Opinion ID: 33225
Heading Depth: 3
Heading Rank: 1

Heading: e. insulation of shareholders from

Text: liability, and a disallowance of the separate corporate entity privilege for others. Each situation must be considered by the court on its merits. The facts presented must demonstrate some misuse of the corporate privilege in that situation or the need of limiting it in order to do justice. Glazer v. The Commission on Ethics, 431 So. 2d 752, 757-58 (La. 1983) (internal citations omitted). Balancing these equities, Louisiana courts have recognized that corporate liabilities that result from consensual contractual relationships between sophisticated parties dealing at arms length should only be attributed to the corporate shareholders in extreme situations. Specifically, Where the action underlying the request to pierce the corporate veil is based on contract, courts have usually applied more stringent standards to piercing the corporate veil. The rationale for more carefully scrutinizing these factors is that the party seeking relief in a contract case is presumed to have voluntarily and knowingly entered into an agreement with a corporate entity and was aware that he would have to suffer the consequences of limited liability of the shareholders associated with the corporate entity. Accordingly, absent very compelling equitable considerations, courts should not rewrite contracts or disturb the allocation of risk the parties have themselves established. 12 Riggins v. Dixie Shoring Co., 592 So.2d 1282, 1285 (La. 1992) (Dennis, J., concurring) (internal citations omitted); see also Barnco International, Inc. v. Arkla, Inc. 684 So.2d 986, 992 (La. App. 2 Cir. 1996) (citing Riggins and noting that “the courts have usually applied a more stringent standard where the party seeking to pierce the veil, in a contract case, voluntarily entered into an agreement with a corporate entity and knowingly accepted the consequences of limited liability”). While the above cited cases provide us with insight into the general approach that the Louisiana courts take to piercing the corporate veil, we also need to determine what particular factors, if any, the Louisiana courts examine in determining whether the corporate veil should be pierced in any specific case. Professor Glenn Morris has performed an in-depth analysis of all Louisiana veil piercing cases between 1944 and 1991. See Glenn G. Morris, Piercing the Corporate Veil in Louisiana, 52 La.L.Rev. 271, 273 (1991). His analysis provides insight into how Louisiana courts analyze piercing the corporate veil in consensual creditor cases. Notably, he comments that “[o]f the many dozens of reported veilpiercing cases covered by this article, not one of them involving a claim by a consensual creditor has pierced the veil simply because the obligor corporation was a controlled shell or instrumentality.” Id. at 292. Instead, other factors must be present in order to hold that the corporate veil should be pierced 13 in a consensual creditor case. Id. Specifically, Louisiana courts must find one of the following four factors before they will pierce the corporate veil in favor of a consensual creditor: (1) the creditor is less sophisticated than the corporation; (2) a single shareholder controls a number of different corporations and moves assets back and forth among the various corporations; (3) the shareholder has deliberately stripped the corporation of assets, knowing that the corporation is about to face liability, or has placed the contract into the shell corporation knowing that the contract was going to be breached; or (4) an extension of credit to the corporation has been procured, at least in part, as the result of some false representation made personally by the defendant shareholder or officer. Id. at 293-94 (citing, inter alia, Troyer v. Webster Homes, Inc., 566 So. 2d 114 (La. App. 5 Cir. 1990); Terry v. Guillory, 538 So.2d 317 (La. App. 3 Cir. 1989); George A. Hormel & Co. v. Ford, 486 So. 2d 927 (La. App. 5 Cir. 1986); Entech Systems Corp. v. Gaffney, 466 So.2d 788 (La. App. 4 Cir. 1985)). Rive argues that these four factors are not applicable to the analysis of piercing the corporate veil in this case and that we should instead apply an eighteen factor test that the Louisiana Court of Appeal enumerated in Green v. Champion Insurance Co., 577 14 So.2d 249 (La.App.1991).6 Technically, Green did not involve piercing the corporate veil in order to impose a corporation’s liability onto its shareholders. Instead, Green enumerated a nonexhaustive, non-dispositive list of factors to determine whether a group of related companies is a “single business enterprise.” Id. at 258. The district court heard extensive testimony on these Green factors from both parties and specifically found that the defendant’s expert testimony on these factors was more credible. The district court then analyzed these factors and found that BC and DBE did not constitute a “single business enterprise.” We agree with the district court’s legal analysis and findings of fact. To the extent that the Green factors apply to this case, we affirm the district court’s refusal to use the Green factors to 6 The eighteen factors are “(1) Corporations with identity or substantial identity of ownership, that is, ownership of sufficient stock to give actual working control; (2) common directors or officers; (3) unified administrative control of corporations whose business functions are similar or supplementary; (4) directors and officers of one corporation act independently in the interest of the corporation; (5) corporation financing another corporation; (6) inadequate capitalization (‘thin incorporation’); (7) corporation causing the incorporation of another affiliated corporation; (8) corporation paying the salaries and other expenses or losses of another corporation; (9) receiving no business other than that given to it by its affiliated corporations; (10) corporation using the property of another corporation as its own; (11) noncompliance with corporate formalities; (12) common employees; (13) services rendered by the employees of one corporation on behalf of another corporation; (14) common offices; (15) centralized accounting; (16) undocumented transfers of funds between corporations; (17) unclear allocation of profits and losses between corporations; and (18) excessive fragmentation of a single enterprise into separate corporations.” Green, 577 So.2d at 257-58. 15 find that BC and DBE were a single business enterprise. We must next look at the four “piercing the corporate veil” factors listed above to determine whether the district court properly refused to impose liability on DBE via that theory. Examining these four factors in turn, the district court found that none of these factors applied to this situation. First, the court explained that both Rive and BC are very sophisticated business entities. Second, the court found, based on the testimony of the accountants at trial, that all of the money in the Briggs family of companies was adequately tracked among the various companies. The money was not, as would be required to pierce the veil, transferred among the companies in such a manner as to make it impossible to track. Third, the court noted that, far from being a shell corporation, BC is still an ongoing profitable business. Finally, the court noted that there is no evidence in the record to demonstrate that BC, DBE, or Briggs engaged in fraud or deceit in entering into the Agreement with Rive. Accordingly, the district court found that none of the four factors were met and did not allow Rive to pierce BC’s corporate veil and enforce the arbitration award against DBE. To the extent that the district court’s determination involved findings of fact, we hold that the district court did not clearly err in making those findings. To the extent that the district court’s determination involved an 16 interpretation of law, it correctly interpreted the law.7 V Rule 60(b) Motions Both sides appeal the district court’s denial of their Rule 60(b) motions made after the conclusion of the trial. Rule 60(b) allows the district court to relieve a party from a final judgment for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied or relies on a law invalidated subsequent to entry of the judgment; or (6) any other reason justifying relief. Fed. R. Civ. P. 60(b). As explained above, we review the district court’s decision to grant or deny a Rule 60(b) motion for abuse of discretion. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 997 (5th Cir. 2001). Rule 60(b) is an “extraordinary” remedy; courts are disinclined to disturb final judgments except when necessary. See 7 In addition to the analysis above, it is also notable that Rive initially wanted DBE to assume liability under the Agreement. DBE expressly refused, and the parties negotiated for and agreed to a risk allocation arrangement in which DBE did not have liability under the Agreement. For the district court to invalidate this term of the Agreement and impose the extraordinary remedy of corporate veil piercing on BC would directly conflict with Louisiana law to the contrary. Barnco, 684 So.2d at 992 (“[Louisiana] courts have usually applied a more stringent standard where the party seeking to pierce the veil, in a contract case, voluntarily entered into an agreement with a corporate entity and knowingly accepted the consequences of limited liability”). 17 Goldstein v. MCI Worldcom, 340 F.3d 248, 258 (5th Cir. 2003) (citing Pease v. Pakohed, 980 F.2d 995, 998 (5th Cir. 1993) and Longden v. Sunderman, 979 F.2d 1095, 1102 (5th Cir. 1992)). Rive claims that BC made several misrepresentations during the proceedings that obligate the district court to relieve Rive from its decision not to pierce BC’s corporate veil.8 Specifically, Rive contends that (1) several post-judgment actions by BC and DBE indicated that they made misrepresentations at trial; (2) DBE lied about how much revenue it received from the Fat Tuesday’s; and (3) BC lied about being a “successful” business. We have reviewed these arguments and uphold the decision of the district court. First, Rive argues that BC and DBE took post-judgment actions, such as opening a separate bank account for BC and making payments by DBE on behalf of BC, that indicate that BC’s and DBE’s testimony at trial were misrepresentations that necessitate Rule 60(b) interference with enforcement of the judgment. We hold that the district court did not abuse its discretion in holding that these post-judgment actions by BC and DBE did not implicate the extraordinary Rule 60(b) remedy of undercutting the judgment. Rive also contends that defendant’s claim that DBE only received 5% of 8 To the extent that elements of Rive’s 60(b) motion relate to alleged misconduct by BC involving enforcement of the arbitration award against BC, we do not address the issue because it is moot. The district court ruled in favor of Rive concerning enforcement of the arbitration award against BC. 18 the gross revenue generated by the Fat Tuesday’s from BC must be false because the new company managing the Fat Tuesday’s is paying 15% in fees. The district court properly held that defendants did not prove that BC was paying more than 5% to DBE. Finally, Rive contends that BC lied about being a “successful” company. However, BC is a profitable company and “success” is a relative term. It was not an abuse of discretion for the district court to hold that it was not a misrepresentation to claim that BC was successful. In short, the district court properly denied Rive’s Rule 60(b) motion. BC also brought a Rule 60(b) motion, contending that a Mexican appeals court held that the Mexican district court’s decision was improper. Therefore, BC argues, the district court in this case should have set aside its judgment enforcing the Mexican arbitration award. BC, however, had an opportunity to post a bond and stay these proceedings pending the resolution of the Mexican appellate proceedings. BC did not post this bond. It was not an abuse of discretion for the district court to refuse to use Rule 60(b) in this instance to undercut its judgment. VI