Page 18: of Maritime Reporter Magazine (August 2021)

Legal Beat

Rule B Alter-Ego

Vessel Seizures

By Keith B. Letourneau laintiffs seeking to recover from ship managers or elections, maintaining proper corporate records, the vessels they operate but lacking a direct claim etc.); against a particular vessel have developed a clever 2. Whether the subservient corporation is adequately strategy under U.S. maritime law. They seize a capitalized to meet its ? nancial obligations;

P managed vessel under Supplemental Admiralty Rule B and 3. Whether corporate funds are used for personal claim the vessel-owning company is an alter ego of the defen- purposes; dant with whom the dispute really exists. In this way, plain- 4. Whether overlap exists in ownership, directors, tiffs can take advantage of the relatively low evidentiary bar to of? cers, and personnel; delve into protracted discovery to develop the alter-ego con- 5. Whether the corporation share of? ce space, address, nection they need to prove up their case. or contact information;

Rule B requires showing that the defendant is not present 6. Whether the alleged subservient entity lacks within the district to satisfy the existence of general-personal discretion in operating its business; jurisdiction. The Supreme Court’s general jurisdiction ruling 7. Whether business dealings between the companies in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), has made it are at arms-length; much easier to meet Rule B’s requirement because it essen- 8. Whether one entity holds that it is responsible for tially requires the defendant’s principal place of business to the debts of another; lie within the district, which is never the case for foreign ? ag 9. Whether the dominating corporation uses the vessels or their owning companies, thus enabling plaintiffs to subservient entity’s property as its own. almost automatically meet Rule B’s “not present within the district” requirement. See Paci? c Gulf Shipping v. Vigorous Shipping & Trading

The defendant shipowner can challenge the attachment at a S.A., et al, 992 F.3d 893, 898 (9th Cir. 2021).

post-seizure hearing where the federal courts typically apply a The crux of the issue is that often international corporate probable cause test, which equates to reasonable grounds for special purpose vehicle (“SPV”) structures do not meet the supposing the allegations are true. Invariably, Plaintiffs allege rigors of corporate separateness required in the United States, that the ship manager or ship-owning group are dominated which makes them more susceptible to the veil-piercing argu- and controlled by a single individual or entity and that the ment at the outset of the case. U.S. federal courts apply the target defendant is but a corporate extension of the company corporate-formality requirements of their respective circuits, with whom the plaintiffs’ real dispute exists. Federal courts and not those employed by the country of incorporation. The examine a laundry list of factors for purposes of assessing use of common of? cers, directors, of? ces, contact details, and whether the ostensibly controlling corporation exercised com- common ? nancial and operational management, while cer- plete domination and control over the purported subservient tainly more economical and ef? cient, makes it easier to ar- corporation, though more is required to pierce the corporate gue that the group structure is dominated and controlled by veil as discussed below. These factors often include: one or two key individuals or parent company. Also bear in mind that U.S. federal judges are not familiar with the role 1. Whether the corporations maintain proper of ship managers and how they operate and manage their corporate formalities (holding annual board of vessel ? eets, nor are they familiar with how vessel-owning director and shareholder meetings, holding proper groups are constructed as investment vehicles for institutional 18 Maritime Reporter & Engineering News • August 2021

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