283 F.R.D. 142
S.D.N.Y.2012Background
- GE Microgen and Plug Power formed GEFCS; Soroof seeks to add GE as defendant via veil-piercing theory.
- GE was a major shareholder of Plug Power and GE Microgen is GE’s subsidiary.
- Soroof entered a distributor agreement in 2000, paying $1 million and expending over $1 million.
- GE allegedly knew of market viability risks but misrepresented project prospects.
- GE dissolved GEFCS in 2006 without informing Soroof; dissolution affected claims and possible liability.
- Judge Swain had previously allowed limited amendment considerations; current motion grants leave to amend to add GE.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 16 good cause applies to untimely amendment | Soroof filed renewal after discovery facts; good cause shown | GE Microgen argues scheduling order governs and requires diligence | Yes; Rule 16 good cause satisfied for untimely amendment |
| Whether the amendment to add GE as a defendant is futile | Facts support alter ego against GE via control and dissolution | Allegations do not establish control over GE Microgen/GEFCS | Not futile; pleadings allege plausible alter ego relationship |
| Whether the amendment would prejudice defendants | Delay and discovery burdens justified by continued ongoing proceedings | Additional issues and discovery would prejudice | Not/prejudice not shown; prejudice insufficient to deny amendment |
| Whether the amended complaint states a valid alter ego claim under Delaware law | Facts show intermingling, undercapitalization, control, entry into dissolution | Need stronger proof of fraud/inequitable use of corporate form | Sufficient to plead alter ego under Delaware law for viability of claim |
Key Cases Cited
- Blair v. Infineon Technologies AG, 720 F.Supp.2d 462 (D.Del.2010) (alter ego standard; control factors; piercing standard applied via veil)
- In re Digital Music Antitrust Litigation, 812 F.Supp.2d 390 (S.D.N.Y.2011) (factors for piercing corporate veil; single-enterprise inquiry)
- NetJets Aviation, Inc. v. LHC Communications, LLC, 537 F.3d 168 (2d Cir.2008) (necessary element: inequitable use of corporate form; some fraud may be required)
- Trevino v. Merscorp, Inc., 583 F.Supp.2d 521 (D.Del.2008) (alter ego; surplus factors; fraud/inequity standard)
- Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp.260 (D.Del.1989) (alter ego foundations; piercing for purposes of liability)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (S. Ct.2007) (pleading standards; plausibility)
- Park B. Smith Inc. v. CHF Industries Inc., 811 F.Supp.2d 766 (S.D.N.Y.2011) (delay alone not basis to deny leave to amend)