## Facts

- Sea-Land Services, Inc., an ocean carrier, shipped multiple consignments of Jamaican sweet peppers for The Pepper Source (PS).
- PS failed to pay Sea-Land’s freight charges of approximately $86,767.70.
- Sea-Land obtained a default judgment against PS in federal court.
- PS had been dissolved for failure to pay Illinois franchise tax and, in any event, appeared to have no assets to satisfy the judgment.
- Gerald J. Marchese was PS’s sole shareholder and also owned or controlled several related corporations, all operating from the same office and using shared expense arrangements.
- Marchese moved funds among the corporations and used corporate accounts to pay personal obligations (including support payments).
- The entities did not observe basic corporate formalities (e.g., meetings, minutes, bylaws), and PS was undercapitalized.
- Sea-Land filed a second action seeking to pierce PS’s corporate veil to reach Marchese and to “reverse pierce” Marchese’s other corporations as alter egos to satisfy the PS judgment.

## Issues

1. Whether the summary judgment record established a “unity of interest and ownership” between Marchese and PS (and the related corporations) sufficient to treat them as alter egos under Illinois law.
2. Whether the record also established that respecting separate corporate existence would “sanction a fraud or promote injustice,” as required to pierce (or reverse pierce) the corporate veil.
3. Whether summary judgment imposing joint and several liability on Marchese and the related corporations was proper.

## Decision

- The Seventh Circuit reversed the district court’s grant of summary judgment for Sea-Land and remanded.
- The court agreed that the evidence strongly supported the “unity of interest and ownership” prong.
- The court held that the record did not yet establish the second prong—fraud or injustice beyond an uncollected debt—so veil piercing (including reverse piercing) could not be resolved on summary judgment.

## Legal Principles

- Under Illinois law, veil piercing requires proof of both:
  - unity of interest and ownership such that separate personalities no longer exist; and
  - circumstances showing that respecting separateness would sanction a fraud or promote injustice.
- Evidence of commingling, domination, lack of corporate formalities, and undercapitalization may satisfy the unity-of-interest prong, but does not alone satisfy the fraud/injustice prong.
- An unsatisfied judgment or ordinary nonpayment of a debt, standing alone, is insufficient to show the fraud/injustice element; “something more” is required.
- Reverse veil piercing (reaching affiliated entities to satisfy an individual’s or another entity’s liability) is subject to the same two-part analysis.

## Conclusion

The Seventh Circuit held that Sea-Land’s proof that Marchese and his companies functioned as alter egos was substantial, but summary judgment was premature because the record did not yet show that honoring corporate separateness would sanction fraud or promote injustice beyond leaving a contract debt unpaid.


Sea-Land Servs., Inc. v. Pepper Source, 941 F.2d 519 (7th Cir. 1991)