705 F. App'x 103
3rd Cir.2017Background
- Mark IV (NJ) provided "last mile" delivery for Lightning (Tennessee LLC) from 2008–2009 and was owed about $100,000 when services stopped.
- Lightning was owned/operated by Tennessee residents Scott Evatt (president) and John O’Riordan (former owner); Evatt later formed Crosstown Courier (Tennessee).
- Lightning was administratively dissolved in 2010; Traveller Logistics succeeded Lightning and later was dissolved; default judgments entered against Lightning and Traveller.
- Mark IV amended to add Evatt, O’Riordan, and Crosstown and sought to pierce Lightning’s corporate veil to impute Lightning’s liability to those Tennessee defendants and establish personal jurisdiction.
- After discovery, the District Court found Mark IV failed to show Lightning was a "sham or dummy" under Tennessee veil-piercing law and dismissed Evatt and Crosstown for lack of personal jurisdiction; it also sua sponte dismissed claims against O’Riordan for lack of personal jurisdiction.
- The Third Circuit affirmed, applying Tennessee law on veil-piercing and reviewing dismissal for lack of personal jurisdiction de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lightning’s corporate veil should be pierced so Lightning’s liability can be imputed to Evatt and Crosstown (alter ego) | Lightning disregarded formalities; Evatt diverted ~$160,000 from Lightning’s line of credit leaving it unable to pay Mark IV; shared office/employees with Crosstown | Lightning was not a sham: LLCs need not follow corporate formalities; withdrawals didn’t show permanent impairment or misconduct sufficient to justify piercing; companies formed for different purposes | Veil not pierced. The equities did not substantially favor disregarding Lightning’s corporate status; dismissal for lack of personal jurisdiction over Evatt and Crosstown affirmed |
| Whether the District Court properly dismissed claims against O’Riordan sua sponte for lack of personal jurisdiction during default-judgment proceedings | Mark IV argued O’Riordan had appeared previously and default judgment was proper | Court must ensure personal jurisdiction before entering default judgment; O’Riordan never answered the Second Amended Complaint and did not litigate jurisdiction | Dismissal affirmed: district court may sua sponte address personal jurisdiction before default judgment and properly dismissed claims against O’Riordan |
Key Cases Cited
- CAO Holdings, Inc. v. Trost, 333 S.W.3d 73 (Tenn. 2010) (standard: veil-piercing only when entity is a "sham or dummy" or disregarding entity is necessary to accomplish justice)
- D'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94 (3d Cir.) (plenary review of personal-jurisdiction dismissal)
- Pamperin v. Streamline Mfg., Inc., 276 S.W.3d 428 (Tenn. Ct. App.) (factors used in Tennessee veil-piercing analysis)
- Oceanics Sch., Inc. v. Barbour, 112 S.W.3d 135 (Tenn. Ct. App.) (veil-piercing applied with caution)
- Muroll Gesellschaft M.B.H. v. Tenn. Tape, Inc., 908 S.W.2d 211 (Tenn. Ct. App.) (presumption of corporate regularity and cautious application of veil-piercing)
- In re Steffner, 479 B.R. 746 (Bankr. E.D. Tenn.) (withdrawal/transfer of funds not sufficient to pierce veil absent evidence of permanent inability to meet obligations)
- In re Tuli, 172 F.3d 707 (9th Cir.) (court may dismiss sua sponte for lack of personal jurisdiction when considering default judgment)