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BROSS UTILS. SERV. CORP. v. ABDULLA FOUAD ABOUBSHA

October 10, 1985

BROSS UTILITIES SERVICE CORP., THE THEODORE D. BROSS LINE CONSTRUCTION CORPORATION, Plaintiffs,
v.
ABDULLA FOUAD A. ABOUBSHAIT, ABDULLA FOUAD A. ABOUBSHAIT ESTABLISHMENT, FOUAD ABDULLA FOUAD, FOUAD ABDULLA FOUAD CORPORATION, Defendants.



The opinion of the court was delivered by: SPRIZZO

SPRIZZO, JOHN E., United States District Judge

OPINION AND ORDER

 SPRIZZO, District Judge:

 BACKGROUND

 In March of 1974, plaintiff, The Theodore D. Bross Line Construction Corp. ("Bross Line"), received a letter from S. S. Ayntrazi, managing director of the Electrical and Instrumentation Division of Abdulla Fouad in Saudi Arabia, concerning possible "cooperation" between the company and Bross Line with respect to work related to the generation, transmission, and distribution of electrical power. Bross Line, a Connecticut corporation, is a wholly-owned subsidiary of plaintiff Bross Utilities Service Corp. ("Bross Utilities"), a holding company and also a Connecticut corporation.

 Plaintiffs entered into extensive negotiations with defendants Abdulla Fouad A. Aboubshait ("Fouad") and Fouad Abdulla Fouad, both Saudi Arabian citizens, regarding the project. *fn1" In January of 1975, Bross Utilities incorporated a wholly-owned subsidiary in Grand Cayman Islands, British West Indies, named Bross International, Ltd. ("Bross International"), and, in April of 1975, Bross International, defendant Fouad Establishment and Emeco International Engineers Contractors ("Emeco"), a Lebanese company, entered into an "Association Agreement" to form a joint venture company in accordance with the laws of Saudi Arabia, called Fouad Bross Emeco-Electrical Engineers, Contractors ("FBE"). The company was formed in accordance with the terms of the Association Agreement.

 The stated business of FBE was to "carry out operations involved in the fabrication, construction, erection, commissioning and maintenance of electrical works related to generating plants, substations, transmission and distribution lines and related services." See Ex. B to Plaintiffs' Memorandum in Opposition to Defendants' Motion for Summary Judgment ("Pl. Memo. in Opp.") at 1 ("Association Agreement"). The FBE agreement and subsequent by-laws provided that Fouad Establishment would have a 50% interest in the profits of FBE, and that Bross International and Emeco would have 31.5% and 18.5% interests respectively. FBE would be managed by its board of directors, with two directors to be appointed by Bross International and one each by Fouad Establishment and Emeco. Id. at 4. In 1976, Fouad Establishment and Bross International removed Emeco from the joint venture and continued working under the name Abdulla Fouad & Bross ("Fouad & Bross").

 Plaintiffs have sued defendants for alleged breaches of (1) the FBE/Fouad & Bross joint venture, and (2) an alleged overarching oral partnership agreement between plaintiffs and defendants. Defendants have moved for summary judgment pursuant to Fed. R. Civ. P. 56, on the ground that there is no factual support for the claim of an oral agreement, and that plaintiffs cannot sue for violations of either the FBE or Fouad & Bross agreements, as they were not parties to those contracts.

 Plaintiffs contend that summary judgment is improper because (1) the separate corporate existence of Bross International can be disregarded to allow plaintiffs, the real parties in interest to the FBE joint venture, to assert claims against defendants with respect to the FBE joint venture; (2) Fouad & Bross was a joint venture undertaken directly between defendants and plaintiffs; and (3) there is a genuine issue of material fact as to whether an overreaching oral partnership agreement exists between plaintiffs and defendants with respect to the joint venture. *fn2"

 DISCUSSION

 1. Breach of the FBE Agreement

 The Court agrees with defendants that plaintiffs cannot assert any claims based upon breach of the FBE joint venture agreement. Plaintiffs concede that Bross International, the foreign subsidiary of Bross Utilities, was the only Bross company party to that agreement. The contract refers only to Bross International, and is subscribed only by Bross International. Plaintiffs contend, however, that Bross International is merely a shell corporation created for tax purposes and that plaintiffs were the real parties in interest with respect to the contract with defendants. Therefore, they argue that the Court should pierce the corporate veil between Bross Utilities and Bross International and allow plaintiffs to assert any claim of Bross International arising from the joint venture with defendants.

 Plaintiffs' argument clearly lacks merit. The deposition testimony of plaintiffs' own officers, some of whom were also officers of Bross International, demonstrates that while Bross Line was the party originally contacted by defendants, and while plaintiffs engaged in negotiations with defendants, plaintiffs chose to create a subsidiary to enter into the written agreement with defendants.

 Plaintiffs have cited no authority for their contention that they should be permitted to disregard the separate corporate existence of Bross International in order to sue defendants. It is well-established that, under New York law, n.3 [Footnote Omitted] "a corporation is a 'creature of the law, endowed with a personality separate and distinct from its owners' and . . . the 'dual personality of parent and subsidiary is not lightly disregarded.'" See Boise Cascade Corp. v. Wheeler, 419 F. Supp. 98, 102 (S.D.N.Y. 1976), aff'd without opinion, 556 F.2d 554 (2d Cir. 1977) (quoting Berger v. Columbia Broadcasting System, Inc., 453 F.2d 991, 994 (5th Cir. 1972)). A parent corporation cannot create a subsidiary corporation and then ignore the separate corporate existence of that subsidiary whenever it would be advantageous to the parent. See, ...


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