Cleveland Thermal Steam Distribution, LLC v. Carlyle Leader, LLC, 1:14-cv-02709

Cleveland Thermal sues Carlyle Leader and two affiliates for breach of contract and seeks veil piercing and agency liability.
Carlyle Leader is a Delaware LLC; CDG Leader is its sole member and a Delaware corporation; Carlyle Development is a New York corporation that indirectly owns Carlyle Leader.
November 2013 contract: Cleveland Thermal to provide steam to Leader Building; contract signed by Cleveland Thermal president and Carlyle Development president as Manager for Carlyle Leader.
2014 payment disputes; payment plan modified March 26, 2014; June 2014 set monthly amounts; July 29, 2014 demand for full payment; August 12, 2014 termination notice if not cured; August 15, 2014 Leader Building sold without steam contract assignment.
Plaintiff alleges veil piercing factors (shared address, common employment, jointly operated properties, undercapitalization) and that Fear served roles across entities; Defendant moves to dismiss agency claim.
Court applies Rule 12(b)(6) to dismiss or deny, addresses Rule 9(b) for fraud claims, and discusses choice of law as to veil piercing and agency theories.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether amended complaint adequately pleads veil piercing (alter ego)	Cleveland Thermal alleges lack of separate existence based on control and common operations.	Defendants argue allegations are mere conclusions not establishing lack of separate existence.	Yes for first element; allegations, viewed in aggregate, support lack of independent existence.
Whether fraud/illegality element of veil piercing is pled with specificity	Plaintiff asserts a detailed promissory fraud scheme tied to the March 26, 2014 letter.	Defendants contend Southeast Texas Inns requires more than a contract breach; not pled with misrepresentation at time of agreement.	Plaintiff adequately pled fraud/illicit conduct under Rule 9(b) given detail of the scheme.
Choice of law for veil piercing and agency claims	Forum would apply substantive veil piercing law without determining internal affairs.	Internal affairs doctrine; NY or DE law should apply based on corporate form.	Court declines to resolve; any of the involved states would apply similar veil piercing elements; not outcome-determinative.
Whether plaintiff can hold Carlyle Development liable on agency theory for contract with Cleveland Thermal	Carlyle Leader acted as agent of Carlyle Development; communications reflect authority.	No express/implied/app parent authority; contract shows only Leader as Customer and letters to Leader.	Agency claim against Carlyle Development dismissed.

Southeast Texas Inns, Inc. v. Prime Hospitality Corp., 462 F.3d 666 (6th Cir. 2006) (fraud or similar injustice required to pierce veil; contract alone insufficient)
Dombrowski v. Wellpoint, Inc., 895 N.E.2d 538 (Ohio 2008) (elements of veil piercing require control and use to commit fraud or wrong)
Morris v. New York State Dep’t of Taxation & Fin., 623 N.E.2d 807 (N.Y. 1983) (domination must be used to commit a fraud or wrong; separate organizational significance must be lacking)
Midkiff v. Adams Reg’l Water Dist., 409 F.3d 758 (6th Cir. 2005) (veiling piercing standards and pleading requirements)