Linus Holding Corp. v. Mark Line Indus., LLC
376 F. Supp. 3d 417
| D.N.J. | 2019Background
- Linus Holding Corp., a New York corporation, contracted with Mark Line Industries, LLC (Indiana) for design documents and later to manufacture modular units for a New Jersey project; Linus paid $37,125 and a $790,000 deposit.
- Linus alleges Mark Line failed to obtain required performance/payment bonds, used deposits for payroll, and refused to return funds after termination.
- Linus claims Mark Line transferred roughly $1.5 million (2016–2017) to affiliated entities and individuals for little or no consideration, leaving Mark Line undercapitalized and unable to bond.
- Plaintiff sought to pierce the corporate veil / treat affiliated entities and officers (13 defendants including MCG Cane Bay, BMB-MCG, BMB Investments, BOMA, Reimann, Brown) as alter egos to impute Mark Line’s New Jersey contacts and impose liability.
- Several affiliated LLCs and two individuals moved to dismiss for lack of personal jurisdiction; defendants submitted sworn certifications denying New Jersey contacts.
- The Court evaluated whether Linus pleaded sufficient facts to pierce the veil/establish alter-ego liability (thereby supporting specific jurisdiction) and dismissed claims against the moving defendants without prejudice for lack of personal jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court may exercise personal jurisdiction by imputing Mark Line’s NJ contacts via alter-ego / veil-piercing | Linus: transfers and corporate overlap show affiliates and officers dominated Mark Line; veil-piercing imputes Mark Line’s contacts to defendants | Defendants: no NJ contacts; transfers were permissible affiliate advances; common ownership/management and transfers alone insufficient | Dismissed for lack of personal jurisdiction—Linus failed to plead plausible veil-piercing/alter-ego facts |
| Whether alleged transfers show gross undercapitalization at formation (veil-piercing factor) | Linus: transfers rendered Mark Line undercapitalized and unable to perform | Defendants: insolvency after formation is not proof of undercapitalization at formation; no facts on required initial capitalization | Court: plaintiff conflated insolvency and undercapitalization; no facts showing inadequate capitalization at formation—factor not met |
| Whether common ownership/management and intercompany transfers establish unity of interest/control | Linus: overlapping executives and interrelated corporate structure evidence control | Defendants: common ownership/management is insufficient; Mark Line maintained separate books, employees, tax filings | Court: allegations of executive overlap and transfers are conclusory; common management alone insufficient—no plausible showing of domination |
| Whether failure to observe LLC formalities supports piercing veil | Linus: transfers violated Mark Line’s Operating Agreement and show disregard of formalities | Defendants: LLCs are flexible; New Jersey statute protects LLCs from liability for not observing formalities; transfers were recorded and permissible | Court: statutory and case law limit formalities inquiry for LLCs; even if formality failures existed, they alone don’t justify veil-piercing—insufficient showing of fraud/injustice |
Key Cases Cited
- D'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94 (3d Cir. 2009) (plaintiff bears burden to establish personal jurisdiction by a preponderance; prima facie standard when no evidentiary hearing)
- Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93 (3d Cir. 2004) (prima facie standard and limits on relying on pleadings alone in jurisdictional factfinding)
- Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310 (U.S. 1945) (minimum contacts due process standard)
- Daimler AG v. Bauman, 571 U.S. 117 (U.S. 2014) (contacts among defendant, forum, and litigation are central to jurisdictional analysis)
- Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (U.S. 2011) (limits on general jurisdiction)
- Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145 (3d Cir. 1988) (non-exhaustive factors for veil-piercing inquiry)
- Trs. of the Nat'l Elevator Indus. Pension, Health Benefit & Educ. Funds v. Lutyk, 332 F.3d 188 (3d Cir. 2003) (distinguishing insolvency from undercapitalization; veil-piercing is an exception for extreme circumstances)
- State Dept. of Environmental Protection v. Ventron Corp., 94 N.J. 473 (N.J. 1983) (corporate separateness generally respected; veil-piercing is equitable remedy for fraud or injustice)