George A. Ga

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CHALOS Co, P.C. - Houston
Piercing the corporate veil

• George A. Gaïtas
• Attorney at Law

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Why?
CHALOS Co, P.C. - Houston
George A. Gaitas

• To secure your eventual judgment or arbitration
  award

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When and under what law ?
CHALOS Co, P.C. - Houston
George A. Gaitas

• As part of the prejudgment
• remedy of maritime attachment
• and garnishment, under Rule B
• of the Supplemental Rules for
• Admiralty or Maritime Claims
• and Asset Forfeiture Actions,
• before adjudication of the
• merits of the principal claim.
• .

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Where?
CHALOS Co, P.C. - Houston
George A. Gaitas

• In a United States District Court
• which has jurisdiction over admiralty matters

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English biscuit
CHALOS Co, P.C. - Houston
George A. Gaitas

• English admiralty court jurisdiction

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Texas biscuit
CHALOS Co, P.C. - Houston
George A. Gaitas

• U.S. admiralty court jurisdiction

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CHALOS Co, P.C. - Houston
George A. Gaitas

• U.S. District Courts have jurisdiction over all
  admiralty and maritime claims which comprehends
  all maritime contracts, torts, and injuries.
• DeLovio v. Boit 7 Fed. Cas. 418, no. 3,776
  C.C.D.Mass. (1815)

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Conditions for Rule B relief
CHALOS Co, P.C. - Houston
George A. Gaitas

• 1) a valid prima facie admiralty
• claim against the defendant
• 2) the defendant cannot be found
• within the district
• 3) the defendant's property may be
• found within the district and
• 4) there is no statutory or maritime law
• bar to the attachment.
• Aqua Stoli Shipping Ltd. v. Gardner Smith
• Pty Ltd., 460 F.3d 434 (2nd Cir., 2006)

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How ?
CHALOS Co, P.C. - Houston
George A. Gaitas

• File suit in admiralty court specifically praying
  for the related entity corporate separateness to
  be disregarded. Atlanta Shipping Corp., Inc. v.
  Chemical Bank 818 F.2d 240, 248 (2d Cir. 1987)
  Vitol, S.A. v. Primerose Shipping Co., 708 F.3d
  527,542 (4th Cir., 2013)
• .

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In Rule B proceedings a district court can and
will pierce the corporate veil
CHALOS Co, P.C. - Houston
George A. Gaitas

• "The basis of admiralty's power is to protect its
  jurisdiction from being thwarted by a fraudulent
  transfer, and that applies equally whether it is
  concerned with executing its judgment or
  authorizing an attachment to secure an
  independent maritime claim.
• Swift Co. Packers v. Compania Colombiana Del
  Caribe, S. A., 339 U.S. 684,694-695 (1950)

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Veil Piercing Grounds
• Use of the corporate form to commit fraud. Lee v.
  Thompson, 15 F. Cas. 233 15 F. Cas. 233, 235
  (Circuit Court, D. Louisiana 1878) Williamson
  v. Recovery L.P., 542 F.3d 43, 53(2nd Cir 2008)
  )
• Alter ego relationship (Complete domination of
  the subsidiary by the parent so that the
  subsidiary was the agent of the parent or the
  two comprised a single business). Lehigh Valley
  R. Co. v. Dupont, 128 F. 840 Luckenbach S.S.
  Co. v. W. R. Grace Co., 267 F. 676, 681 (4th
  Cir. 1920) THE WILLEM VAN DRIEL 252 F. 35, 1918
  U.S. App. LEXIS 2032, (4th Cir.1918).

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Factual basis for veil piercing
• Sabine Towing case fact pattern
• Common or overlapping stock ownership between the
  parent and the subsidiary
• Common or overlapping directors and officers
• Use of Same Corporate Office
• Inadequate Capitalization of the Subsidiary
• Financing of the subsidiary corporation by the
  Parent
• Whether the Parent existed solely as a Holding
  company for its subsidiaries
• The Parent's use of the subsidiary's property and
  assets as its Own

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Sabine Towing case fact pattern (cont.)
• 8. The Nature of Intercorporate LoanTransactions
  
• 9. Incorporation of the Subsidiary being caused
  by the Parent
• 10. Whether the Parent and the Subsidiary file
  Consolidated Income Tax Returns
• 11. Decision-Making for the Subsidiary made by
  the Parent and its Principals
• 12. Whether the Directors of the Subsidiary act
  Independently in the Interest of the Subsidiary
  or in the Interest of the Parent
• 13. The Making of Contracts between the Parent
  and the Subsidiary that are more favorable to the
  Parent

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Sabine Towing case fact pattern (cont.)
• Observance of Formal Legal Requirements
• The Existence of Fraud, wrong-doing or Injustice
  to Third Parties.
• Sabine Towing Transp. Co. v. Merit Ventures,
  Inc., 575
• F. Supp. 1442 (E. D. Tex., 1983).

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Proof in Veil Piercing
• To obtain the order, and hold on to attachment,
  prima facie evidence. Not required to prove
  the case. Wajilam Exports (Singapore) v. Atl
  Shipping 475 F.Supp.2d 275, 279 (S.D.N.Y. 2006).
• To prevail on the merits of the veil piercing
  suit preponderance of the evidence. Rose
  Containerline, Inc. v. Omega Shipping Co. (D.N.J.
  2011).

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Choice of Law
• US law applies in all Rule B proceedings in order
  to maintain uniformity and consistency in the
  admiralty. Wall Street Traders, Inc. v. Sociedad
  Espanola, 245 F. Supp. 344, 350 (S.D.N.Y., 1964)
  SLS Shipbuilding Co. Ltd v. Ionia Mgmt. S.A. 2011
  U.S. Dist. LEXIS 72506, at 6-7 (S.D. Tex.,
  2011).
• U.S. law would apply even if we used multi-factor
  choice of law test Blue Whale Corp. v. Grand
  China Shipping Dev. Co., 722 F.3d 488, 499-500
  (2nd Cir., 2013.

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CHALOS Co, P.C. - Houston
George A. Gaitas

• Veil Piercing to compel Arbitration
• Suit to compel alter egos to arbitrate under the
• Federal Arbitration Act 9 U.S.C. 4.
• Not a Rule B proceeding.
• Preponderance standard of proof.
• Result incompatible with Rule B veil piercing
  claim against the same party.

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The End
CHALOS Co, P.C. - Houston
George A. Gaitas