August 21, 2014

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Fourth Circuit Refuses to Pierce the Corporate Veil in Oil Spill Case

The US Court of Appeals for the Fourth Circuit has refused to enforce a judgment against an entity with ties to the judgment debtor, finding that the judgment creditor had not adequately pled an alter ego claim.

Plaintiff Vitol SA secured a $9 million judgment against Capri Marine Ltd. on the grounds that Capri breached certain warranties of seaworthiness, which resulted in an oil spill. Vitol had been unable to collect on the judgment, and filed suit in Federal Court against Spartacus Navigation Corp and Primerose Shipping Co. (together, S&P) to collect on the judgment, claiming that S&P were alter egos of Capri.

Plaintiff identified a variety of links between Capri and S&P, including, among others, that Primerose was started with funds from Capri’s parent company, Starlady Marine; the vessels of Starlady and Primerose had similar coloration; Primerose and Starlady shared offices, phone numbers, and other office facilities; the owner of Primerose extended a line of credit to Starlady’s parent company; and Starlady paid off a loan held by one of Primerose’s subsidiaries. The Fourth Circuit found that these allegations showed only a strong business relationship between Capri and S&P, and together failed to state a claim to pierce the corporate veil, an action which is taken “only under extraordinary circumstances.” Vitol v. Primerose Shipping Co., No. 11-1900 (4th Cir. Feb. 8, 2013).

©2014 Katten Muchin Rosenman LLP

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About this Author

Bruce M. Sabados, Financial Institutions Attorney, Katten Muchin Law Firm
Partner

Bruce M. Sabados concentrates his practice in complex commercial litigation, with an emphasis on securities- and financial services-related matters and secured lender litigation. He represents both plaintiffs and defendants in a variety of commercial matters in federal and state courts and in arbitration. His clients include securities firms, international banks, hedge funds, high net worth individuals and asset-backed lenders. Bruce handles matters involving fraud, restrictive covenants, breaches of contract, business torts and Racketeer Influenced and Corrupt Organizations Act (RICO). He...

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Dean N. Razavi, Litigation Attorney, Katten Muchin law firm
Associate

Dean Razavi concentrates his practice in litigation and dispute resolution matters.

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