Energy Coal S P A v. CITGO Petroleum Corporation
836 F.3d 457
5th Cir.2016Background
- Energy Coal (Italian, Genoa) contracted with Petróleo (Venezuelan PDVSA subsidiary) to provide services and supply petroleum coke; contracts designated Venezuelan law and forum.
- Petróleo allegedly failed to pay ~$186 million; Energy Coal sued CITGO Petroleum Corp. (Delaware corp., U.S. affiliate of PDVSA) in Louisiana state court invoking Louisiana's single business enterprise doctrine to reach its affiliate.
- CITGO removed to federal court on diversity grounds and moved to dismiss, arguing Delaware law (its state of incorporation) governs whether corporate separateness may be disregarded.
- The district court held Delaware law governs and dismissed because Energy Coal did not plead the exceptional circumstances Delaware requires to pierce the corporate form.
- The Fifth Circuit reviewed choice-of-law de novo, examined Louisiana’s article 3515 interest-balancing test, and affirmed that Delaware law governs whether CITGO can be held liable for its affiliate’s breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state law governs whether CITGO may be held liable for Petróleo’s conduct (choice-of-law)? | Louisiana law should apply so the single business enterprise doctrine can reach CITGO because of its relationship to PDVSA and contacts with Louisiana (refinery, certificate of authority). | Delaware law governs because CITGO is incorporated in Delaware and issues of corporate separateness are tied to state of incorporation. | Delaware law governs; state of incorporation has strongest interest in corporate-structure questions. |
| Substantive reachability: can Energy Coal invoke Louisiana’s single business enterprise theory to hold CITGO liable? | Single business enterprise doctrine should apply to hold affiliates liable for each other’s obligations. | Even under Louisiana doctrine, Delaware’s higher bar for disregarding corporate form controls here; Energy Coal did not allege facts meeting Delaware’s ‘‘exceptional case’’ standard. | Energy Coal cannot disregard the corporate form under Delaware law; dismissal affirmed. |
Key Cases Cited
- Brown v. ANA Ins. Grp., 994 So. 2d 1265 (La. 2008) (discusses Louisiana Supreme Court’s treatment of corporate separateness and related doctrines)
- Green v. Champion Ins. Co., 577 So. 2d 249 (La. App. 1 Cir. 1991) (articulated Louisiana single business enterprise doctrine and listed nonexhaustive factors)
- Bujol v. Entergy Servs., Inc., 922 So. 2d 1113 (La. 2004) (emphasized corporate separate legal identity and criticized expansive piercing doctrines)
- NorAm Drilling Co. v. E & PCo Int’l, LLC, 131 So. 3d 926 (La. App. 2 Cir. 2013) (applied law of state of incorporation in single business enterprise context)
- Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640 (5th Cir. 2002) (authored discussion that state of incorporation governs veil-piercing/corporate-structure questions)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts must apply forum state choice-of-law rules in diversity cases)
- Alliance Data Sys. Corp. v. Blackstone Capital Partners V L.P., 963 A.2d 746 (Del. Ch. 2009) (describes Delaware’s strong policy of respecting corporate formalities)
- In re Ark–La–Tex Timber Co., 482 F.3d 319 (5th Cir. 2007) (describes single business enterprise as related to veil-piercing and equitable disregard of corporate form)