     10-3510-cv
     Teitelbaum v. Lin & Mochdar

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 3rd day of June, two thousand eleven.
 5
 6       PRESENT: DENNIS JACOBS,
 7                              Chief Judge,
 8                DEBRA ANN LIVINGSTON,
 9                              Circuit Judge,
10                JED S. RAKOFF,
11                              District Judge.*
12
13       - - - - - - - - - - - - - - - - - - - -X
14       WILLIAM A. TEITELBAUM,
15                Plaintiff-Counter-Defendant-
16                Appellant,
17
18                    -v.-                                               10-3510-cv
19
20       LAY SIOK LIN,
21                Cross-Claimant-Counter-
22                Claimant-Appellee,
23
24       AZIZ MOCHDAR,
25                Cross-Claimant-Appellee,
26
27       BRUCE MABEY, PLATINUM TOO, LLC,
28                Defendants-Cross-Defendants.
29       - - - - - - - - - - - - - - - - - - - -X


                *
               The Honorable Jed S. Rakoff, of the United States
         District Court for the Southern District of New York,
         sitting by designation.
 1
 2   FOR APPELLANT:    Anton J. Borovina, Melville, New York.
 3
 4   FOR APPELLEES:    Matthew N. Metz, Metz Law Group, PLLC,
 5                     Seattle, Washington (Levy, Ehrlich &
 6                     Petriello, P.C., Newark, New Jersey, on
 7                     the brief).
 8
 9        Appeal from a judgment of the United States District
10   Court for the Eastern District of New York (Wexler, J.).
11
12        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
13   AND DECREED that the judgment of the district court be
14   AFFIRMED.
15
16        William Teitelbaum appeals from portions of the
17   judgment of the United States District Court for the Eastern
18   District of New York (Wexler, J.) finding that Platinum Too,
19   LLC, breached its obligation to repay two investors, Lay
20   Siok Lin and Aziz Mochdar, in connection with promissory
21   notes issued by the company and holding Teitelbaum
22   personally liable for the breach under an alter ego theory
23   of liability. We assume the parties’ familiarity with the
24   underlying facts, the procedural history, and the issues
25   presented for review.
26
27        The district court’s legal conclusion that Platinum Too
28   was the alter ego of Teitelbaum is reviewed de novo, but we
29   defer to factual findings of the district court unless they
30   are clearly erroneous. United States v. Funds Held in the
31   Name or for the Benefit of Wetterer, 210 F.3d 96, 106 (2d
32   Cir. 2000); see also Fed. R. Civ. P. 52(a)(6). The parties’
33   assumption that Utah law controls the alter ego analysis “is
34   sufficient to establish choice of law.” Motorola Credit
35   Corp. v. Uzan, 388 F.3d 39, 61 (2d Cir. 2004) (internal
36   quotation marks omitted).
37
38        Under Utah law, “[o]rdinarily, a corporation is
39   regarded as a separate and distinct legal entity . . . .”
40   Colman v. Colman, 743 P.2d 782, 786 (Utah Ct. App. 1987)
41   (internal quotation marks omitted). Although “there is
42   little case law discussing veil piercing theories outside
43   the corporate context,” the doctrine has been applied to
44   limited liability companies such as Platinum Too. Ditty v.
45   CheckRite, Ltd., 973 F. Supp. 1320, 1335 (D. Utah 1997); see
46   also d’Elia v. Rice Dev., Inc., 147 P.3d 515, 521 n.5 (Utah


                                  2
 1   Ct. App. 2006). In order to disregard the corporate entity
 2   under the alter ego doctrine, the court must find:
 3
 4            (1) [s]uch a unity of interest and ownership that
 5            the separate personalities of the corporation and
 6            the individual no longer exist, but the
 7            corporation is, instead, the alter ego of one or a
 8            few individuals; and (2) if observed, the
 9            corporate form would sanction a fraud, promote
10            injustice, or result in an inequity. . . . It is
11            not necessary that the plaintiff prove actual
12            fraud, but must only show that failure to pierce
13            the corporate veil would result in an injustice.
14
15   Colman, 743 P.2d at 786. Utah courts look to a list of
16   “factors which are deemed significant, although not
17   conclusive,” id., in evaluating whether the alter ego test
18   is satisfied:
19
20            (1) undercapitalization of a one-man corporation;
21            (2) failure to observe corporate formalities; (3)
22            nonpayment of dividends; (4) siphoning of
23            corporate funds by the dominant stockholder; (5)
24            nonfunctioning of other officers or directors; (6)
25            absence of corporate records; (7) the use of the
26            corporation as a facade for operations of the
27            dominant stockholder or stockholders; and (8) the
28            use of the corporate entity in promoting injustice
29            or fraud.
30
31   Id. (internal footnotes omitted). For substantially the
32   reasons stated by the district court, we affirm the district
33   court’s ruling that Platinum Too was Teitelbaum’s alter ego.
34
35        Teitelbaum invokes Utah Revised Limited Liability
36   Company Act, Utah Code Ann. § 48-2c-605 (the “Revised Act”),
37   which provides that the “failure of a company to maintain
38   records, to hold meetings, or to observe any
39   formalities . . . is not a ground for imposing personal
40   liability on any member, manager, or employee for any debt,
41   obligation, or liability of the company.” Teitelbaum argues
42   that it was therefore legal error to hold him personally
43   liable to Lay Siok Lin and Mochdar. “No Utah state court or
44   federal court has explicitly decided whether the veil of an
45   LLC can be pierced under the Revised Act. In the absence of
46   controlling state authority, we must predict as best we can
47   what the Utah Supreme Court would do in these

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 1   circumstances.” TFH Props., LLC v. MCM Dev., LLC, No. CV-
 2   09-8050-PCT-FJM, 2010 WL 2720843, at *6 (D. Ariz. July 9,
 3   2010).
 4
 5        Under the Revised Act, it would clearly be error to
 6   impose alter ego liability based solely on the failure to
 7   observe formalities. “But it does not follow that because
 8   formalities cannot be the lone basis for piercing, no LLC
 9   member can be held personally liable for an LLC’s debts.”
10   Id. In addition to disregarding formalities, Teitelbaum
11   “conduct[ed] his private and corporate business on an
12   interchangeable or joint basis as if they were one,” and
13   “failure to pierce the [LLC’s] veil would result in an
14   injustice.” Colman, 743 P.2d at 786.
15
16        Finding no merit in Teitelbaum’s remaining arguments,
17   we hereby AFFIRM the judgment of the district court.
18
19
20                              FOR THE COURT:
21                              CATHERINE O’HAGAN WOLFE, CLERK
22




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