United States v. 2020-04-06 | 18-17056 | TODD LEANY V. ZURICH AMERICAN INS. CO. | nonprecedential | memorandum disposition |

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

TODD L. LEANY,
Plaintiff-counter-
defendant-Appellee,
v.
ZURICH AMERICAN INSURANCE
COMPANY,
Defendant-counter-claimant-
Appellant.
No. 18-17056
D.C. No.
2:16-cv-01890-RFB-PAL
MEMORANDUM
*
Appeal from the United States District Court
for the District of Nevada
Richard F. Boulware II, District Judge, Presiding
Submitted March 25, 2020
**
Las Vegas, Nevada
Before: W. FLETCHER, BYBEE, and WATFORD, Circuit Judges.
In 2008, Century Steel (Century) sold the majority of its assets for $150
million. From that $150 million, Century put aside $2.1 million to satisfy any
FILED
APR 6 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
* *
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

future debts the company might incur. It spent and distributed the rest. Five years
later, Zurich American Insurance Company (Zurich) sought to collect a $300,000
debt from Century. But by then, unforeseen litigation costs had exhausted the $2.1
million reserve, and Century was unable to pay. Zurich now seeks to force
Century into arbitration in accordance with an arbitration agreement between the
two companies. It wants to “pierce the corporate veil” and force Todd
Leany—Century’s president, sole board-member, and majority shareholder—into
arbitration too. The district court granted summary judgment to Leany. We
review this decision de novo. See Animal Legal Def. Fund v. U.S. FDA, 836 F.3d
987, 988 (9th Cir. 2016) (en banc) (per curiam). We affirm.
Under Nevada law, a party may “pierce the corporate veil” and force an
individual to abide by a corporation’s arbitration agreement only if the party can
show: (1) the corporation is “influenced and governed by the [individual],” (2)
there is “such unity of interest and ownership” that the corporation is inseparable
from the individual, and (3) “adherence to the fiction of separate entity would,
under the circumstances, sanction a fraud or promote injustice.” Frank McCleary
Cattle Co. v. Sewell, 317 P.2d 957, 959 (Nev. 1957), overruled on other grounds
by Callie v. Bowling, 160 P.3d 878 (Nev. 2007) (en banc); see also Nev. Rev. Stat.
§ 78.747(2) (codifying this test). The party seeking to pierce the corporate veil
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bears the burden to establish all three of the above factors by a preponderance of
the evidence. See Ecklund v. Nev. Wholesale Lumber Co., 562 P.2d 479, 480 (Nev.
1977).
Summary judgment for Leany was proper because Zurich has not shown that
adhering to the corporate form would sanction fraud or promote injustice. Zurich
has not established that Leany knew or should have known that Century’s $2.1
million reserve was insufficient, nor has it presented any evidence demonstrating
that the $2.1 million would not have been sufficient but for the unanticipated
litigation against Century. And though Zurich correctly notes that adherence to the
corporate form sanctions injustice when the financial setup of the corporation is a
sham, a corporation’s financial setup is not a sham if it was established for
legitimate reasons. See Paul Steelman, Ltd. v. Omni Realty Partners, 885 P.2d
549, 550–51 (Nev. 1994) (per curiam) (refusing to pierce the corporate veil when a
corporation was undercapitalized not “to defraud . . . creditors” but “to minimize
losses”). Zurich has not presented evidence that Leany left Century with $2.1
million for any illegitimate reason, and so we cannot conclude that Century’s
financial setup was a sham. Moreover, when comparing this case with those in
which the Nevada Supreme Court has pierced the corporate veil, it is apparent that
Nevada law requires a showing of much more egregious conduct to find fraud or
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injustice in adhering to the corporate form. See, e.g., Carson Meadows Inc. v.
Pease, 533 P.2d 458, 460–61 (Nev. 1975) (piercing the corporate veil after finding
defendant “manipulated [corporate assets] to suit himself” and “used the corporate
shell as a conduit for his individual enterprise”); Caple v. Raynel Campers, Inc.,
526 P.2d 334, 336 (Nev. 1974) (piercing the veil when corporation “had no
apparent independent business operation and existed solely for the purpose of
conducting the personal business of” defendant).
Unable to show that “adherence to the fiction of separate entity would, under
the circumstances, sanction a fraud or promote injustice,” Zurich cannot pierce the
corporate veil. Sewell, 317 P.2d at 959. Accordingly, it cannot force Leany to
abide by Century’s arbitration agreement. For this reason, summary judgment for
Leany was proper.
AFFIRMED.
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