Court Opinion

ID: 8941207
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:56:44.679449+00
Date Added: 2024-06-11T17:09:44.202411
License: Public Domain

IRVING R. KAUFMAN, Circuit Judge
(dissenting in part and concurring in part):
I concur in the majority opinion insofar as it rejects David Friedmann’s claims raised on cross-appeal, remands the issue of damages to the district court, and affirms the district court’s refusal to enforce the settlement agreement. I must dissent, *1058however, from that part of the opinion reversing the district court and imposing full liability on Constantine Gratsos.
Motivated by an unshakeable conviction that Gratsos should be liable for the damages suffered by Kashi, my colleagues have cast aside the usual restraint exercised by appellate courts reviewing the factual findings of a lower court. In so doing, they have created liability where none exists.
My brothers properly note that in New York a civil conspiracy requires (1) an agreement between two or more persons, (2) an overt act, (3) an intentional participation in the furtherance of a plan or purpose, and (4) resulting damage. Suarez v. Underwood, 103 Misc.2d 445, 447, 426 N.Y.S.2d 208, 210 (Sup.Ct.1980) (emphasis added). None of the facts set forth in the majority opinion to support the existence of a conspiracy, however, establish that Gratsos knowingly engaged in a common scheme to defraud Kashi.
The district judge found that Gratsos learned of SMSC’s failure to ship the grain in July, 1980, two months after the letter of credit had been cashed. Judge Sofaer also found that Gratsos shared in some of the proceeds from the letter of credit. Indeed, these facts support an action for conversion, and the district court properly held Gratsos’s estate liable for $47,500.00 — the amount by which Gratsos benefitted from the breach of contract.
The mere fact that Gratsos had ties to the Onassis organization, and that Kashi was induced by that affiliation to engage in business with the defendants, however, does not establish that Gratsos intended to defraud Kashi. Nor does Gratsos’s silence after learning of SMSC’s failure to ship the grain lead to the conclusion that he conspired from the outset to defraud Kashi. In fact, the district judge specifically found that Gratsos’s joint venturers probably contracted for the second shipment without consulting Gratsos, and that Kashi failed to prove either that Gratsos knew about the breach of contract when it was committed or that Gratsos’s representations about SMSC were fraudulent. I am thus mystified how, on appeal, we can view the facts to “compel the conclusion that [Gratsos] was a full participant in the entire scheme.” The district judge’s holding that Gratsos was liable only to a limited extent may seem unlikely, or even improbable, but it is not clearly erroneous. See Anderson v. City of Bessemer City, — U.S. -, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).
The majority also states that the district judge “believed that it would have been proper to pierce the corporate veil but for Kashi’s failure to prove that Gratsos was a full participant in the fraudulent scheme.” In fact, the district court ruled that there was no need to reach the question whether SMSC’s corporate existence should be disregarded. Otherwise, however, the district court found that SMSC functioned as a legitimate corporation in previous transactions, and that the evidence did not establish that the company was formed as part of a fraudulent plan. By instructing the district court to pierce the veil of a possibly legitimate corporation, this Court departs sharply from established precedent. Cf. Metropolitan Transportation Authority v. Triumph Advertising Productions, Inc., 497 N.Y.S.2d 673 (1st Dept.1986) (conclusory allegations that corporate structure is a sham are insufficient to warrant piercing corporate veil); Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50 (2d Cir.1984) (corporate veil pierced because jury found shell corporation was inadequately capitalized and lacked formalities of normal corporate existence); Bartle v. Finkelstein, 241 N.Y.S.2d 655, 19 App.Div.2d 256 (4th Dept.1963) (veil pierced upon a determination that corporation was a fictional entity).
Accordingly, I disagree with the majority recommending reversal and would affirm the district court finding that Gratsos’s liability was of a limited nature. As I noted above, however, I concur in the majority’s decision to reject Friedmann’s cross-appeal, remand to the district court on the damages issue, and affirm the lower court’s *1059refusal to enforce the settlement agreement.