[00:00:01] Speaker 01:
I think we're done rustling papers already.

[00:00:03] Speaker 01:
Thank you.

[00:00:05] Speaker 04:
Thank you, Your Honors.

[00:00:07] Speaker 04:
Good afternoon.

[00:00:08] Speaker 04:
I am George Gaitas of Gaitas and Chalice, a law firm in Houston, Texas, and we represent the appellants.

[00:00:18] Speaker 04:
A small housekeeping matter, very, very brief.

[00:00:24] Speaker 04:
Our briefing

[00:00:26] Speaker 04:
is two numbers off the excerpts of record.

[00:00:31] Speaker 04:
For example, if we say one, please add two to get there.

[00:00:36] Speaker 01:
I don't know how— Does that mean we're supposed to look at 12 or just page two?

[00:00:40] Speaker 04:
If it is just one, add two and you look—then you get to three.

[00:00:44] Speaker 04:
That's—you add two.

[00:00:45] Speaker 01:
Now I'm really confused.

[00:00:46] Speaker 04:
Add two to the page numbers.

[00:00:48] Speaker 01:
Add two to the page numbers and one means three?

[00:00:50] Speaker 04:
No.

[00:00:51] Speaker 04:
Let me clarify.

[00:00:55] Speaker 04:
If we refer to page 10, what we mean is page 12.

[00:01:00] Speaker 04:
So you've got two.

[00:01:02] Speaker 01:
Okay.

[00:01:03] Speaker 01:
Is that clear?

[00:01:03] Speaker 01:
That was clear.

[00:01:04] Speaker 01:
Thank you.

[00:01:04] Speaker 04:
Thank you very much.

[00:01:05] Speaker 04:
And we apologize for the mistake.

[00:01:06] Speaker 01:
It's going to get easier from here on out.

[00:01:08] Speaker 01:
The rest of your argument is going to be much easier.

[00:01:10] Speaker 01:
Go right ahead.

[00:01:13] Speaker 04:
It is common ground among the parties.

[00:01:15] Speaker 04:
that the controlling case is Pacific Gulf Shipping Co.

[00:01:19] Speaker 04:
versus Vigor Shipping and Trading SA, 992 Federal Third, 893, Ninth Circuit, 2021.

[00:01:31] Speaker 04:
Although the case is common ground, what has emerged in the course of the trial will be attachment

[00:01:43] Speaker 04:
is different understandings by the parties and the court as to the meaning of some of the ruling in Pacific Gulf.

[00:02:01] Speaker 04:
The appellees in applying for a vacatur of the attachment

[00:02:07] Speaker 04:
urged the court, and I'll quote, that the entity to be held liable under the alter ego theory must itself have been used ellipse for a fraudulent purpose.

[00:02:20] Speaker 04:
This is in except 0017, that's the court's judgment vacating the attachment.

[00:02:31] Speaker 04:
This does not seem right to

[00:02:36] Speaker 04:
The appellant, and we looked at the case, and I will have to quote exactly what this court said in Pacific Gulf, in this regard, quote, Pacific Gulf's claim is that the Gordo-Mihalises dominated and controlled Blue Wall, Vigorous, and Adamastos as parts of a single enterprise, so that all of them should be treated as one.

[00:03:06] Speaker 04:
Therefore, for it's a word against the Damastos to be enforceable against the Apelles, Pacific Gulf must show at least that the brothers dominated and controlled either a blue wall or vigorous and used it for a fraudulent purpose.

[00:03:24] Speaker 04:
And that is in Pacific Gulf at page 898.

[00:03:31] Speaker 04:
How does this apply here?

[00:03:36] Speaker 04:
Appellant's understanding, our understanding, that if they succeed in showing that either the purge of ship-holding AES dominated and controlled either the immediate corporate owner of the berica or the parent company

[00:04:02] Speaker 04:
of this vessel owning company, then we prevail.

[00:04:10] Speaker 04:
We brought this to the attention of the district court, and the district court agreed with the accuracy of the quote, but distinguished this case from the case of Pacific Gulf at the urging of the appellees

[00:04:33] Speaker 04:
that in that case, both the registered owner's company and the parent company of the registered owner's company were present, had entered appearances in the case.

[00:04:49] Speaker 04:
No case, and that is excerpt 0018, that's in the order of the court that vacated the attachment.

[00:04:58] Speaker 04:
No authority was cited for this.

[00:05:01] Speaker 04:
Appellees cited no authority for this.

[00:05:05] Speaker 04:
It is unexplained.

[00:05:08] Speaker 04:
And it cannot be an issue of jurisdiction because the court had jurisdiction quasi in rem over the ship.

[00:05:14] Speaker 04:
And if the court adjudicated that the ship-owning company was on alter ego of Bergshaft Shipping Limited, that was that.

[00:05:25] Speaker 04:
That adjudication is filing.

[00:05:27] Speaker 04:
It's binding to parents.

[00:05:29] Speaker 04:
judgment that the company is an alter ego of another binds all the alter egos.

[00:05:40] Speaker 04:
This court also upheld another argument of Appellee's that case American

[00:05:50] Speaker 04:
American Queen versus San Diego Marine Construction Corporation, 708 Federal Second, Ninth Circuit, 1983, clarifies the point.

[00:06:02] Speaker 04:
We have looked closely at American Queen.

[00:06:06] Speaker 04:
It does not clarify that point where we contend there was an error in the interpretation of Pacific Gulf.

[00:06:18] Speaker 04:
There's a distinction between

[00:06:21] Speaker 04:
American Queen and the case that was before the court.

[00:06:28] Speaker 04:
American Queen was a case of summary judgment, and the court in that case held that there was a bare allegation of alter ego.

[00:06:46] Speaker 04:
There was no proof whatsoever offered.

[00:06:50] Speaker 04:
In our case, the standard is, of course, it's not summary judgment.

[00:06:54] Speaker 04:
It is probable cause.

[00:06:56] Speaker 04:
And we feel that we did show probable cause.

[00:06:59] Speaker 02:
Probable cause of what?

[00:07:02] Speaker 04:
Of domination and control, Your Honor, and of abuse, fraudulent abuse of the company.

[00:07:10] Speaker 02:
Is fraudulent abuse a necessary element of alter ego, or is a single enterprise showing enough?

[00:07:19] Speaker 04:
Your Honor, this is an issue on this case, and it seems that the fraudulent abuse or abuse of the corporate entity to do injustice is an element of a single business corporation.

[00:07:38] Speaker 02:
In order to find an older ego, you have to show a fraudulent element, is your point.

[00:07:44] Speaker 04:
fraudulent element or intends to defeat contractual obligations or law.

[00:07:54] Speaker 02:
So what do we do with the evidence that was presented to the district court that Beppalo, the debtor, had a structure which required a majority vote, which also required the vote of an independent director?

[00:08:18] Speaker 04:
The response to that, Your Honor, is that

[00:08:24] Speaker 04:
And we rely on Pacific Gulf and make an alter ego determination.

[00:08:28] Speaker 04:
We understand that the standard is set by the Ninth Circuit, is that the court adjudicating the case must look at the realities as what is actually going on.

[00:08:45] Speaker 04:
indicia, superficial indicia.

[00:08:48] Speaker 04:
And in this case, we think that the court looked at really superficial indicia, basically.

[00:08:54] Speaker 02:
Where was the evidence that the court should overlook the superficial indicia and look at what you call the realities?

[00:09:03] Speaker 02:
What was the reality?

[00:09:04] Speaker 02:
Was the independent director not really independent?

[00:09:07] Speaker 02:
Is that what you're saying?

[00:09:08] Speaker 04:
Your Honor, I must correct myself.

[00:09:12] Speaker 04:
There was no independent director.

[00:09:14] Speaker 04:
It was a majority.

[00:09:16] Speaker 04:
It was a shareholders agreement in which there was a majority, and the others wanted to control their interests.

[00:09:22] Speaker 04:
That's the gist of the agreement as I got it.

[00:09:25] Speaker 04:
So they all had to vote, and the conclusion of the court and appellees was because of this, abuse could not happen.

[00:09:36] Speaker 02:
Because there wasn't domination by Burgshafen of Bebelow.

[00:09:40] Speaker 02:
Now, tell me what was wrong with the proof the appellees proffered as to the independence of one of the shareholders or directors.

[00:09:52] Speaker 04:
Your Honor, that proof was outweighed by the facts.

[00:09:57] Speaker 04:
What's that?

[00:09:57] Speaker 04:
The facts that were put before the court.

[00:10:00] Speaker 04:
And these facts were those evidencing domination and control.

[00:10:06] Speaker 02:
What facts were those, Mr. Gaitas?

[00:10:08] Speaker 04:
All right.

[00:10:10] Speaker 04:
The initiative for the destructuring of Beppalo, Your Honor, was spearheaded and undertaken by Berg's Ship Holding AS.

[00:10:20] Speaker 04:
Its chief financial officer wrote out a plan called Plan B that provided that the control of Beppalo

[00:10:35] Speaker 04:
should be shifted away in papers, shifted away from Berkshire Shipping Limited that sold its controlling interest for the price of a dollar.

[00:10:49] Speaker 04:
The company that bought the controlling interest for a dollar was one that was started about two weeks or one week before all of the restructuring transactions started.

[00:11:04] Speaker 04:
The shareholders of Bipalo agreed among themselves to start another company in Norway that would buy the assets for their benefit, for the benefit of the new company.

[00:11:20] Speaker 04:
It was a premeditated, worked out plan that was implemented that showed domination and control

[00:11:33] Speaker 04:
And if you look at the shareholder's agreement, it doesn't cover any of these activities.

[00:11:42] Speaker 04:
It doesn't address these activities.

[00:11:43] Speaker 04:
It is, but you cannot sell away one ship without everybody concurring.

[00:11:49] Speaker 01:
Here they sold everything.

[00:11:51] Speaker 01:
Isn't that exactly the point?

[00:11:54] Speaker 01:
I have the same question Judge Bea has, I think.

[00:11:57] Speaker 01:
The district court seemed to be very concerned about the shareholder agreement and also the affidavit or declaration from the one minority director.

[00:12:06] Speaker 01:
Your brief argues that the domination was indisputable, but the district court seemed to be very concerned depositions hadn't been taken, even though he indicated that's what would be helpful.

[00:12:20] Speaker 01:
So, what he had was this, it seems to me, this uncontradicted minority declaration.

[00:12:27] Speaker 01:
Yes, Your Honor.

[00:12:28] Speaker 01:
Minority declaration, excuse me.

[00:12:30] Speaker 01:
So, what's your best answer to that, please?

[00:12:32] Speaker 04:
My answer to that is, Your Honor, and I'll have to find the reference.

[00:12:36] Speaker 04:
Okay.

[00:12:37] Speaker 04:
It's at the excerpt of record, page 17.

[00:12:43] Speaker 04:
Yes, this is the judgment of the court.

[00:12:47] Speaker 01:
So you want me looking at 15.

[00:12:48] Speaker 04:
Vacating the attachment.

[00:12:49] Speaker 04:
And it's the remarks of the judge.

[00:12:52] Speaker 04:
He noted several of these transactions that took place.

[00:12:55] Speaker 04:
And the court remarked that these transactions may or may not be above board.

[00:13:02] Speaker 04:
Right.

[00:13:02] Speaker 04:
But they do not involve AFRAMAX.

[00:13:05] Speaker 04:
So we're left with something that to us looks

[00:13:09] Speaker 04:
sort of like a determination of probable cause, or we should inquire further.

[00:13:14] Speaker 04:
And to inquire further, we would have to take serious depositions not limited to a few months.

[00:13:24] Speaker 02:
You interpret may or may not as being probable?

[00:13:29] Speaker 04:
It, no.

[00:13:31] Speaker 04:
I'll say it may or may not.

[00:13:32] Speaker 04:
But it questions, it raises a question.

[00:13:37] Speaker 04:
The court raises a question if these are probable or not.

[00:13:40] Speaker 04:
So what cures that is further evidence.

[00:13:44] Speaker 03:
Mr. Gayetis, could I ask you a couple of questions?

[00:13:47] Speaker 03:
What is the current status of the ship?

[00:13:51] Speaker 03:
Which ship, Your Honor?

[00:13:52] Speaker 03:
Berica.

[00:13:53] Speaker 04:
Berica has been sold, Your Honor.

[00:13:56] Speaker 03:
Okay.

[00:13:56] Speaker 03:
And where are the proceeds?

[00:13:59] Speaker 04:
Berks of Ship Holding, I guess, had the proceeds.

[00:14:06] Speaker 03:
Okay, so what is it that you're asking us to order the district court to reattach now?

[00:14:13] Speaker 04:
There's nothing for the court to reattach, Your Honor, because we have a letter of undertaking from the Protection and Indemnity Association of the ship.

[00:14:26] Speaker 04:
If the case is reinstated and is put on the docket and we litigate it, we feel we can collect it.

[00:14:32] Speaker 03:
Okay.

[00:14:33] Speaker 03:
Thank you.

[00:14:34] Speaker 03:
If I could pursue a couple of other questions.

[00:14:36] Speaker 03:
You were asked about this minority shareholder director for Beppalo.

[00:14:42] Speaker 03:
I would have thought under these circumstances that the interests of the majority and minority shareholders of Beppalo are aligned and that they were aligned in this asset stripping series of transactions.

[00:15:00] Speaker 03:
So I'm not quite sure why we have the focus so much on domination of Beppalo.

[00:15:07] Speaker 03:
I understand the district judge to have focused on whether Afromax was involved in the so-called fraud, but I thought, under the logic of Pacific Gulf, we should be looking at Berkshoff Shipping Limited.

[00:15:23] Speaker 03:
Yes, Your Honor.

[00:15:25] Speaker 03:
And the parent of Afromax.

[00:15:27] Speaker 03:
And that's our point, yes.

[00:15:28] Speaker 03:
Okay.

[00:15:29] Speaker 03:
And that's where you don't see a valid distinction drawn by the district judge between this case and Pacific.

[00:15:35] Speaker 03:
Yes, Your Honor.

[00:15:38] Speaker 03:
Okay.

[00:15:39] Speaker 03:
All right.

[00:15:43] Speaker 03:
Thank you.

[00:15:45] Speaker 04:
Thank you very much.

[00:15:46] Speaker 04:
More questions?

[00:15:48] Speaker 01:
Apparently not.

[00:15:50] Speaker 04:
Okay.

[00:15:51] Speaker 01:
Thank you.

[00:15:51] Speaker 04:
Thank you.

[00:16:02] Speaker 00:
May it please the court, Keith Letourneau for Appellee, Berkshav, Afromax, making a restricted appearance pursuant to Admiralty Supplemental Rule E-8.

[00:16:13] Speaker 00:
Your Honor, one question you had with respect to the assets of the vessel, the LOU was posted and that has required our client to post a reserve of 10 million in order to secure that LOU.

[00:16:27] Speaker 00:
So our client's assets have been tied up

[00:16:31] Speaker 00:
since the inception of this case has been a considerable burden.

[00:16:38] Speaker 00:
With respect to a variety of issues, Mr. Gaitis mentioned about deposing Birdshaft Affermax representatives.

[00:16:50] Speaker 00:
They certainly had the opportunity to do that during discovery.

[00:16:53] Speaker 00:
We made those witnesses available.

[00:16:55] Speaker 00:
They chose not to depose those witnesses.

[00:16:59] Speaker 00:
During the course of the discovery, Judge Breyer was surprised that they did not take those depositions, so they had the opportunity and chose not to do so.

[00:17:10] Speaker 00:
I would point out, with respect to Nikolai Lorentzen's declaration, it is entirely unrefuted

[00:17:18] Speaker 03:
Why does it matter, given what sounds, at least to me, like a congruence of interests among the different Beppalo shareholders?

[00:17:32] Speaker 00:
Your Honor, truly it does matter, because he still has to exercise independent judgment in making those decisions.

[00:17:39] Speaker 03:
Well, there's a question.

[00:17:41] Speaker 03:
I mean, look, the assets were stripped, right?

[00:17:45] Speaker 00:
Well, I disagree with that.

[00:17:47] Speaker 00:
Okay.

[00:17:47] Speaker 00:
Tell me why.

[00:17:50] Speaker 00:
The assets were not stripped.

[00:17:52] Speaker 00:
What happened during this pandemic crisis, the gas market and marine industry collapsed.

[00:17:58] Speaker 00:
the company went to its charters, asked them if they could go ahead and reduce the charter hire, excuse me, the owners of the other vessels, asked them if they could reduce the charter hire for those assets.

[00:18:14] Speaker 00:
They refused.

[00:18:16] Speaker 00:
And at that point in time, it became more problematic for them to be able to survive the collapse of the gas market.

[00:18:22] Speaker 00:
So what they did is,

[00:18:24] Speaker 00:
They ended up selling the assets to another company.

[00:18:29] Speaker 03:
Well, this is the sale for a dollar.

[00:18:31] Speaker 00:
No, no, Your Honor.

[00:18:33] Speaker 00:
So let's talk about Bipalo.

[00:18:35] Speaker 00:
Bipalo had four vessels.

[00:18:38] Speaker 00:
Bipalo sold the four vessels.

[00:18:41] Speaker 00:
One was a very valuable vessel.

[00:18:44] Speaker 00:
They received liquidity in return.

[00:18:47] Speaker 00:
in order to meet their debts.

[00:18:49] Speaker 00:
They also retained a bare boat charter over those vessels, so they retained control in the event that the market would return, which they expected once the pandemic subsided.

[00:19:00] Speaker 00:
Unfortunately, that did not happen.

[00:19:02] Speaker 00:
Same thing with the other vessels.

[00:19:03] Speaker 00:
The other vessels were also sold.

[00:19:05] Speaker 00:
They obtained some minor liquidity because the vessels weren't as valuable.

[00:19:10] Speaker 00:
And the whole idea was they would use that liquidity to continue operations until everything returned to normal.

[00:19:18] Speaker 00:
That did not happen.

[00:19:20] Speaker 00:
In the fall of 2020, they again went back to the vessel owners requesting a cut in the charter hire.

[00:19:28] Speaker 00:
They refused.

[00:19:30] Speaker 00:
The company then went insolvent.

[00:19:33] Speaker 00:
and they ended up having to declare insolvency.

[00:19:36] Speaker 03:
Okay, which company went insolvent?

[00:19:38] Speaker 00:
This was Bupalo.

[00:19:39] Speaker 03:
Okay.

[00:19:40] Speaker 00:
So when you talk about the $1 sale, and I beg to differ with respect to whether or not that actually is a lack of value, because what ended up happening is the parent company, Berkshaft Shipping, sold its assets of 51% to B-Gas Limited, now B-Gas Holding,

[00:20:03] Speaker 00:
now the parent company of Bupalo, what B-Gas Holding received was an asset that had value.

[00:20:11] Speaker 00:
It had value because it had vessels under charter.

[00:20:16] Speaker 00:
It had some liquidity.

[00:20:19] Speaker 00:
Bupalo had liquidity.

[00:20:20] Speaker 00:
So it may have been a book value of $1, but it was not an asset that did not have value.

[00:20:30] Speaker 00:
So BGAS Holding owned an asset, Bupalo, that had value, it had liquidity, it had vessels under charter, and our view is that that was not a sham transaction.

[00:20:43] Speaker 00:
That's certainly one part of this analysis, but getting back to Nikolai Lorentzen's declaration.

[00:20:50] Speaker 03:
So what assets are available to collect on this arbitration award?

[00:20:56] Speaker 00:
Well, Your Honor, at this point in time, the company's in insolvency.

[00:21:00] Speaker 00:
So I don't know the answer to that.

[00:21:01] Speaker 00:
I don't think there are any assets to recover against it.

[00:21:04] Speaker 03:
There's only, at this point, the letter of understanding.

[00:21:07] Speaker 00:
The letter of undertaking.

[00:21:07] Speaker 00:
But Berkshaft-Affermax has nothing to do with these entities.

[00:21:12] Speaker 00:
It was not involved in anything.

[00:21:15] Speaker 03:
It is a different... Well, it's an asset of the parent company, right?

[00:21:20] Speaker 00:
It is an asset.

[00:21:20] Speaker 00:
Held indirectly.

[00:21:22] Speaker 00:
Correct.

[00:21:22] Speaker 00:
Okay.

[00:21:23] Speaker 00:
But with respect to Burgshaft-Affermax, there were no changes in the Burgshaft-Affermax corporate structure.

[00:21:32] Speaker 00:
There were no assets of Bapalo that were funneled into Burgshaft-Affermax.

[00:21:37] Speaker 00:
Burgshaft-Affermax's assets were wholly unchanged.

[00:21:41] Speaker 00:
It did not alter B-Gas holding, as Judge Breyer noted.

[00:21:45] Speaker 03:
Judge Breyer also noted that Burgshaft-Affermax was not involved in this, but it is an asset of

[00:21:54] Speaker 03:
an entity that was involved, right?

[00:21:57] Speaker 00:
Your Honor, it was.

[00:21:59] Speaker 03:
And that's where we get into the Pacific Gulf.

[00:22:01] Speaker 00:
Yes, it was a subsidiary of Burgshaft Shipping.

[00:22:06] Speaker 03:
So why should we, how do we distinguish Pacific Gulf?

[00:22:10] Speaker 00:
So, Your Honor, I think Pacific Gulf, you have to look at the source of authority for Pacific Gulf, which is American Queen.

[00:22:19] Speaker 00:
And in American Queen, the citation to American Queen

[00:22:23] Speaker 00:
is on 708F2nd, 1490 in the Pacific Gulf case.

[00:22:31] Speaker 00:
The citation actually starts on 1489 and it reads, further, it must appear that injustice will result from recognizing San Diego Marine, which was a subsidiary as a separate entity, and that Campbell the parent

[00:22:45] Speaker 00:
had a fraudulent intent or an intent to circumvent statutory or contractual obligations in its control of San Diego Marine, the subsidiary.

[00:22:55] Speaker 00:
That is what the authority that Pacific Gulf relied upon.

[00:22:59] Speaker 00:
If you take a look at Pacific Gulf, I actually was counsel for vigorous shipping and trading in that case.

[00:23:09] Speaker 00:
The analysis that I would present to the court

[00:23:13] Speaker 00:
I would present to the court is that Adamistus was a separate entity.

[00:23:20] Speaker 00:
The Gordomechalus brothers were ship managers.

[00:23:23] Speaker 00:
They provided commercial, technical operational oversight for the vessels.

[00:23:29] Speaker 00:
Adamastus was a vessel owned by Adamastus Shipping and Trading.

[00:23:34] Speaker 00:
It had a vessel down in Brazil that broke away from the dock.

[00:23:41] Speaker 00:
It ran aground.

[00:23:42] Speaker 00:
It had a cargo of about $31 million worth of grain that went bad.

[00:23:49] Speaker 00:
And the owner abandoned the ship.

[00:23:53] Speaker 00:
The Gordon-Mickles brothers were caught in the middle because they were still commercially managing and technical managers.

[00:23:59] Speaker 00:
They also managed, on the other side, a completely different conglomerate, Blue Wall, with subsidiary companies, one of which was Vigorous Shipping and Trading.

[00:24:10] Speaker 00:
In order to reach that asset, which was seized in that case, owned by Vigorous Shipping and Trading, the appellants had to go from Adamistus through the Gordon-Mickles brothers through Blue Wall to get to Vigorous Shipping and Trading.

[00:24:27] Speaker 00:
The argument that the appellants raise in this case is they basically say that a parent company's use of its corporate form for a fraudulent purpose independent of a subsidiary whose veil is to be pierced is sufficient to establish alter ego status with respect to that subsidiary.

[00:24:46] Speaker 00:
That does not work in Pacific Gulf because

[00:24:50] Speaker 00:
Adamistus was not part of that conglomerate.

[00:24:53] Speaker 00:
It was not a subsidiary in the true sense of the word.

[00:24:58] Speaker 00:
They had to do a lot of machinations in order to get from that company over to Blue Wall.

[00:25:04] Speaker 00:
And my point is, if you look at the quote in Pacific Gulf where it says, therefore, for its award against the Domestas to be enforceable against the Apolles, Pacific Gulf must show at least that the brothers dominated and controlled either Blue Wall or Vigorous and used it for fraudulent purpose, I would argue that it should be vis-a-vis the Domestas.

[00:25:27] Speaker 00:
because you have to go you have to try what does what does that mean what what it means your honor is you have to get through the corporate veil of a domestice the fraudulent purpose has to relate to that company otherwise you have a completely independent

[00:25:44] Speaker 00:
source of fraud by a parent company in that case that has nothing to do with Adamistus because it's not even part of the same conglomerate.

[00:25:52] Speaker 03:
It sounds like you want to rewrite Pacific Gulf.

[00:25:55] Speaker 00:
No, Your Honor, I just want to, I think we clarify Pacific Gulf by noting what it relied upon.

[00:26:01] Speaker 00:
It relied upon American Queen.

[00:26:03] Speaker 00:
American Queen relied upon another federal common law case that held for the same proposition.

[00:26:10] Speaker 00:
You basically, you've got to have a fraudulent intent

[00:26:13] Speaker 00:
in the use of the subsidiary in order to pierce the corporate bail.

[00:26:23] Speaker 00:
With that, Your Honor, I'd like to move on.

[00:26:25] Speaker 00:
If you have no other questions about that.

[00:26:27] Speaker 00:
I'd like to point out an argument with respect to what appellants raised in their brief about the dead letter, the shareholders agreement being a dead letter.

[00:26:40] Speaker 00:
That argument was not raised below before Judge Breyer, and therefore it's waived.

[00:26:47] Speaker 00:
In our view, in any event, the minority shareholders continued to abide by the shareholders' agreement by virtue of the votes that were taken in June of 2020 and in the fall of 2020 as well, and also addressed in Nikolai Lawrence's declaration.

[00:27:03] Speaker 00:
I would also note that if the court is so inclined to look at that language of the shareholders agreement, which is found on page 18 of the appellant's opening brief.

[00:27:16] Speaker 01:
Counsel, could you give me one second to turn to it here?

[00:27:20] Speaker 01:
Okay, got it.

[00:27:21] Speaker 00:
They rely upon this language to suggest that because Berkshaft Shipping sold its assets that the shareholders agreement is a dead letter.

[00:27:31] Speaker 00:
To the contrary, what this says is, any change of ownership shares of the company, including by merger or demerger, shall be subject to the new owner's confirmation in writing that he exceeds to this agreement without restrictions or limitations of any kind, et cetera.

[00:27:46] Speaker 00:
But it's the next sentence.

[00:27:47] Speaker 00:
The next sentence reads, any such new owner shall be deemed to be a shareholder for the purposes of this agreement.

[00:27:54] Speaker 00:
And my argument here is that if that is true and they did not exceed, and

[00:28:00] Speaker 00:
I don't know that the discovery has been completed with respect to this issue, but let's assume for the sake of argument that they didn't sign it.

[00:28:07] Speaker 00:
My argument is it doesn't make any difference.

[00:28:09] Speaker 00:
That just means that the new owner is not a shareholder for purposes of this agreement.

[00:28:15] Speaker 00:
The minority shareholders continue to act in accordance with the shareholders agreement.

[00:28:20] Speaker 00:
And they made the decisions in June of 2020 and the fall of 2020 as well to sell the vessels and then defile for insolvency.

[00:28:32] Speaker 00:
I'd also like to address the single enterprise doctrine under California law.

[00:28:38] Speaker 00:
California does not require proof of fraud.

[00:28:43] Speaker 00:
Pacific Gulf does require proof of fraud.

[00:28:46] Speaker 00:
Pacific Gulf has a conjunctive test.

[00:28:49] Speaker 00:
There must be domination and control.

[00:28:51] Speaker 00:
There must be injustice from piercing the corporate veil.

[00:28:55] Speaker 00:
And there must be some form of ill intent.

[00:28:58] Speaker 00:
And toward the end of Pacific Gulf, the court noted that the corporate form had to be used for a

[00:29:07] Speaker 00:
a fraudulent purpose.

[00:29:09] Speaker 00:
Judge Breyer noted that he didn't see any injustice because there's little evidence to support that injustice argument as to Bergshaff-Affermax.

[00:29:19] Speaker 00:
He said it was not especially compelling when Affermax played no role in the plaintiff's harm.

[00:29:25] Speaker 03:
Mr. Letunaro, if you could indulge me a moment longer, suppose we were talking not just about alter ego, but a claim of fraudulent conveyance.

[00:29:38] Speaker 03:
Fraudulent conveyance by Berkshoff shipping in offloading these ships.

[00:29:53] Speaker 03:
a person aggrieved by that fraudulent conveyance of assets away from Bipolo, be able to pursue the assets of Berkshoff's shipping?

[00:30:07] Speaker 00:
Your Honor, if assuming jurisdiction exists over those parties, I presume the answer to that question would be yes.

[00:30:14] Speaker 03:
Okay, I think so too.

[00:30:16] Speaker 03:
And you highlighted the question because those weren't assets in San Francisco Harbor.

[00:30:24] Speaker 00:
Well, they were at it for a time, but it wasn't an asset of the subsidiary.

[00:30:32] Speaker 00:
It was a beneficial owner.

[00:30:36] Speaker 00:
Burgshaft Shipping was a beneficial owner, but they were not the owner of the asset.

[00:30:40] Speaker 00:
The owner of the asset was Burgshaft Affermax.

[00:30:43] Speaker 00:
And so they would have to... You'd have to grab the stock, right?

[00:30:48] Speaker 00:
They would have to grab the stock of Burgshaft Shipping.

[00:30:52] Speaker 00:
Of Affermax.

[00:30:53] Speaker 00:
Stock of Affermax.

[00:30:54] Speaker 00:
Yes, Ron.

[00:30:54] Speaker 03:
Got it.

[00:30:55] Speaker 03:
Okay, thank you.

[00:30:58] Speaker 00:
But the other point I'd like to make, I just, I'm out of time.

[00:31:02] Speaker 01:
Go ahead, go ahead.

[00:31:03] Speaker 00:
I was just gonna say, this is a case where Berkshaft Affermax is a company that committed no tort, it breached no contract, it committed no fraud.

[00:31:13] Speaker 00:
It should not be subjected to this seizure of its asset when there is no proof that it participated in any aspect of this alleged activity

[00:31:26] Speaker 00:
the alleged activities, which we deny, but Berkshef-Affermax had nothing to do with any of it.

[00:31:32] Speaker 01:
Thank you, Your Honor.

[00:31:53] Speaker 04:
In the closing remarks, oh, my friend, I would say that Berks of Afromax, to be held liable under Pacific Gulf, it doesn't need to do anything because its parent company did all of their own doing that is essential.

[00:32:20] Speaker 04:
to have the fraud.

[00:32:22] Speaker 04:
It did dominate, it was dominated by Berkshire Shipholding AS.

[00:32:32] Speaker 04:
You have everything, all of the ingredients, and it is exposed.

[00:32:37] Speaker 04:
There is nothing, there is nothing in Pacific Gulf.

[00:32:40] Speaker 04:
To the contrary, the passage we quoted holds the intermediate holding company,

[00:32:51] Speaker 04:
the parent company or the vessel that will seize, liable if you meet your standard of proof.

[00:32:59] Speaker 04:
And I think here we showed probable cause.

[00:33:05] Speaker 01:
Thank you for your arguments, both of you.

[00:33:07] Speaker 01:
We appreciate your help very much.

[00:33:08] Speaker 01:
We'll take this case under advisement and move on to the last case on the calendar, please.