Exxon Mobil Corporation v. Freeman Holdings LLC
2:09-cv-00390
| E.D. Wash. | Feb 10, 2011Background
- Exxon provided aviation fuel at Moses Lake Airport and stored fuel in leased facilities including Tank #38.
- In 2001 Exxon contracted with Air America to store and distribute its fuel; Air America did not take title to the fuel.
- In fall 2008 Exxon notified the Port and Air America that it would cease aviation-fuel operations and terminate its lease effective December 31, 2008.
- Air America was sold to Freeman Holdings of Washington, LLC (FHW) / Freeman Holdings, LLC (FH), an entity solely owned and controlled by Francis B. Freeman, who traveled to Washington to finalize the purchase.
- After negotiations about the remaining fuel, Freeman entities demanded below-market sale or removal; Exxon rejected the demand and negotiations continued, with Exxon proposing options that included removal of the fuel.
- Beginning January 2009, the Freeman entities sold or diverted Exxon’s remaining fuel, with Mr. Freeman personally benefiting from these activities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Amended Complaint plausibly pleads alter-ego liability | Exxon contends Freeman uses FHW to evade duties and to avoid liability. | Freeman contends the Amended Complaint fails to show deliberate disregard of corporate form. | Yes; the Amended Complaint plausibly supports veil-piercing. |
| What elements are required to pierce the corporate veil under Washington law | Exxon need show abuse of the corporate form to evade a legal obligation. | Freeman argues the two-element test is not clearly defined or required. | Two elements are required: evasion of a legal obligation and necessity to prevent a loss to an innocent party. |
| Whether discovery is appropriate to support the veil-piercing theory | Exxon should be permitted to conduct discovery to develop the theory. | No specific argument against discovery beyond the Rule 12(b)(6) posture. | Discovery may proceed, including deposition of Mr. Balestrieri. |
Key Cases Cited
- J.I. Case Credit Corp. v. Stark, 64 Wn.2d 470 (Wash. 1964) (veil-piercing analysis and the concept of piercing the corporate veil)
- Chadwick Farms Owners Ass'n v. FHC LLC, 166 Wn.2d 178 (Wash. 2009) (corporate-veil-piercing doctrine; emphasis on two-element approach)
- Meisel v. M & N Modern Hydraulic Press Co., 97 Wn.2d 403 (Wash. 1982) (elements and fairness concerns in disregard of corporate entities)
- Washington v. Davies, 176 Wash. 100 (Wash. 1934) (early articulation of corporate disregard principles)
- Grayson v. Nordic Constr. Co., Inc., 92 Wn.2d 548 (Wash. 1979) (alter-ego considerations and review of corporate form)
- Morgan v. Burks, 93 Wn.2d 580 (Wash. 1980) (fraudulent intent and misuse of corporate structure)
- Truckweld Equip. Co., Inc. v. Olson, 26 Wn. App. 638 (Wash. App. 1980) (treata of corporate disregard; necessity to prevent injustice)
- Harrison v. Puga, 4 Wn. App. 52 (Wash. App. 1971) (application of alter-ego analysis in veil piercing)
- Minton v. Ralston Purina Co., 146 Wn.2d 385 (Wash. 2002) (corporate structure manipulation to avoid duties)
- Davies v. Wash. Dept. of Labor & Indus., 176 Wash. 100 (1934) (historical treatment of corporate disregard doctrine)