010). 3 4 Under the Revised Act, it would clearly be error to 5 impose alter ego liability based solely on the failure to 6 observe formalities. “But it does not follow that because 7 formalities cannot be the lone basis for piercing, no LLC 8 member can be held personally liable for an LLC’s debts.” 9 Id. In addition to disregarding formalities, Teitelbaum 10 “conduct[ed] his private and corporate business on an 11 interchangeable or joint basis as if they were one,” and 12 “failure to pierce the [LLC’s] veil would result in an 13 injustice.” Colman , 743 P.2d at 786. 14 15 Finding no merit in Teitelbaum’s remaining arguments, 16 we hereby **AFFIRM** the judgment of the district court. 17 18 19 FOR THE COURT: 20 CATHERINE O’HAGAN WOLFE, CLERK 21 22