Opinion ID: 745452
Heading Depth: 3
Heading Rank: 3

Heading: Discoverer's Liability

Text: 29 The district court found Discoverer liable under two alternative theories. First, it found that because Discoverer was the operator of the ship, it could be held liable for the Chans' injuries. Second, it pierced the corporate veil between Discoverer, Adventurer, and Society to hold Discoverer liable as an owner of the ship. We consider these holdings in turn. 30 The operator of a ship may be held liable for injuries sustained by passengers on the vessel. See 1 Thomas J. Schoenbaum, Admiralty and Maritime Law § 5-5, at 172 (2d ed.1994). However, mere brokers or agents who issue the ticket or manage the ship for a disclosed principal are not proper defendants in a passenger case. Id.; see also Haffel v. United States Lines Co., 114 F.Supp. 443, 444 (S.D.N.Y.1953). 31 Discoverer contends that it was only the managing agent for the cruise, and as such, may not be held liable for the Chans' injuries. See Weade, 337 U.S. at 805, 69 S.Ct. at 1328 (non-liable agents' duties included issuing tickets, maintaining vessel, maintaining terminals and offices, arranging for loading and unloading of passengers, arranging advertising, provisioning ship, and procuring officers and crew). The record supports the district court's finding, however, that although Discoverer acted as a traditional managing agent, it also performed tasks akin to that of an operator and held itself out as the operator of the ship. 32 The ship's captain testified that he directed his questions regarding the operation of the ship to Discoverer. Captain Lampe also filed an accident report after the incident listing Discoverer as the owner of the ship. While the captain testified that this designation was a mistake from [his] present point of view, the district court was entitled to discount this post hoc rationalization in its role as factfinder. The typed sheet entitled Landing Procedures by Rubber Boats distributed to passengers on the ship was labeled with the name Discoverer Reederei GmbH. In its briefs to this court in the prior Chan appeal, Discoverer characterized itself as the operator of the vessel. 33 Given this support in the record, we cannot conclude that the district court clearly erred in holding that Discoverer was the operator of the ship. We therefore affirm the court's ruling that Discoverer is liable as the ship's operator for the Chans' injuries. 34 More problematic is the district court's holding that Discover is also liable as the owner of the vessel. Admiralty courts may pierce the corporate veil in order to reach the alter egos of a corporate defendant. See Swift & Co. Packers v. Compania Colombiana Del Caribe, S A, 339 U.S. 684, 689 n. 4, 70 S.Ct. 861, 865 n. 4, 94 L.Ed. 1206 (1950); see also Talen's Landing, Inc. v. M/V Venture, 656 F.2d 1157, 1160 (5th Cir.1981). Federal courts sitting in admiralty generally apply federal common law when examining corporate identity. See In re Holborn Oil Trading Ltd., 774 F.Supp. 840, 844 (S.D.N.Y.1991). Corporate separateness is respected unless doing so would work injustice upon an innocent third party. Kilkenny v. Arco Marine Inc., 800 F.2d 853, 859 (9th Cir.1986). 35 We have held that disregard of corporate separateness requires that the controlling corporate entity exercise total domination of the subservient corporation, to the extent that the subservient corporation manifests no separate corporate interests of its own. Id. (internal quotations omitted). As formulated by the Second Circuit, federal common law allows piercing of the corporate veil where a corporation uses its alter ego to perpetrate a fraud or where it so dominates and disregards its alter ego's corporate form that the alter ego was actually carrying on the controlling corporation's business instead of its own. See Kirno Hill Corp. v. Holt, 618 F.2d 982, 985 (2d Cir.1980). 36 The record is not sufficient to support the district court's decision to pierce the corporate veil in this case. See Teixeira v. Van Camp Seafood Co., 783 F.2d 951, 953 (9th Cir.1986); Kilkenny, 800 F.2d at 859. Aside from the common ownership of these three corporations by Heiko Klein, no other evidence presented at trial demonstrated a shared corporate existence or common scheme to perpetrate fraud on third parties. Common ownership alone is insufficient to support disregard of the corporate form. See United States v. Jon-T Chems., Inc., 768 F.2d 686, 691 (5th Cir.1985). We therefore reverse the district court's ruling that Discoverer was liable as an owner for the Chans' injuries.