Belliveau v. Barco, Inc., No. 19-50717 (5th Cir. 2021)
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Plaintiff, a prolific inventor in the field of lighting technology, licensed his intellectual property exclusively to High End Systems in 2007. High End became a wholly owned subsidiary of Barco several years later. After Barco decided to sell High End to a third party in 2017, plaintiff filed suit alleging claims against Barco including breach of contract, breach of fiduciary duty, and fraud by nondisclosure arising out of the events leading up to the sale of High End.
The Fifth Circuit held that the district court properly granted summary judgment on plaintiff's claim to pierce the corporate veil. In this case, to hold Barco liable for High End's alleged breach of contract, plaintiff must show that Barco (the then-shareholder) used High End (the corporation) to (1) "perpetrate an actual fraud" (2) primarily for Barco's "direct personal benefit." The court concluded that the evidence, when viewed as a whole, does not raise a fact issue regarding Barco's dishonest purpose or intent to deceive plaintiff in entering into the Barco Sublicense. The court explained that piercing the corporate veil is not a cumulative remedy for creditors of corporate or other legal entities in Texas; that theory does not make owners of such entities codefendants for every breach of contract case. Rather, it is a remedy to be used when the actions of the entity's owner amounting to "actual fraud" have rendered the entity unable to pay its debts. The court held that the district court properly granted summary judgment on plaintiff's claim for breach of fiduciary duty and fraud by nondisclosure. The court agreed with the district court that there was no evidence of a fiduciary relationship between plaintiff and Barco.
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