174 Conn. App. 573
Conn. App. Ct.2017Background
- Deutsche Bank obtained a £/USD English judgment (~$243 million) against Sebastian Holdings, Inc. (a Turks and Caicos corporation) for trading losses; Sebastian did not pay.
- Deutsche Bank then sued in Connecticut to pierce Sebastian’s corporate veil and enforce the English judgment against Alexander Vik, Sebastian’s sole shareholder and director.
- In the English proceedings Sebastian’s counterclaims (that Deutsche Bank breached duties) were rejected; the English court also entered a separate nonparty costs order under Senior Courts Act §51 making Vik liable for certain costs.
- Deutsche Bank relied on the English judgment and the §51 costs finding in its Connecticut action; defendants argued res judicata and that collateral estoppel barred Deutsche Bank from litigating veil-piercing/liability.
- The Connecticut trial court denied both parties’ summary judgment motions: it held the veil-piercing claim was not barred by res judicata and that collateral estoppel did not preclude defendants from contesting alter-ego liability.
- The Appellate Court affirmed, finding the enforcement/veil-piercing claim distinct from the English contract action and that the English findings were not identical, necessary, or sufficiently procedurally comparable to trigger issue preclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Deutsche Bank’s veil-piercing enforcement action is barred by res judicata because it should have been raised in the English action | Deutsche Bank: enforcement by piercing is a distinct claim seeking to collect an existing unsatisfied judgment; thus it need not have been litigated in the English merits action | Defendants (Vik/Sebastian): veil-piercing arises from the same transactional nucleus as the English suit and therefore should have been raised there | Held: Not barred. The enforcement/veil-piercing claim is different in nature and arises from a distinct nucleus of operative facts; res judicata would produce injustice here |
| Whether the English court’s factual findings (control/draining of assets) and the §51 costs order collaterally estop Vik from denying alter-ego liability in Connecticut | Deutsche Bank: English findings established Vik’s control/alter-ego status and thus issue preclusion should apply | Defendants: English findings were nonessential to the merits and the §51 costs proceeding was a summary procedure without full procedural protections; issues are not identical | Held: No collateral estoppel. Relevant English findings were not necessary to the merits decision and the §51 costs proceeding lacks comparable procedural safeguards; issues are not identical |
| Whether the §51 (nonparty costs) determination is equivalent to a corporate veil-piercing adjudication | Deutsche Bank: §51 finding demonstrates Vik’s connection and culpability; should have preclusive effect | Defendants: §51 is a discretionary, summary costs mechanism distinct from a cause-of-action adjudication | Held: §51 is not equivalent; English court itself said a §51 order is not the same as piercing the corporate veil and the procedure did not guarantee full litigation rights, so it lacks preclusive effect |
| Proper choice of law for veil-piercing elements | Deutsche Bank: applicable law is Turks and Caicos (English law authorities applicable); plaintiff pleaded sufficient facts under that law | Defendants: argued Turks and Caicos law precluded piercing as pleaded | Held: Trial court correctly applied Turks and Caicos/English-derived law and found Deutsche Bank adequately pleaded a veil-piercing claim to proceed |
Key Cases Cited
- Orselet v. DeMatteo, 206 Conn. 542 (Conn. 1988) (adopts transactional test for claim preclusion)
- Duhaime v. American Reserve Life Ins. Co., 200 Conn. 360 (Conn. 1986) (factors for defining a transaction for res judicata)
- Powell v. Infinity Ins. Co., 282 Conn. 594 (Conn. 2007) (procedures for comparing complaints under transactional test)
- Gladysz v. Planning & Zoning Comm’n, 256 Conn. 249 (Conn. 2001) (res judicata should not work an injustice)
- Corcoran v. Dept. of Social Services, 271 Conn. 679 (Conn. 2004) (issue preclusion requires identity of issues)
- Wiacek Farms, LLC v. Shelton, 132 Conn. App. 168 (Conn. App. 2011) (requirements for collateral estoppel)
- Connecticut Natural Gas Corp. v. Miller, 239 Conn. 313 (Conn. 1996) (declining preclusion where prior proceeding lacked full procedural safeguards)
- Lighthouse Landings, Inc. v. Conn. Light & Power Co., 300 Conn. 325 (Conn. 2011) (appealability of denials of summary judgment based on res judicata or collateral estoppel)