Knight Brothers v. Barer Engineering Company of America
2:10-cv-00108
| D. Utah | Jan 24, 2011Background
- Barer Engineering Co. of America, Central Bearing Corp. (Canadian), and BEI allegedly operate as Barer entities under common control; Barer resides in Montreal, Canada; plaintiff Knight Brother, LLC contracted to install foundation and machinery at Hill AFB, Utah; higher foundation cost arose from Barer’s incomplete information; Barer promised payment for increased price but later did not pay; contract total around $619,805 with $431,160.20 unpaid; Barer and Barer entities allegedly commingle funds, undercapitalized, and Barer controls entities for personal gain.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Barer | Barer engaged in Utah activities via Barer entities; alter ego shows minimum contacts | Barer acted as corporate officer shielded by fiduciary shield doctrine | Court finds prima facie minimum contacts and exercises specific jurisdiction over Barer |
| Alter ego and instrumentality claim viability | Allegations show undercapitalization, fund commingling, and control by Barer | Claims rely on conclusory assertions about entities | Second Amended Complaint states an alter ego/instrumentality claim under Vermont law |
| Fraudulent misrepresentation vs. economic loss rule | Fraud claim not barred due to independent duty or unjust enrichment theory; Barer personally participated | Economic loss doctrine bars tort claims arising from contract | Fraud claim not clearly barred; may proceed in light of alter ego context and potential independent duty |
| Impact of contract formation on economic loss rule | No meeting of the minds on increased price; quasi-contract theories may apply | There was a contract; terms disputed; economic loss rule applies if contract governs | Economic loss rule not clearly applicable to bar fraud claim at this stage; quasi-contract theories possible |
Key Cases Cited
- Segil v. Gloria Marshall Management Co., Inc., 568 F.Supp. 915 (D. Utah 1983) (fiduciary shield and piercing corporate veil when misuse of corporate form)
- In re Vermont Toy Works, Inc., 135 B.R. 762 (Bankr. Vt. 1990s) (veil piercing when personal use of corporate funds and undercapitalization)
- Agway, Inc. v. Brooks, 790 A.2d 438 (Vt. 2001) (veil piercing under equity and injustice principles)
- d'Elia v. Rice Development, Inc., 147 P.3d 515 (Utah Ct. App. 2006) (applies law of incorporation to alter ego claims)
- Becker v. HSA/Wexford Bancgroup, L.L.C., 157 F. Supp. 2d 1243 (D. Utah 2001) (contract/quasi-contract pleadings and implications for dismissal)
- Omi Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086 (10th Cir. 1998) (minimum contacts and personal jurisdiction in diversity actions)
- Rusakiewicz v. Lowe, 556 F.3d 1095 (10th Cir. 2009) (minimum contacts analysis for long-arm statutory claims)
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009) (plausibility standard; rejecting mere conclusory allegations)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (pleading standard: plausible claims required)
- Fidelity & Cas. Co. of N.Y. v. Philadelphia Resins Corp., 766 F.2d 440 (10th Cir. 1985) (minimum contacts notion in long-arm jurisprudence)
- Bartile Roofs, Inc. v. TLC Homes, 618 F.3d 1153 (10th Cir. 2010) (application of Twombly/Iqbal to pleadings)