SIKOUSIS LEGACY, INC. V. B-GAS LIMITED, No. 23-15245 (9th Cir. 2024)
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In this case, the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision to vacate the plaintiffs' quasi in rem attachment of a vessel owned by Bergshav Aframax Ltd., a defendant in an admiralty action seeking fulfillment of arbitration awards. The arbitration awards were owed to the plaintiffs by B-Gas Ltd., renamed Bepalo, a different corporate entity. The plaintiffs tried to hold Aframax liable for the arbitration awards by arguing that Aframax and Bepalo were alter egos, essentially the same entity.
However, the court found that the plaintiffs failed to show a reasonable probability of success on their veil piercing theory, which would be required to establish that Aframax and Bepalo were alter egos. The court found that the plaintiffs did not demonstrate that Bepalo was dominated and controlled by the Bergshav Group, the parent corporate group of Aframax. The court noted that the minority shareholders of Bepalo exercised independent judgment in approving the relevant transactions, countering the claim that the Bergshav Group had total domination of Bepalo. Therefore, the court concluded that the plaintiffs had not met their burden of demonstrating a reasonable probability of success on their veil-piercing claim, leading to the affirmation of the district court's decision to vacate the attachment of the vessel.
Court Description: Admiralty The panel affirmed the district court’s order vacating plaintiffs’ quasi in rem attachment of a vessel owned by Bergshav Aframex Ltd., a defendant in an admiralty action seeking fulfillment of arbitration awards.
The arbitration awards, arising from a contract dispute, were owed to plaintiffs by a different corporate entity, B-Gas Ltd., later renamed Bepalo. Plaintiffs sought to “pierce the corporate veil” of Bepalo and hold Aframax liable for the arbitration awards on a theory that Aframex and Bepalo were alter egos. * The Honorable David F. Hamilton, United States Circuit Judge for the U.S. Court of Appeals for the Seventh Circuit, sitting by designation. The panel held that the district court did not abuse its discretion when it vacated the pre-judgment attachment of the vessel. Adopting a probable cause standard, and applying federal common law, the panel affirmed the district court’s conclusion that plaintiffs failed to show a reasonable probability of success on their veil piercing theory.
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