United States District Court, S.D. New York
February 11, 2015
MWH INTERNATIONAL, INC., Plaintiff,
INVERSORA MURTEN, S.A., ENERGOPROJEKT HOLDING COMPANY, and ENERGOPROJEKT HIDROINZENJERING CO., LTD., Defendants
For MWH International, Inc., Plaintiff: Edwin R. Matthews, BOURNE NOLL & KENYON, SUMMIT, NJ.
For Inversora Murten S.A., Defendant, Cross Claimant: Jon Schuyler Brooks, LEAD ATTORNEY, Phillips Nizer LLP, New York, NY.
For Energoprojekt holding company, Energoprojekt hidroinzenjering co., ltd, Defendants, Cross Defendants: Thomas M. Mullaney, LEAD ATTORNEY, Law Offices of Thomas M. Mullaney, New York, NY.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
GREGORY H. WOODS, United States District Judge.
MWH International, Inc. (" MWH") contracted with Energoprojekt Hidroinzenjering Co. Ltd. (" EP-Hidro"), a subsidiary of Energoprojekt Holding a.d. (" EP-Holding a.d."). Pursuant to the contract, EP-Hidro provided engineering services to MWH; in turn, MWH owed money to EP-Hidro. Inversora Murten, S.A. (" Inversora") holds a $38.5 million default judgment against Energoprojekt Holding Company (" EP-Holding"). Inversora sought to garnish the payments from MWH owing to EP-Hidro to satisfy Inversora's judgment against EP-Holding. Faced with the competing claims of Inversora and EP-Hidro to the funds MWH owed EP-Hidro, MWH filed this interpleader action. MWH subsequently deposited the disputed funds with the Court and was dismissed from the case. Inversora has raised cross-claims against EP-Hidro and EP-Holding a.d. (together, the " Energo Defendants"),  through which Inversora asserts that it is entitled to the funds.
In order to prevail in this case, Inversora must surpass three hurdles. First, Inversora would need to defend the validity of its default judgment against EP-Holding against the Energo Defendants' claim that the judgment is void. While the Energo Defendants have raised substantial questions about the validity of the default judgment, the Court need not address this issue to resolve this case. Second, Inversora must establish that EP-Holding a.d., the parent of EP-Hidro, is the legal successor to EP-Holding, the judgment debtor. The Court does not need to decide this issue in order to resolve this dispute. For purposes of this decision only, the Court assumes, without holding, that EP-Holding a.d. is the same entity as EP-Holding, the judgment debtor. Third, Inversora must demonstrate that it can collect the default judgment owing by EP-Holding against the assets of EP-Hidro, a separate legal entity. As described below, the Court finds, as a matter of both fact and law, that Inversora has failed to meet this hurdle on any of the alternative bases it has asserted. For the reasons that follow, the Court grants judgment in favor of the Energo Defendants and orders that the res be distributed to EP-Hidro.
I. PROCEDURAL HISTORY
This case has an extensive and tortuous procedural history in this Court, most of which is not directly relevant to this decision. The case was filed by MWH in October 2010 in the District of New Jersey, where the default judgment against EP-Holding was issued. The case was transferred to the Southern District of New York in March 2011 and was assigned to The Honorable Judge Harold Baer. MWH deposited the amount in dispute--$178, 283.39--with the Court in January 2011. MWH was then dismissed from the lawsuit. Dkt. No. 44. Judge Baer later ordered that $26, 338.98 of the funds on deposit with the Court be paid to MWH to offset its legal expenses. Dkt. No. 90.
For over three years, Inversora and the Energo Defendants litigated jurisdictional questions and conducted discovery under the supervision of Judge Baer and Magistrate Judge Maas. The discovery process appears to have been erratic. On June 18, 2013, Judge Maas wrote of the case " it has been referred to me for only two months; despite my brief association with the matter, I share Judge Baer's considerable frustration with the manner in which it has been litigated." Dkt. No. 82. Of particular note for the ultimate disposition of this case, Inversora, after litigating its right to take depositions of the Energo Defendants, ultimately chose to take no depositions at all in support of its case. Instead, as will be seen, Inversora chose to rest its case entirely on documents produced by the Energo Defendants and documents that Inversora's principal found on the internet.
The case was transferred to the undersigned in July 2014, following Judge Baer's passing. Shortly thereafter, Inversora and the Energo Defendants represented to the Court that, after nearly four years of litigation, discovery in the case was complete. Accordingly, in August 2014, the Court set a briefing schedule for any dispositive motions and a trial date.
In September 2014, the Energo Defendants filed a third motion to dismiss Inversora's cross-claims pursuant to Fed.R.Civ.P. 12(b) or to vacate the Default Judgment pursuant to Fed.R.Civ.P. 60(b). At the time that the motion was filed, the parties had already conducted discovery. The Court's preference was to resolve on the evidence instead of the pleadings a case that had been pending for four years in which all discovery was complete. The Court thus elected to resolve this case at trial.
The Energo Defendants' motion to vacate the default judgment against EP-Holding raises substantial questions regarding the validity of that judgment. See Energo Defendants' Motion to Dismiss for Lack of Jurisdiction and to Vacate Judgment. Dkt. No. 114. The Court need not reach those issues, however, to resolve this case. The primary issue before the Court is whether Inversora can enforce against EP-Hidro the default judgment against EP-Holding. Because the Court answers this question in the negative, it is not required to reach the issue of the validity of the default judgment itself. In the spirit of judicial restraint, the Court believes that it should adjudicate this dispute on the most limited basis necessary. A different conclusion in this interpleader action would warrant confronting the question as to whether the default judgment itself is void.
Although the Energo Defendants have answered Inversora's cross-claims, they have not answered MWH's interpleader complaint. Based on the latter fact, counsel for Inversora made an oral motion for a default judgment on the morning of the first day of trial in this matter. Inversora's motion is denied. The motion does not comply with Rule 55, as Inversora has not obtained a certificate of default against the Energo Defendants. See Fed.R.Civ.P. 55(a); see also Allstate Ins. Co. v. Yadgarov, No. 11-cv-6187, 2014 WL 860019, at *13 (E.D.N.Y. Mar. 5, 2014) (" [P]rocedural irregularities warrant denial of a motion for default judgment; the court cannot simply overlook a technical error."). More importantly, the Energo Defendants appeared in this case over three years ago and have been actively litigating it since then, and Inversora is in no way prejudiced by the Energo Defendants' failure to answer the interpleader complaint. Under these circumstances, given that " default judgments are disfavored" and that " [a] clear preference exists for cases to be adjudicated on the merits, " Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 174 (2d Cir. 2001), the Court will not decide this case against an active litigant based on a procedural technicality raised on the first day of trial, see Cablevision of Southern Conn., Ltd. Partnership v. Smith, 141 F.Supp.2d 277, 281-82 (D. Conn. 2001) (noting that, in determining whether to enter a default judgment, courts may consider, inter alia, " whether the default is largely technical, " " whether the plaintiff has been substantially prejudiced by the delay involved, " " how harsh an effect a default judgment might have, " and " whether the court thinks it later would be obligated to set aside the default on defendant's motion").
The Court held a three-day bench trial to determine which defendant is entitled to the disputed funds beginning on January 12, 2015. Inversora presented the testimony of its principal, Peter Bronner, and the Energo Defendants presented the testimony of EP-Hidro's Director, Bratislav Stiŝ ović . The direct testimony of those witnesses was taken by written declaration, and the witnesses were subject to live cross-and redirect examination by counsel.
Mr. Bronner was the only witness who appeared for Inversora at trial. His testimony is fundamentally limited, however, by the fact that he has no personal knowledge of the operations of the Energo Defendants or any other issue relevant to the disposition of this dispute. He testified that his knowledge of the operations of the Energo entities is derived from his work with a Guinean subsidiary of EP-Holding in the early 90's--over twenty years ago. Trial Tr. at 24, 147. Otherwise, the only basis for his knowledge regarding the operations of any member of the Energo group of companies comes from documents that he has read. Trial Tr. at 24. Mr. Bronner was not presented as an expert witness. Because of Mr. Bronner's lack of personal knowledge regarding the structure, assets, nature, or operations of the Energo Defendants, the Court does not credit any statements made by him on those issues other than direct quotations from documentary evidence that Inversora sought to introduce through his testimony. In particular, the Court does not credit any of Mr. Bronner's extrapolations or conclusions from, or characterizations of, the evidence that he collected.
As a general matter, the Court also found Mr. Bronner to lack credibility as a witness. He is interested in the outcome of the litigation. He testified that he is entitled to receive all of the proceeds of the litigation should Inversora prevail, net of legal expenses. Trial Tr. at 251. The Court found him to be heavily invested personally in this matter. Moreover, throughout his testimony on cross-examination, Mr. Bronner looked at his counsel for direction as to the proper responses to questions. Confronted with the opportunity to demonstrate his own familiarity with the matters about which he was testifying, he was unable to do so capably without guidance from counsel. See, e.g., Trial Tr. at 211-216.
Because the only witness offered by Inversora lacked personal knowledge of pertinent facts, the only basis that it offered in support of its case in chief were documents procured by Mr. Bronner and his counsel, Mr. Brooks. Many of the documents were corporate records of the Energo Defendants produced by them in discovery or located by Mr. Bronner through internet searches. The Energo Defendants understandably objected to the introduction of much of this evidence for a number of reasons, but principally because Mr. Bronner could not lay a foundation for the document or because the documents constituted hearsay. At trial, the Court provisionally accepted the disputed evidence and took the parties' objections under advisement. For purposes of this decision only, rather than ruling on each objection, the Court is accepting the documents proffered by Inversora. The Court is essentially finding that, even assuming, arguendo, that the evidence offered by Inversora is admissible, Inversora is not entitled to the disputed funds. As a result, the Court is not required to resolve the Energo Defendants' objections to the admissibility of Inversora's evidence. The Court has not based any findings of fact on evidence presented by the Energo Defendants to which Inversora objected.
Over Inversora's objection, the Energo Defendants' sole witness, Mr. Stisovic, testified through a Serbian interpreter. Although Mr. Stisovic has represented professionally that he is " fluent" in English, Mr. Stisovic has only a high school level of education in English and admitted that he does not understand the English versions of " legal terms, " see Trial Tr. at 347. In light of both the complex nature of this case--which involves numerous legal terms--and Mr. Stiŝ ović 's limited background and proficiency in English, the Court finds that the use of a Serbian interpreter was necessary for Mr. Stiŝ ović to understand the questions presented to him and to provide complete and accurate answers. Indeed, on the few occasions on which Mr. Stisovic endeavored to testify in English both the Court and the court reporter had difficulties understanding him.
With that background established, the Court now issues these findings of fact and conclusions of law.
II. FINDINGS OF FACT
This story begins over twenty years ago--in the early 1990s. At that time, Inversora, a Uruguayan company, was actively involved a hydro-electric development project in the Republic of Guinea. Mr. Peter Bronner, Inversora's sole principal, ran the company from a shared office in New York City and his home in the suburbs. He traveled internationally in support of the business' operations.
According to Inversora, in December 1992, the company entered into a joint venture agreement with respect to the hydro-power project with an entity described solely as " Energoprojekt." Complaint and Jury Demand, 95-cv-5022 (D. N.J.) (" New Jersey Complaint"), Exhibit A. According to Inversora, as part of that transaction, on the same day, Inversora and an entity named " Energoprojekt Holding Guinea" entered into a " Joint Assignor Notice of Agreement Assignee Agreement to Be Bound." New Jersey Complaint Exhibit B.
The record is not clear why, but at some point in the early 1990s, Inversora's business operations in Guinea began to deteriorate. Mr. Bronner asserted at trial he had received low quality engineering drawings from his Energoprojekt partner; he also claims that local people in Guinea worked to undermine his business. It is clear, however, that his business deteriorated in part because Mr. Bronner's ability to travel abroad in support of his business activities was constrained for a period of time. Inversora has been inactive since the mid-90's and the company's registration fees have not been paid since that time. Tr. Trans. at 14-15.
In 1995, Inversora filed a lawsuit against " Energoprojekt Holding Company" in the United States District Court for the District of New Jersey. See Inversora Ex. 1. In the complaint, Inversora asserted that the defendant had breached contracts that it entered into with Inversora in 1992. The New Jersey Complaint references contracts as having been entered into by the defendant, Energoprojekt Holding Company, even though the underlying contracts attached to the complaint were entered into between Inversora and companies with other names: " Energoprojekt" and " Energoprojekt Holding Guinea, " respectively. The connection between those entities and the named defendant " Energoprojekt Holding Company" is obscure to this Court, but is irrelevant to this decision.
What is relevant is that in 1996, the district court in New Jersey awarded Inversora a default judgment against Energoprojekt Holding Company (" EP-Holding") in the amount of $38, 750, 000 (the " Default Judgment"). Id. The judgment has been registered in this Court. See Inversora Ex. 2.
Since obtaining the Default Judgment, the sole mission of Inversora has evidently been to attempt to enforce the judgment by garnishing the funds of any entity that does business with EP-Holding or its subsidiaries. Mr. Bronner has pursued that decades-long, as, as yet, unsatisfied mission with the assistance of his counsel. His first counsel, who filed for and obtained the Default Judgment, was Mr. Vincent Verdiramo. For a number of years now, Mr. Bronner has been supported in his efforts by Mr. Jon Brooks, who is associated with the law firm of Phillips Nizer LLP.
Mr. Bronner testified at trial that he has a " Google Alert" programmed to notify him of news related to EP-Holding and its subsidiaries. See Trial Tr. at 29-30. After he receives an alert, Mr. Bronner investigates the lead from his home in Uruguay, using his AOL internet connection. It was in that way that Mr. Bronner learned of the transaction that spawned this interpleader action.
In 1998, MWH (as successor-by-merger to Harza Engineering Company International L.P.) entered into a joint venture agreement with EP-Hidro for the purpose of providing construction services for a hydroelectric power plant in Ethiopia. See Energo Defendants Ex. 3. Pursuant to that joint venture agreement, EP-Hidro was entitled to receive certain payments from MWH. Id. at 3. Mr. Bronner learned of the joint venture agreement several years after its execution as a result of a Google Alert. See Trial Tr. at 29-30. Spurred on by the alert, Mr. Bronner proceeded to research EP-Holding and EP-Hidro by visiting various websites, including those entities' own websites. See id. at 36.
In February 2010, Inversora served a restraining notice on MWH. In the restraining notice, Inversora asserted that " it appears you owe a debt to the judgment debtor or are in possession of property in which the judgment debtor has an interest, including but not limited to payments due or to become due from the Tekese hydropower project in Ethiopia." Inversora Ex. 3. Inversora's restraining notice eventually led MWH to initiate this interpleader action.
B. The Relationship between EP-Holding and EP-Hidro
EP-Holding a.d. is a Serbian holding company that is a majority owner of several subsidiaries. See Energo Defendants Ex. 4 at 3.0. The principal business of EP-Holding a.d. is the management and financing of its subsidiaries. See Inversora Ex. 12 at EP-00068. EP-Hidro is a subsidiary of EP-Holding a.d. that provides design, consulting, engineering, project development, and project management services related to hydroelectric power. See Energo Defendants Ex. 4 at 3.0, 4.2.
At the time of trial, EP-Holding a.d. owned 100% of EP-Hidro. See Dkt. No. 150 at ¶ 7(k) (Joint Stipulations of Fact). However, at the time that Inversora issued its 2010 restraining notice, and throughout most of the course of this litigation, EP-Hidro was not wholly-owned by EP-Holding a.d. Shares of EP-Hidro that EP-Holding a.d. did not own were publicly traded on the Belgrade Stock Exchange. Trial Tr. at 410. In March 2014, EP-Holding a.d. announced a compulsory buyout of minority shareholders, which the Court understands resulted in EP-Holding a.d. becoming the sole parent of EP-Hidro. Inversora Ex. 50.
EP-Holding a.d. and EP-Hidro are separately registered companies, see, e.g., Energo Defendants Ex. 4 at 3.0 (2013 Annual Report outlining the structure of EP-Holding a.d. and its subsidiaries), with separate registration and tax numbers, see Energo Defendants Exs. 8-10, and separate bank accounts, see Energo Defendants Ex. 1 (Stisovic Decl.) at ¶ ¶ 28-29. EP-Holding a.d. and EP-Hidro each have separately audited financial statements. Trial Tr. at 406.
According to EP-Hidro's Articles of Association, shareholders of the company act through a shareholders' assembly. See Inversora Ex. 44 at EP-00031. EP-Hidro is managed by a Management Board, whose members are elected by shareholders at an annual meeting of the company assembly. See Inversora Ex. 44 at EP-00044. Of the five members of the management board, two members are required to be independent. The company also has an executive board. The Articles of Association establish the positions of director and secretary of the company as well. The Articles of Association require the appointment of an external auditor. EP-Hidro's Articles of Association authorize EP-Holding a.d. to approve a number of the large-scale management decisions of EP-Hidro. See, e.g., Inversora Ex. 44 at EP-00055. At the same time, the Articles of Association expressly provide that the controlling shareholders are obligated to act in the best interest of EP-Hidro. Inversora Ex. 44 at EP-00057.
At trial, Inversora pointed to the authority provided to EP-Holding a.d. under the terms of the Articles of Association of EP-Hidro to support its theory that EP-Holding a.d. dominates and controls EP-Hidro. Inversora failed to elicit evidence to demonstrate that EP-Holding a.d. in fact exercises the authority provided to it under the Articles of Association, or, if so, the manner in which EP-Holding a.d. exercises that authority. In the absence of evidence, Inversora asks the Court to draw speculative inferences from the text of EP-Hidro's Articles of Association to conclude that EP-Holding a.d. exercises plenary management authority over EP-Hidro in fact. The evidence, however, does not support that conclusion. The Articles of Association establish rules; they do not establish how the company operates in fact. As an analogy, presented with the rulebook for football, the Court would not conclude that a two point conversion happened in every game played, because the rulebook contains a rule for two point conversions. The Court cannot conclude on the sole basis of the documents provided that EP-Holding a.d. exercises the degree of control over EP-Hidro required to substantiate Inversora's claims.
On the other hand, Mr. Stiŝ ović testified credibly that EP-Hidro complied with its corporate formalities. Trial Tr. at 438-440. He also testified credibly that he, as company director, managed the company's daily operations. Id. There was no evidence that EP-Holding a.d. or EP-Hidro disregarded or abused in any way corporate formalities.
EP-Holding a.d. provides services to its subsidiaries, including EP-Hidro. The services provided by EP-Holding a.d. involve back office support functions, like legal, treasury and accounting services. EP-Holding a.d. also contracts for heating and electricity on behalf of itself and its subsidiaries. Trial Tr. at 422. Mr. Bronner's direct testimony points the Court to the provisions of EP-Holding a.d.'s corporate documents that describe these functions. Bronner Declaration at 42. EP-Holding a.d. charges fees for the services that it provides to its subsidiaries. See Inversora Ex. 12 at EP-00068. Mr. Bronner characterizes the fees that EP-Holding a.d. " siphons" from its subsidiaries as " enormous, " Bronner Declaration at 47, but, given Mr. Bronner's lack of personal knowledge and credibility, the Court does not accept those characterizations of the evidence. According to Mr. Bronner's declaration, the amount EP-Holding a.d. charged EP-Hidro for services to the 200 person subsidiary in 2011 was approximately $340, 674. Bronner Declaration at 50.
Mr. Stiŝ ović testified that there are legal constraints on transactions between EP-Holding a.d. and EP-Hidro. Trial Tr. at 425. During nearly the entire course of this litigation, EP-Hidro was a separately listed public company. The Court accepts Mr. Stisovic testimony that the terms of related party transactions are constrained by Serbian law and practice. On this record, the Court cannot find that EP-Holding a.d. can set unconstrained fees for services rendered by it to EP-Hidro. The evidence supports the conclusion that fees paid by EP-Hidro to EP-Holding a.d. are for services actually rendered, and that EP-Holding a.d. charges a market rate for those services. Trial Tr. at 426. The record does not support Inversora's contention that the fees are paid merely as a vehicle to " siphon" funds from the subsidiary to its parent company.
Inversora sought to establish that EP-Hidro owes a debt to EP-Holding a.d. that could serve as the basis for a collection proceeding under New York C.P.L.R. § 5227. In support of its claim, Inversora pointed the Court to portions of EP-Holding a.d.'s financial statements indicating that it had outstanding long term loans " to its subsidiaries." See, e.g . Bronner Declaration ¶ 53. However, Mr. Bronner's declaration ignored the fact that the EP-Holding a.d. financial statements also contain specific breakdowns of the amount of debt owing by each subsidiary. Those statements show no debt owing by EP-Hidro to EP-Holding a.d. See, e.g., Inversora Ex. 46 at 62; Inversora Ex. 47 at 64; Inversora Ex. 48 at pp. 55 and 58; Inversora Ex. 49 at 15, 22, 25. Similarly, those statements do not show income from debt owing by EP-Hidro. See, e.g., Inversora Ex. 45 at 26; Inversora Ex. 49 at 15. The financial statements provide credible evidence that EP-Hidro was not indebted to EP-Holding a.d.--at least at the end of the fiscal periods reported on in those financial statements.
The only evidence that Inversora introduced during its case in chief that credibly demonstrated the existence of a debt by EP-Hidro to EP-Holding a.d. at any time was a purchase and sale agreement between those two entities dated December 31, 2012. Pursuant to that agreement, EP-Hidro sold a piece of property to EP-Holding a.d. Inversora Ex. 51. The agreement provides that the purchase price was to be deducted from a portion of EP-Hidro's debt to EP-Holding a.d. The agreement then specifies the types of " debt" against which the purchase price was offset, which included " debt for electricity, " " debt arising from the Office Building Maintenance Agreement, " and " debt arising from the Service Agreement" for specified years. Inversora Ex. 51 at EP 0385. The Court believes that this document establishes that some amount of obligations were owing by EP-Hidro to EP-Holding as of December 31, 2012. The document does not establish, however, when those obligations arose, the amount of those obligations prior to the date of the agreement or the amount of those obligations on or after the date of the agreement.
On cross-examination, Mr. Stisovic testified that EP-Hidro owed EP-Holding a.d. deferred service fees from 2009, 2010, and part of 2011. He testified that those " debts" continued as of the date of trial. See Trial Tr. at 409. Inversora did not elicit any testimony regarding the amount of any obligations that EP-Hidro owed to EP-Holding a.d. at any relevant time. The Court does not believe that the testimony of Mr. Stisovic regarding EP-Hidro's purported indebtedness to EP-Holding was credible. In other portions of his testimony, Mr. Stisovic testified that he was " not financial" and disclaimed understanding of portions of EP-Hidro's financial statements. See, e.g., Trial Tr. at 401, 408, 414. The Court specifically asked Mr. Stisovic's if he had " knowledge of the nature or extent of any debt owing by EP-Hidro to EP Holdings other than what's set forth here in Article 4" of Inversora's Exhibit 51. Trial Tr. at 437. Mr. Stisovic answered " I don't think that there is any other debt . . . ." Trial Tr. at 437. The Court does not credit Mr. Stisovic's testimony to establish the existence of any obligation other than the debt described in Inversora's Exhibit 51.
Finally, Inversora did not demonstrate at trial that EP-Holding a.d. was entitled to possess the payments due to EP-Hidro from MWH. The only evidence presented in support of that position is the fact that EP-Holding a.d. is the parent of EP-Hidro and that the shareholder assembly of EP-Hidro has the corporate authority to declare dividends. Inversora did not present any evidence that leads the Court to believe that EP-Holding a.d. can extract that amount at will from EP-Hidro. EP-Hidro has hundreds of employees, who are presumably due to be paid, there may be other creditors of EP-Hidro, whose claims have priority over equity distributions, or there may be tax or other legal constraints on distributions of payments to the parent company. Until 2014, EP-Holding was not even the sole shareholder of EP-Hidro; EP-Hidro was a separately listed public company. These are just examples of the kinds of issues that may limit EP-Holding's access to the funds of its subsidiary. Inversora did not even attempt to address these considerations at trial, but instead asks the Court to draw the inference that equity ownership of a subsidiary conveys a direct entitlement to a particular stream of the subsidiary's cash flow. The Court rejects Inversora's proposed inference, which is not supported by the evidence and is inconsistent with basic principles of corporate law. The Court finds that Inversora has not established that EP-Holding was entitled to possess the payments owed to EP-Hidro.
III. CONCLUSIONS OF LAW
Inversora has raised three separate arguments as to why it may enforce against EP-Hidro the Default Judgment against EP-Holding, thus establishing its cross-claims and entitlement to the disputed funds. See Dkt. No. 138 (Inversora's Proposed Findings of Fact and Conclusions of Law). First, Inversora argues that EP-Holding and EP-Hidro are either the same entity (or part of the same entity) or are alter egos of each other. Second, Inversora argues that, by virtue of EP-Holding's ownership interest in EP-Hidro and its corresponding right to receive dividend payments, EP-Holding has " an interest" in the disputed funds, such that the Default Judgment is enforceable under N.Y. C.P.L.R. § 5225(b). Third, Inversora argues that EP-Hidro is indebted to EP-Holding and thus that the Default Judgment is enforceable under N.Y. C.P.L.R. § 5227. The Court will address each of these arguments in turn.
Under New York law,  Inversora's claim that the Default Judgment against EP-Holding should be enforced against EP-Hidro because these two entities are in fact the same is governed by N.Y. C.P.L.R. § 5225(a). Under § 5225(a), a judgment creditor may enforce a judgment against the judgment debtor " where it is shown that the judgment debtor is in possession or custody of money or other personal property in which [the judgment debtor] has an interest." N.Y. C.P.L.R. § 5225(a).
Here, Inversora has not established that EP-Holding a.d. and EP-Hidro are the same entity, such that EP-Hidro could be deemed the judgment debtor under § 5225(a). Inversora's theory in this regard appears to be that EP-Holding and all of its subsidiaries, including EP-Hidro, constitute a single entity, variously referred to as the " Energoprojekt Group, " the " Energoprojekt System, " or simply " Energoprojekt." However, while EP-Holding a.d. and its subsidiaries have occasionally referred to themselves as a single entity, see, e.g., Energo Defendants Ex. 4 at 2.0 (2013 Annual Report referring to " Energoprojekt" as " a complex business entity"), there is no evidence demonstrating that a legal entity comprised of EP-Holding and its subsidiaries actually exists. Moreover, Inversora has not shown that such a category of business organization--a company that is itself composed of various companies--exists as a matter of Serbian law. Cf. Bigio v. Coca-Cola Co., No. 97 Civ. 2858(BSJ), 2010 WL 3377503, at *4 (S.D.N.Y. Aug. 23, 2010) (" [T]he party claiming foreign law applies carries both the burden of raising the issue that foreign law may apply in an action and the burden of proving foreign law to enable the district court to apply it in a particular case." (internal quotation marks and citation omitted)).
In fact, the record permits the Court to affirmatively conclude both that there is no overarching " Energoprojekt" entity and that such a business organization could not exist under Serbian law. According to the expert opinion of Radomir Miloš evic, which is discussed further below and which the Court may properly consider under Fed.R.Civ.P. 44.1, " [t]he term 'Energoprojekt System' . . . is a common-place colloquial idiom for a group of affiliated companies in which [EP-Holding] holds a majority equity stake, " and " Serbian Company Law . . . does not recognize a 'system' of companies as one single legal entity, but instead each of the companies exist within the 'system' with [their] own rights and liabilities towards third parties." Dkt. No. 133-1 at 1-2; Fed.R.Civ.P. 44.1 (" In determining foreign law, the court may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.").
Finally, in addition to above deficiencies in this argument, it is not clear why a judgment obtained against one " sub-entity" (EP-Holding a.d.) would be enforceable against another " sub-entity" (EP-Hidro), even within the context of an overarching " super-entity" (Energoprojekt). Accordingly, the Court cannot deem EP-Hidro to be the judgment debtor against which the Default Judgment is enforceable under § 5225(a).
B. Alter Ego Liability
Inversora also argues that the Default Judgment against EP-Holding is enforceable against EP-Hidro because the two entities are alter egos of each other. The parties dispute whether the law of the forum state--New York--or the law of the state of incorporation--Serbia--applies to this claim. Because this claim requires the Court to disregard EP-Hidro's corporate form, the Court agrees with the Energo Defendants that Serbian law applies. In Fletcher v. Atex, Inc., the Second Circuit held, in no uncertain terms, that " [u]nder New York choice of law principles, [t]he law of the state of incorporation determines when the corporate form will be disregarded . . . ." 68 F.3d 1451, 1456 (2d Cir. 1995). The Court is bound by this holding interpreting New York law, see Euro Trust Trading S.A. v. Uralsib Ins. Group, No. 09 Civ. 4712(RJH), 2009 WL 5103217, at *1 (S.D.N.Y. Dec. 23, 2009) (" Even on issues of state law, the [district court] is bound by Second Circuit precedent."); a fact evidenced by its repeated application in decisions throughout this Circuit, including decisions applying foreign law, see, e.g., Presbyterian Church of Sudan v. Talisman Energy, Inc., 453 F.Supp.2d 633, 683-89 (S.D.N.Y. 2006) (applying the laws of Mauritius, the Netherlands, and England in determining whether to disregard the corporate forms of companies incorporated in those respective countries); Kingdom 5- KR-41, Ltd. v. Star Cruises PLC, No. 01 Civ. 2946(AGS), 2003 WL 262507, at *4 (S.D.N.Y. Feb. 7, 2003) (Norwegian law); Mega Tech International Corp. v. Al-Saghyir Establishment, No. 96 CIV 8711 LBS, 1999 WL 269896, at *8 (S.D.N.Y. May 3, 1999) (Saudi Arabian law); but cf. First National City Bank v. Banco Para El Comercio Exterior de Cuba (" Bancec "), 462 U.S. 611, 621-22, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) (" As a general matter, the law of the state of incorporation normally determines issues relating to the internal affairs of a corporation. . . . Different conflicts principles apply, however, where the rights of third parties external to the corporation are at issue." (emphasis in original)). Ultimately, however, the Court is not required to resolve this dispute, as Inversora has not established that alter ego liability should be imposed against EP-Hidro under either Serbian or New York law for the reasons described below.
1. Serbian Law
With respect to Serbian law, in accordance with Rule 44.1, the Court has considered (1) the October 22, 2014 and November 9, 2014 expert opinions of Radomir Miloš ević, the founding partner of the Miloš evic Law Office in Belgrade, which the Energo Defendants filed in support of their September 2014 motion to dismiss, see Docs. 118-1 (" Miloš evic Op."), 133-1 (" Miloš ević Reply Op.") (together, " the Miloš evic Opinion"); and (2) the October 13, 2014 expert opinion of Duš an Rakitic, the managing partner of the Belgrade office of the law firm Specht Boehm, and Jelena Obradovic, a senior associate at Specht Boehm,  which Inversora filed in opposition to the Energo Defendants' motion and offered as an exhibit at trial, see Inversora Ex. 52 (" Rakitic Op." or " the Rakitic Opinion"); Fed.R.Civ.P. 44.1; accord Deutsche Zentral-Genossenchaftbank AG v. HSBC North American Holdings, Inc., No. 12 Civ. 4025(AT), 2013 WL 6667601, at *7 (S.D.N.Y. Dec. 17, 2013) (" The court has broad discretion in determining what evidence to take into account and at what stage of the case to resolve questions of foreign law."). Based on these expert opinions, the Court concludes that Serbian law does not permit disregarding the corporate form of a subsidiary in order to hold it liable for the obligations of its parent, under an alter ego theory or otherwise. See Miloš evic Op. at 3 (" The relevant Serbian legislation does not provide grounds for liability of a subsidiary for the debts of its parent company, whatsoever."). Notably, the two sets of expert opinions are consistent is this regard. See Rakitić Op. at 4 (" [T]he Company Law [of the Republic of Serbia] does not provide for liability of a daughter company for obligations of its parent holding company . . . ."). It follows from this conclusion that, under Serbian law, the Court may not enforce against EP-Hidro the Default Judgment against EP-Holding in disregard of EP-Hidro's corporate form.
2. New York Law
As a preliminary matter, before turning to the substance of Inversora's alter ego claim under New York law, the Court will address the assertion by Inversora that, in raising this claim, it is not seeking to pierce EP-Hidro's corporate veil. Some courts have distinguished these two concepts on the ground that alter ego claims are premised on direct liability, while veil piercing claims are premised on vicarious liability. See, e.g., Bd. of Trustees, Sheet Metal Workers' Nat. Pension Fund v. Elite Erectors, Inc., 212 F.3d 1031, 1038 (7th Cir. 2000) (" Efforts to pierce the corporate veil ask a court to hold A vicariously liable for B's debt. . . . But a contention that A is B's 'alter ego' asserts that A and B are the same entity; liability then is not vicarious but direct."). Under New York law as interpreted by the Second Circuit, however, these two concepts are, at least as a practical matter, identical. See Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 138 (2d Cir. 1991) (" [T]he . . . rule[s] in New York [governing piercing the corporate veil] and the alter ego theory sued on in this case are indistinguishable, do not lead to different results, and should be treated as interchangeable."); accord In re Adler, 494 B.R. 43, 56 (Bankr. E.D.N.Y. 2013) (recognizing the " merger [of veil piercing and alter ego claims] into one rule of corporate disregard in New York"); Labarbera v. United Crane and Rigging Services, Inc., No. 08-CV-3274 (DLI)(ALC), 2011 WL 1303146, at *11 (E.D.N.Y. Mar. 2, 2011) (noting in a different context that the Second Circuit " has equated alter ego and veil piercing claims") (citing Epperson v. Entertainment Express, Inc., 242 F.3d 100, 106 (2d Cir. 2001)).
As a result, whatever theoretical differences may exist between alter ego liability and veil piercing, those differences are not relevant in this case. Under New York law, in order to establish that EP-Hidro should be held liable for a judgment against its parent company in disregard of its corporate form, Inversora must demonstrate that the circumstances warrant piercing EP-Hidro's corporate veil. In particular, Inversora must rely on the doctrine of " reverse veil piercing." See Liberty Synergistics, Inc. v. Microflo Ltd., F.Supp.3d, 2014 WL 4793454, at *19 (E.D.N.Y. 2014).
Turning to the substantive law, " [i]t is well settled that New York courts are reluctant to disregard the corporate entity, " William Wrigley Jr. Co. v. Waters, 890 F.2d 594, 600 (2d Cir. 1989), and thus that a party seeking to do so bears a " heavy burden, " TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 703 N.E.2d 749, 680 N.Y.S.2d 891 (1998). " Because a decision whether to pierce the corporate veil in a given instance will necessarily depend on the attendant facts and equities, the New York cases may not be reduced to definitive rules governing the varying circumstances when the power may be exercised." Morris v. New York State Dep't of Taxation and Fin., 82 N.Y.2d 135, 141, 623 N.E.2d 1157, 603 N.Y.S.2d 807 (1993). Generally, however, " New York law requires the party seeking to pierce a corporate veil to make a two-part showing: (i) that the owner exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil." American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997) (citing Morris, 82 N.Y.2d at 141). " The legal standard for reverse piercing is the same as that applied in the traditional veil-piercing context." Ross Univ. School of Med., Ltd. v. Brooklyn-Queens Health Care, Inc., No. 09-CV-1410 (KAM), 2012 WL 6091570, at *22 (E.D.N.Y. Dec. 7, 2012).
In this case, Inversora all but concedes that the circumstances do not warrant piercing EP-Hidro's corporate veil, as it has not even attempted to demonstrate that any control that EP-Holding a.d. exercised over EP-Hidro resulted in a wrongful or unjust act that caused it harm. That such a showing is required has been confirmed by both the New York Court of Appeals, see TNS Holdings, 92 N.Y.2d at 339 (" Evidence of domination alone does not suffice [to pierce the corporate veil] without an additional showing that it led to inequity, fraud or malfeasance."); see also Cobalt Partners, L.P. v. GSC Capital Corp., 944 N.Y.S.2d 30, 97 A.D.3d 35, 40 (1st Dep't 2012) (collecting cases for the proposition that " cases following TNS Holdings have dismissed complaints seeking to hold a parent liable for the contractual obligations of its subsidiary or affiliate unaccompanied by allegations of consequent wrongs" (internal quotation marks omitted)), and by the Second Circuit, see American Fuel, 122 F.3d at 134 (" 'While complete domination of the corporation is the key to piercing the corporate veil, . . . such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward [the party seeking piercing] is required.'" (quoting Morris, 82 N.Y.2d at 141-42)). Moreover, as already indicated, Inversora cannot avoid this requirement on the ground that it is proceeding under an alter ego theory, see, e.g., TNS Holdings, 92 N.Y.2d at 339 (" Applying the 'alter ego' test here, plaintiffs have failed to show that, even if MKI dominated Batchnotice, that control resulted in some fraud or wrong mandating disregard of the corporate form in this case."); see also Adler, 494 B.R. at 56 (" [B]ecause of these equitable remedies' [alter ego liability and veil piercing] merger into one rule of corporate disregard in New York, if a party can prove no more than a corporation's complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked and hence its status as an alter ego, New York courts cannot abrogate limited liability." (internal quotation marks omitted)), or on the ground that it is seeking to impose alter ego liability between a parent and subsidiary, see, e.g., Passalacqua, 933 F.2d at 138 (" [C]ontrol, whether of the subsidiaries by the parent or the corporation by its stockholders, is the key[, ] . . . [but such] control must be used to commit a fraud or other wrong that causes plaintiff's loss." (emphasis added)).
In any event, even if EP-Hidro had engaged in any relevant wrongful conduct in this case (or was not required to do so),  Inversora failed to establish that EP-Holding completely dominated or controlled EP-Hidro. The following factors are relevant in determining whether one corporation is dominated by another:
(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arms length, (8) whether the corporations are treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own.
Passalacqua, 933 F.2d at 139. Inversora has demonstrated that only one of these ten factors weighs in favor of disregarding EP-Hidro's corporate form, in that EP-Holding owns 100% of EP-Hidro and the two companies have overlapping directors or officers. Of course, ownership and shared management is a defining feature of the parent-subsidiary relationship that, without more, does not establish alter ego liability or warrant disregarding the corporate form. See William Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 26 (2012) (" A 'subsidiary corporation' is one that is controlled by another corporation by reason of the latter's ownership of at least a majority of the shares of the capital stock. . . . A parent corporation does not lose the benefits of limited liability by taking an active interest in the affairs of its subsidiary, by using its voting power to elect directors, or by entering into contracts with the subsidiary, so long as the corporate formalities are observed."); Greene v. Long Island R.R. Co., 280 F.3d 224, 235 (2d Cir. 2002) (" [C]orporate ownership of a subsidiary and overlapping offices and directorates are not, without more, sufficient to impose liability on the parent for conduct of the subsidiary . . . .").
At trial, Inversora focused almost exclusively on attempting to demonstrate that EP-Holding a.d. controls the management of EP-Hidro. But Inversora's evidence was probative of such control in only in the most broad and generic terms. For instance, while EP-Hidro's Articles of Association indicate that EP-Holding a.d. has a substantial degree of authority over the management of EP-Hidro, see generally Inversora Ex. 44, the record is devoid of specific evidence demonstrating that EP-Holding actually exercises that authority and, if so, the extent to which it does so. See De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 69 (2d Cir. 1996) (noting in this context that " [a]ctual domination, rather than the opportunity to exercise control, must be shown" (internal quotation marks omitted)). Furthermore, even if there was such evidence, the authority granted to EP-Holding a.d. by EP-Hidro's Articles of Association pertains mostly to large-scale management decisions, such as whether to establish new company branches or to elect or remove directors. See Inversora Ex. 44 at EP-00047 - 00049. Management of this sort generally does not warrant disregarding the corporate form. See Billy v. Consolidated Machine Tool Corp., 51 N.Y.2d 152, 163, 412 N.E.2d 934, 432 N.Y.S.2d 879 (1980) (stating that the control at issue must involve " direct intervention by the parent in the management of the subsidiary to such an extent that the subsidiary's paraphernalia of incorporation, directors and officers are completely ignored"); Bellomo v. Penn. Life Co., 488 F.Supp. 744, 745 (S.D.N.Y. 1980) (" Only day to day control by the parent so complete that the subsidiary is, in fact, merely a department of the parent will constitute the requisite control." (citation and internal quotation marks omitted)). Just as ownership and shared management is a defining feature of the parent-subsidiary relationship, a holding company such as EP-Holding a.d. is, by definition, " [a] company formed to control other companies." Black's Law Dictionary (9th ed. 2009). Accordingly, under New York law, Inversora has not sustained its heavy burden of demonstrating that EP-Holding a.d. dominated EP-Hidro, much less that such domination resulted in some fraud or wrong that warrants disregarding EP- Hidro's corporate form.
C. Section 5225(b)
Inversora further argues that, under N.Y. C.P.L.R. § 5225(b), the Court is not required to disregard EP-Hidro's corporate form in order to enforce the Default Judgment. Section 5225(b) provides, in relevant part, as follows:
Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property or that the judgment creditor's rights to the property are superior to those of the transferee, the court shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor . . . .
N.Y. C.P.L.R. § 5225(b). The Second Circuit has provided the following guidance in construing this subsection:
By its express language, the rule provides for a two-step analysis in determining whether property belonging to a judgment debtor--but in the possession of a third party--should be turned over to a judgment creditor. First, it must be shown that the judgment debtor " has an interest" in the property the creditor seeks to reach. Where this first step is satisfied, the trial court must, second, then make one of two findings: it must find either that the judgment debtor is " entitled to the possession of such property, " or it must find that " the judgment creditor's rights to the property are superior" to those of the party in whose possession it is. Only after both steps of the analysis are demonstrated may the trial court order the transferee to turn over the property to the judgment creditor . . . .
Beauvais v. Allegiance Sec., Inc., 942 F.2d 838, 840-41 (2d Cir. 1991).
Here, Inversora specifically argues that EP-Holding a.d. has " an interest" in all of EP- Hidro's profits, which include the payments owed to EP-Hidro under the joint venture agreement with MWH, by virtue of its total ownership of EP-Hidro and its corresponding right to EP-Hidro's profits in the form of dividend payments. The Court is not required to determine whether the parent company has " an interest" in the profits of its wholly owned subsidiary within the meaning of § 5225(b), as Inversora failed to make the second showing required by the statute. Specifically, there is no evidence that EP-Holding a.d. would be entitled to the possession of the disputed funds as the profits of EP-Hidro or even that EP-Holding a.d. is entitled to the possession of EP-Hidro's profits more generally. In other words, Inversora has not established that EP-Hidro would be required to pay the disputed funds to EP-Holding a.d. as dividends. Cf. Beauvais, 942 F.2d at 841 (" A debtor obviously has an interest in its own money or property held by a third party, but that does not necessarily mean it is entitled to possession of that money or property. For example, here Allegiance [the debtor] had an interest in the funds held by appellant [the third party], but it may not have been entitled to possession of those funds because the clearing agreement may have given appellant the right to apply them to Allegiance's unpaid balance for services rendered to it or its customers. Under these circumstances, Beauvais would have no right to the turn-over remedy [under § 5225(b)] . . . ."). In this regard, Serbian law appears to be similar to American law in that dividend payments are not required. See Miloš ević Reply Op. at 2. Accordingly, Inversora has not demonstrated that it is entitled to the disputed funds under § 5225(b).
D. Section 5227
Finally, Inversora argues that it is entitled to the disputed funds under N.Y. C.P.L.R. § 5227. Section 5227 provides, in relevant part, as follows: " Upon a special proceeding commenced by the judgment creditor, against any person who it is shown is or will become indebted to the judgment debtor, the court may require such person to pay to the judgment creditor the debt upon maturity, or so much of it as is sufficient to satisfy the judgment . . . ." N.Y. C.P.L.R. § 5227. In order to be subject to enforcement under this Section, a debt must be either " past due or certain to become due upon demand" or " assignable or transferrable." Alliance Bond Fund Inc. v. Grupo Mexicano de Desarrollo, S.A., 190 F.3d 16, 23-24 (2d Cir. 1999) (discussing N.Y. C.P.L.R. § 5201, which governs the nature of assets that are subject to enforcement under New York law more generally).
As a preliminary matter, as described above, the Court rejects the testimony of Mr. Stisovic regarding EP-Hidro's purported indebtedness to EP-Holding a.d. as lacking credibility and foundation. Based on other portions of Mr. Stisovic's testimony, the Court finds that Mr. Stisovic had limited knowledge of EP-Hidro's finances. Consequently, the sole credible evidence in the record of a debt owed by EP-Hidro to EP-Holding a.d. is the December 2012 Purchase and Sale Agreement between those two companies. See Inversora Ex. 51 at EP-0384. This evidence demonstrates only that, on or about December 31, 2012, EP-Hidro owed a debt to EP-Holding a.d. There is no evidence as to the amount of this debt or as to its nature, including whether it was past due or certain to become due, or assignable or transferable. Moreover, Inversora's cross-claims are premised on its purported right to restrain funds owed by MWH to EP-Hidro. As a result, Inversora was required to establish the existence of an attachable debt owed by EP-Hidro during the pendency of the restraining notice that it served on MWH. Inversora's restraining notice expired on February 2011, one year after it was served. See N.Y. C.P.L.R. § 5222(b). Inversora thus has not established that the Default Judgment is enforceable against EP-Hidro as a debtor of the judgment debtor under § 5227.
Perhaps recognizing these deficiencies, Inversora suggested in a letter filed shortly after trial that it was not required to establish either the amount or precise dates of EP-Hidro's purported indebtedness to EP-Holding. See Dkt. No. 151 at 3. According to Inversora, EP-Hidro will incur debts to EP-Holding " for so long as both EP-Holding and EP-Hidro exist" and it is seeking an order " requiring EP-Hidro to pay to Inversora the amount of EP-Hidro's current and future indebtedness to [EP-Holding] upon maturity of said debt(s)." Id. However, while Inversora may rely on New York's judgment enforcement mechanisms in attempting to establish its cross-claims, this is an interpleader action. The Court's jurisdiction to decide this case is premised solely on the fact that this is an interpleader action. See n.6, supra . Within the confines of this interpleader action, the Court does not have the authority to order EP-Hidro to pay to Inversora all current and future debts that EP-Hidro may owe to EP-Holding a.d. The Court's jurisdiction does not extend to such a dispute between two alien corporations. The Court's sole task is to determine which defendant is entitled to the funds that plaintiff MWH deposited with the Court. Inversora failed to establish any entitlement to those funds for the reasons set forth above. EP-Hidro is therefore entitled to the funds by virtue of its direct contractual relationship with MWH.
For the foregoing reasons, EP-Hidro is entitled to the interpleaded funds. The Clerk of Court is directed to enter judgment accordingly, to release to EP-Hidro the funds on deposit in the registry of the Court, and to close this case.