Sea-Land Services, Inc. v. Pepper Source

941 F.2d 519 (1991)

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Sea-Land Services, Inc. v. Pepper Source

United States Court of Appeals for the Seventh Circuit
941 F.2d 519 (1991)

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Facts

Gerald Marchese (defendant) owned six business entities (defendants). Marchese operated these entities out of the same office, with the same expense accounts. Marchese repeatedly borrowed and withdrew money from the entities to pay for his personal expenses. None of the entities ever held a corporate meeting, passed articles of incorporation, or had corporate bylaws. One of these entities, Pepper Source, owed Sea-Land Services, Inc. (Sea-Land) (plaintiff) approximately $87,000 for delivery services. Pepper Source had no assets. When Pepper Source did not pay, Sea-Land sued it in federal district court to recover the money. However, Pepper Source was dissolved by the state for failing to pay taxes. The court entered a default judgment against Pepper Source for the debt. Sea-Land then sued Marchese individually and Marchese’s other business entities, seeking to pierce the corporate veil to get paid. Sea-Land argued that Pepper Source and Marchese were alter egos of each other and, therefore, that Marchese was personally liable for Pepper Source’s debt. Sea-Land also argued that the other business entities and Marchese were alter egos of each other, which allowed Sea-Land to reverse pierce the corporate veil to have these entities pay the debt Marchese owed on behalf of Pepper Source. The district court found that the entities were all alter egos of Marchese and granted summary judgment for Sea-Land. Marchese appealed to the Seventh Circuit.

Rule of Law

Issue

Holding and Reasoning (Bauer, C.J.)

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