Martinez v. Petrenko

United States Court of Appeals
For the First Circuit

No. 14-2112

GABRIEL F. MARTINEZ,

Plaintiff, Appellant,

v.

VICTOR F. PETRENKO,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

Before

Howard, Chief Judge,
Selya and Kayatta, Circuit Judges.

Benjamin T. King, with whom Douglas, Leonard & Garvey, P.C.
was on brief, for appellant.
Martha Van Oot, with whom Jackson Lewis, P.C. was on brief,
for appellee.

July 6, 2015
 KAYATTA, Circuit Judge. To maintain a private action

under the Fair Labor Standards Act ("FLSA" or "the Act") for a

failure to pay for overtime at the mandated rate, an employee must

prove a nexus to interstate commerce sufficient to trigger coverage

under the Act. The employee can prove this nexus by showing that

the employee engaged in commerce for the employer within the

meaning of the Act, or by showing that the employer has other

employees who engaged in commerce within the meaning of the Act

and that the employer also generated annual gross sales of not

less than $500,000. In filing this lawsuit asserting an FLSA claim

for unpaid overtime, Gabriel Martinez alleged that his employer

engaged in commerce within the meaning of the Act and generated

annual gross sales of not less than $500,000. While this

allegation served to fend off a motion to dismiss, Martinez was

ultimately unable to ferret out any evidence to prove that his

employer's sales were high enough to trigger coverage under the

Act.

Eventually confronted with a motion for summary judgment

based on the fact that his employer's annual gross sales were less

than $500,000, Martinez pointed to evidence that he himself engaged

in commerce within the meaning of the Act. Finding that this

change in the way Martinez proposed to establish coverage came too

late, the district court granted summary judgment against Martinez

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on his FLSA claim. For other reasons, the court also granted

summary judgment on Martinez's state-law claims. We affirm.

I. Background

A. Statutory Background

An employee enjoys the protections of the FLSA's

overtime pay requirements only when either the employee

individually or the employer's enterprise as a whole is "engaged

in commerce or in the production of goods for commerce." 29 U.S.C.

§ 207(a)(1). The burden is on the employee to prove a sufficient

nexus to interstate commerce as an essential element of the claim.

See Chao v. Hotel Oasis, Inc., 493 F.3d 26, 32-33 & n.6 (1st Cir.

2007) (holding that coverage is "an element of the claim," and

that the defendants' stipulation relieved the plaintiff of her

burden to prove it).

FLSA coverage triggered by the business activities of

the employer (often called "enterprise coverage") requires a

showing that the employer:

(i) has employees engaged in commerce or in
the production of goods for commerce, or that
has employees handling, selling, or otherwise
working on goods or materials that have been
moved in or produced for commerce by any
person; and (ii) is an enterprise whose annual
gross volume ["AGV"] of sales made or business
done is not less than $500,000 . . . .

29 U.S.C. § 203(s)(1)(A); see also 29 C.F.R. § 779.259 (defining

"[w]hat is included in annual gross volume").

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 How one shows that coverage is triggered by the

activities of the individual employee (so-called "individual

coverage") is less clear. Neither the statute nor our circuit

precedent offers any road map. Other circuits have held that the

employee must "directly participate" in the movement of persons or

things in interstate commerce, but this can be satisfied through

regular use of an instrument of interstate commerce, such as by

using a telephone to call other states for business purposes. See,

e.g., Reagor v. Okmulgee Cnty. Family Res. Ctr., 501 F. App'x 805,

809 (10th Cir. 2012) (internal quotation marks and alterations

omitted). What is clear, in any event, is that the facts capable

of establishing individual coverage are different from those

supporting a theory of enterprise coverage. To establish

individual coverage, the employee must present facts showing his

own activities. To establish enterprise coverage, the employee

instead must present facts showing the activities of other

employees, and the employer's sales.

B. Factual Background

As this is an appeal from a grant of summary judgment,

we recite the facts in the light most favorable to Martinez, the

non-movant, and we draw all reasonable inferences in his favor.

See Ramos-Santiago v. United Parcel Serv., 524 F.3d 120, 122 (1st

Cir. 2008).

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 Victor Petrenko is an emeritus professor of engineering

at Dartmouth College who founded Ice Code LLC,1 a start-up that

commercialized a de-icing technology Petrenko had developed.

Petrenko served variously as a board member, board chair, and chief

technology officer. Martinez, one of Petrenko's former graduate

students, began working in research and development for Ice Code

in 2005, and rose to the title of senior manager in 2007. In

February 2010, Martinez became chief operating officer pursuant to

a written "executive agreement" that promised a $190,000 salary,

to be paid in monthly installments.

Because Ice Code was facing significant cash-flow

problems, Martinez was never paid in accordance with this

agreement. Instead, he intermittently received partial payment of

the sums owed. On November 3, 2010, the four-member board (which

included Martinez, Petrenko, and Ice Code CEO Roman Zhigalov)

unanimously2 passed a "special resolution" listing the legal,

financial, and operational challenges facing the company, and

putting Zhigalov on warning that, because he had failed to generate

any revenue for the last six months while incurring over $2 million

in debt, he faced termination as CEO.

1The parties in their filings spell Ice Code as both "IceCode"
and "Ice Code." For consistency, we use the latter. The company
was previously called Ice Engineering LLC.
2 Zhigalov recused himself.
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 A few weeks later, in mid- to late November 2010,

Martinez approached the board and asked to be paid 10,000

additional equity units of Ice Code because he needed "additional

incentive" to keep working for the company. Petrenko balked at

Martinez's request for 10,000 equity units and, according to

Martinez, told him that 10,000 units were worth more than $2

million. (The number seems to have been derived from the per-unit

price set for an attempt to raise private capital that had ended

in August 2010.) Nevertheless, the board approved the transfer of

units to Martinez, and the deal was formalized through an "equity

grant agreement" signed on January 13, 2011, by Zhigalov on behalf

of the company. It provided that the units would be released on

a quarterly basis over two years, and that as partial consideration

for the units, Martinez's job duties under the executive agreement

would be amended to add a requirement to work to secure "at least

one" investment or licensing/development transaction "such that

the [company] is able to return to, and continue its full business

operations and activities."

At the time, Ice Code did indeed need more investment or

business. According to Martinez, by January 2011, all of the

employees except for Martinez had been let go, and the company

owed money to suppliers and contractors. Over the next few months,

Martinez, Petrenko, and Zhigalov all came to be involved, to

varying degrees, in formulating what appear to be at least two
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competing plans for escaping Ice Code's liabilities while still

marketing the de-icing technology (which was owned by Dartmouth

and licensed to Ice Code). Martinez's preferred approach entailed

the continuation of Ice Code as a viable entity. For purposes of

summary judgment, we take as true Martinez's claim that he was

unaware that an alternative plan ultimately preferred by Petrenko,

"Plan B," called for the formation of an entirely new entity to

license the technology from Dartmouth, rendering worthless any

equity in Ice Code.

In late April 2011, Petrenko told Martinez and Zhigalov

that he would not support or participate in Martinez's preferred

plan for escaping Ice Code's debts. About two weeks later, on May

13, 2011, Martinez sent a letter to Petrenko and Zhigalov

indicating that he considered the failure to pay him pursuant to

the executive agreement a constructive termination.3 He calculated

that at the time, the company owed him $172,860.99 in unpaid wages.

He also sought the immediate vesting of his 10,000 equity units.

He received neither, and through a complicated series of events

that need not be recited for purposes of this appeal, Ice Code

lost the license to the de-icing technology and, as a practical

3 Petrenko wrote to respond that there had been no
constructive termination, but whether or not there had been is not
relevant to this appeal.
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matter, ceased to exist. The technology was licensed to a new

entity with which Petrenko was involved but Martinez was not.

In August 2012, Martinez brought suit against Ice Code

and Petrenko in district court, alleging violations of the overtime

provisions of the FLSA, violations of New Hampshire labor laws,

breach of contract, wrongful discharge, and intentional

misrepresentation. Ice Code was dismissed without prejudice when

Martinez failed to file a timely return of service. Petrenko is

now the sole defendant.

In support of the FLSA claim, paragraph 57 of the

complaint alleges that FLSA coverage was triggered by Ice Code's

activities, i.e., "enterprise coverage." The entirety of this

allegation is as follows:

Ice Code was a covered employer within the
meaning of the Fair Labor Standards Act for
the period running from March 1, 2010, through
March 1, 2011. Ice Code, LLC, engaged in
interstate commerce. Furthermore, Ice Code's
annual gross volume of sales made or business
done exceeded $500,000.00 for this time period
. . . totaling approximately $719,391.46.

The complaint also alleges that Petrenko individually

qualified as Martinez's employer under the FLSA. See 29 U.S.C.

§ 203(d). Petrenko does not dispute this allegation as it bears

on the FLSA claim in this appeal.

Petrenko moved to dismiss the FLSA claim under Federal

Rule of Civil Procedure 12(b)(6), arguing that Martinez had failed

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to plead sufficient facts to plausibly support the element of FLSA

coverage. In particular, he noted that Martinez had alleged that

Ice Code had received "revenues and investments" totaling more

than $500,000, but argued that investments do not count as "sales

made or business done" under the FLSA. See 29 C.F.R. § 779.259.

Petrenko also pointed out in his motion that Martinez had "not

even attempted to allege that he was a 'covered employee' or that

there was individual coverage under the FLSA," let alone alleged

facts sufficient to support such a claim.

Martinez filed an objection to the motion to dismiss,

stating that the claim "should be allowed to proceed because Mr.

Martinez has adequately pled enterprise coverage." For an obvious

reason (it was correct), Martinez did not dispute Petrenko's

characterization of his complaint as attempting to allege

enterprise coverage only. For reasons that are less obvious,

indeed inexplicable, he did not at the same time amend his

complaint to add a plausible assertion of individual coverage.

See Fed. R. Civ. P. 15(a)(1)(B) (allowing a party to amend the

pleadings as a matter of course within 21 days after service of a

motion under Rule 12(b)). Nor did he thereafter seek leave to

amend. See Fed. R. Civ. P. 15(a)(2) (providing that after the

time to amend by right has expired but before trial begins, the

court should "freely give leave [to amend the pleadings] when

justice so requires").
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 The district court denied Petrenko's motion to dismiss.

In a March 2013 scheduling order, the court approved a twelve-

month discovery plan setting an April 1, 2013, deadline for

amending the pleadings and a summary judgment deadline of March 3,

2014. The parties commenced discovery. Petrenko submitted

interrogatories to Martinez, including a question asking Martinez

to "[s]tate each and every fact upon which you rely to support

your claim that [Ice Code] was a 'covered employer' under the Fair

Labor Standards Act." Martinez replied that "Ice Code engaged in

interstate commerce," but he offered no facts demonstrating any

such engagement. Instead, the only facts Martinez provided in

response to that inquiry were a list of Ice Code's gross receipts

as reflected in bank statements. Nor did Martinez cite any of his

own activities as a basis for asserting coverage.

After fourteen months of litigation and well after the

deadline for amending the pleadings had passed, Petrenko in October

2013 moved for summary judgment on the FLSA claim, arguing that

Martinez had not established facts sufficient to meet his burden

of proving that Ice Code had at least $500,000 in non-investment

sales or business to establish enterprise coverage.

Martinez tried to parry the motion on three levels.

First, he argued that proof of FLSA coverage was not a required

element of his cause of action. Unsurprisingly, the district court

rejected this argument. See Chao, 493 F.3d at 33 (describing
- 10 -
coverage as an element of the claim). Second, Martinez reiterated

his argument that Ice Code engaged in commerce and had revenues in

excess of $500,000. The district court rejected this argument

because a $295,600 investment by Zhigalov did not qualify as "sales

made or business done" as required by the plain language of the

statute, 29 U.S.C. § 203(s)(1)(A)(ii), and the remaining revenue

sources, even if they counted toward AGV, did not total $500,000.

Finally, Martinez submitted an affidavit claiming that he himself

engaged in interstate travel and phone calls sufficient to

establish individual coverage under the Act. The district court

rejected that last argument because it was "a new and unadvertised

theory of individual coverage" not raised in the complaint or in

response to the earlier motion to dismiss.

After the district court granted Petrenko's motion for

summary judgment on the FLSA claim, Martinez v. Petrenko, No. 12-

cv-331-JD, 2014 WL 109073, at *5 (D.N.H. Jan. 13, 2014), Martinez

moved for reconsideration, arguing that the language in paragraph

57 of his complaint (quoted above) was broad enough to encompass

both individual and enterprise coverage. The district court

disagreed, interpreting paragraph 57 as pleading only enterprise

coverage, and denied the motion.

In a separate order, the district court also granted

summary judgment for Petrenko on Martinez's various state-law

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claims.4 With regard to the three of those claims raised on this

appeal, Martinez sought to prevail against Petrenko personally for

liabilities allegedly incurred by Ice Code (which was no longer a

defendant). Martinez therefore had to demonstrate that New

Hampshire's version of the doctrine of piercing the corporate veil

allowed him, a company executive and director, to state a claim

against another director. The district court held that Martinez

had not demonstrated a triable issue of fact as to the

applicability of the veil-piercing doctrine to Martinez's claims.

II. Standard of Review

We review a district court's grant of summary judgment

de novo. Litz v. Saint Consulting Grp., Inc., 772 F.3d 1, 3 (1st

Cir. 2014). The moving party is entitled to summary judgment if

it "shows that there is no genuine dispute as to any material fact

and [it] is entitled to judgment as a matter of law." Fed. R.

Civ. P. 56(a).

4Petrenko had initially argued that because Martinez's claim
under the federal FLSA failed, the court lacked subject-matter
jurisdiction over the state-law claims under 28 U.S.C. § 1331.
The district court held that there existed complete diversity
between the parties (at least once Ice Code was dismissed as a
defendant), so the court had jurisdiction under 28 U.S.C. § 1332.
Martinez, 2014 WL 109073, at *5-6.
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 III. Analysis

A. FLSA Claim

"The fundamental purpose of our pleadings rules is to

protect a defendant's inalienable right to know in advance the

nature of the cause of action being asserted against him." Ruiz

Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st Cir. 2008)

(internal quotation marks omitted). The complaint must provide

this notice not with mere "conclusions," but rather with "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 we said in Manning v. Boston Medical Center

Corporation, a complaint must allege facts "sufficient to show an

entitlement to relief." 725 F.3d 34, 43 (1st Cir. 2013). One of

the "basic elements" necessary to showing an entitlement to relief

under the FLSA is that "the work involved interstate activity."

Id. The complaint must therefore allege facts sufficient to

establish that either the plaintiff's work or another employee's

work involved interstate commerce within the meaning of the Act.

Id.

On appeal, Martinez abandons his attempt to prove

enterprise coverage. He argues, instead, that his complaint's

conclusory allegation that "Ice Code was a covered employer" under

the FLSA was sufficient to give notice that he might try to prove
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individual coverage. This argument is twice flawed. First, as we

explained in Manning, when we read a complaint, "conclusory

allegations that merely parrot the relevant legal standard are

disregarded." Id. at 43. Second, the only nonconclusory

allegations pertinent to establishing FLSA coverage refer to Ice

Code's annual sales, and thus point only to enterprise, not

individual, coverage. As such, the complaint gave even less notice

than a "merely" conclusory complaint would have given that

Martinez's individual activities would provide the grounds upon

which coverage depended, because it pointed specifically and

exclusively in the other direction. See Ruiz Rivera, 521 F.3d at

85 ("It simply will not do for a plaintiff to fail to plead with

adequate specificity facts to support a . . . claim, all-the-while

hoping to play that card if her initial hand is a dud."); see also

Calvi v. Knox Cnty., 470 F.3d 422, 431 (1st Cir. 2006) (stating

that a plaintiff is "not entitled to raise new and unadvertised

theories of liability for the first time in opposition to a motion

for summary judgment").

Martinez did not file a motion to amend his complaint,

so he can hardly complain about being held to his original

complaint. It nevertheless reinforces our conclusion to note that,

had he filed such a motion when he first announced his reliance on

individual coverage after the deadline for amending the pleadings

had passed, it is unlikely that we would have found the denial of
- 14 -
that belated motion to be an abuse of discretion. See Fed. R.

Civ. P. 15(a)(2), 16(b)(4); see Torres-Rios v. LPS Labs., Inc.,

152 F.3d 11, 16 (1st Cir. 1998) (reviewing denial of motion to

amend the pleadings for abuse of discretion). In Torres-Rios, for

example, the complaint alleged a product liability claim through

facts establishing that the product was defective because its

warnings were inadequate. Id. at 12-15. In opposing summary

judgment, the plaintiffs then tried to rely on facts said to show

that the product was defectively designed, arguing that a design

defect theory was implicit in their complaint. Id. at 15-16.

Affirming the district court's refusal to allow the plaintiffs to

rely on the new theory, we observed that such a change after

discovery was completed "unquestionably would prejudice defendant,

whose focus until that time had been on the adequacy of the warning

labels and not on the costs and benefits of the product itself."

Id. at 16.

But, says Martinez, his change did not present a change

in a "theory of liability," because he consistently argued that

Petrenko was liable for unpaid overtime under the FLSA--all that

changed was Martinez's theory of why he should enjoy the FLSA's

protections in the first place. However, the nexus to commerce is

an element of the claim, without which there is no entitlement to

recovery, and Martinez sought to change entirely the theory

establishing a nexus. A belated change of the facts Martinez would
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use to establish that nexus implicates precisely the type of unfair

misdirection at issue in cases such as Torres-Rios.

The default rule is that, before trial, the court should

"freely give leave" to amend the pleadings "when justice so

requires." Fed. R. Civ. P. 15(a)(2). Once a court sets a deadline

for seeking such leave, though, the complaint may be modified "only

for good cause." Fed. R. Civ. P. 16(b)(4). "Good cause" does not

typically include a change of heart on a litigation strategy. See

Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315,

327 (1st Cir. 2008) (affirming a magistrate's refusal to amend the

pleadings eleven months after a scheduling order deadline had

passed because "[t]he explanation for the delay seems to be simply

that [the plaintiff] thought that it would prevail . . . without

any need to further amend. In that, its calculations were wrong.

Nonetheless, [the plaintiff] must be bound by the consequences of

its litigation strategy."). Here, we note also that all of the

facts upon which Martinez belatedly sought to demonstrate

individual coverage were known to him before he filed his

complaint.

Our decision in Bacou Dalloz USA, Inc. v. Continental

Polymers, Inc., 344 F.3d 22 (1st Cir. 2003), is not to the

contrary. In that case, we stated that a district court should

consider the full record, including affidavits and

interrogatories, when considering a motion for summary judgment.
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Id. at 26. Nothing in that case, though, suggests that a district

court need look for facts in support of a theory that was not even

pleaded. Such a rule would effectively require all litigants to

engage in discovery based not on what was pleaded but also on what

might have been pleaded. We reject such a requirement.

B. State-Law Claims

Martinez also appeals the district court's grant of

summary judgment to Petrenko on his state-law claims for unpaid

wages under New Hampshire Revised Statutes Annotated §§ 275:43 and

44, breach of contract, and wrongful discharge.5 New Hampshire

law governs these claims in this action grounded on diversity

jurisdiction. See Hansen v. Sentry Ins. Co., 756 F.3d 53, 57 (1st

Cir. 2014).

Martinez brought these claims against Petrenko

personally under the doctrine of piercing the corporate veil, which

allows a person with a claim against a corporation to recover from

a principal of that corporation when the principal abuses the

corporate form.6 See, e.g., Terren v. Butler, 134 N.H. 635, 638-

5The district court also granted Petrenko summary judgment
on Martinez's intentional misrepresentation claim, holding that
Martinez had not raised an issue of fact as to whether he had
relied on any misrepresentation made by Petrenko. Martinez did
not appeal the grant of summary judgment on his intentional
misrepresentation claim.
6Petrenko concedes that veil-piercing can apply to limited
liability companies (LLCs) under New Hampshire law. See Mbahaba
v. Morgan, 163 N.H. 561, 568 (2012) (applying the veil-piercing
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40 (1991) (affirming the lower court's decision to allow veil-

piercing upon a finding that corporate principals "divert[ed]

corporate assets to their benefit when substantial notice of claims

[against the corporation] were outstanding"). In granting

Petrenko's motion for summary judgment, the district court

rejected Martinez's veil-piercing theory on two grounds, holding

first that veil-piercing is not available to allow one company

insider to recover against another; and second, that even if veil-

piercing were potentially available, Martinez had not shown an

issue of fact as to whether Petrenko had used the LLC form to

perpetrate a fraud on him.

Defending the judgment, Petrenko presses the argument

that veil-piercing is categorically unavailable to corporate

insiders under New Hampshire law. While many states have adopted

or come close to adopting such a rule, see 2 F. Hodge O'Neal &

Robert B. Thompson, O'Neal and Thompson's Close Corporations and

LLCs: Law and Practice § 8:18 (rev. 3d ed. 2014) ("[C]ourts rarely

permit a corporation to be disregarded for the benefit of its own

shareholders."), neither party points us to any New Hampshire case

law on point.

doctrine to a claim against the principal of an LLC). Because
most of the relevant veil-piercing case law involves corporations,
in this opinion we use the term "corporate" broadly to include
LLCs.
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 We see no need to decide in this case whether New

Hampshire law per se bars an insider like Martinez from

successfully piercing the corporate veil to hold another insider

liable for the corporation's debts. Rather, the record here allows

us to affirm on the district court's alternative ground that

Martinez has not made out a case for veil-piercing even if he is

not categorically barred from doing so.

We begin by observing that Martinez points to no case

from New Hampshire or elsewhere allowing the piercing of the

corporate veil for a type of wrongdoing analogous to that alleged

here.7 Under New Hampshire law, corporate owners are not

"[o]rdinarily" liable for corporate debts. Mbahaba v. Morgan, 163

N.H. 561, 568 (2012). The common law veil-piercing exception to

that rule only arises when "a shareholder suppresses the fact of

incorporation, misleads his creditors as to the corporate assets,

or otherwise uses the corporate entity to promote injustice or

fraud." Druding v. Allen, 122 N.H. 823, 827 (1982); see also

Terren, 134 N.H. at 639-40.

7 He relies on Cheney v. Moore, 193 Ga. App. 312, 312 (1989),
in which veil-piercing was used to allow a 50% shareholder to
recover her start-up capital when her former business partner shut
her out of the business and she left the company a month after its
incorporation; and Southern California Federal Savings & Loan
Association v. United States, 422 F.3d 1319, 1331-32 (Fed. Cir.
2005), where the court rejected a bid by individual shareholders
to sue the government for breach of a contract with the
corporation.
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 Martinez obviously knew that Ice Code was a corporation,

and that it was Ice Code that employed him. He therefore trains

his argument on his claim that Petrenko induced him to continue

working for Ice Code by misrepresenting the value of its assets.

The alleged misrepresentation is Petrenko's statement (according

to Martinez) that the 10,000 units that Ice Code granted to

Martinez were worth "[s]omething around $2 million" even though he

knew that Ice Code was going to fail. The sequence of events,

though, was that during a board meeting, Martinez demanded 10,000

equity units as a condition of continuing to work for Ice Code,

and Petrenko balked, stating that Martinez's "request seemed very

high because the value of those equity units was very high," i.e.,

"[s]omething around $2 million."8 The board, with Petrenko in

agreement, nevertheless acceded to Martinez's demand.9 As thus

described by Martinez, his offer to continue working for 10,000

8 In his deposition testimony, Martinez characterized the
value as based on the per-unit price of a recent private placement
memorandum the board had authorized, and said that the board
members shared a general agreement about the units' value.
9 Although Martinez argues that Petrenko "authorized" the
conveyance, the facts do not seem to support this characterization.
The record shows the conveyance was discussed by the board in
November 2010 and January 2011, and formalized through a January
2011 agreement signed by Zhigalov. Whether Petrenko authorized
the conveyance is not relevant to this appeal, however, because
even if he did, this authorization does not constitute an abuse of
the corporate form for which veil-piercing is available.
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units came before Petrenko made any assertion of the units' value,

and could not have been induced by any such assertion.

More generally, there is no evidence that Martinez was

unaware of Ice Code's precarious circumstances when he sought

additional equity. At the time of the alleged fraud, Martinez

knew the company faced significant hurdles--indeed, the

underpayment of his salary is why he approached the board in

November 2010 seeking additional equity as an alternative form of

compensation. Moreover, he did so only weeks after he had voted

to approve the special board resolution describing the company's

dire financial straits. As any investor knows, the value of a

company's equity may rise or fall, or it may disappear completely

if the company fails. When Martinez agreed to keep working at Ice

Code for company equity, he was assuming a risk that the company

could fail, and he assumed that risk knowing the company's finances

were in poor shape. The equity grant agreement itself confirmed

(in rather desperate-sounding terms) that the company was, at best,

hobbling along. In short, the LLC veil had nothing to do with

impeding Martinez from knowing that which he says he did not know.

Nor, finally, does Martinez claim that Petrenko actually

misrepresented any facts concerning Ice Code's assets, or removed

any assets from the company.

Martinez's response is to point to Petrenko's failure to

disclose to Martinez the existence of so-called Plan B. Martinez
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knew that Ice Code did not own its core technology, that it owed

"[s]everal hundred thousand" dollars to the actual owner

(Dartmouth), and that it would lose its license if it did not

timely pay Dartmouth what it owed.10 However, Martinez says he did

not know that (again, according to Martinez) Petrenko had given up

on Ice Code, and was working on Plan B to form a new entity to

exploit Dartmouth's technology in the event Ice Code's license to

the technology expired.

An initial hurdle in the way of this argument is, again,

the chronology. Martinez points to two February 2011 e-mails in

which Petrenko described problems with Plan B and indicated he was

still trying to pursue "Plan A," (which Petrenko says was a plan

to attract new investment to Ice Code); and an April 2011 memo

that states that "[t]he effort to reorganize [Ice Code] began in

earnest" in January 2011, but suggests that Petrenko and others

did not "decide[] to shift to a plan-b" until mid-April. Nothing

in these documents would seem to support Martinez's assertion that

Petrenko had decided to pursue Plan B in November 2010 when

Martinez signed the equity agreement.

10 Dartmouth imposed a May 1, 2011, deadline for payment of
the debt. It is unclear exactly when it imposed this deadline,
but Martinez admits that by March 2011, he and Petrenko had already
negotiated "several extensions."

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 Even if a jury could somehow interpret these documents

to support Martinez's claim that Petrenko had decided to pursue

Plan B in November 2010,11 we would see no reason to equate one

corporate insider's failure to disclose to another insider his own

plans to give up on a corporation with the misuse of the corporate

veil, at least where the plans involve no use of the corporate

form to conceal the plans and no removal of corporate assets

without reasonable consideration. Perhaps such an insider, in

appropriate circumstances, may owe a duty of disclosure directly

to another insider. Whether that is so we need not decide.

Martinez has not appealed the dismissal of his intentional

misrepresentation claim and otherwise presses no claim against

Petrenko directly, resting instead on his attempt to hold Petrenko

vicariously liable for the obligations of Ice Code.

Ultimately, Martinez's argument that the veil should be

pierced to correct an injustice fails to address the distinction

between use of the corporate form to protect the owner from

liability for an injustice perpetrated by the corporation, and an

owner's use of the corporate form to promote or perpetrate the

injustice. New Hampshire law allows veil-piercing in the case of

the latter. See Terren, 134 N.H. at 639. To allow veil-piercing

11 In granting summary judgment to Petrenko on Martinez's
intentional misrepresentation claim, the district court held they
could not.
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in the case of the former, however, would essentially eliminate

the ordinary rule that the owner is not legally responsible for

the liabilities of the corporation. New Hampshire case law rejects

the notion of such a flimsy veil. See Druding, 122 N.H. at 827-

28 (reversing a lower court's piercing of the veil, even though a

closely held corporation had failed to observe certain

formalities, "[i]n view of the dearth of evidence that [the

corporation's president] used the corporation to promote injustice

or fraud"); Village Press, Inc. v. Stephen Edward Co., 120 N.H.

469, 471-72 (1980) (noting that veil-piercing is not allowed simply

because a corporation is a "one-man operation" if there is no

evidence of a fraudulent conveyance, of suppressing the fact of

incorporation, or of misleading the plaintiff about corporate

assets); Peter R. Previte, Inc. v. McAllister Florist, Inc., 113

N.H. 579, 582-83 (1973) (holding that creditor of insolvent family

business could not recover from defendants personally because

there was no evidence defendants had "suppressed the fact of their

incorporation or misled the plaintiff as to the corporate

assets").12

IV. Conclusion

For the foregoing reasons, we affirm.

12Martinez does not allege that Ice Code was an alter ego of
Petrenko, nor that Petrenko fraudulently transferred Ice Code
assets to himself, his relatives, or an entity he controlled.
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