DOCTORS ASSOCIATES INC. v. WHITE
2:12-cv-07393
D.N.J.Jan 30, 2014Background
- DA moves for partial reconsideration of the court’s September 17, 2013 order confirming the arbitration award against White and denying confirmation against Coach.
- White entered into a Subway franchise agreement with DA and later assigned rights to Coach; White promised DA could enforce against Coach if he breached and DA obtained a judgment.
- DA alleges Coach is White’s alter ego; Durso attests that White is majority owner, Coach exists to administer White’s obligations, and White is insolvent living off Coach’s income.
- Arbitrator DiFazio awarded DA against White for breach; Coach was not a party to the arbitration.
- The Court previously treated a motion for default against Coach as a request to confirm against Coach on alter-ego grounds but denied it, citing caselaw that alter-ego determinations are improper in a confirmation proceeding.
- DA argues reconsideration is necessary to prevent injustice if Coach cannot be held liable because White is hiding behind an alter ego.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court may pierce the corporate veil to hold Coach liable as White’s alter ego | DA contends Coach is White’s alter ego created to administer White’s obligations under the Agreement. | Coach is a separate entity; no appearance should not affect whether alter-ego liability can be imposed in a confirmation action. | Yes; alter-ego liability can be imposed in a confirmation action when appropriate. |
| Whether the arbitration Award against White can be confirmed against Coach on alter-ego grounds | DA asserts Coach should be liable because of alter ego relationship with White. | Nonparties to arbitration (Coach) generally cannot be held liable in a confirmation proceeding absent alter-ego piercing. | Yes; the Court can confirm the Award against Coach on alter-ego grounds. |
Key Cases Cited
- Orion Shipping & Trading Co. v. Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir. 1963) (piercing the corporate veil and alter-ego liability framework)
- Bd. of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164 (3d Cir. 2002) (alter-ego/veil-piercing standard applied in corporate liability cases)
- Max’s Seafood Café by Lou-Ann, Inc. v. Quinteros, 176 F.3d 669 (3d Cir. 1999) (reconsideration and equitable relief considerations in acknowledgments of alter ego issues)
- North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194 (3d Cir. 1995) (standard for reconsideration and correction of legal errors to prevent manifest injustice)