SHIPPING company and its sister companies, Eitzen Chemical A/S, claim that by denying their attempt to pierce the corporate veil of a defendant, a 'magistrate judge failed to apply their equitable principles called for in maritime cases because it effectively leaves Eitzen without a remedy, as there is no way for it to collect on its judgment.'
But the US Court of Appeals for the 11th Circuit said while the trial in the lower court involved a breach of contract governed by maritime law 'absent some other wrong or injustice that would result if the corporate veil is not pierced, a creditor's inability to collect a judgment alone is insufficient to justify piercing the corporate veil'.
Eitzen operated tankers for transporting chemicals around the world. Eitzen today is part of Team Tankers International Ltd, which has a fleet of 51 chemical tankers, reported American Shipper.
The defendants in the case were Carlos Gamboa and two companies of which he was the individual owner and operator: Carib Petroleum, a Bahamian corporation, and Carib Petroleum Inc, a Florida corporation.
In December 2009, Carib Petroleum entered into a maritime contract with Eitzen Chemical A/S to have the tanker, Glen, transport 5,000 tons of a product described as Tecsol from Venezuela to the Dominican Republic.
Discharge of the cargo was delayed in the Dominican Republic and Eitzen incurred additional costs. Carib challenged Eitzen's ability to bring the suit since it did not own the ships but was the commercial manager. The lower court said Eitzen was the bailee of the Glen and was entitled to pursue the claim.
The following summer, Carib Petroleum entered into a second contract to have an Eitzen-owned tanker, Sichem Challenge, transport Tecsol from Venezuela to the Dominican Republic. Again, the contract did not specify which Carib entity was the charterer.
On June 29, 2010, Sichem Challenge arrived in Puerto Cabello, Venezuela, and began loading the cargo the next morning. On July 2, 2010, the Venezuelan National Guard stopped the loading of the cargo. Samples of the cargo were taken and the Sichem Challenge was detained under the authority of the Venezuelan prosecutor's office.
The authorities gave no reason for the halting of the loading of the cargo on the Sichem Challenge, but the vessel's crew was instructed not to leave the port.
Eitzen retained a correspondent from its protection and indemnity insurer to try to resolve the dispute.
His investigation revealed that the Venezuelan government claimed that tests of the cargo samples indicated that the cargo was not Tecsol but 'national diesel fuel.' The Venezuelan government had export controls for certain products and the ability to regulate exports, including national diesel fuel.
Venezuela 'initiated a smuggling investigation against the exporter, Tecnopetrol and its principal, Javier Bertucci. As part of its investigation, the government detained the Sichem Challenge, believing it to be an asset of Bertucci or Tecnopetrol.'
The court said over the next several weeks, Eitzen's P&I representative attempted to convince Venezuelan officials that the Sichem Challenge was not such an asset and petitioned for release of the ship.
The prosecutor in Venezuela eventually ordered that the cargo be discharged and the cargo was removed from the vessel between August 27 and September 2 2010. Sichem Challenge left port the following day.
Thereafter, the Eitzen companies initiated a civil suit against Carib-Bahamas, Carib-Florida and Carlos Gamboa, in his individual capacity, for breach of contract based on the delay of unloading the cargo on the Glen and the detention of the Sichem Challenge.
Eitzen claimed in the trial court that both Carb companies owed demurrage under the charter agreements that they had entered into and that they 'operated interchangeably and solely by Carlos Gamboa, without keeping any [corporate] form'.
The trial court found that Eitzen had proven by a preponderance of the evidence that 'the cargo loaded on the Sichem Challenge was Venezuelan national diesel that Carib-Bahamas was attempting to smuggle out of Venezuela without the proper permits.'
It also found that 'Gamboa knew of the nature of the cargo he was exporting,' as evidenced by 'his repeated instructions that the cargo should not be referred to as diesel; (2) his directions to change the description of the cargo on the Glen after it left Venezuela; and (3) the fact that he was responsible for selling the cargo.'
The trial court ruled that Carib-Bahamas was liable for the breach of contract damages and awarded Eitzen a total judgment of US$1,110,276 against Carib-Bahamas.
But the US Court of Appeals for the 11th Circuit said while the trial in the lower court involved a breach of contract governed by maritime law 'absent some other wrong or injustice that would result if the corporate veil is not pierced, a creditor's inability to collect a judgment alone is insufficient to justify piercing the corporate veil'.
Eitzen operated tankers for transporting chemicals around the world. Eitzen today is part of Team Tankers International Ltd, which has a fleet of 51 chemical tankers, reported American Shipper.
The defendants in the case were Carlos Gamboa and two companies of which he was the individual owner and operator: Carib Petroleum, a Bahamian corporation, and Carib Petroleum Inc, a Florida corporation.
In December 2009, Carib Petroleum entered into a maritime contract with Eitzen Chemical A/S to have the tanker, Glen, transport 5,000 tons of a product described as Tecsol from Venezuela to the Dominican Republic.
Discharge of the cargo was delayed in the Dominican Republic and Eitzen incurred additional costs. Carib challenged Eitzen's ability to bring the suit since it did not own the ships but was the commercial manager. The lower court said Eitzen was the bailee of the Glen and was entitled to pursue the claim.
The following summer, Carib Petroleum entered into a second contract to have an Eitzen-owned tanker, Sichem Challenge, transport Tecsol from Venezuela to the Dominican Republic. Again, the contract did not specify which Carib entity was the charterer.
On June 29, 2010, Sichem Challenge arrived in Puerto Cabello, Venezuela, and began loading the cargo the next morning. On July 2, 2010, the Venezuelan National Guard stopped the loading of the cargo. Samples of the cargo were taken and the Sichem Challenge was detained under the authority of the Venezuelan prosecutor's office.
The authorities gave no reason for the halting of the loading of the cargo on the Sichem Challenge, but the vessel's crew was instructed not to leave the port.
Eitzen retained a correspondent from its protection and indemnity insurer to try to resolve the dispute.
His investigation revealed that the Venezuelan government claimed that tests of the cargo samples indicated that the cargo was not Tecsol but 'national diesel fuel.' The Venezuelan government had export controls for certain products and the ability to regulate exports, including national diesel fuel.
Venezuela 'initiated a smuggling investigation against the exporter, Tecnopetrol and its principal, Javier Bertucci. As part of its investigation, the government detained the Sichem Challenge, believing it to be an asset of Bertucci or Tecnopetrol.'
The court said over the next several weeks, Eitzen's P&I representative attempted to convince Venezuelan officials that the Sichem Challenge was not such an asset and petitioned for release of the ship.
The prosecutor in Venezuela eventually ordered that the cargo be discharged and the cargo was removed from the vessel between August 27 and September 2 2010. Sichem Challenge left port the following day.
Thereafter, the Eitzen companies initiated a civil suit against Carib-Bahamas, Carib-Florida and Carlos Gamboa, in his individual capacity, for breach of contract based on the delay of unloading the cargo on the Glen and the detention of the Sichem Challenge.
Eitzen claimed in the trial court that both Carb companies owed demurrage under the charter agreements that they had entered into and that they 'operated interchangeably and solely by Carlos Gamboa, without keeping any [corporate] form'.
The trial court found that Eitzen had proven by a preponderance of the evidence that 'the cargo loaded on the Sichem Challenge was Venezuelan national diesel that Carib-Bahamas was attempting to smuggle out of Venezuela without the proper permits.'
It also found that 'Gamboa knew of the nature of the cargo he was exporting,' as evidenced by 'his repeated instructions that the cargo should not be referred to as diesel; (2) his directions to change the description of the cargo on the Glen after it left Venezuela; and (3) the fact that he was responsible for selling the cargo.'
The trial court ruled that Carib-Bahamas was liable for the breach of contract damages and awarded Eitzen a total judgment of US$1,110,276 against Carib-Bahamas.