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Tac-Critical Systems, Inc v. Integrated Facility Systems

August 24, 2011


The opinion of the court was delivered by: James E. Boasberg United States District Judge


Plaintiff TAC-Critical Systems, Inc. has brought this diversity action for breach of contract against Defendants Integrated Facility Systems, Inc. and its sole owner and officer, Mohan Jacob. IFS is now a defunct company that closed its doors in 2009. To recover the $239,666.04 in damages it seeks on its breach-of-contract claim, Plaintiff asserts a veil-piercing theory to hold Jacob personally liable for IFS's corporate debts. Jacob now moves for summary judgment, arguing that, even if IFS did breach the contract, TAC cannot, as a matter of law, pierce IFS's corporate veil and recover from him personally. As the Court disagrees, it will deny the Motion.*fn1

I. Background

Both TAC and IFS are contracting firms. In around 2005, they entered into an agreement to perform work on "three federal facilities in the District of Columbia." Compl., ¶ 6. IFS was to be the general contractor, and TAC was to serve as a subcontractor. The arrangement was made contingent on IFS's being awarded the prime contract from the federal government, which it ultimately obtained. Id., ¶¶ 6-7.

Shortly after starting work on the federal contracts, the relationship between IFS and TAC began to sour. Despite the fact that IFS was the general contractor, Jacob felt that "TAC decided to run th[e] project on [its] own[,] . . . disregarding that [IFS] was the GC." Pl. Opp., Exh. 1 (Deposition of Mohan Jacob) at 62. Frustrated by the situation, Jacob became "[un]happy with the whole process right through the contract" and generally believed that he had "lost control of the contract . . . ." Id. Animosity also developed between the parties with respect to the value of each company's work on the relevant projects. While they "never had any problem with the scope of work," the parties were not in accord regarding how much TAC would receive as payment. Id. at 66. Jacob avers that IFS paid TAC $840,000 for its work on the facilities and kept only $128,000 for itself. Id. at 79-80. He further contends that, because of TAC's alleged conduct, IFS actually lost nearly $75,000 in unrecouped expenses on the federal projects. Id. at 69. Other than a $15,000 debt that Jacobs acknowledges that IFS owes Plaintiff, see id. at 73, 78, 106, he asserts that TAC has been fully paid for its work on all pertinent contracts. Id. at 105-06.

Not surprisingly, TAC takes a different view of their contractual dispute. In filing this breach-of-contract action against both IFS and Jacob, TAC alleges that IFS owes it almost $240,000. Compl., ¶ 14. Plaintiff additionally advances a veil-piercing theory to hold Jacob personally liable for these contractual damages.

Jacob has now filed a Motion for Summary Judgment under FED. R. CIV. P. 56(a), arguing that no genuine issues of material fact remain with respect to his personal liability for the contract.

II. Legal Standard

Summary judgment may be granted if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247--48 (1986); Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record." FED. R. CIV. P. 56(c)(1)(A). "A fact is 'material' if a dispute over it might affect the outcome of a suit under the governing law; factual disputes that are 'irrelevant or unnecessary' do not affect the summary judgment determination." Holcomb, 433 F.3d at 895 (quoting Liberty Lobby, Inc., 477 U.S. at 248). An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Scott v. Harris, 550 U.S. 372, 380 (2007); Liberty Lobby, Inc., 477 U.S. at 248; Holcomb, 433 F.3d at 895.

The party seeking summary judgment "bears the heavy burden of establishing that the merits of his case are so clear that expedited action is justified." Taxpayers Watchdog, Inc. v. Stanley, 819 F.2d 294, 297 (D.C.Cir.1987). "Until a movant has met its burden, the opponent of a summary judgment motion is under no obligation to present any evidence." Gray v. Greyhound Lines, East, 545 F.2d 169, 174 (D.C. Cir. 1976). When a motion for summary judgment is under consideration, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [its] favor." Liberty Lobby, Inc., 477 U.S. at 255; see also Mastro v. Potomac Electric Power Co., 447 F.3d 843, 849--50 (D.C. Cir. 2006); Aka v. Washington Hospital Center, 156 F.3d 1284, 1288 (D.C. Cir. 1998) (en banc); Washington Post Co. v. U.S. Dep't of Health and Human Services, 865 F.2d 320, 325 (D.C. Cir. 1989).

The nonmoving party's opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits, declarations, or other competent evidence, setting forth specific facts showing that there is a genuine issue for trial. FED. R. CIV. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The non-movant is required to provide evidence that would permit a reasonable jury to find in its favor. Laningham v. United States Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987). If the non-movant's evidence is "merely colorable" or "not significantly probative," summary judgment may be granted. Liberty Lobby, Inc., 477 U.S. at 249--50; see Scott, 550 U.S. at 380 ("[W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is 'no genuine issue for trial.'") (quoting Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

III. Analysis

A. Choice of Law

Before addressing the merits of Jacob's Motion, the Court must first sort through a complicated choice-of-law question. Because the case concerns -- albeit indirectly -- contracts with the federal government, the Court must determine whether federal or state common law applies to Plaintiff's veil-piercing theory. If federal law controls, the Court must apply that veil-piercing common law. If state law governs, however, the Court must then decide which of three jurisdictions' common law is applicable here. The State of Delaware, the Commonwealth of Virginia, and the District of Columbia each has an ostensible interest in having its law applied to this dispute. Delaware is the state in which IFS is incorporated. IFS's principal place of business is located in Virginia, and the Commonwealth is also where the relevant contracts were executed. Finally, the District of Columbia is the ...

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