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Itel Containers International Corporation v. Atlanttrafik Express Service Limited

United States Court of Appeals for the Second Circuit
909 F.2d 698 (1990)


Facts

Sea Container Ltd. (SCL) sold cargo-shipping containers. SCL formed Atlanttrafik Express Service Limited (AES) (defendant) as the holding company for Atlanttrafik Express Service Incorporated, a wholly owned subsidiary of AES. The purpose of the AES corporate group was to purchase a shipping line that was already in operation. Itel Containers International Corporation (Itel) (plaintiff) leased cargo containers to the shipping line before it was purchased by AES. Itel asked SCL to guarantee the leases that were transferred to AES during the purchase. SCL would not guarantee the leases, but Itel entered the leases with AES anyway. Because AES was in direct competition with SCL’s customers, AES’s corporate structure was set up to distance SCL’s involvement with AES. The boards of directors did not overlap, and AES functioned independently of SCL. AES eventually went bankrupt. Itel filed suit in the United States District Court for the Southern District of New York against SCL and AES for payment on the leases. Itel argued that SCL could be held liable for AES’s leases under the theories that: a joint venture existed between SCL and AES, AES was the agent of SCL, or the corporate veil of AES should be pierced.

Rule of Law

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Issue

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Holding and Reasoning (Kearse, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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