Cevdet Aksut Ve Ogullari Koll. v. Huseyin Cavusoglu
704 F. App'x 137
| 3rd Cir. | 2017Background
- Cevdet (Turkish exporter) sold dried apricots and pine nuts to HGC (U.S. importer owned by Cavusoglu). After two cash-against-documents shipments, Cevdet shipped 13 open-account shipments (~$1.1M) based on Cavusoglu’s representations; HGC never paid.
- Cevdet sued Cavusoglu and HGC, settled with a provision allowing revival of claims; HGC defaulted and a ~$1.1M judgment was entered against HGC.
- Cevdet later sued Cavusoglu individually in federal court (diversity) alleging fraud and seeking to pierce HGC’s corporate veil to hold Cavusoglu liable for the $1.1M judgment.
- At trial a jury found Cavusoglu liable for fraud (~$1M) and pierced the corporate veil (~$1M); jury also found Cevdet 20% at fault on the fraud claim, yielding an adjusted fraud award but the court entered a final judgment for about $1M due to veil piercing.
- Cavusoglu appealed pro se, raising challenges to denial of summary judgment, evidentiary rulings, Rule 50(b) denial, and application of comparative fault to the veil-piercing award. The Third Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Cevdet) | Defendant's Argument (Cavusoglu) | Held |
|---|---|---|---|
| Fraud — reliance and reasonableness | Cavusoglu personally made false representations about HGC’s distribution and ability/intention to pay; Cevdet relied reasonably | Cevdet relied on third-party (Museoglo) and industry practice; reliance was unreasonable | Jury evidence supported reasonable reliance on Cavusoglu; verdict upheld |
| Piercing corporate veil | Cavusoglu used HGC to perpetrate fraud; veil-piercing warranted to collect HGC judgment | Piercing is improper here; any remedy should be under UFTA/creditor-fraud principles | Veil piercing sustained because fraud (misrepresentation + reliance) was proven; Banco Popular inapplicable |
| Admission of prior suits/settlements | Relevant to intent, scheme, and veil-piercing; admissible with limiting use | Evidence improper propensity evidence and prejudicial | District Court did not abuse discretion; no reversible prejudice shown |
| Comparative fault reduction for veil piercing | N/A (Cevdet sought full recovery) | The 20% comparative fault on fraud should reduce veil-piercing liability | Issue not preserved/adequately developed; Third Circuit declined to apply comparative-fault reduction to veil piercing |
Key Cases Cited
- Frank C. Pollara Gp., LLC v. Ocean View Inv. Holdings, LLC, 784 F.3d 177 (3d Cir. 2015) (limits appellate review of summary judgment to purely legal issues)
- Ortiz v. Jordan, 562 U.S. 180 (U.S. 2011) (summary-judgment-review jurisdiction principles)
- Trabal v. Wells Fargo Armored Serv. Corp., 269 F.3d 243 (3d Cir. 2001) (standard of review for Rule 50(b) motions)
- Banco Popular N. Am. v. Gandi, 876 A.2d 253 (N.J. 2005) (fraud requires misrepresentation and reliance; rejects creditor-fraud without those elements)
- Eisenberg v. Gagnon, 766 F.2d 770 (3d Cir. 1985) (sufficiency of reliance evidence where multiple sources may have informed plaintiffs)
- Byrne v. Weichert Realtors, 675 A.2d 235 (N.J. Super. Ct. App. Div. 1996) (fact question on reliance where multiple information sources exist)
- Allesandra v. Gross, 453 A.2d 904 (N.J. Super. Ct. App. Div. 1982) (no duty to disclose corporate financials where commercial safeguards available)
- Van Dam Egg Co. v. Allendale Farms, Inc., 489 A.2d 1209 (N.J. Super. Ct. App. Div. 1985) (distinguishes failure-to-disclose cases from affirmative misrepresentation by principals)
- Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145 (3d Cir. 1988) (elements and factors for piercing corporate veil)
- Walid v. Yolanda for Irene Couture, Inc., 40 A.3d 85 (N.J. Super. Ct. App. Div. 2012) (reasonable reliance can exist despite additional steps plaintiffs might have taken)
- Becker v. ARCO Chem. Co., 207 F.3d 176 (3d Cir. 2000) (harmless-error standard for evidentiary rulings)
- Draper v. Airco, Inc., 580 F.2d 91 (3d Cir. 1978) (prejudice standard for improper evidence at trial)
- Lesende v. Borrero, 752 F.3d 324 (3d Cir. 2014) (preservation required for appellate review of trial objections)