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National Soffit & Escutcheons, Inc. v. Superior Systems

October 11, 1996

NATIONAL SOFFIT & ESCUTCHEONS, INCORPORATED, PLAINTIFF-APPELLANT,

v.

SUPERIOR SYSTEMS, INCORPORATED, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Indiana, South Bend Division. No. 95 C 180 Robert L. Miller, Jr., Judge.

Before CUMMINGS, BAUER, KANNE, Circuit Judges.

BAUER, Circuit Judge.

ARGUED SEPTEMBER 6, 1996

DECIDED OCTOBER 11, 1996

National Soffit & Escutcheons, Inc. ("National"), an Arizona corporation, filed suit against Superior Systems, Inc. ("Superior"), an Indiana corporation. National sought to enforce an Arizona state court judgment entered against Soffit Systems, Inc. ("Soffit"), an Arizona corporation. National contended that Superior was liable as a corporate successor to Soffit because it was merely a continuation of Soffit, created to defraud Soffit's creditors. National further asserted that because of this alleged fraud, National should be able to collect its judgment against Soffit by piercing Superior's corporate veil. National now appeals an Indiana district court's grant of summary judgment for Superior. We affirm.

Background

National manufactures and sells a product called "Coverline," a sheet metal aluminum material used to cover exposed water pipes and sprinkler heads. Louise Hoisington ("Hoisington") worked for National from 1980 until March 1989. In 1987, Hoisington and her husband Duane ("the Hoisingtons") formed Coverline Corporation and became franchisees of National under five area contracts. These contracts granted Coverline the exclusive right to sell and market National's product in five geographic areas and prohibited Coverline and its employees from divulging any of National's customer information or trade secrets. In addition, the contracts subjected Coverline to a restrictive covenant which forbade competition or sales for a one-year period in the five geographic areas. Hoisington's sons, David and A. Craig Alexander, served as Coverline's president and vice-president, respectively. Because they were both Indiana residents, they were not actively involved in Coverline's business until March 1989. Coverline also employed Ron Alexander, Hoisington's nephew.

In March 1989, Hoisington misled National into believing that she was going to retire, prompting National to rescind the franchise contracts. In actuality, Hoisington went into direct competition with National under the name of Soffit Systems, Inc. Using information obtained from National, Soffit underbid National on several key projects in the areas covered by the franchise contract's non-competition clause.

National filed suit against Soffit, the Hoisingtons, David Alexander, A. Craig Alexander, and Ron Alexander in an Arizona state court. The Arizona court determined that the rescission of the franchise contracts was void because it had been induced by fraud and that Soffit, the Hoisingtons, and Ron Alexander had breached the non-competition clause and an implied covenant of good faith and fair dealing. The court then awarded National damages not to exceed $29,535.46, plus fees and costs.

However, before the final judgment was entered, Soffit formally ceased doing business. In February 1992, the Hoisingtons filed for bankruptcy and were granted a discharge in June 1992. Because of the discharge in bankruptcy, National was unable to collect its judgment from Soffit and attempted to enforce it elsewhere. In the meantime, on November 26, 1991, Soffit's former president, David Alexander, and former vice-president, A. Craig Alexander, formed an Indiana corporation, Superior Systems, Inc. Superior engages in the same line of business as Soffit.

Seeking to enforce the Arizona judgment, National then filed suit in a Pennsylvania district court against Superior and Fire Protection Industries, a Pennsylvania corporation indebted to Superior. National initially sought relief under the equitable doctrine of piercing the corporate veil. National subsequently argued that Superior may also be liable for Soffit's debts as a successor corporation. Although the Pennsylvania district court had personal jurisdiction over Fire Protection Industries, it was not clear that it had personal jurisdiction over Superior, an Indiana corporation. By agreement, the court severed the claims, transferred the claims against Superior to the district court in Indiana, retained jurisdiction over the garnishment proceedings against Fire Protections Industries, and stayed that proceeding pending the outcome in Indiana district court.

National had filed a motion for judgment on the pleadings before the Pennsylvania district court. Superior's answer included a counterclaim against National alleging tortious interference with existing and prospective contractual relationships and seeking, among other things, an injunction prohibiting National from initiating further collection proceedings against Superior in any state or federal court. The case was then transferred to the Indiana district court. Superior filed a motion for summary judgment. The Indiana district court determined that there was no conflict among the laws of Indiana, Pennsylvania, and Arizona. The court found that all three states apply the same general principles in considering whether one corporation may be liable for the debts of another under the doctrine of piercing the corporate veil or as a successor corporation. The court denied National's motion, granted Superior's motion for summary judgment, and denied Superior's counterclaim. National now appeals the trial court's grant of summary judgment for Superior.

Analysis

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Rule 56(e) "mandates entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an essential element to that party's case, and on which the party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322. "Where the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of ...


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