Clientron Corp. v. Devon IT Inc, No. 16-3432 (3d Cir. 2018)Annotate this Case
Devon, a Pennsylvania corporation, sells computer products; Bennett and DiRocco, a married couple, jointly own 100 percent of Devon’s shares as tenants by the entirety. In 2010, Devon obtained a contract from Dell. Devon contracted with Clientron, a Taiwanese company, to manufacture Dell's computers. Clientron shipped them directly to Dell; Dell paid Devon. Devon stopped paying Clientron entirely in 2012, owing over $6 million. Dell terminated its relationship with Devon, paying Devon $2 million, none of which reached Clientron. Pursuant to their contract, Clientron requested arbitration in Taiwan; arbitrators awarded Clientron $6.5 million. Clientron then sued Devon, Bennett, and DiRocco in Pennsylvania to enforce the award and seeking $14.3 million in damages for fraud and breach of contract. Clientron alleged that Devon was the alter ego of the couple. During discovery, the defendants continually failed to meet their obligations under the Federal Rules. The court entered sanctions, and instructed the jury that it was permitted, but not required, to make an adverse inference due to Devon' discovery conduct; the instruction did not reference Bennett or DiRocco. The jury found Devon liable for breach of contract and awarded Clientron an additional $737,018 in damages but rejected Clientron’s fraud claim and declined to pierce Devon’s corporate veil. Post-trial, the court pierced the veil to reach Bennett but not DiRocco, holding Bennett personally liable for the $737,018 damages award and the $44,320 monetary sanction earlier imposed on Devon; it did not make Bennett personally liable for the Taiwanese arbitration award. Devon is insolvent The Third Circuit vacated; the court committed legal error in piercing Devon’s veil to reach only Bennett and in holding Bennett personally liable for only part of the judgment.