International Millennium Consultants, Inc. v. Taycom Business Solutions

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a0202n.06
No. 10-1554
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
INTERNATIONAL MILLENNIUM ) Feb 21, 2012
CONSULTANTS, INC., ) LEONARD GREEN, Clerk
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR THE
) EASTERN DISTRICT OF MICHIGAN
TAYCOM BUSINESS SOLUTIONS, )
)
Defendant, )
)
DANTE BISHOP, )
)
Defendant-Appellant. )
Before: GIBBONS, STRANCH, and ROTH, Circuit Judges.*
JULIA SMITH GIBBONS, Circuit Judge. Defendant–appellant, Dante Bishop
(“Bishop”), appeals the district court’s order granting plaintiff–appellee’s, International Millennium
Consultants, Inc. (“IMC”), motion to pierce the corporate veil of defendant Taycom Business
Solutions (“Taycom”) in order to hold its owner, Bishop, liable for an arbitration award entered
against Taycom. For the following reasons, we vacate the district court’s order and remand.
*
The Honorable Jane R. Roth, United States Circuit Judge for the United States Court of
Appeals for the Third Circuit, sitting by designation.
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I.
In October 2007, Taycom entered into a subcontract agreement to provide consulting services
to Federal-Mogul Corporation (“Federal-Mogul”). Later that month, IMC entered into a written
subcontract purchase order with Taycom to provide consulting services for the Federal-Mogul
project. Essentially, Federal-Mogul subcontracted with Taycom to find talent, and Taycom
subcontracted with IMC to complete this process. Federal-Mogul paid Taycom, and Taycom paid
IMC.
On March 26, 2008, IMC filed suit against Taycom—but not its owner, Bishop—for breach
of contract for “refus[ing] to pay IMC’s previously issued invoices for services provided under the
purchase order, which invoices total $91,300.” A summons issued on that same day, notifying
Taycom that it was being sued by IMC. On April 11, 2008, the Summons and Complaint were
served upon Taycom. The return of service form lists Taycom as the “Defendant Served,” and
handwritten next to Taycom is “Dante Bishop - President,” presumably because the Summons and
Complaint were actually given to Bishop as the president of the defendant, Taycom. On May 2,
2008, Taycom filed a counterclaim against IMC for breach of contract—because IMC “arrang[ed]
for direct placement of personnel with clients of Taycom’s”—and tortious interference with business
relations—because “IMC’s wrongful interference caused Federal Mogul and Merrilat to cease doing
business with Taycom.”
The district court granted IMC’s motion to compel arbitration pursuant to the Federal
Arbitration Act and to stay proceedings in the district court. The dispute was submitted to the
American Arbitration Association as the matter between “International Millennium Consultants, Inc.
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and Taycom Business Solutions, Inc. and Dante V. Bishop.” The resulting arbitration award was
as follows:
As to the claims of Claimant:
1. In favor of [IMC] and against [Taycom] for breach of its payment obligation,
including pre-judgment interest, in the amount of $97,109.10.
2. Zero dollars against [Taycom] and Dante V. Bishop for fraudulent and/or innocent
misrepresentation.
3. In favor of [IMC] and against [Taycom] for reasonable attorney fees, costs and
interest in the amount of $22,405.76.
As to the claim of Respondents:
1. In favor of [Taycom] and against [IMC] for set off in the amount of $25,000.
Accordingly, it is award as follows:
[Taycom] shall pay to [IMC] the sum of $94,514.86.
....
This award is in full resolution of all claims and counterclaims submitted to this
arbitration. All claims not expressly granted herein are hereby denied.
On September 17, 2009, the federal district court, on stipulation from the parties, lifted the stay and
confirmed the arbitration award in the amount of $97,252.36 plus pre- and post-judgment interest
“owing to IMC from Taycom.” Also on September 17, 2009, the federal district court entered
judgment in the amount of the arbitration award including attorneys’ fees and costs. The case
retained the original caption between IMC and Taycom, with no reference to Bishop.
After entry of the judgment, IMC’s counsel conducted a creditor’s examination of Dante
Bishop on October 2, 2009. During the examination, IMC’s counsel sought to gather information
from Bishop, under oath, regarding Taycom’s ability to pay the judgment awarded to IMC. The
examination revealed a number of facts that ultimately led the district court to pierce Taycom’s
corporate veil and enter judgment personally against Bishop. Bishop, a licensed certified public
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accountant, answered a series of questions regarding the establishment of Taycom. Taycom was
established as a C-corporation in 1997, meaning that its earnings were subject to corporate income
tax. Bishop and his wife, Vonnita Bishop, were the only principals and shareholders; Bishop owned
approximately 92% and Vonnita owned approximately 8%. The two split all of the officer positions
and provided all of the initial capital as well as additional capital as it was later needed. Taycom’s
business was to “provide clients with recruiting services for professionals in either technology or
accounting”; sometimes this task was performed directly by Taycom, and sometimes this was
subcontracted to an intermediary (such as IMC). The company began with no employees or
subcontractors, but by 2007 approximately thirty people were “getting money out of Taycom,”
including employees, contractors, and subcontractors. The company went from moderate to
substantial to zero prosperity—in 2006, the Bishops’ combined salary from Taycom was $50,000;
in 2007, it was $190,000; in 2008, it was $8,000; and in 2009, they received no salary.
Bishop is also the managing member of Innosynth Technologies, L.L.C. (“Innosynth”), which
“develop[s] web applications for prospective licensing to clients.” Innosynth was created as Taycom
was beginning to experience financial hardship in the fall of 2008. At the time of the creditor’s
examination, Innosynth had no bank account, nor had it made any financial transactions or acquired
any assets beyond one code, which will not generate revenue until it is sold. Innosynth had,
however, three or four times sent checks or wired money to an individual named Prince Gupta.
Throughout the course of Taycom’s existence, the Bishops authorized the payment of funds
from Taycom’s accounts to their personal bills. Bishop stated that, rather than having Taycom pay
him money owed as income or repayment for his “loans” to the company, he authorized money to
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flow directly from Taycom to his personal expenses. This took the form of a number of
payments—many years of mortgage payments, personal expenses such as cellular telephone bills and
home electric bills, and expenses of his other corporation, Innosynth. These personal payments
continued even when Taycom had no income. According to Bishop, he and Vonnita would deposit
funds from personal loans and gifts mostly from friends and family into a Taycom account and then
use that money to continue paying personal expenses. Additionally, Bishop revealed that Taycom’s
books were slightly misleading in that, although receivables are on the books, those receivables
“should all be written off such that there is not a current net receivable to Taycom for all practical
purposes.” During the examination, Bishop did, however, promise to sign over a receivable for
approximately $50,000 to IMC so that IMC could pursue this receivable to fulfill a portion of its
judgment.
Following the judgment and the creditor’s examination, IMC filed a motion on November
24, 2009, to pierce the corporate veil of Taycom, entitled “Plaintiff’s motion to pierce the corporate
veil of defendant Taycom Business Solutions, Inc. and enter judgment against Dante V. Bishop and
Vonnita Bishop personally, and against Innosynth Technologies, L.L.C., jointly and severally.” The
motion was filed in the original case captioned “International Millennium Consultants, Inc. v.
Taycom Business Solutions, Inc.” In its motion, IMC argued that the Bishops abused the corporate
form of Taycom and used Taycom as a mere instrumentality to perpetrate fraud because Taycom
paid the Bishops’ residential mortgage obligation and other personal expenses and because Bishop
directed Taycom to transfer money to Innosynth resulting in Taycom’s having no assets with which
to pay IMC. In its response, Taycom asserted that it was irrelevant whether Taycom paid some of
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the Bishops’ personal expenses directly, that the arbitrator had already determined that Taycom and
Bishop had not committed fraud, and, finally, that Vonnita and Innosynth (with no mention of
Bishop himself) were not parties to the case and could not be held liable.
The district court initially granted IMC’s motion in its entirety, entering judgment in favor
of IMC against Taycom, Dante, Vonnita, and Innosynth, jointly and severally. The district court
concluded that Taycom was indeed a “mere instrumentality” of the Bishops; that Taycom was used
to commit a wrong and, as a result, IMC suffered an unjust loss; and that the court should, as Bishop
did, treat Taycom and Innosynth as one. The case caption remained the same. The district court
altered this order slightly in response to Taycom’s motion to reconsider. It concluded that “Vonnita
Bishop and Innosynth cannot be held liable for the judgment entered by ths Court” but maintained
that personal liability was to be imposed on Bishop.
After these proceedings, the deputy clerk of the court certified a Notice of Judgment Lien,
in which IMC was listed as the plaintiff, IMC was listed as the judgment creditor, Taycom was listed
as the defendant, and Bishop was listed as the judgment debtor. Writs of garnishment issued as to
Taycom and as to Bishop. Ultimately, Bishop filed a notice of appeal, in which the caption named
both Taycom and Bishop as defendants for the first time in the course of the litigation. The caption
has continued to name both since the appeal began.
II.
On appeal, Bishop argues that the district court incorrectly granted IMC’s motion to pierce
the corporate veil of Taycom and to hold Bishop personally liable for the judgment entered against
Taycom. We will not reach the merits of this question. Given the procedural status of this case, the
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district court had no authority to issue an order entering judgment against Bishop personally. Thus,
we vacate the district court’s order.
Initially, we note the obvious: Bishop was not a party to this proceeding. He was not served
with process, nor was relief sought against him at any time prior to the filing of this post-trial motion
to enter judgment against him. That this situation might present a problem appears not to have
occurred to anyone, even on appeal.
The parties dispute the nature of the motion filed by IMC in an effort to pierce Taycom’s
corporate veil. IMC’s initial motion was entitled merely a motion “to pierce the corporate veil . . .
and enter judgment.” IMC made no effort to base its motion on a specific rule of state civil
procedure. Taycom’s opposition to IMC’s motion framed IMC’s motion as “essentially a motion
for summary judgment,” and IMC seemed to concede this by reciting in its reply brief the standard
for summary judgment under Federal Rule of Civil Procedure 56. The district court made no
mention of what type of motion was actually before the court beyond characterizing it as a motion
to pierce the corporate veil. On appeal Bishop maintains that the motion was essentially a motion
for summary judgment. IMC argues that this court should view it as a motion to alter or amend the
judgment under Federal Rule of Civil Procedure 59(e).
IMC’s motion in no way resembles a motion for summary judgment pursuant to Federal Rule
of Civil Procedure 56. Summary judgment is a pretrial—and, thus, prejudgment—motion. Fed. R.
Civ. Pro. 56; see also Pahuta v. Massey-Ferguson, Inc., 170 F.3d 125, 130 (2d Cir. 1999) (“Once
trial began, the summary judgment motion [] effectively became moot.” (quoting Black v. J.I. Case
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Co., 22 F.3d 568, 571 (5th Cir. 1994))). This motion was filed after judgment was entered, and thus
summary judgment was no longer appropriate.
IMC’s motion also could not have been premised on Federal Rule of Civil Procedure 59(e),
which permits motions to alter or amend judgment. “A motion to alter or amend a judgment must
be filed no later than 28 days after the entry of the judgment.” Fed. R. Civ. Pro. 59(e). The instant
motion was filed on November 24, 2009, nearly 70 days after judgment was entered. We conclude
that the motion to pierce Taycom’s corporate veil was neither a motion for summary judgment nor
a motion to alter or amend a judgment.
We will not attempt to advise the parties as to whether and how IMC might have properly
sought to enforce its judgment against Bishop personally. We note only that Bishop’s situation was
no different procedurally from that of Vonnita Bishop and Innosynth, against whom the district court
did not enter judgment. And we further note that it is incumbent upon the party seeking relief to
provide a proper jurisdictional and procedural basis for that relief.1
III.
For the foregoing reasons, we vacate the district court’s order entering judgment against
Bishop and remand the case to the district court.
1
Arguably, IMC might have sought to enforce its judgment against Bishop under Federal
Rule of Civil Procedure 69. If so, then Michigan law would likely guide the analysis. In addition,
we observe that Federal Rule of Civil Procedure 71, the only rule referring to orders against
nonparties, “does not undertake to say when an order can be made . . . against a person not a party.”
12 Charles Alan Wright et al., Fed. Prac. & Pro. Civ. § 3031 (2d ed. Westlaw current through 2011
update).
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