Carney v. International Capital Group

Background

On March 13, 2024, the court denied Philip Carney’s motion for partial summary judgment seeking to pierce the corporate veil and hold Brian Nord and Larry Russel, identified together as the individual defendants, liable for an unpaid installment payment owed under a General Release agreement. The court also dismissed Carney’s remaining claims. On March 22, 2024, Carney moved for reconsideration of that decision.

A reconsideration motion is an extraordinary request that generally cannot be used to repeat arguments, present arguments that could have been made earlier, or obtain another hearing on the merits. Reconsideration is generally appropriate only when the court overlooked controlling law or facts, there has been a change in controlling law, new evidence is available, or correction is needed to prevent clear error or serious unfairness.

Discovery Sanction and Missing Documents

Carney argued that the court should have imposed an adverse inference—a decision to treat missing evidence as unfavorable to the party responsible for it—as a discovery sanction. He relied on the individual defendants’ production of approximately 100 pages of documents and their failure to retrieve corporate records after they were evicted from their corporate offices in 2016.

The court rejected the argument. It explained that Carney had not timely requested a discovery sanction and that the court had previously directed his counsel to pursue depositions and requests for admissions. The court also concluded that Carney had not shown the required elements for spoliation sanctions: an obligation to preserve the evidence, a culpable state of mind, and relevance of the destroyed evidence. The court found no authority establishing that the individual defendants had to retrieve and preserve the records for five years, no basis to find a culpable state of mind, and only speculation about the records’ relevance. The court therefore rejected Carney’s attempt to reargue the adverse-inference issue.

Corporate-Veil Argument

Carney argued that the court had overlooked evidence of corporate domination and legal authority concerning fraud or wrongdoing. He pointed to the resignations of minority owner Todd Bergeron and accountant Ken Kenning and to dividends and withdrawals taken from the corporate entities.

The court concluded that the resignations occurred between 2011 and 2012, before the parties entered into the General Release, and were therefore not relevant. It also stated that it had already considered the dividend policy and had found that the irregular dividends and withdrawals were features of corporate activity that did not justify ending limited liability. The court further rejected Carney’s reliance on a case involving corporate asset stripping because Carney had not shown comparable evidence here. The court noted that the individual defendants had personally guaranteed the first three payments, but Carney did not identify evidence that the corporate entities were stripped when the fourth payment became due.

The court also rejected Carney’s argument that disputed facts required a trial. Because the individual defendants did not respond to the summary-judgment motion, they did not dispute Carney’s factual statements. After reviewing the record, the court found that Carney had not connected the facts to either transaction in a way that supported piercing the corporate veil and stated that no reasonable jury could reach the opposite conclusion.

Remaining Claims

Carney challenged the dismissal of claims for breach of the duty of good faith and fair dealing, fraud, and fraudulent conveyance.

The court upheld dismissal of the good-faith-and-fair-dealing claim because the individual defendants were not parties to the relevant contract, and such a claim may be brought only against a contract party. It upheld dismissal of the fraud claim because Carney’s arguments did not overcome his prior admissions that he knew about the individual defendants’ involvement with the entities and knew the entities were experiencing cash-flow problems when he entered into the General Release and installment arrangement.

The court also found no basis for the fraudulent-conveyance claim. Carney had offered no evidence that the individual defendants received fraudulent transfers or benefited from them. The court stated that dividends or other compensation could not simply be treated as fraudulent transfers and that the absence of evidence could not be converted into an adverse inference.

Disposition

Judge Naomi Reice Buchwald denied Carney’s motion for reconsideration. The Clerk of Court was instructed to terminate the motion pending at ECF No. 77.