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Virginia Electric and Power Co. v. Peters

United States District Court, E.D. Virginia, Richmond Division

April 27, 2018

VIRGINIA ELECTRIC AND POWER COMPANY d/b/a DOMINION VIRGINIA POWER., Plaintiff,
v.
MICHAEL PETERS, Defendant.

          AMENDED OPINION

          John A. Gibney Jr. Judge

         On March 22, 2018, the Court entered an Opinion accompanying an Order denying the defendant's motion to dismiss. (Dk. No. 27.) The Opinion contained a typographical error that read "the law of the case doctrine does prevent Dominion from claiming that Peters fraudulently siphoned money away from Bransen for his own gain." The statement should read "the law of the case doctrine does not prevent Dominion from claiming that Peters fraudulently siphoned money away from Bransen for his own gain." The Court reissues the amended complaint below.

         In 2014, Virginia Electric and Power Company ("Dominion") obtained a $24.5 million judgement in this Court against Bransen Energy, Inc. ("Bransen"). Dominion has not been able to collect on its judgment and now brings this action to pierce Bransen's corporate veil and impose liability on Michael Peters, Bransen's owner and sole shareholder. Dominion also alleges that Peters breached his fiduciary duty to Dominion as a creditor.

         Peters has moved to dismiss this action based on a lack of personal jurisdiction, res judicata, statute of limitations grounds, and other theories. The Court denies the motion. First, the Court has jurisdiction over Peters as an alter ego of Bransen. Res judicata does not bar the present claims because the issues presented in the prior litigation differ from those here. The statute of limitations also does not bar any of Dominion's claims based on the face of the complaint. Finally, none of Peters' novel theories concerning marshalling assets or the law of the case doctrine bar Dominion's suit.

         I. BACKGROUND

         In 2011, Dominion and Bransen signed a $27 million contract for the sale of coal. Bransen breached that contract by delivering piles of unusable product-essentially black mud- hidden beneath a sheath of real coal. On February 15, 2012, Peters admitted wrongdoing during an interview with Dominion and recognized that he needed to replace the coal. Rather than make good the breach, Peters looted more than $2.66 million from Bransen between 2012 and 2015. He did this even though the company lacked any operating income after 2012. In the same time frame, Peters added his wife as a signatory on Bransen's account and transferred thousands of dollars to her accounts even though she had no business connection to Bransen. Peters' mother, who also had no connection to Bransen, wrote two checks using Bransen's account between April and May 2013. Peters also founded a number of companies unrelated to Bransen, including Taylor Rose (June 2012), Bransen Holdings (July 2012), Primitive Creations (now Coal Stone) (September 2013), TR Nichols LLC (February 2014), and RPM Solutions LLC (June 2015), and diverted significant amounts of Bransen's money to each of them. To top off the decimation of Bransen, Peters unconditionally pledged its corporate assets to secure a $9 million note for Taylor Rose in July 2014.

         On July 30, 2014, Dominion filed suit in this Court alleging that Bransen, a North Carolina corporation, breached its coal delivery contract.[1] The Court ultimately awarded compensatory damages of nearly $23 million and an additional $1.6 million in attorney's fees. Not surprisingly, Dominion has not collected this judgment because Bransen had no operating income after 2012 and started winding down operations around that time. Bransen now claims insolvency.

         II. DISCUSSION [2]

         Peters has moved to dismiss Dominion's complaint, claiming that (1) this Court lacks personal jurisdiction over him, (2) due process precludes suit against him, (3) res judicata bars Dominion's claims, (4) the doctrine of marshalling assets bars Dominion's claims, (5) the statute of limitations bars the claims, (6) the law of the case doctrine bars the claims, and (7) Dominion fails to make a showing for punitive damages. For the reasons outlined below, the Court rejects each ground and denies this motion.

         A, Personal Jurisdiction [3]

         Where a court rules on personal jurisdiction without the aid of an evidentiary hearing, the plaintiff must only make a prima facie showing of jurisdiction, and the court must "resolve all factual disputes in the plaintiffs favor." Mylcm Laboratories, Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). In corporate veil piercing actions, due process permits personal jurisdiction over individuals if (1) they are the alter ego of a corporation and (2) that corporation would have been subject to the court's personal jurisdiction. Newport News Holding Corp. v. Virtual City Vision, Inc., 650 F.3d 423, 433 (4th Cir. 2011). Peters satisfies both requirements.

         Virginia law dictates whether Peters acted as Bransen's alter ego for the purpose of establishing jurisdiction. Int'l Bancorp, LLC. v. Societe Des Baine De Mer Et Du Cercle Des Estrangers A Monaco, 192 F.Supp.2d 467, 477 (E.D. Va. 2002); see Newport News Holding Corp., 650 F.3d at 433-34 (applying Virginia's corporate veil piercing statute to establish personal jurisdiction over an Alabama corporation).[4] Under Virginia law, a court may pierce the corporate veil "to find that an individual is the alter ego of a corporation where it finds '(i) a unity of interest and ownership between [the individual and the corporation], and (ii) that [the individual] used the corporation to evade a personal obligation, to perpetrate fraud or a crime, to commit an injustice, or to gain an unfair advantage.'" Newport News Holding Corp., 650 F.3d at 434 (alterations in original) (quoting C.F. Trust, Inc. v. First Flight Ltd. P'ship, 306 F.3d 126, 132 (4th Cir. 2002)).[5] Piercing the corporate veil is an "extraordinary act" permitted only when "necessary to promote justice." C.F. Trust, Inc. v. First Flight L.P., 266 Va. 3, 10, 580 S.E.2d 806, 809 (Va. 2003). To pierce the veil, a court must make a "fact-specific determination" that requires it to "closely scrutinize" the factual circumstances surrounding the allegations. Id. at 10, 810.

         Here, the facts support corporate veil piercing. The complaint shows that Peters used his unity of ownership and interest to gain an unfair advantage. First, Peters' role as Bransen's president, owner, and sole shareholder establishes a unity of ownership. Peters also showed a unity of interest by siphoning more than $2.66 million away from Bransen for his personal benefit. Peters knew on February 15, 2012, that he had breached the contract and needed to replace the coal. Despite this admission, Peters and his family used Bransen as a personal checking account: Peters' wife and mother each wrote checks from Bransen's account without any business connection to the company; Peters also created new companies with no connection to Bransen and funded them with Bransen's money; and Peters unconditionally pledged Bransen's assets to secure a $9 million note for another company. These facts establish a unity of ownership and interest.

         These allegations make a prima facie showing that Peters used the corporate structure to avoid liability to Dominion by making corporate decisions that benefited him and not his corporation. See A.G. Dillard, Inc. v. Stonehaus Construction, LLC, 2016 WL 3213630, at *3 (Va. 2016). Since the Court has jurisdiction over Bransen, it also ...


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