Court Opinion

ID: 5117421
Source: CourtListenerOpinion
Date Created: 2021-10-09 01:00:37.884014+00
Date Added: 2024-06-11T08:22:02.696696
License: Public Domain

Case: 20-50823      Document: 00516049080         Page: 1     Date Filed: 10/08/2021

              United States Court of Appeals
                   for the Fifth Circuit
                                                                         United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
                                                                          October 8, 2021
                                   No. 20-50823                            Lyle W. Cayce
                                                                                Clerk

   United States of America,

                                                              Plaintiff—Appellee,

                                       versus

   Arthur Dale Lothringer,

                                                           Defendant—Appellant.

                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 5:18-CV-373

   Before Davis, Elrod, and Oldham, Circuit Judges.
   Per Curiam:*
          The question presented is whether Arthur Lothringer can be held
   personally liable for his corporation’s failure to pay taxes. The district court
   said yes. We affirm.
          Lothringer formed Pick-Ups, Inc., which ran used-car lots. Lothringer
   was the sole director, officer, and shareholder and had complete dominion

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-50823      Document: 00516049080          Page: 2    Date Filed: 10/08/2021

                                    No. 20-50823

   and control over Pick-Ups. The United States sued Lothringer, his wife Janet
   Lothringer, and Pick-Ups to collect federal taxes. The Government moved
   for summary judgment.
          The district court made three relevant determinations—only one of
   which is challenged on appeal. First, the court determined that Pick-Ups
   owed $1,777,047.98 in federal taxes. Second, the court determined that Pick-
   Ups was Lothringer’s alter ego. Third, the court awarded the Government
   the proceeds from the sale of Lothringer’s properties and his cabin permit
   minus his wife’s homestead interest. On appeal, Lothringer challenges only
   the second determination: that Pick-Ups was his alter ego. We reject that
   challenge.
          Our review is de novo. Morrow v. Meachum, 917 F.3d 870, 874 (5th Cir.
   2019). The parties agree that Texas law applies. “Texas law permits courts
   to ‘disregard the corporate fiction . . . when the corporate form has been used
   as part of a basically unfair device to achieve an inequitable result.’” Ledford
   v. Keen, 9 F.4th 335, 339 (5th Cir. 2021) (alteration in original) (quoting SSP
   Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444, 454 (Tex. 2008)).
   Such a circumstance includes a corporation that is an alter ego of an
   individual. Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986).
   “Under Texas law, ‘[a]lter ego applies when there is such unity between
   corporation and individual that the separateness of the corporation has
   ceased and holding only the corporation liable would result in injustice.’”
   Bollore S.A. v. Imp. Warehouse, Inc., 448 F.3d 317, 325 (5th Cir. 2006)
   (alteration in original) (quoting Castleberry, 721 S.W.2d at 272). “An alter
   ego relationship may be shown from the total dealings of the corporation and
   the individual.” Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex. 1990).
          The district court applied Texas law and concluded there was no
   genuine issue of material fact and that the totality of the circumstances

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                                     No. 20-50823

   established “such unity between [Pick-Ups] and [Lothringer] that the
   separateness of the corporation . . . ceased and holding only the corporation
   liable would result in injustice.” Castleberry, 721 S.W.2d at 272. The court
   relied on a slew of undisputed facts, including that Lothringer was the sole
   shareholder, officer, director and owner of Pick-Ups; exercised complete
   dominion and control over Pick-Ups; failed to observe certain corporate
   formalities; loaned substantial money to Pick-Ups; and made payments from
   the corporate bank account to service personal loans.
          We see no error in the district court’s conclusion. Lothringer makes
   two arguments that warrant brief discussion. But we reject both.
          First, Lothringer argues that the district court improperly relied on his
   failure to follow corporate formalities. This is because, Lothringer argues,
   Castleberry has been superseded by Texas statute. See, e.g., Tex. Bus.
   Orgs. Code Ann. § 21.223. As we have explained, “[t]he amendments
   overruled Castleberry to the extent that a failure to observe corporate
   formalities is no longer a factor in proving the alter ego theory in contract
   claims.” W. Horizontal Drilling, Inc. v. Jonnet Energy Corp., 11 F.3d 65, 68 (5th
   Cir. 1994) (Texas law) (emphasis added); see also Flores v. Bodden, 488 F.
   App’x 770, 776 n.3 (5th Cir. 2012) (per curiam); Wilson v. Davis, 305 S.W.3d
   57, 68 n.5 (Tex. App.—Houston [1st Dist.] 2009, no pet.). Lothringer has
   provided no support that tax collection should be treated like a contract claim
   and no persuasive reason to deviate from our precedent applying Texas law.
          Second, Lothringer argues that the district court improperly granted
   summary judgment after acknowledging that some facts were disputed. But
   the court determined that those disputed facts were not material. And it is
   well-established that “[f]actual disputes that are irrelevant or unnecessary
   will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
   (1986).

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Case: 20-50823     Document: 00516049080          Page: 4   Date Filed: 10/08/2021

                                   No. 20-50823

         We have considered Lothringer’s other arguments and find them
   unpersuasive. For these reasons, and for substantially the same given in the
   district court’s thorough opinion, we refuse to disturb the judgment.
         AFFIRMED.

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