Taylor Steel, Inc. v. Keeton
| Decision Date | 08 August 2005 |
| Docket Number | No. 02-4167.,02-4167. |
| Citation | 417 F.3d 598 |
| Parties | TAYLOR STEEL, INC., Plaintiff-Appellee, v. Lana C. KEETON, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ON BRIEF: Lana C. Keeton, Coral Gables, Florida, for Appellant. Ronald S. Marshek, Ronald Marshek Co. L.P.A., Woodmere Village, Ohio, for Appellee.
Before: BOGGS, Chief Judge; GILMAN, Circuit Judge; and CLELAND, District Judge.*
GILMAN, J. (pp. 610-612), delivered a separate dissenting opinion.
In a bench trial, Defendant-Appellant Lana Keeton and her company, Great Events, Inc. d/b/a Keeton Corporation,1 were found jointly and severally liable to Plaintiff-Appellant Taylor Steel for $88,345.78, as a result of Keeton's failure to pay for five truckloads of steel that she ordered from Taylor Steel on behalf of a third party. To hold Keeton liable in her personal capacity, the court had to pierce the corporate veil. Keeton appeals pro se, contending that the district court's holding was against the weight of the evidence, that Taylor Steel owed her money because it sold her defective steel, and that the district court improperly pierced the corporate veil to hold her personally liable. The clerk of this court denied Keeton's pro se appeal on behalf of her company, so Keeton, in her individual capacity, is the only appellant. We affirm the district court.
Keeton, through her company Great Events, Inc. d/b/a Keeton Corp. (Keeton Corp.), of which she is the sole shareholder, officer, director, and employee, acted as a steel broker and outside steel salesperson. The transaction at issue in the suit concerned a large purchase of steel that Keeton Corp. made on behalf of its client, Mountain Metals, from Taylor Steel. Keeton Corp. placed the Mountain Metals order for 500 tons of steel in August 2000. As per Taylor Steel's standard practice with Keeton Corp., the company was sold steel on a limited credit line, requiring either cash in advance or payment within ten days of invoicing. Taylor Steel had maintained these terms with Keeton Corp. since first doing business with the company in 1997, due to its knowledge that Keeton Corp. had limited credit and generally did business on a cash flow basis.
Keeton Corp. paid in a timely fashion for the first ten truckloads of steel shipped to Mountain Metals. This suit concerns the last five truckloads, shipped during January and February 2001, amounting to $94,860.98 worth of steel. In order to pay for these shipments, Keeton obtained a letter of credit from Mountain Metal made out to Keeton Corp., not to Taylor Steel. The five truckloads were shipped, Mountain Metals paid Keeton Corp. on the letter of credit, but Keeton Corp. never paid Taylor Steel.
The parties have stipulated to all of these facts. The parties also stipulate that Keeton Corp. returned three coils of steel as unacceptable and that Taylor Steel credited Keeton Corp. the full amount of these coils. The stipulated total amount owed on the five truckloads of steel, then, is $88,345.78. Taylor Steel sued for an action upon an account and for fraud and sought to pierce the corporate veil.
The Defendants counterclaimed for breach of commissions contract, breach of contract, and tortious interference with contracts and business relationships. Asserting—apparently for the first time—in their counterclaim that the steel shipped to Mountain Metals was not prime steel and that it was not properly warranted, Defendants calculated that they owed Taylor Steel only $14,847.16. In addition, Defendants sought damages in the amount of $199,352 for (1) commissions that Keeton claimed Taylor Steel owed Keeton for sales made to D.T. Sari, a company Keeton had brought to Taylor Steel; and (2) for Taylor Steel's tortious interference with Keeton's business relationship with Mountain Metal in selling directly to that company. Keeton claims that she refused to pay Taylor Steel and ceased all communications with that company in March 2001 due to these complaints. Taylor Steel offered proof that it continued to pay Keeton her commission and refrained from dealing directly with Mountain Metals as long as Keeton was in contact with Taylor Steel.
After Taylor Steel initiated the present suit, Keeton closed the Keeton Corp. bank account, put Great Events, Inc. and Keeton Corp. out of business, and formed a new company, Lana Keeton, LLC, to continue her steel brokering business.
The district court found Keeton Corp. liable for the full $88,345.78 and pierced the corporate veil to extend liability to Keeton herself. The court denied Taylor Steel's complaint for fraud, finding that Keeton Corp. did not contract with Taylor Steel with the intent to defraud it, and the court denied all of the Defendants' counterclaims. This appeal, ostensibly on behalf of Keeton Corp. and Lana Keeton individually, followed.
Because neither a corporate officer nor a shareholder may appear on behalf of the corporation, the clerk of the court properly denied Keeton the right to represent her company. Doherty v. American Motors Corp., 728 F.2d 334, 340 (6th Cir. 1984); Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 602-03 (6th Cir.1988); see also Rowland v. California Men's Colony, 506 U.S. 194, 201-02, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993); In re K.M. A., Inc., 652 F.2d 398, 399 (5th Cir.1981). Therefore, we consider only the question of Keeton's personal liability for the corporate liability.
We review the factual findings of the district judge in a bench trial for clear error, and the legal findings de novo. Pressman v. Franklin Nat'l Bank, 384 F.3d 182, 185 (6th Cir.2004). Great deference is demanded when the factual findings required the judge to make credibility determinations. Anderson v. City of Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). This being a diversity case, the district court looked to the choice of law provisions of the forum state (Ohio), properly leading it to apply Ohio law.
Under Ohio law, "an action on an account is appropriate where the parties have conducted a series of transactions, for which a balance remains to be paid." AMF, Inc. v. Mravec, 2 Ohio App.3d 29, 440 N.E.2d 600, 601 (Ohio App. 8 Dist. 1981), paragraph 1 of the syllabus. To succeed in an action on an account, the plaintiff must prove both all the elements of the contract and that the contract is one that involves transactions usually the subject of a book account. Am. Sec. Serv., Inc. v. Baumann, 32 Ohio App.2d 237, 289 N.E.2d 373, 378 (Ohio App. 10 Dist.1972). The parties produced invoices demonstrating the transactions in question. They further stipulated to the contract to pay for the five truckloads of steel and the failure to make that payment.
The district court found unsupported Keeton's claims that she withheld payment because the shipped steel was not prime, as specified in the order, and because Taylor Steel owed her money from past commissions and was trying to deprive her of future earnings by direct dealing with her customers. The evidence for all of this derives entirely from Keeton's trial testimony, which the judge did not find credible. Keeton produced no other evidence that she complained about the quality of the steel to Taylor Steel, nor has Mountain Metals complained. And while the district judge chose to believe Taylor Steel's unsupported testimony that the steel had been properly warranted rather than Keeton's unsupported testimony that it had not, we defer to the reasonable credibility determinations of the district judge. Thus, this finding of fact cannot be said to be clearly erroneous.
Furthermore, Taylor Steel produced undisputed evidence that, as late as March 2001, it had continued to pay Keeton commissions and it had promised not to deal directly with Mountain Metals. At that point, Keeton ceased all communication with Taylor Steel, refusing to answer phone calls from the company and refusing to pay the money she owed it. Keeton's oral contract to represent Taylor Steel as an outside salesperson and as a broker presupposed that she would be "actively trying to solicit sales" for the company. Once she ceased to communicate with Taylor Steel in March 2001, she was no longer acting in the company's interest, and the company was no longer obligated to avoid direct dealing with her clients or to pay her a commission on sales it continued to make to clients she had brought it.
Therefore, we find that the judge did not clearly err in finding the Defendant companies liable to Taylor Steel for the full amount owed on the five truckloads of steel shipped to Mountain Metals.
We are somewhat less sanguine about the district court's decision to pierce the corporate veil. Nonetheless, we affirm on different grounds. See Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 619, 629 (6th Cir.2002) (). Under Ohio law,
the corporate form may be disregarded and individual shareholders held liable for corporate misdeeds when (1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.
Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos., Inc., 67...
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