## Facts

- Iceland Telecom, Ltd., an Icelandic telecommunications provider, contracted to provide internet telephony-related services to ISN Global Communications, Inc. (ISNGC).
- ISNGC was formed and controlled by Arvin Malkani, its sole owner and principal officer.
- Information Systems and Networks Corp. (ISN), owned and led by Roma Malkani, provided ISNGC substantial funding and support, including shared office space, furnishings, phone numbers, and payment processing for expenses.
- ISNGC observed few corporate formalities and operated in close operational and financial proximity to ISN.
- ISNGC’s communications and branding represented it as affiliated with ISN (e.g., describing itself as “an ISN company” and referring to ISN as its “parent company”).
- During negotiations, Iceland Telecom contended it was led to believe it was dealing with ISN; however, the written contract was executed only by ISNGC, not ISN.
- A payment dispute arose after services were provided, and Iceland Telecom sued ISNGC, ISN, and Arvin Malkani for breach of contract and unjust enrichment.
- ISNGC later ceased operations, increasing the plaintiff’s effort to impose liability on ISN and Malkani through derivative theories.

## Issues

1. Under Maryland law, may ISN or Arvin Malkani be held liable for ISNGC’s contract obligations by piercing ISNGC’s corporate veil based on intercompany entanglement and lax corporate formalities?
2. Under Maryland agency doctrines, did ISNGC act as ISN’s (or Malkani’s) agent—actually or by apparent authority/agency by estoppel—such that ISN or Malkani could be bound by ISNGC’s contract?

## Decision

- The court granted partial summary judgment for ISN and Arvin Malkani.
- The court held the evidence was insufficient, as a matter of Maryland law, to pierce ISNGC’s corporate veil to reach ISN or Malkani.
- The court held no actual agency relationship existed between ISNGC and ISN (or Malkani) that would bind ISN or Malkani to ISNGC’s contract.
- The court held apparent authority/agency by estoppel was not established because the required manifestations attributable to the alleged principal (ISN) were not shown.
- ISNGC remained the contracting party potentially liable on the contract; the ruling addressed only derivative liability theories against ISN and Malkani.

## Legal Principles

- Under Maryland law, veil-piercing generally requires proof of fraud or the need to enforce a “paramount equity”; commingled operations, shared resources, and failure to observe corporate formalities are ordinarily insufficient without that showing.
- The existence of a parent-subsidiary relationship, common ownership, or significant financial support does not alone justify disregarding corporate separateness.
- Actual agency requires intent to create an agency relationship, consent, and the principal’s right of control over the agent with respect to the entrusted matters.
- Apparent authority or agency by estoppel requires manifestations by the alleged principal that would reasonably cause a third party to believe the agent is authorized, plus reliance by the third party.
- Where a written contract is executed by only one corporate entity, a non-signatory affiliate is not bound absent a valid veil-piercing basis or a proven agency theory meeting the governing elements.

## Conclusion

The court refused to impose contractual liability on a closely related corporation and the owner/controller of the contracting company because Maryland law permits veil-piercing only in exceptional circumstances (typically fraud or a demonstrated paramount equity) and because the record did not show principal-generated manifestations or other elements necessary to treat the contracting company as an agent authorized to bind the non-signatory.


Iceland Telecom, Ltd. v. Info. Sys. & Networks Corp., 268 F. Supp. 2d 585 (D. Md. 2003)