Decided: February 8, 2013
This case involved a sea vessel chartering company’s attempt to reach the assets of two shipping companies—entities claimed to be controlled by the corporate owner of a certain vessel that had been the cause of an oil spill in the country of Estonia—in an effort to satisfy an outstanding judgment that the chartering company had recovered against the vessel owner in an English court.
In 2000, the plaintiff, Vitol, S.A., was chartering the Capri Marine-owned vessel, ALAMBRA, when the ship caused marine pollution in an Estonian port. Vitol subsequently sued Capri Marine in England for breach of the warranty of seaworthiness; Vitol went on to recover a judgment for $6.1 million. The English judgment was never paid off by Capri Marine, however, and at the time that this case reached the Fourth Circuit, with interest still accruing, the judgment totaled over $9 million. In 2009, Vitol filed suit in the U.S. District Court for the District of Maryland against Spartacus Navigation Corp. and Primerose Shipping Company (collectively “S&P”)—two entities that Vitol claimed to be the corporate alter ego of Capri Marine. Thus, Vitol requested that the district court pierce the corporate veil of Capri Marine and hold S&P liable for Vitol’s outstanding English judgment. The district court granted Vitol’s motion for a maritime attachment of a Spartacus vessel that was then docked in the Baltimore harbor; however, S&P submitted to the court’s jurisdiction on a restricted basis and the court released the attachment in exchange for S&P posting $9 million as collateral. In its 2010 order, although it ruled that it had competent jurisdiction to hear the dispute, the district court nonetheless granted S&P’s motion to dismiss for failure to state a claim.
On appeal, the Fourth Circuit first considered whether the district court had properly asserted subject matter jurisdiction over the case. In answering that question, the court had to determine whether the plaintiff’s complaint “sound[ed] in admiralty so as to invoke the district court’s admiralty jurisdiction under [28 U.S.C.] § 1333.” The court noted that it was well established that U.S. federal courts had admiralty jurisdiction to enforce the judgments of foreign admiralty courts. The court rejected the argument by S&P that because the admiralty judgment was rendered in the English Commercial Court—and not the English Admiralty Court—that the claim lacked the “admiralty character” necessary to invoke the admiralty jurisdiction of the U.S. District Court. The court pointed out that both parties’ expert witnesses on English law stated that there was overlap between those two English jurisdictions and that admiralty claims were occasionally brought in the Commercial Court. The Fourth Circuit held, “[i]nasmuch as the English Commercial Court exercised jurisdiction over a maritime claim, we agree with the district court’s conclusion that ‘the Commercial Court was an admiralty court with respect to the English Judgment.’”
After resolving that jurisdictional question, the Fourth Circuit turned to the district court’s dismissal of Vitol’s alter ego claim. The court was forced to determine whether Vitol had pled facts sufficient to state a claim for piercing the corporate veil of Capri Marine and thus exposing S&P to liability on the English judgment. The court examined at depth the factual contentions in Vitol’s complaint concerning the ownership and operations of Capri Marine, focusing on the relationship between the entity that controlled Capri Marine (and its network of affiliates) and S&P. In determining whether the alleged facts suggested that the defendants were the alter ego of Capri Marine, the court analyzed various factors including, the corporate formalities, transfers of money, comingling of funds, and corporate structures. The court ultimately concluded that while the plaintiff had alleged a close business relationship, “there [was] nothing in the allegations of interconnectness [sic] that plausibly suggests the sort of dominion, control, failure to observe corporate formalities, or fundamental unfairness needed to state a claim for alter ego status.” And under the pleading standards required by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the complaint’s “bald allegations” and “legal conclusions couched as factual allegations” were insufficient to show that the plaintiff was entitled to relief. Thus, the Fourth Circuit affirmed the trial court’s dismissal for failure to state a claim.
-John C. Bruton, III