Case 1:17-mc-00360-AT-RWL Document 153 Filed 07/12/19 Page 1 of 19

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

ESSAR STEEL ALGOMA INC.,
Plaintiff,
vs.
NEVADA HOLDINGS, INC., f/k/a
SOUTHERN COAL SALES
CORPORATION, et al.,
Defendants.

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Case No. 1:17-mc-00360-AT
Judge Analisa Torres
vs.
Magistrate Judge Robert W.
Lehrburger

_______________________________________________________________________
ESSAR STEEL ALGOMA INC.’S OPPOSITION TO DEFENDANTS’ MOTION TO
DISMISS SECOND AMENDED COMPLAINT AS TO THE NEW DEFENDANTS

Def

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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .......................................................................................................... ii
I.

II.

The Alter Ego Defendants Improperly Apply a Heightened Pleading Standard and
Extrinsic Evidence. ............................................................................................................. 1
A.

The Alter Ego Defendants Misconstrue the Motion to Dismiss Standard. ................ 1

B.

The Alter Ego Defendants Rely on Extrinsic Evidence that Cannot Be Considered
on a Motion to Dismiss. ............................................................................................. 2

The Second Amended Complaint Sufficiently Alleges Plausible Claims for Relief against
the Alter Ego Defendants. ................................................................................................... 5
A.

The SAC Sufficiently Alleges that SCSC and the Alter Ego Defendants Operated as
a Single Economic Entity........................................................................................... 5

B.

The SAC Sufficiently Alleges an Overall Element of Injustice or Unfairness.......... 8

III.

Because the Second Amended Complaint Alleges a Plausible Claim for Relief Against
the Alter Ego Defendants, the Court Has Personal Jurisdiction Over Them. ..................... 9

IV.

The Alter Ego Defendants’ Judicial Admissions Demonstrate that They Are Alter Egos as
a Matter of Law. ................................................................................................................ 10

V.

A.

The Alter Ego Defendants Admit They Operate as a Single Economic Entity. ...... 10

B.

The Alter Ego Defendants Admit Injustice and Unfairness in Their Dealings with
Algoma. .................................................................................................................... 11

Conclusion ........................................................................................................................ 13

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TABLE OF AUTHORITIES
Page
Cases
Am. Lecithin Co. v. Rebmann, No. 12-CV-929 (VSB), 2017 U.S. Dist. LEXIS 162037 (S.D.N.Y.
Sep. 30, 2017) ..................................................................................................................... 9
Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 1
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................... 1
Cardell Fin. Corp. v. Suchodolski Assocs., No. 09 Civ. 6148 (VM) (MHD), 2012 U.S. Dist.
LEXIS 188295 (S.D.N.Y. July 17, 2012) ........................................................................... 9
Cohen v. Schroeder, 248 F. Supp.3d 511 (S.D.N.Y. 2017) ............................................................ 8
De Sole v. Knoedler Gallery LLC, 139 F. Supp. 3d 618 (S.D.N.Y. 2015) ..................................... 8
Doubleline Capital LP v. Odebrecht Fin., Ltd., 323 F. Supp.3d 393 (S.D.N.Y. 2018) ................. 3
Fletcher v. Atex, Inc., 68 F.3d 1415 (2d Cir. 1995) ........................................................................ 2
Gevvs Healthcare Solutions, Inc. v. Orion Healthcorp, Inc., No. 1:16-cv-2206-GHW, 2017 U.S.
Dist. LEXIS 51422 (S.D.N.Y. Apr. 4, 2017) ...................................................................... 2
Goel v. Bunge, Ltd., 820 F.3d 554 (2d Cir. 2016) ...................................................................... 2, 3
Irwin & Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983 (Del. Ch. 1987) .......................... 5, 7
Leber Assocs., LLC v. Entm’t Group Fund, Inc., No. 00 Civ. 3759 (LTS)(MHD), 2003 U.S. Dist.
LEXIS 13009, 2003 WL 21750211 (S.D.N.Y. July 29, 2003) ........................................... 8
Lilakos v. New York City, No. 14 CV 5288 (PKC)(LB), 2017 U.S. Dist. LEXIS 177851
(E.D.N.Y. Oct. 25, 2017) .................................................................................................... 3
McBeth v. Porges, 171 F. Supp. 3d 216, 234 (S.D.N.Y. 2016) ...................................................... 8
Mercury Time, Inc. v. Gruen Mktg. Corp., No. 97-CV-0020 (JG), 1999 WL 342299 (E.D.N.Y.
May 26, 1999) ..................................................................................................................... 5
Nelson v. Int’l Paint Co., 734 F.2d 1084 (5th Cir. 1984) ............................................................... 2
NetJets Aviation, Inc. v. LHC Communs., LLC, 537 F.3d 168 (2d Cir. 2008) ................. 5, 7, 8, 10
Orange County Water Dist. v. Unocal Corp. In re Methyl Tertiary Butyl Ether (“MTBE”) Prods.
Liab. Litig., 67 F. Supp.3d 619 (S.D.N.Y. 2014) .............................................................. 13

ii

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Purgess v. Sharrock, 33 F.3d 134 (2d Cir. 1994) ......................................................................... 10
Soroof Trading Dev. Co. v. GE Microgen, Inc., 283 F.R.D. 142 (S.D.N.Y. 2012) ........................ 8
TradeWinds Airlines, Inc. v. Soros, No. 08 Civ. 5901, 2012 U.S. Dist. LEXIS 39459, 2012 WL
983575 (S.D.N.Y. Mar. 22, 2012) ...................................................................................... 8
Transfield ER Cape Ltd. v. Indus. Carriers, Inc., 571 F.3d 221 (2d Cir. 2009) ............................. 9

iii

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Plaintiff Essar Steel Algoma Inc. (“Algoma”) hereby files its Opposition to Defendants’
Motion to Dismiss the Second Amended Complaint (“SAC”) as to the New Defendants: James
C. Justice Companies, Inc.; James C. Justice Companies, LLC; Bluestone Industries, Inc.;
Bluestone Coal Corporation; Bluestone Mineral, Inc.; Bluestone Energy Sales Corporation;
A&G Coal Corporation; Tams Management Inc.; Encore Leasing LLC; Bluestone Resources
Inc.; Justice Family Farms, LLC; and Southern Coal Corporation (collectively, the “Alter Ego
Defendants”). The Motion to Dismiss (the “Motion”) lacks merit because, as Magistrate Judge
Lehrburger already found, “the SAC plausibly claims that [the Alter Ego Defendants] were alteregos of [Defendant Southern Coal Sales Corporation n/k/a Nevada Holdings, Inc. (“SCSC”)].”
(Dkt. 71, at 10.) Further, the Motion applies the incorrect legal standard for the Court’s review
of a motion to dismiss, it improperly relies on extrinsic evidence, and it proffers unsupported
legal conclusions, such as its newly minted defense that companies cannot be alter egos if it is
typical for other companies in the industry to treat related entities in the same manner. Finally,
the Motion makes over a dozen judicial admissions that actually support Algoma’s alter ego
allegations, perhaps definitively. For these reasons, the Motion to Dismiss should be denied.
I.

The Alter Ego Defendants Improperly Apply a Heightened Pleading Standard and
Extrinsic Evidence.
A.

The Alter Ego Defendants Misconstrue the Motion to Dismiss Standard.

To survive a motion to dismiss, a complaint need only set forth “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). As opposed to a motion for summary judgment that
tests a complaint’s “substantive merits,” a motion to dismiss challenges only the complaint’s

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“legal feasibility.” Goel v. Bunge, Ltd., 820 F.3d 554, 558 (2d Cir. 2016). A motion to dismiss
“is not the proper vehicle for [a party] to tell its side of [the] story.” Gevvs Healthcare Solutions,
Inc. v. Orion Healthcorp, Inc., No. 1:16-cv-2206-GHW, 2017 U.S. Dist. LEXIS 51422, at *12
(S.D.N.Y. Apr. 4, 2017).
Despite this well-settled standard, the Alter Ego Defendants attempt to impose higher
requirements on Algoma, as though this were a summary judgment motion. They imply that
Algoma needs to do more than simply allege enough facts to state a plausible claim, and actually
must prove its claims in the SAC. For example, they argue that “Algoma offers no proof. . .”
(Dkt. 145-1, at 71), that “Algoma has presented no evidence. . .” (id. at 8), that “Algoma has
failed to show sufficient evidence. . .” (id. at 14–15), and that despite Algoma’s allegations,
“[t]he evidence shows” otherwise (id. at 15). The Alter Ego Defendants even rely on summary
judgment cases to argue that the SAC should be dismissed for “lack of sufficient evidence.” (Id.
at 14, citing Fletcher v. Atex, Inc., 68 F.3d 1415 (2d Cir. 1995) and Nelson v. Int’l Paint Co., 734
F.2d 1084, 1092 (5th Cir. 1984) for the proposition that a defendant may be entitled to summary
judgment for lack of sufficient evidence.) While the Alter Ego Defendants are wrong on all
counts – the evidence supporting alter ego liability is voluminous – for purposes of this motion,
evidence is entirely irrelevant; Algoma need only allege a plausible claim, not prove it.
B.

The Alter Ego Defendants Rely on Extrinsic Evidence that Cannot Be
Considered on a Motion to Dismiss.

The Court should also disregard the Alter Ego Defendants’ myriad of citations to
extrinsic evidence. Courts generally may not “consider material extrinsic to the complaint in
evaluating a motion to dismiss” unless such material is “integral” to the complaint. Doubleline

1

The citations to docket 145-1 are to the pages as numbered on the bottom of each page, which
are inconsistent with the page numbers on the ECF time stamp on the top of each page.
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Capital LP v. Odebrecht Fin., Ltd., 323 F. Supp.3d 393, 457 (S.D.N.Y. 2018) (refusing to
consider deposition testimony cited in motion to dismiss because the testimony was not integral
to the second amended complaint); Lilakos v. New York City, No. 14 CV 5288 (PKC)(LB), 2017
U.S. Dist. LEXIS 177851, at *3, n.5 (E.D.N.Y. Oct. 25, 2017) (declining to consider deposition
transcripts when deciding motion to dismiss); Goel, 820 F.3d at 559 (same). A document is
“integral” to a complaint only if the complaint “relies heavily upon its terms and effect.” Goel,
820 F.3d at 559. This exception is usually recognized in the context of a contract or other legal
document that contains “obligations upon which the plaintiff’s complaint stands or falls” but that
is not attached to the complaint. Goel, 820 F.3d at 559.
The Court should disregard the vast majority of the Alter Ego Defendants’ Motion to
Dismiss on this basis alone – because it relies on extrinsic evidence not integral to (and largely
irrelevant to) the SAC. While the Alter Ego Defendants spend seven pages summarizing the
report of their expert witness Aaron Heighton (dkt 145-1 at 15–22), there is no conceivable
argument that Mr. Heighton’s report was integral to the SAC. Indeed, it would be impossible for
the Heighton Report to be “integral” to the SAC, because it was not created until May 2019, five
months after Algoma filed the SAC. The Court cannot consider the references to Mr. Heighton’s
report and can therefore disregard pages 15 through 22 of the Motion to Dismiss.
The rest of the Alter Ego Defendants’ motion is replete with citations to deposition
testimony that the Court also cannot consider on a motion to dismiss. For example, the Alter
Ego Defendants cite to the 2019 deposition of Stephen Ball (see, e.g., dkt 145-1 at 9, 12), but this
deposition could not possibly be integral to the SAC because, like the Heighton Report, it did not
take place until two months after the SAC was filed. Nor is the 2018 deposition of Stephen Ball
integral to the SAC – the SAC does not once mention Mr. Ball’s testimony. While the SAC

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occasionally references Jay Justice’s testimony, it does not rely heavily on the “terms and effect”
of Mr. Justice’s deposition as a complaint might rely on an underlying contract, and the
deposition is not integral to the SAC.
Moreover, the Alter Ego Defendants cherry-picked the extrinsic evidence on which they
chose to rely and presented it out of context. For example, the Alter Ego Defendants cling to the
argument that they cannot be alter egos of SCSC because Algoma supposedly “stiffed” SCSC ‘to
the tune of $6.0 million’” (dkt. 145-1 at 8, 14, citing deposition of Jay Justice), but Jay Justice
testified that he roughly estimated that Algoma was about $6 million behind in payments in
2015, not 2016 (dkt. 145-2 at 60–61). Moreover, the $6 million that Mr. Justice alleged Algoma
owed SCSC was not even pursuant to the Agreements at issue in this case. Rather, it resulted
from a contract between Algoma and a third-party broker, who apparently purchased the coal
from SCSC, and this alleged debt predates Algoma filing for bankruptcy at the end of 2015.
After stripping away the misapplied heightened standard and citations to improper
extrinsic evidence, the Court is left with nothing but the Alter Ego Defendants’ unsupported
legal conclusions that they cannot be alter egos of SCSC because “everyone else is doing it,” a
few citations to the SAC (many of which are inaccurate),2 and a personal-jurisdiction argument
that ignores the Defendants’ alter-ego status. (Dkt. 145-1 at 4–14, 22–23). Once the Court

2

The Alter Ego Defendants mis-cite the SAC as to the number of transfers to and from each
defendant on pages 8 and 9 of docket 145-1: There are two transfers to James C. Justice
Companies, Inc.; there are no transfers from James C. Justice Companies, LLC; there are no
transfers from and nine transfers to Bluestone Energy Sales Corporation, there are no transfers
from and ten transfers to Encore Leasing, LLC; there are three transfers from and thirteen
transfers to Bluestone Resources, Inc.; there are one transfer from and twenty two transfers to
Justice Family Farms, LLC; and there are no transfers from and twenty transfers to Southern
Coal Corporation. (SAC, ¶¶100–47). The Alter Ego Defendants also fail to include James C.
Justice Companies, Inc. in their analysis of each individual defendant. (See dkt. 145-1 at 10–11).
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applies the proper pleading standard and considers the facts as alleged in the SAC, the Court
should deny the Alter Ego Defendants’ Motion to Dismiss.
II.

The Second Amended Complaint Sufficiently Alleges Plausible Claims for Relief
against the Alter Ego Defendants.
“The legal test for determining when a corporate form should be ignored in equity cannot

be reduced to a single formula that is neither over- nor under-inclusive.” Irwin & Leighton, Inc.
v. W.M. Anderson Co., 532 A.2d 983, 989 (Del. Ch. 1987).3

Although courts consider

“numerous factors” in determining whether to “treat separate legal entities . . . as alter egos”
(id.), the Second Circuit has focused the inquiry on two prongs: “(1) whether the entities in
question operated as a single economic entity, and (2) whether there was an overall element of
injustice or unfairness.” NetJets Aviation, Inc. v. LHC Communs., LLC, 537 F.3d 168, 177 (2d
Cir. 2008). The SAC sufficiently alleges facts to satisfy both prongs.
A.

The SAC Sufficiently Alleges that SCSC and the Alter Ego Defendants
Operated as a Single Economic Entity.

The first prong of the alter-ego analysis is satisfied as it requires those in control of the
company treat it as a separate economic entity. See NetJets, 537 F.3d at 177. The SAC alleges
that the Alter Ego Defendants had overlapping officers, directors, office locations, and
employees. (SAC, ¶¶89, 161–62, 167, 176, 181, 184, 186, 192–93, 196–97, 201, 205–06, 230).
Employees of SCSC and the Alter Ego Defendants say they worked “for all of the companies”
and received paychecks from “Bluestone,” which they regarded as the “same thing” as SCSC,
and Jay Justice, who owns “the family business,” could not remember which entity paid him. (Id.
3

The defendants assert that Delaware law applies to the alter-ego issue. (Dkt. 124, at 1.)
Algoma does not concede the issue, but it assumes for purposes of this memorandum that
Delaware law applies because the result would be the same under New York or Delaware law.
See Mercury Time, Inc. v. Gruen Mktg. Corp., No. 97-CV-0020 (JG), 1999 WL 342299, at *44
(E.D.N.Y. May 26, 1999) (regardless of whether New York or Delaware law applied, plaintiff
adequately alleged alter ego claim).
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at ¶¶ 83, 158–62). The information systems used by SCSC and the Alter Ego Defendants
overlapped, as SCSC employees had Bluestone and Justice Corporation email addresses and
Bluestone email signatures. (Id. at ¶¶156, 161–62). Bluestone Resources, Inc. issued invoices to
Algoma for coal supposedly delivered by SCSC; an invoice directed Algoma to make a payment
to a bank account in the name of Bluestone Energy Sales Corporation; and Bluestone’s address
listed on the invoice was the same as SCSC’s address. (SAC, ¶167). Other invoices were issued
by Bluestone Energy Sales Corporation but directed Algoma to remit payment to a bank account
in SCSC’s name (id. at ¶180), making it clear that SCSC and the Alter Ego Defendants are
interchangeable.
Algoma further alleges that SCSC was undercapitalized because of funds being siphoned
to the Alter Ego Defendants. (Id. at ¶¶100–47). Indeed, despite Algoma paying SCSC more than
$54 million in 2016, some entity other than SCSC reported the revenue on its tax return. (Id. at ¶
93). Millions of dollars paid by Algoma to SCSC was immediately transferred to the Alter Ego
Defendants. (Id. at ¶¶ 94, 100–47). All of this siphoning was done at the behest of Jay Justice,
who told Bluestone Industries, Inc.’s treasury department, which also handled SCSC’s money,
“what they are supposed to do” with the money. (Id. at ¶ 92). SCSC’s undercapitalization
resulted in its inability to satisfy its contractual obligations and rendered it purposefully
judgment-proof. (Id. at ¶¶ 93–99).
In short, the SAC sufficiently alleges that SCSC and the Alter Ego Defendants failed to
observe any corporate formalities. Funds that Algoma paid to SCSC were siphoned to the Alter
Ego Defendants, and funds were commingled; officers, directors, employees, office space, and
information systems overlapped; and owners and employees view “the family business” as one
single company (SAC, ¶ 83). Because those controlling SCSC and the Alter Ego Defendants

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treat them as one entity, the law treats them the same way. See NetJets, 537 F.3d at 177; Irwin &
Leighton, 532 A.2d at 989 (when corporate “formalities are not respected, the legal fiction of
corporateness becomes less ‘real’ in the everyday experience of those involved in the firm’s
operations and any expectation that others would treat it as a distinct, liability-limiting entity
becomes less reasonable”).
The Alter Ego Defendants do not deny that they operate as a single economic unit,
instead they attempt to argue that they are not alter egos of SCSC because their intertwined
structure is “typical” in the coal industry.4 Indeed, the Alter Ego Defendants spend many pages
trying to spin Algoma’s “gross misunderstanding of how affiliated entities operate in the coal
industry. . .” (Dkt. 145-1 at 2–3). The Alter Ego Defendants argue that they are not alter egos of
SCSC because SCSC did not hide its shared ownership with the Alter Ego Defendants from
Algoma (id. at 4), SCSC recorded its transactions with the Alter Ego Defendants (id. at 4), it
“makes economic sense” to share staff between companies, SCSC was not engaging in fraud (id.
at 5), “it is an owner’s prerogative to infuse capital into his own company or companies to ‘keep
them afloat’. . .” (id. at 8), and the transfers between SCSC and the Alter Ego Defendants “are
easily explained” (id. at 11). Notably, the Alter Ego Defendants offer no legal authority for this
new “everyone is doing it” defense to alter ego liability. Just because other entities in the coal
industry allegedly intertwine corporate structures does not mean that the intertwined entities are
not also alter egos. Put another way, all the Alter Ego Defendants have managed to establish is
that other unidentified entities in the coal industry may also be subject to alter ego liability.

4

While the Motion to Dismiss is replete with assertions as to what is “typical” in the coal
industry, the Alter Ego Defendants provide no actual support for those assertions as related to the
SAC. What the Alter Ego Defendants “believe” is not the legal standard applied by the Court to
a Motion to Dismiss, and as such is irrelevant.
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Moreover, the Alter Ego Defendants’ contention that Algoma’s alter ego argument
“centers almost entirely” on its allegation that SCSC was undercapitalized is factually incorrect.
(Dkt. 145-1 at 6). The Alter Ego Defendants rely on Cohen v. Schroeder, 248 F. Supp.3d 511,
520 (S.D.N.Y. 2017) for the proposition that undercapitalization has “a limited role in veilpiercing cases.” (Dkt. 145-1 at 6). Rather, Cohen emphasizes that undercapitalization cannot
serve as the sole basis to pierce the veil, but is one factor to consider. Cohen, 248 F. Supp. 3d
520. But Algoma is not relying on undercapitalization alone to allege that the Alter Ego
Defendants and SCSC operated as a single economic entity. Algoma also alleges, and the Alter
Ego Defendants themselves admit in their Motion to Dismiss, that those in charge of SCSC and
the Alter Ego Defendants treat the entities as a single comingled economic unit.
B.

The SAC Sufficiently Alleges an Overall Element of Injustice or Unfairness.

As Magistrate Judge Lehrburger noted (Dkt. 71, at 9), allegations of undercapitalization
and siphoning of funds are sufficient to satisfy the “injustice or unfairness” element.

See

NetJets, 537 F.3d at 183; McBeth v. Porges, 171 F. Supp. 3d 216, 234 (S.D.N.Y. 2016); De Sole
v. Knoedler Gallery LLC, 139 F. Supp. 3d 618, 669 (S.D.N.Y. 2015); TradeWinds Airlines, Inc.
v. Soros, No. 08 Civ. 5901, 2012 U.S. Dist. LEXIS 39459, at *18–19, 2012 WL 983575
(S.D.N.Y. Mar. 22, 2012); Soroof Trading Dev. Co. v. GE Microgen, Inc., 283 F.R.D. 142, 151
(S.D.N.Y. 2012); Leber Assocs., LLC v. Entm’t Group Fund, Inc., No. 00 Civ. 3759
(LTS)(MHD), 2003 U.S. Dist. LEXIS 13009, at *45–47, 2003 WL 21750211 (S.D.N.Y. July 29,
2003).

As discussed above, Algoma sufficiently alleged that SCSC was undercapitalized

because of funds being siphoned to the Alter Ego Defendants. (SAC at ¶¶ 100–47). Algoma’s
additional factual allegations include the fact that SCSC immediately transferred millions of
dollars that Algoma paid it to the Alter Ego Defendants upon receipt. (Id. at ¶¶ 94, 100–47).

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The Alter Ego Defendants’ argument that there is no element of injustice or unfairness
because “SCSC attempt[ed] to ‘make it work’” and did in fact deliver some coal under its
agreements with Algoma misses the point and lacks any legal support. (Dkt. 145-1 at 13–14).
The fact remains that the SCSC did not deliver the amount of coal the Agreements obligated it to
provide to Algoma, and then acted unfairly and in its own self interest by transferring all
available funds to the Alter Ego Defendants. Indeed, the Alter Ego Defendants now flaunt the
unfairness of the undercapitalization and siphoning in their Motion to Dismiss: “any recovery
from the sales company [Algoma] contracted with, SCSC, may be limited” (Dkt. 145-1 at 2).
The Alter Ego Defendants, who act as a single comingled unit and collectively undercapitalized
and siphoned funds from SCSC, should be liable for SCSC’s obligations to Algoma – regardless
of whether SCSC shipped any coal to Algoma and regardless of the purported “standard”
corporate improprieties in the coal industry.
III.

Because the Second Amended Complaint Alleges a Plausible Claim for Relief
Against the Alter Ego Defendants, the Court Has Personal Jurisdiction Over Them.
Alter-ego entities are a single entity for purposes of personal jurisdiction, which means a

defendant’s alter egos are subject to personal jurisdiction if the court already has personal
jurisdiction over the defendant. See Transfield ER Cape Ltd. v. Indus. Carriers, Inc., 571 F.3d
221, 224 (2d Cir. 2009). In Cardell Financial Corp. v. Suchodolski Assocs., for example, the
court exercised personal jurisdiction over a defendant because the defendant was the alter ego of
a party that had consented to personal jurisdiction in New York by signing a contract with a New
York choice-of-law provision. Cardell Fin. Corp. v. Suchodolski Assocs., No. 09 Civ. 6148
(VM) (MHD), 2012 U.S. Dist. LEXIS 188295, at *93–94 (S.D.N.Y. July 17, 2012); see also Am.
Lecithin Co. v. Rebmann, No. 12-CV-929 (VSB), 2017 U.S. Dist. LEXIS 162037, at *24
(S.D.N.Y. Sep. 30, 2017).

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Here, SCSC consented to personal jurisdiction in New York by executing the Coal
Supply Agreement, which includes a provision submitting “to the exclusive jurisdiction of the
United States District Court for the Southern District of New York” and waiving any right to
object to personal jurisdiction. Thus, because Algoma has adequately pleaded a claim against
the Alter Ego Defendants, they also are subject to personal jurisdiction in New York to the same
extent as SCSC.
IV.

The Alter Ego Defendants’ Judicial Admissions Demonstrate that They Are Alter
Egos as a Matter of Law.
The Alter Ego Defendants make a variety of statements in their brief that support a

finding of alter ego liability and must be treated as judicial admissions.

“A court can

appropriately treat statements in briefs as binding judicial admissions of fact.”

Purgess v.

Sharrock, 33 F.3d 134, 143–44 (2d Cir. 1994) (holding that the district court properly admitted
“statement made by defense counsel in a memorandum of law . . . filed in support of defendants’
motion to dismiss”). Here, the Alter Ego Defendants’ Motion to Dismiss (dkt. 145-1) contains
several statements that are judicial admissions lending factual support to the legal conclusion that
they are alter egos because they “operated as a single economic entity” and “there was an overall
element of injustice or unfairness.” NetJets Aviation, 537 F.3d at 177.
A.

The Alter Ego Defendants Admit They Operate as a Single Economic Entity.

The Alter Ego Defendants’ Motion contains many admissions that support that they and
SCSC operate as a single economic entity. First, the Alter Ego Defendants admit that they share
employees, officers, services, facilities, and equipment:


“… Summer Harrison, the Vice President of Treasury for Bluestone, who also
handles financial transactions and performs other tasks on behalf of multiple coalrelated companies.” (Dkt. 145-1, at 4);



Summer Harrison “takes her marching orders from Jay Justice in service of multiple
companies, for all of which he serves as the Chief Executive Officer…” (Id.);
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

“Encore Leasing owns aircraft that are utilized by employees of the various Justice
entities.” (Id. at 12); and



“…[T]hree different mining companies owned by the Justices may need mining
engineering services but none of them individually is large enough to keep a full-time
engineering staff. It only makes sense to share such services between [sic] the
companies.” (Id. at 4–5).

Likewise, the Alter Ego Defendants readily admit that they operated as a single economic
entity by sharing funds to conduct business:


“It also makes economic sense to have Bluestone or another entity with ready cash
initially pay for payroll, mineral leases, royalties and the like for a mining operation.
Once the coal is mined and sold, the proceeds of sale are available to the mining
entity to pay back the intercompany advance/loan made by Bluestone.” (Dkt. 145-1 at
5);



“New Defendant Bluestone Energy Sales Corporation was created specifically to
assume the contract with Algoma and to facilitate obtaining a $60 million line of
credit from the primary Justice financial institution, which was needed to fulfill the
Algoma contract.” (Id.);



“…BESC was formed as a coal sales company in November 2015, just as the
Agreement was getting started with the idea that it would take over the SCSC duties
under the Agreement.” (Id. at 12);



“…SCSC borrowed $60 million in order to fund its participation under the
Consignment Agreement.” (Id. at 14); and



“In order to obtain a line of credit to finance the consignment arrangement required
by Algoma, Carter Bank and Trust required that a new entity be created.” (Id. at 20–
21).

B.

The Alter Ego Defendants Admit Injustice and Unfairness in Their Dealings
with Algoma.

The Alter Ego Defendants also make factual admissions that support an overall element
of injustice or unfairness. In fact, the Alter Ego Defendants essentially admit that SCSC is
judgment proof, stating that “any recovery from the sales company [Algoma] contracted with,
SCSC, may be limited.” (Dkt. 145-1, at 5).

11

Additionally, they readily admit that they

 Case 1:17-mc-00360-AT-RWL Document 153 Filed 07/12/19 Page 16 of 19

undercapitalized SCSC and siphoned funds:


“The ongoing transfers were to keep SCSC afloat, which allowed it to continue to ship
coal to Algoma – a benefit conveniently ignored by Algoma.” (Dkt. 145-1 at 9);



“The transfers, as with others, were fully documented intercompany loans to assist with
the financial difficulties Southern Coal Sales experienced.” (Id. at 12);



“Southern Coal Corporation loaned funds to SCSC on 21 occasions as loans to keep it
afloat.” (Id. at 13);



“What Algoma fails to take into account, however, is that conglomerates or affiliated
entities frequently use intercompany transfers to shore up one entity that needs financial
support, and are repaid when circumstances allow it. The other options are to let the
company suffer financially or even fail, or to borrow from a bank at a higher cost.” (Id. at
7);



“Indisputably, it is an owner’s prerogative to infuse capital into his own company or
companies to ‘keep them afloat,’ and the coal industry, in particular, experiences ups and
downs that require such support.” (Id. at 8);



“It also makes economic sense to have Bluestone or another entity with ready cash
initially pay for payroll, mineral leases, royalties and the like for a mining operation.
Once the coal is mined and sold, the proceeds of sale are available to the mining entity to
pay back the intercompany advance/loan made by Bluestone.” (Id. at 5);



“New Defendant Bluestone Energy Sales Corporation was created specifically to assume
the contract with Algoma and to facilitate obtaining a $60 million line of credit from the
primary Justice financial institution, which was needed to fulfill the Algoma contract.”
(Id.); and



“In order to obtain a line of credit to finance the consignment arrangement required by
Algoma, Carter Bank and Trust required that a new entity be created…The line of credit
was required to meet the financial needs of Algoma…The creation of BESC and its
issuance of invoices was all part of that accommodation.” (Id. at 20–21).
Based on these judicial admissions contained in the Alter Ego Defendants’ Motion to

Dismiss, along with other evidence discovered in this lawsuit, Algoma respectfully requests that
the Court allow it to file a Motion for Summary Judgment pursuant to Fed. R. Civ. P. 56(a) on
the alter ego parts of its claims for breach of contract. See Orange County Water Dist. v. Unocal
Corp. In re Methyl Tertiary Butyl Ether (“MTBE”) Prods. Liab. Litig., 67 F. Supp.3d 619, 635

12

 Case 1:17-mc-00360-AT-RWL Document 153 Filed 07/12/19 Page 17 of 19

(S.D.N.Y. 2014) (granting summary judgment in part based on judicial admission from prior
briefing). Algoma’s Motion would show that no genuine dispute of material fact exists and that
Algoma is entitled to judgment as a matter of law holding the Alter Ego Defendants liable for
any breach of contract against SCSC that Algoma may prove at trial. Should the Court grant this
request, Algoma would provide the Alter Ego Defendants with its Local Rule 56.1 Statement of
Material Facts, per Judge Torres’ Individual Practices III (C)(i).
V.

Conclusion
The Alter Ego Defendants’ Memorandum in Support of their Motion to Dismiss does not

entitled them to dismissal. Instead, it confirms Algoma’s alter ego allegations as set forth in the
SAC. Not only do the Alter Ego Defendants improperly employ a heightened pleading standard,
extrinsic evidence, and unsupported legal conclusions, they admit facts that actually establish
that they are alter egos of SCSC. Algoma respectfully requests that the Court deny the Alter Ego
Defendants’ Motion to Dismiss and grant Algoma leave to file a motion for summary judgment
on their alter ego allegations.

Date: July 12, 2019

Respectfully submitted,
THOMPSON HINE LLP
/s/ Kip T. Bollin
Kip T. Bollin (admitted pro hac vice)
Laura L. Watson (admitted pro hac vice)
Mark R. Butscha, Jr.
Melissa A. Barrett (admitted pro hac vice)
3900 Key Center, 127 Public Square
Cleveland, OH 44114
Tel: (216) 566-5500
Fax: (216) 566-5800
kip.bollin@thompsonhine.com
laura.watson@thompsonhine.com
mark.butscha@thompsonhine.com
melissa.barrett@thompsonhine.com
13

 Case 1:17-mc-00360-AT-RWL Document 153 Filed 07/12/19 Page 18 of 19

-andRebecca Brazzano
335 Madison Ave., 12th Floor
New York, NY 10017-4611
Tel: (212) 344-5680
Fax: (212) 344-6101
Rebecca.Brazzano@thompsonhine.com
Attorneys for Plaintiff Essar Steel Algoma Inc.

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 Case 1:17-mc-00360-AT-RWL Document 153 Filed 07/12/19 Page 19 of 19

CERTIFICATE OF SERVICE
I hereby certify that on July 12, 2019, I caused the foregoing to be served on all counsel
of record, electronically via the Court’s electronic filing system.

/s/ Kip. T. Bollin
Attorney for Essar Steel Algoma, Inc.