Labadie Coal Company v. Black

United States Court of Appeals for the District of Columbia Circuit · 1982 · Corporations

672 F.2d 92 (1982)

Updated August 22, 2026

CorporationsPiercing the corporate veilDiscovery sanctionsLimited liabilityalter egocorporate veilcorporate formalitiesundercapitalization

Facts

Labadie, a Kentucky coal company, dealt with Harry Black, who was the director, president, and sole employee of F.A.I. Trading, Ltd., a purported closely held Virginia family corporation. Black negotiated agreements for coal purchases and use of Labadie's shipping facilities, and Labadie continued performance until late 1978 when FAI fell behind in payments. During discovery, Labadie repeatedly requested corporate and financial records bearing on FAI's existence and Black's relationship to it, but Black did not produce key materials until the last day of trial after Labadie had rested. The district court admitted those late-produced documents and relied on them to find that FAI was a viable corporation and that Labadie had not pierced the corporate veil.

Issue

Whether the district court erred by admitting and relying on corporate documents first produced at the end of trial despite Black's failure to supplement discovery, and whether the district court inadequately analyzed whether FAI's corporate veil should be pierced to hold Black personally liable.

Rule

A party who agrees in discovery to provide relevant documents has a duty under Federal Rule of Civil Procedure 26(e) to seasonably supplement prior responses. When late-produced evidence is withheld until a point at which the opposing party cannot effectively examine or meet it, the trial court should not admit that evidence if doing so rewards the nondisclosing party and prejudices the opponent. On veil piercing, the proper inquiry is whether there is such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and whether treating the acts as those of the corporation alone would produce an inequitable result; relevant factors include control, failure to maintain records and formalities, commingling, diversion of assets, office overlap, and inadequate capitalization.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a bench trial in Washington, D.C., Stone River Aggregates sues Nolan Price personally for debts allegedly incurred by Harbor Crest Materials, Ltd. During discovery, Price repeatedly promises under oath to produce the company's charter papers, minute book, and bank records, but does not do so until after Stone River rests. The judge refuses to continue the trial and admits the documents over objection.

What is the best analysis of the judge's ruling?

Explanation. The majority held that a party who agreed in discovery to provide relevant documents had a Rule 26(e) duty to seasonably supplement. When the documents were first produced after the opposing party had rested and the court would not allow time to inspect or respond, admitting them unfairly rewarded nondisclosure and prejudiced the opponent. In that situation, suppression may be the proper remedy even without a prior court order.