Answer

Case Analysis: Sea-Land Services, Inc. v. Pepper Source, 941 F.2d 519 (1991)

A Brief Overview of the Parties involved in the Case

This case involved Sea- Land Services, Inc. as the plaintiff-appellee against the Pepper Source (PS), Caribe Crown, Inc., Jamar, Salescaster, Tie–Net and Gerald Marchese as the defendants. The ocean carrier filed a federal diversity actions against the defendants for money owed on the shipment of goods.

What court is deciding the case (location, fed/state court system, and level of court?

The United States district court for the Northern District of Illinois, Eastern Division presided over the Sea-Land Services, Inc.v.Pepper Source,941 F.2d 519(1991)

What was/were the major issue/issues in the case relevant to that week’s reading and lecture topic?

The lifting of a corporate veil whereby the separate company’s persona from the shareholders, who is usually protected from liabilities of company debts and other obligations, is lifted. In the case of Sea-Land Services, Inc.v.Pepper Source,941 F.2d 519(1991), the case against the defendant, Gerald Marchese, who owns several business entities- Pepper Source, Caribe Crown, Inc.., and Marchese Fegan Associates- was named individually by the Sea-Land plaintiff. The Sea-Land sought by this suit to probe Pepper Source’s corporate veil leaving Marchese personally liable in June 1988 for the judgement owed to Sea-Land when the district court ordered a default judgement in favor of the plaintiff against PS in the amount of $86,767.70 and the PS disappeared leaving the case ‘dissolved’ in the year 1987. The Sea-Land also “reverse probed” Marchese’s other corporations so they too would be on the hook as these were alter egos for Marchese who he created and manipulated these corporations and their assets for his own personal use.

How was/were the issue/issues decided? In other words, what did the judge(s) say re: the issue/issues?

The court granted Sea-Land’s motion. The case was applied the test for corporate veil piercing explicated in Van Dorn Co.v. Future Chemical and Oil Corp.,753 F.2d 565(7^th Cir.1985) where a corporate entity will be disregarded and the veil of limited liability pierced when two requirements are met. The first requirement of unity of interest and ownership of test under Illinois law of piercing corporate veil was satisfied but remand was warranted for additional evidence and argument on issue whether adherence to fiction of separate corporate existence would promote ‘injustice’ beyond carrier’s inability to satisfy judgement. The court concluded that both halves and all features or the test had been satisfied and, therefore, entered judgement in favor of Sea-Land against PS. These defendants were held liable for Sea-Land’s $87,000 judgement and also for post-judgement interest under Illinois law.

Which party benefitted most with the decision?

The Sea-Land plaintiff receives $87,000 from PS and post-judgement interest from PS and brought forth Marchese and his corporate defendants (Marchese’s playthings) for corporate piercing to be considered.

Do you agree with the decision, why or why not?

There is no doubt that the “shared control/unity of interest and ownership” part of the Van Don test is met in this case. The plaintiff although is yet to come forward with evidence akin to the ‘wrongs’ found in these cases to pierce the corporate veil of the first judgement that was not followed through was finally accomplished.

Order Actions

The court ordered the reverse action where the Van Don test was satisfied. The judgement was in error, and the entry of summary judgement premature. The case was remanded with instructions.