Bollore SA v. Import Warehouse Inc

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED JUNE 2, 2006
April 28, 2006
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 04-11514
BOLLORE SA; NORTH ATLANTIC TRADING COMPANY;
NORTH ATLANTIC OPERATING COMPANY
Plaintiffs - Appellees
v.
IMPORT WAREHOUSE INC; ET AL
Defendants
v.
NAJAT MACKIE; FREETOWN MINI MART INC
Movants - Appellants
Appeal from the United States District Court
for the Northern District of Texas, Dallas
No. 3:99-CV-1196-R
Before KING, BARKSDALE and PRADO, Circuit Judges.
KING, Circuit Judge:
In this appeal, Appellants Najat Mackie and Freetown Mini
Mart, Inc., challenge the district court’s order piercing
Freetown Mini Mart’s corporate veil and adding them both as
judgment debtors in a turnover proceeding pursuant to TEX. CIV.
PRAC. & REM. CODE § 31.002. For the following reasons, we VACATE
the district court’s orders as they apply to Najat Mackie and
Freetown Mini Mart, Inc.
I. FACTUAL AND PROCEDURAL BACKGROUND
This appeal arises against the backdrop of an elaborate
international scheme involving Ali Mackie,1 one member of a
Michigan family that engaged in the manufacture, distribution,
and sale of counterfeit Zig-Zag cigarette papers primarily in the
states of Michigan, Texas, and California. In March 1999,
Bolloré S.A., North Atlantic Trading Company, and North Atlantic
Operating Company (collectively, “Appellees”), as the holders and
exclusive licensees of the Zig-Zag trademarks, filed a lawsuit
against various members of the Mackie family (the “Mackie
Defendants”) in the Northern District of Texas, alleging that the
Mackie Defendants and their co-defendants had violated federal
copyright and trademark laws.2 The district court issued a
preliminary injunction in July 1999, which temporarily suspended
the counterfeiting operation.
In 2001, as a result of raids pursuant to an ex parte
seizure order issued by a California federal court, Appellees
1
The record at times refers to the Mackie family as the
“Makki” family; for the sake of consistency, we will use a
uniform spelling throughout.
2
The Mackie Defendants did not include current Appellants
Najat Mackie or Freetown Mini Mart, Inc., the gas station that
she owned. Ali Mackie, who is Najat Mackie’s son, was added as a
defendant in 2001. Ali Mackie is not an appellant in the current
proceeding because his appeal was dismissed for want of
prosecution on May 23, 2005.
-2-
discovered new evidence of continuing counterfeiting activity and
filed a contempt motion against the Mackie Defendants in the
Northern District of Texas. In July 2002, after a contempt
hearing in the district court and the entry of a contempt order,
Appellees received a final contempt judgment against the Mackie
Defendants, including Ali Mackie, for $11 million (“the Final
Judgment”).3 The judgment was placed in escrow pursuant to a
settlement agreement.
In February 2004, after Appellees became aware that the
Mackie Defendants had not stopped their counterfeiting activities
as required by the settlement agreement, Appellees brought
another contempt action against the Mackie Defendants and began
to execute on the Final Judgment. Even though he had wired large
amounts of money overseas in connection with the counterfeiting
scheme, by 2004 Ali Mackie had no assets with which to satisfy
the judgment against him. While preparing to execute on the
Final Judgment, in July 2004, Appellees took depositions of the
Mackie Defendants and their families, including Ali Mackie and
his mother, Najat Mackie. Among other things, Appellees learned
for the first time that Ali Mackie worked and performed
managerial duties for his mother’s gas station in Detroit,
Freetown Mini Mart, Inc. (“Freetown”), in return for free room,
3
The Mackie Defendants, including Ali Mackie, were jointly
and severally liable for the judgment amount. Neither Najat
Mackie nor Freetown Mini Mart, Inc., was named as a judgment
debtor.
-3-
board, and a leased car from his mother. The record reflects
that, at all times relevant to these proceedings, Najat Mackie
was Freetown’s sole shareholder and resided in Michigan, and
Freetown, a corner gas station and convenience store, conducted
business only in Michigan. Najat Mackie owned no land and
entered into no contracts in the state of Texas.
In an effort to collect on the Final Judgment against Ali
Mackie, Appellees filed in the United States District Court for
the Northern District of Texas an “Application for an Order
Setting Hearing Regarding Turnover Relief Against Ali Mackie and
Freetown Mini Mart, Inc.,” (“Turnover Application”) pursuant to
TEX. CIV. PRAC. & REM. CODE § 31.002 (“the Texas Turnover Statute”
or “the turnover statute”), on November 2, 2004. Specifically,
they argued in the Turnover Application that Freetown should be
held liable for the Final Judgment against Ali Mackie because
Freetown was the alter ego of Ali Mackie.4 On November 4, 2004,
Appellees personally served Ali Mackie and Najat Mackie in
Michigan with subpoenas duces tecum ordering them to appear and
produce documents in a turnover relief hearing in the Northern
District of Texas involving the Final Judgment against Ali.
4
It is undisputed that the district court had jurisdiction
over judgment debtor Ali Mackie arising from his counterfeiting
activities in Dallas; it therefore had the authority to order
turnover relief against him. Because Freetown was neither a
defendant nor a judgment debtor in the original contempt action,
however, Appellees attempted to reach its assets to satisfy the
Final Judgment against Ali Mackie by obtaining an order
disregarding Freetown’s corporate fiction.
-4-
Although Najat Mackie and Freetown (“Appellants”) did not appear
at the hearing on November 10, they were represented by counsel,
who made an oral motion to dismiss Appellees’ Turnover
Application, which the court denied. Appellants’ counsel also
requested that the court adjourn to allow Appellants time to
appear personally before the court. The court granted the motion
and adjourned until November 18.
Appellants also failed to appear on November 18, but they
were again represented by counsel who filed written motions to
quash the subpoenas that had been served on Najat Mackie and Ali
Mackie and a motion to dismiss the Turnover Application for lack
of personal jurisdiction. After oral argument, the district
court denied Appellants’ motions, stating, “When the Mackies have
shown up for a hearing, they have lied on each occasion, and I
have found them in contempt of court for that. I do have
jurisdiction over them, and I will enter the orders that
Plaintiffs request.” Although Appellees’ Turnover Application
requested the turnover only of Freetown’s assets, the district
court sua sponte ordered Najat Mackie’s assets turned over as
well. To reach this outcome, the district court first had to
reverse pierce Freetown’s corporate veil after finding that
Freetown was Ali Mackie’s alter ego, and then pierce Freetown’s
veil again after finding that Freetown was also Najat Mackie’s
alter ego.
The district court did so by entering three orders, dated
-5-
November 18, 2004. First, the court entered an order (1) denying
Appellants’ motion to dismiss for lack of personal jurisdiction
and (2) denying the motions to quash the subpoenas served on Ali
Mackie and Najat Mackie (“Order Denying Motion to Dismiss and
Motion to Quash”). Second, it entered an order (1) piercing
Freetown’s corporate veil, finding that Freetown was the alter
ego of Ali Mackie and holding Freetown and Najat Mackie liable
for the $11 million Final Judgment against Ali Mackie, (2)
“adding” both Najat Mackie and Freetown to the contempt order and
to the Final Judgment, (3) awarding Appellees costs and
attorney’s fees, and (4) ordering Appellants’ and Ali Mackie’s
assets frozen and turned over pursuant to the Texas Turnover
Statute (“Turnover Order”). Third, the court entered an order
appointing a receiver for Ali Mackie and for Appellants (“Order
Appointing Receiver”).
Appellants timely appealed all three of the district court’s
orders, asserting that (1) they did not have minimum contacts
with Texas such that personal jurisdiction was proper in the
district court; (2) the Texas Turnover Statute is an
inappropriate vehicle through which to adjudicate the substantive
rights of non-debtor third parties; (3) the district court’s
piercing of the corporate veil and finding of alter ego was
erroneous; and (4) the district court erred when it denied their
motion to quash the subpoena served on Najat Mackie.
-6-
II. DISCUSSION
A. Standard of Review
We review a district court’s turnover judgment for abuse of
discretion. Beaumont Bank v. Buller, 806 S.W.2d 223, 226 (Tex.
1991). A court abuses its discretion when it acts “in an
unreasonable or arbitrary manner . . . without reference to any
guiding rules and principles.” Id. (internal quotations and
citation omitted). In making this determination, we review
errors of law de novo. O’Sullivan v. Countrywide Home Loans,
Inc., 319 F.3d 732, 737 (5th Cir. 2003).
We review a district court’s decision to pierce the
corporate veil for clear error. Patin v. Thoroughbred Power
Boats, Inc., 294 F.3d 640, 647 (5th Cir. 2002); Zahra Spiritual
Trust v. United States, 910 F.2d 240, 242 (5th Cir. 1990).
B. Analysis
In entering the three orders at issue in this case, the
district court erred to the extent that those orders apply to
Appellants because (1) a court may not use a proceeding under the
Texas Turnover Statute as a vehicle to adjudicate the substantive
rights of non-judgment third parties; and (2) Appellees did not
make the required showing under Texas law to establish that
Freetown was Ali Mackie’s alter ego.5
5
Additionally, we note that even if the district court had
made a procedurally and substantively proper finding that
Freetown was Ali Mackie’s alter ego, Appellants were never served
-7-
1. The Use of the Texas Turnover Statute to Pierce the
Corporate Veil
The Texas Turnover Statute is a procedural mechanism that
with a summons as required by FED. R. CIV. P. 4 to hale a
defendant into federal court. Instead, Appellants were served
only with a subpoena duces tecum commanding them to appear and
produce documents at the turnover proceeding. The district
court’s adjudication of Appellants’ substantive rights without
valid service of process was improper. See FED. R. CIV. P. 4;
Attwell v. LaSalle Nat. Bank, 607 F.2d 1157, 1159 (5th Cir. 1979)
(“It is axiomatic that in order for there to be in personam
jurisdiction there must be valid service of process.”); see also
Adams v. AlliedSignal Gen. Aviation Avionics, 74 F.3d 882, 885
(8th Cir. 1996) (holding that, where a defendant is served
improperly, “the district court lack[s] jurisdiction over that
defendant whether or not [the defendant] had actual notice of the
lawsuit”); David D. Siegel, Supplementary Practice Commentaries,
28 U.S.C.A., Rule 4, Federal Rules of Civil Procedure, at C-4
(West 2006) (“A summons is process because its service subjects
the person served to the court’s jurisdiction, which is necessary
to validate a judgment that the court might render against that
person. A subpoena is also process, again in the sense of
obtaining jurisdiction over the person served with it, but the
subpoena acts only to exact testimony or obtain some document or
other physical object from that person.”).
However, this fact came to light for the first time at oral
argument. Neither party briefed this precise issue, and
Appellants did not assign it as error on appeal; therefore, we
will not dispose of this case on this ground alone. See Ins.
Corp. of Ireland, Ltd. v. Compagnie de Bauxites de Guinee, 456
U.S. 694, 702-04 (1982) (noting that, unlike subject-matter
jurisdiction, which the court must consider sua sponte,
“[b]ecause the requirement of personal jurisdiction represents
first of all an individual right, it can, like other such rights,
be waived. In McDonald v. Mabee, [243 U.S. 90 (1917),] the Court
indicated that regardless of the power of the State to serve
process, an individual may submit to the jurisdiction of the
court by appearance”); see also United States v. Fagan, 821 F.2d
1002, 1015 n.9 (5th Cir. 1987) (“We do not search the record for
unassigned error, and contentions not raised on appeal are deemed
waived.”).
-8-
gives Texas courts the power to satisfy a judgment by reaching
the assets of a judgment debtor that cannot be attached or levied
by ordinary legal process.6 In re Hamel, 180 S.W.3d 226, 228-29
(Tex. App.--San Antonio 2005). Texas courts construing the
turnover statute have expressly and consistently held that it may
be used to reach only the assets of parties to the judgment, not
6
The Texas Turnover Statute, in relevant part, provides:
§ 31.002. Collection of Judgment Through Court Proceeding
(a) A judgment creditor is entitled to aid from a court
of appropriate jurisdiction through injunction or other
means in order to reach property to obtain satisfaction
on the judgment if the judgment debtor owns property,
including present or future rights to property, that:
(1) cannot readily be attached or levied on by
ordinary legal process; and
(2) is not exempt from attachment, execution,
or seizure for the satisfaction of
liabilities.
(b) The court may:
(1) order the judgment debtor to turn over
nonexempt property that is in the debtor’s
possession or is subject to the debtor’s
control, together with all documents or
records related to the property, to a
designated sheriff or constable for execution;
(2) otherwise apply the property to the
satisfaction of the judgment; or
(3) appoint a receiver with the authority to
take possession of the nonexempt property,
sell it, and pay the proceeds to the judgment
creditor to the extent required to satisfy the
judgment.
TEX. CIV. PRAC. & REM. CODE § 31.002.
-9-
the assets of non-judgment third parties. See, e.g., Beaumont
Bank, 806 S.W.2d at 227; Bay City Plastics, Inc. v. McEntire, 106
S.W.3d 321, 324 (Tex. App.--Houston 2003); United Bank Metro v.
Plains Overseas Grp., 670 S.W.2d 281, 283 (Tex. App.--Houston
1983). Moreover, the turnover statute is a purely procedural
mechanism, and it is black-letter Texas law that proceedings
pursuant to the turnover statute may not be used to determine the
substantive property rights of the judgment debtors or of third
parties. Maiz v. Virani, 311 F.3d 334, 343-45 (5th Cir. 2002)
(holding that a district court may not use a turnover proceeding
to adjudicate whether a corporation is an individual judgment
debtor’s alter ego); Resolution Trust Corp. v. Smith, 53 F.3d 72,
80 (5th Cir. 1995) (“A proceeding to determine whether a
transaction is fraudulent or otherwise to determine property
rights of the parties is improper under the turnover statute, for
the statute does not allow for a determination of the substantive
rights of involved parties. . . . It is even more clear that a
party not even before the court cannot have its rights determined
via the turnover proceeding.”) (internal quotations and citation
omitted); Cross, Kieschnick & Co. v. Johnston, 892 S.W.2d 435,
438 (Tex. App.--San Antonio 1994) (“The turnover statute is
purely procedural in nature; the statute does not provide for the
determination of the substantive rights of the parties.”);
Steenland v. Tex. Commerce Bank Nat’l Ass’n, 648 S.W.2d 387, 389
(Tex. App.--Tyler 1983) (reversing the trial court’s use of the
-10-
turnover statute to make factual findings without a jury trial on
whether there was nonexempt excess value in judgment debtor’s
homestead).7 Even more specifically, Texas courts have held that
a turnover proceeding is not an appropriate vehicle through which
to make an alter ego determination and that a separate trial on
the merits of that issue is required before the alter ego can be
subject to a turnover proceeding. Maiz, 311 F.3d at 336 (holding
that the Texas Turnover Statute “cannot be utilized to adjudicate
the substantive property rights of the two non-judgment debtor
corporations in this case without a prior judicial determination
which pierces their corporate veils”); United Bank Metro, 670
S.W.2d at 283 (noting that the turnover statute is not designed
to “permit the [turnover applicant] to skip the trial on the
merits in this case with respect to the alter ego issue and
declare itself the winner”).
7
Appellees counter that language in some cases indicates
that Texas courts have begun to read the turnover statute as
authorizing courts to determine the substantive property rights
of third parties as an aid to enforcing judgments under the
statute. See, e.g., Schultz v. Fifth Judicial Dist. Court of
Appeals at Dallas, 810 S.W.2d 738, 740 (Tex. 1991), abrogated by
In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004) (stating that the
turnover statute “authorizes the trial court to order affirmative
action by the judgment debtor and others to assist the judgment
creditor in subjecting such non-exempt property to satisfaction
of the underlying judgment”) (emphasis added). Although this
language might reflect “uncertainty as to how aggressive trial
courts can be in enforcing turnover orders which affect the
rights of non-judgment debtors,” Maiz, 311 F.3d at 343 (referring
to Schultz), it does not undermine the above cases that have
expressly held that the turnover statute is not a vehicle to
adjudicate substantive property rights. See id.-11-
Moreover, these limitations on the reach of the turnover
statute--that it applies only to judgment debtors and that it may
not be used to adjudicate substantive rights--ultimately spring
from due process concerns consistent with those that underlie the
requirement of personal jurisdiction; i.e., they prevent “the
original trial court [from] reach[ing] out and assum[ing]
jurisdiction for trial purposes of potential lawsuits involving
third parties.” Republic Ins. Co. v. Millard, 825 S.W.2d 780,
783-84 (Tex. App.--Houston 1992). Courts must respect such
limitations on the turnover statute’s reach because
[w]hether a turnover order is enforceable by a contempt
order directed to a stranger to the lawsuit is a serious
matter that goes to the very heart of due process. A
turnover order typically issues without service of
citation. . . . [and] effectively shifts the burden to
the judgment debtor to account for assets to satisfy a
judgment. . . . A turnover order that issues against a
non-party for property not subject to the control of the
judgment debtor completely bypasses our system of
affording due process. Otherwise, a court could simply
order anyone (a bank, an insurance company, or the like)
alleged to owe money to a judgment debtor to hand over
cash on threat of imprisonment.
Ex parte Swate, 922 S.W.2d 122, 125 (Tex. 1996) (Gonzalez, J.,
concurring). Therefore, consistent with due process, a court may
not--as the district court attempted to do in this case--use the
turnover statute to adjudicate the rights and seize the assets of
a third party who might not otherwise be amenable to jurisdiction
in that court.8 Republic Ins., 825 S.W.2d at 783-84.
8
Appellants objected to lack of personal jurisdiction in
the district court, arguing that they lacked sufficient minimum
-12-
The district court thus erred as a matter of law by using
the turnover proceeding to find that Freetown was Ali Mackie’s
alter ego and entering the order reverse piercing Freetown’s
corporate veil. See Maiz, 311 F.3d at 343-45; United Bank Metro,
670 S.W.2d at 281. Texas law is clear that Appellees must pursue
their alter ego proceedings in a separate trial on the merits in
the appropriate forum before using the turnover statute to reach
Appellants’ assets to satisfy the judgment against Ali Mackie.
Maiz, 311 F.3d at 343-45; United Bank Metro, 670 S.W.2d at 281.
2. The Alter Ego Determination
contacts with the forum state such that haling them into a Texas
court did not comport with “traditional notions of fair play and
substantial justice.” Int’l Shoe v. Washington, 326 U.S. 310,
316 (1945). The district court overruled this objection, stating
only, “I do have jurisdiction over them, and I will enter the
orders that Plaintiffs request.”
Although Appellants extensively briefed this aspect of the
personal jurisdiction issue before this court, and their
objection below preserved the issue for appeal, we need not get
into the finer points of this debate because it is subsumed in
our discussion of the district court’s improper use of the
turnover statute. Appellees do not argue that Appellants
themselves had sufficient minimum contacts to be amenable to
personal jurisdiction in a Texas court; instead, they argue that,
because the district court had personal jurisdiction over Ali
Mackie, it had personal jurisdiction over Appellants via the
alter ego theory. See Patin, 294 F.3d at 653 (noting that
“federal courts have consistently acknowledged that it is
compatible with due process for a court to exercise personal
jurisdiction over an individual or a corporation that would not
ordinarily be subject to personal jurisdiction in that court when
the individual or corporation is an alter ego or successor of a
corporation that would be subject to personal jurisdiction in
that court”). As discussed above, a turnover proceeding cannot
be used to establish personal jurisdiction over a party not
already amenable to personal jurisdiction in that court, which is
precisely what Appellees attempted to accomplish in their request
for turnover relief. See Republic Ins., 825 S.W.2d at 783-84.
-13-
Appellees alternatively contend that, during the two-day
proceeding pursuant to their Turnover Application, the district
court did hold a “separate trial” on the merits of the alter ego
issue apart from the turnover proceeding. There is no evidence
in the record that any part of this proceeding could be
characterized as a “separate trial,” and thus our analysis could
probably end with our above determination that the district court
improperly used the turnover proceeding to adjudicate Appellants’
substantive rights. However, out of an abundance of caution, we
will proceed to address this argument. Even if there had been a
separate trial on the merits, Appellees’ argument would still
fail because the district court’s finding of alter ego and its
reverse piercing of Freetown’s corporate veil based on that
finding were clear error.
Under Texas law, “[a]lter ego applies when there is such
unity between corporation and individual that the separateness of
the corporation has ceased and holding only the corporation
liable would result in injustice.” Castleberry v. Branscum, 721
S.W.2d 270, 272 (Tex. 1986). This standard applies equally to
reverse-piercing cases such as this one, where it is alleged that
holding only the individual liable would result in injustice.
See Zahra, 910 F.2d at 244 (recognizing that courts can reverse
pierce a corporation’s veil based on a finding of alter ego);
Amer. Petroleum Exchange, Inc. v. Lord, 399 S.W.2d 213, 216-17
(Tex. App.--Ft. Worth 1966) (allowing creditors to reach
-14-
corporate assets to satisfy an individual debtor’s liability
where the debtor owned the majority of the stock and “treated the
corporation as his alter ego”). To determine whether the alter
ego doctrine applies, a court considers the following factors:
the total dealings of the corporation and the
individual, including the degree to which
corporate formalities have been followed and
corporate and individual property have been
kept separately, the amount of financial
interest, ownership and control the individual
maintains over the corporation, and whether
the corporation has been used for personal
purposes.
Permian Petroleum Co. v. Petroleos Mexicanos, 934 F.2d 635, 643
(5th Cir. 1991); see also Castleberry, 721 S.W.2d at 272.
The great weight of Texas precedent indicates that, for the
alter ego doctrine to apply against an individual under this
test, the individual must own stock in the corporation. Permian
Petroleum, 934 F.2d at 643 (“Texas courts will not apply the
alter ego doctrine to directly or reversely pierce the corporate
veil unless one of the ‘alter egos’ owns stock in the other.”);
Zahra, 910 F.2d at 245 (holding that a finding of unity between
the individual and the corporation “alone cannot establish an
alter ego relationship under Texas law, because [Appellants] are
not direct shareholders of [the corporation]”); Castleberry, 721
S.W.2d at 272 (stating that, to be considered a corporation’s
alter ego, an individual must have “ownership and control”)
(emphasis added); Lucas v. Texas Indus., Inc., 696 S.W.2d 372,
374 (Tex. 1984) (same); Patterson v. Wizowaty, 505 S.W.2d 425,
-15-
428 (Tex. App.--Houston 1974) (noting that there is “no Texas
authority for the proposition that an individual can be held
personally liable under the alter ego doctrine when he owns none
of the outstanding stock of the corporation”).
In the instant case, the district court made no findings
that Ali Mackie owned stock in Freetown, and the record reflects
that Appellees offered no evidence of such ownership. Rather,
the record shows that, while Ali Mackie performed managerial
duties and held a position on Freetown’s board of directors,
Najat Mackie was the sole shareholder of Freetown. Appellees do
not even argue before this court that they provided affirmative
evidence to the district court to show that Ali Mackie owned
stock in Freetown; instead, they merely assert that “Ali Mackie’s
alleged lack of stock ownership was not proven by Appellants.”9
Appellees thus rely exclusively on Ali Mackie’s managerial
control of Freetown to support their case that Freetown is Ali
Mackie’s alter ego, which, standing alone, is insufficient under
Texas law to support an alter ego finding.10 Id.9
This assertion is obviously insufficient to support a
finding of stock ownership because Appellees, not Appellants, had
the burden of proof on each element of the alter ego issue. See
Torregrossa v. Szelc, 603 S.W.2d 803, 804 (Tex. 1980); Goldstein
v. Mortenson, 113 S.W.3d 769, 781 (Tex. App.--Austin 2003).
10
Appellees maintain that Stewart & Stevenson Serv., Inc.
v. Serv-Tech, Inc., 879 S.W.2d 89, 108-09 (Tex. App.--Houston
1994), provides support for their contention that stock ownership
is not necessary because the court stated that alter ego can be
proven through “financial interest, ownership, or control” of the
corporation. Id. (emphasis added). However, Appellees’ argument
-16-
In the alternative, Appellees argue that the court could
have pierced the corporate veil via the “sham to perpetrate a
fraud” theory. See Castleberry, 721 S.W.2d at 272-73. This
theory applies “if recognizing the separate corporate existence
would bring about an inequitable result.” Id. Even if the
district court had expressly made such a finding (which it did
not), it still would not suffice to disregard the corporate
fiction in this instance because the court had to reverse pierce
the corporate veil to reach Freetown’s corporate assets.
“Although the . . . ‘sham to perpetrate a fraud’ [theory] . . .
may provide [a basis] for disregarding the corporate fiction, a
reverse piercing case requires the creditor to establish an alter
ego relationship between the individual debtor and corporation in
order to treat them as one and the same.” Zahra, 910 F.2d at 244(emphasis added) (citing Zisblatt v. Zisblatt, 693 S.W.2d 944,
955 (Tex. App.--Ft. Worth 1985); Dillingham v. Dillingham, 434
that the court’s use of the disjunctive in Stewart suggests that
alter ego may be shown through control absent ownership
mischaracterizes that case’s holding and is inconsistent with the
Texas Supreme Court’s alter ego jurisprudence. In Stewart, the
court reversed a lower court’s finding of alter ego where,
despite significant evidence of control, the individual did not
own stock in the corporation. Id. To be sure, Texas case law
does not indicate that the stock ownership requirement for a
finding of alter ego is a per se bright-line rule, but “no cases
that we uncovered dispute[] that the Texas courts will not treat
a corporation and an individual as one and the same unless the
individual has some ownership interest in the corporation.”
Zahra, 910 F.2d at 246; see also Mancorp, Inc. v. Culpepper, 802
S.W.2d 226, 228 (Tex. 1990) (reiterating the Castleberry
requirements of “ownership and control”); Castleberry, 721 S.W.2d
at 272.
-17-
S.W.2d 459, 462 (Tex. App.--Ft. Worth 1968); Amer. Petroleum
Exchange, 399 S.W.2d at 216-17). We therefore also decline to
uphold the district court’s veil piercing based on this theory.
III. CONCLUSION
For the foregoing reasons, we VACATE the district court’s
Order Denying Motion to Dismiss and Motion to Quash; Turnover
Order; and Order Appointing Receiver to the extent that they
apply to Appellants. The motion for judicial notice carried with
the case is DENIED.
-18-