Carney v. International Capital Group

Background

Philip Carney sued International Capital Group, ICG Asia Finance Limited, ICG USA, LLC, fictitious entities identified as “ABC Corporations” 1-10, Larry Russel, and Brian Nord. The action concerned an alleged breach of a November 2015 installment payment agreement, called the “General Release,” relating to an earlier secured loan transaction.

The corporate defendants failed to make the fourth of four installment payments. The court had previously entered a default judgment against those corporate defendants. Carney then moved for partial summary judgment asking the court to pierce the corporate veil and hold Russel and Nord liable for the same unpaid installment. The opinion states that Russel and Nord appeared without lawyers and did not oppose the motion.

Legal standard

Under Federal Rule of Civil Procedure 56, summary judgment may be granted only when the undisputed facts show that the moving party is entitled to judgment as a matter of law. Even when a motion is unopposed by parties without lawyers, the court must independently determine whether the evidence supports the motion.

The court applied New York law to the veil-piercing issue. Under that law, a party generally must show both that an owner exercised complete domination over a corporation concerning the transaction at issue and that the domination was used to commit a fraud or other wrongful act that injured the party. Complete domination alone is not enough. A simple breach of contract, without more, does not justify piercing the corporate veil.

Court’s analysis

The court first addressed the requirement that the corporate control have been used to commit a fraud or wrongful act. It concluded that Carney had shown no more than a breach of the General Release by the corporate defendants. The court noted that Carney sold his portfolio to satisfy his debt while aware that the companies had cash-flow problems and that various entities operated under the International Capital Group name. The court also noted that Nord had personally guaranteed short-term loans intended to help make payments, which the court viewed as evidence that he was not attempting to hide behind the corporate entities.

The court separately concluded that Carney had not shown complete domination over the corporate defendants in connection with the November 2015 transaction. The evidence cited by Carney included a 2011 transfer of $500,000, withdrawals or dividends, alleged undercapitalization, Nord’s personal guarantees, and the opening of another bank account after the corporate entities lost access to their accounts. The court found that Carney did not show that the funds were transferred to the individual defendants, did not connect the older transfer to the 2015 transaction, and did not establish personal commingling of funds. The court also declined to draw adverse inferences from the defendants’ failure to retrieve corporate documents because the court had previously allowed additional discovery on that subject.

The court observed that Carney’s motion papers contained significant inconsistencies with his complaint, but said it did not need to resolve those inconsistencies to decide the narrow veil-piercing issue.

Remaining claims and disposition

Because veil piercing was not established, the court found no basis for a contract claim against Russel and Nord because they were not signatories to the General Release. The court also found that the good-faith-and-fair-dealing claim was based on the same conduct and damages as the contract claim, and that the fraud claim concerned contractual promises about future performance and was therefore duplicative of the contract claim.

The court stated that the asserted “book account” claim is not a statutory action recognized under New York law. It also concluded that Carney had not shown the financial commingling needed to support a fraudulent-conveyance claim. The court denied Carney’s motion for summary judgment to pierce the corporate veil, dismissed the remaining claims against the individual defendants, directed the Clerk to terminate the motion, and closed the case.