Licea v. Curacao Drydock Co., 14-20619
| Decision Date | 23 November 2015 |
| Docket Number | No. 14-20619,consolidated with No. 14-20693,14-20619 |
| Parties | Alberto Justo Rodriguez LICEA; Fernando Alonso Hernandez; Luis Alberto Casanova Toledo, Plaintiffs - Appellees v. CURACAO DRYDOCK COMPANY, INCORPORATED, also known as Curacaose Dokmaatschappij NV, also known as CDMNV, Defendant v. Formosa Plastics Marine Corporation ; Formosa Brick Marine Corporation, Garnishees - Appellants Alberto Justo Rodriguez Licea; Fernando Alonso Hernandez; Luis Alberto Casanov Toledo Plaintiffs - Appellees v. Curacao Drydock Company, Incorporated, also known as Curacaose Dokmaatschappij NV, also known as CDMNV Defendant v. Formosa Plastics Corporation America, Garnishee - Appellant |
| Court | U.S. Court of Appeals — Fifth Circuit |
David Stephen Toy, Spagnoletti & Company, Houston, TX, Phillip A. Wittmann, Lesli Danielle Harris, Stone Pigman Walther Wittmann, L.L.C., New Orleans, LA, for Plaintiffs-Appellees.
James F. Buchanan, Esq., Welder Leshin, L.L.P., Frank Edward Weathered, Dunn, Weathered, Coffey, Rivera & Kasperitis, P.C., Corpus Christi, TX, for Garnishees-Appellants FORMOSA PLASTICS MARINE CORPORATION, FORMOSA BRICK MARINE CORPORATION.
Patrick Aloysius Cullen, Esq., Cullen, Carsner, Seerden & Cullen, L.L.P., Victoria, TX, for Garnishee-Appellant FORMOSA PLASTICS CORPORATION AMERICA.
Before JONES, SMITH, and SOUTHWICK, Circuit Judges.
These are appeals from a garnishment action. Appellees – Alberto Justo Rodriguez Licea, Fernando Alonso Hernandez, and Luis Alberto Casanova (together "Plaintiffs") – were successful plaintiffs in an underlying action against the Curacao Drydock Company ("Curacao"). The garnishees' appeals raise numerous questions. We hold that the court lacked personal jurisdiction over two garnishees, improperly exercised quasi in rem jurisdiction over a debt owed by one of them, and erroneously failed to follow Texas procedure as to the third garnishee.
The underlying action was filed in 2006 under the Alien Tort Statute and RICO in the Southern District of Florida. Licea v. Curacao Drydock Co. , 584 F. Supp. 2d 1355 (S.D. Fla. 2008). It alleged that Plaintiff-Appellees endured human trafficking, false imprisonment, and forced labor in a modern-day slavery conspiracy between Curacao and the Cuban government. Id. at 1356-63. After initially appearing and filing several motions, Curacao "repeatedly flouted [the] Court's authority and refused to defend the matter." Id. at 1357. The court entered default judgment against Curacao on the issue of liability and held a separate trial to set damages, at which Curacao did not appear. Id. at 1357-58. The plaintiffs won an $80 million judgment: $50 million in compensatory damages and $30 million in punitive damages. Id. at 1366. There was no appeal from that action. The plaintiffs registered their judgment in the Southern District of Texas pursuant to 28 U.S.C. § 1963 on May 7, 2013.
Three garnishees are Appellants in these cases: Formosa Brick Marine Corporation ("FBMC"), Formosa Plastics Marine Corporation ("FPMC"), and Formosa Plastics Corporation, America ("FPCA") (together "Garnishees"). Though it is not entirely clear from the record, FPCA may be the parent company of both FBMC and FPMC, FBMC and FPMC might be brother-sister corporations, and/or FPMC might own FBMC. In any case, the entities are related in a corporate family. FBMC and FPMC are Liberian corporations with their principal place of business in Taiwan but no apparent contacts with Texas. FPCA, however, is registered to do business in Texas, has a registered agent, and operates a large processing plant in the state.
Pursuant to FED. R. CIV. P. 64, TEX. R. CIV. P. 657 - 79, and the TEX. CIV. PRAC. & REM. CODE Ch. 63, the plaintiffs sought writs of garnishment against FBMC, FPMC, and FPCA in partial satisfaction of their judgment against Curacao. FPCA was served with process through its statutory agent for service.
FPMC and FBMC were both "served" by United States Marshals through the masters of vessels. Putative service upon FPMC was made on the master of M/V FPMC 30 while it was docked in Corpus Christi, Texas and, again on the master of M/V FPMC 19 when that vessel was conducting cargo operations in Texas City, Texas. FBMC was also putatively served through the master of M/V FPMC 19 when it was conducting cargo operations in Texas City. At the time of service, each vessel was owned by other entities, and FPMC operated the vessels under contract with the owners. Consequently, neither FBMC nor FPMC was directly served with process. The record indicates no other connection between Texas and either FBMC or FPMC.
FPMC and FBMC nevertheless answered the writs of garnishment and moved to dismiss. Both garnishees objected that the court lacked personal jurisdiction and that service was improper. FPMC denied that it was indebted to Curacao, while FBMC admitted it owed $2,639,000 to Curacao. The district court initially denied these motions without prejudice, and both parties later filed amended motions to dismiss raising the same issues.
FPCA filed a verified answer that denied any indebtedness to Curacao or that it knew any person who was so indebted. After receiving no controverting response or affidavit, FPCA moved for discharge from the proceedings, which was denied.
Responding to plaintiffs' motion to interplead funds, FBMC deposited $2,639,000 with the clerk for the Southern District of Texas, subject to its amended motion to dismiss. FBMC and FPMC again objected to personal jurisdiction and service of process in their objection to the district court's proposed final judgment.
The district court issued a final judgment on September 19, 2014, awarding the $2,639,000 to Plaintiffs and discharging Garnishees' liability to Curacao for that amount.
In its opinion, the district court found that "Plaintiffs provided the court with uncontroverted evidence showing that FPMC Brick Marine Corporation [the owner of the M/V FPMC 19 ] and FBMC are alter egos of FPMC and thereby each other." The district court also found that FPCA, FBMC, and FPMC were all alter egos of each other. Serving the masters therefore effectuated service on all Garnishees.1
The district court noted that because Garnishees were served with writs while in Texas, the funds they owe Curacao are subject to garnishment under the court's quasi in rem jurisdiction. It cited United States Rubber v. Poage , 297 F.2d 670 (5th Cir. 1962). The court rejected Garnishees' argument that Poage was overruled by subsequent Supreme Court decisions.
The district court also found that it would be fair to exercise jurisdiction over the Garnishees because this proceeding imposes a slight burden on them compared to normal litigation and because of the alter egos' extensive activities in Texas. Further, because FPCA did not object to personal jurisdiction and is the alter ego of FPMC and FBMC, its amenability can be imputed to the two other corporations.
Following this judgment, this court granted FPMC's and FBMC's motion to stay enforcement of the judgment pending appeal and to accept the previously deposited amount as security in lieu of a supersedeas bond.
Questions of jurisdiction, service of process, and the denial of the motion to discharge are issues of law reviewed de novo.
Herman v. Cataphora, Inc. , 730 F.3d 460, 465 (5th Cir. 2013) ; Af-Cap, Inc. v. Republic of Congo , 462 F.3d 417, 423 (5th Cir. 2006) ; Bullion v. Gillespie , 895 F.2d 213, 216 (5th Cir. 1990). The district court's finding of alter ego is a fact that is reviewed for clear error. United States v. Jon-T Chems., Inc. , 768 F.2d 686, 694 (5th Cir. 1985).
As a preliminary matter, FED. R. CIV. P. 64 and 69 provide that the law, both substantive and procedural, of the state where the federal court sits governs writs of garnishment unless a federal statute provides otherwise. The parties have briefed Texas law and have not called attention to any applicable federal statute. Texas law also governs the alter ego determinations, which bear on the exercise of jurisdiction over and proper service on FPMC and FBMC. See Jackson v. Tanfoglio Giuseppe, S.R.L. , 615 F.3d 579, 586-88 (5th Cir. 2010) (); Hargrave v. Fibreboard Corp. , 710 F.2d 1154, 1159 (5th Cir. 1983) (). The principal error by the district court in addressing the issues was its failure to apply Texas law.
Separate appeals were filed by FPCA, on one hand, and FBMC and FPMC on the other. The common issue raised by the Garnishees is whether the district court erred in finding that they are all alter egos of each other. Jurisdiction and service of process on FPMC and FBMC depend on the alter ego findings. Other issues concern the district court's failure to apply substantive Texas law to the garnishment and its failure to dismiss FPCA as required by Texas law when a garnishee files an uncontroverted affidavit denying possession of any account subject to garnishment. We address these points in turn.
The district court found that "FPMC Brick Marine Corporation [the owner of the M/V FPMC 19 ] and FBMC are alter egos of FPMC and thereby of each other." It also found that FPMC, FBMC, and FPCA are all alter egos of each other. As a result, the court held that service on the vessel masters was sufficient to serve all of the entities, and that FPCA's failure to challenge personal jurisdiction could be imputed to FPMC and FBMC. These findings of alter ego, which did not cite a single supporting case, were erroneous.
Texas law recognizes that the corporate form can be disregarded in certain circumstances. See Castleberry v. Branscum , 721 S.W.2d 270, 272-73 (Tex. 1986). One of the bases for doing so is the alter ego doctrine, whereby "a...
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