Piercing the Corporate Veil: North Carolina Court Grants Motion to Vacate Attachment

Sikousis Legacy Inc. v. B-Gas Limited, No. 22-cv-032732023-CRB, 2023 U.S. Dist. LEXIS 11442, 2023 WL 322900 (N.D. Cal. Jan. 19, 2023).

Author: Jacob Whitlow

            Sikousis Legacy Inc., was awarded $7.5 million in arbitration awards against B-Gas Ltd., now known as “Bepalo”.1  As Bepalo subsequently declared insolvency, Sikousis sought to recover from Aframax. The plaintiff claimed that Aframax is one of several related corporate entities which are “alter-egos” of one another under the corporate structure of Bergshav Group.2  Pursuant to Rule B of the Supplement Rules for Certain Admiralty or Maritime Claims, the lower court authorized attachment of a vessel, THE M/T BERICA, which is owned by Aframax.3  Aframax filed a motion to vacate the attachment.4

            Ninth Circuit jurisprudence suggests that the plaintiff bears the burden of showing that there is probable cause to attach property—THE BERICA.5  To show probable cause, the plaintiff must demonstrate that there is a reasonable probability that they prevail on an alter-ego claim.6  Generally, subsidiaries and their parent are treated as separate entities; however, if a plaintiff can “pierce the corporate veil”, the court can disregard corporate forms and hold subsidiaries liable with parent entities.  The court emphasized that to “pierce the corporate veil a party must show that (1) the controlling corporate entity exercise[s] total domination of the subservient corporation. . . . (2) injustice will result from recognizing [the subservient entity] as a separate entity. . . . and (3) the controlling entity had a fraudulent intent. . .”7

            The question for the court was to determine whether Sikousis can show that it is reasonably likely to prevail on an alter-ego claim and thus whether the attachment should be vacated.

            Sikousis asserted that Bepalo is an alter-ego of Bergshav Holding AS such that a judgment against Bepalo can be collected against another entity within this group.8  Similarly, Sikousis claimed that Aframax is an alter-ego of Bergshav and a fraudulent relationship exists between the two.9

            The court found that evidence demonstrated that Bepalo is not dominated and controlled by Bergshav.10  The court relied, in part, on declaration from Begshav Shipholding AS’ deputy CEO, Andreas Hannevik, who set out legitimate circumstances as to why Bepalo is not dominated and controlled by Bergshav Shipholding AS.11

            The plaintiff again failed regarding the relationship between Aframax and Bergshav.  Sikousis had some success in showing that Bergshav exercises some dominion over the subservient Aframax with evidence of Bergshav transferring funds to Aframax, dictating how those funds would by entered into their system, and bailing out Aframax; however, plaintiff failed to show that Bergshav had any fraudulent intent in its use of Aframax.12

            Because Sikousis cannot “pierce the corporate veil” and show that Bepalo and Aframax are alter-egos of the related corporate entity, the court cannot attach THE BERICA in order for Sikousis to recover from Aframax the debt owed by Bepalo.13

1 Sikousis Legacy Inc. v. B-Gas Limited, No. 22-cv-032732023-CRB, 2023 U.S. Dist. LEXIS 11442, 2023 WL 322900, at *1 (N.D. Cal. Jan. 19, 2023).

2 Id.

3 Id.

4 Id. at 3.

5 See Tefida v. 1,925 Cartons of Crab, No. 2:13-cv-464-RSM, 2013 WL 4049011, at *3 (W.D. Wash. Aug. 9, 2013).

6 OS Shipping Co. Ltd v. Global Maritime Trust, No. 11-cv-377-BR, 2011 WL 1750449, at *5 (D. Or. May 6, 2011).

7  See Chan v. Society Expeditions, Inc., 123 F.3d 1287, 1294 (9th Cir. 1997).

8 Sikousis Legacy Inc., 2023 WL at *1. 

9 Id.

10 Id. at *5-7.

11 Id. at *5.

12 Id. at *7-10.

13 Sikousis Legacy Inc., 2023 WL at *11.