Amazon Withdraws Claims Seeking to Impose a Corporation’s Debt onto a Person in light of Amazon’s Failure to Comply with State and Federal Lending Laws
For Immediate Release – Long Beach, NY – Aug. 14, 2019.
In light of undisputed evidence that Amazon failed to comply with consumer lending laws, Amazon withdrew its attempt to hold an individual person responsible for money that Amazon loaned to a corporation. The law and the facts Amazon faced can be accessed here.
In Amazon Capital Services, Inc., v. Charon Intl. Trading, Inc., Amer. Arb. Assoc. # 01-18-002-0327:
- Amazon approached a corporation to accept a loan. Amazon required the corporation use the money to sell more products on Amazon entitling Amazon to fees;
- Amazon never obtained any personal guarantee and solely indebted the corporation;
- Amazon offered no denial that it failed to comply with Consumer Credit Protection Laws including:
Federal Laws:
- The Federal Consumer Protection Act
- Equal Credit Opportunity Act
- Fair Debt Collection Act
- Fair Credit Reporting Act
- Truth in Lending Act
State Laws:
- Washington Consumer Protection Act [1]
- Florida’s Consumer Collection Practices Act [2]
When the shareholder stood up to Amazon with the law and the facts, Amazon chose to avoid an adverse decision and withdrew all of its claims against the corporation’s shareholder.
CJ is a partner of Rosenbaum Famularo, P.C., a law firm that helps people and companies that sell products on Amazon.com (“Amazon Sellers”). The firm authored six books for Amazon Sellers and maintains AmazonSellersLawyer.com, a depository of information for Amazon Sellers. CJ and his partner Anthony Famularo, Esq., have been quoted in media around the world. Anthony testified before California’s legislature and they both teach courses to over 20,000 Amazon Sellers each year at Sellers’ training events around the world.
[1] Amazon Capital Services, Inc., is a Delaware corporation, but it claims to operate under Washington State’s laws.
[2] Charon International is a Florida corporation; Mr. Simpson worked for the Florida corporation.
AMERICAN ARBITRATION ASSOCIATION
December 7, 2018
Re: Amazon Capital Services, Inc. v. Charon International Trading, Inc.
Case #: 01-18-0002-0327
MOTION TO DISMISS JAMES SIMPSON FROM PERSONAL LIABILITY
TO: Amazon Capital Services, Inc. / Davis Wright Tremaine, LLP – Counsel for Claimant
AND TO: AAA / Arbitrator Cogan
Overview:
The dispute at issue is entirely between two parties:
Charon International Trading, Inc. and Amazon Capital Services, Inc.
The terms of the operative contract in this matter, the Amazon Lending Agreement, specifies that applicable federal law, Washington State law and the FAA govern this dispute. The terms of the contract and Washington law, dictate Simpson cannot be held personally liable for the debts, loans, and actions of the corporation Charon International Trading. As such, the arbitrator should dismiss all claims asserted against James Simpson.
I. The Amazon Lending Agreement stipulates that the contract is between the business entity & Amazon.
First, Amazon’s Counsel’s applied definition of the word “you” blatantly contradicts how “you” is defined in the Amazon Lending Agreement.
Per the Agreement,
If Amazon Capital Service, Inc. (“we” “us” or “our”) makes a loan to the business identified in this Registration form (“you”) in the principal amount of the Loan Request Amount you selected in the Registration Form, you promise to pay us that principal amount, together with accrued interest, as described in this Loan Agreement. [1]
By the terms of the Amazon Lending Agreement in this matter “you” ie: the party that signs the contract with Amazon and holds the liability of the loan, is considered to be the “business identified in this Registration form.”
The business identified in the Registration form is Charon International Trading, Inc. James Simpson is merely registered as the “contact.” The “contact,” by the terms of Amazon’s own agreement is not the entity that promised to pay the principal amount.
This issue should be settled immediately; James Simpson cannot be held personally liable in this matter because such an action would go against the specific terms of the governing contract. The agreement in this matter stipulates that James Simpson is not the party with which Amazon is contracted, it is the corporate entity involved in the matter.
II. Charon International Trading, Inc. is a separate and distinct entity from James Simpson.
Washington State courts have held that corporations are separate and distinct entities from their principals and that an individual is separate and distinct from their corporations:
The principle upon which we proceed is that a corporation exists as an organization distinct from the personality of its shareholders. This separate organization, with its distinctive privileges and liabilities, is a legal fact, and not a fiction to be disregarded when convenient. The concentration of its ownership in the hands of one or two principal shareholders does not, ipso jure, dispel those corporate characteristics of the organization. [2]
Even in the hypothetical event where all the stock of a corporation is held by a small group of people or one person, a “corporation’s separate legal identity is not lost merely because all of its stock is held by members of a single family or by one person.” [3]
III. James Simpson never personally contracted with Amazon.
Charon International Trading, Inc. signed a contract with Amazon agreeing to submit disputes to arbitration if issues ever arose. James Simpson, acting solely on behalf of the corporation, signed this contract. Since James Simpson only agreed for the AAA to hear matters pertaining to the corporation, the only party in contract with Amazon, disputes raised against him personally in this matter should be dismissed.
What solely exists is a contract between Amazon Lending and the Charon International Trading Corporation (“CIT”). All of James Simpson’s acts were solely as a shareholder and manager of that corporation:
- Amazon never sought or obtained any agreements from James Simpson, individually;
- Amazon never sought or obtained any personal guarantee of the business loan at issue.
Mr. Simpson’s right to due process is protected by the Fourteenth Amendment. [4]
Due process includes the right not to be bound by decisions rendered against him in which there is no personal jurisdiction. Absent an agreement by Mr. Simpson in his personal capacity, the AAA has no authority over Mr. Simpson.
With specific regard to Amazon Lending’s anticipated argument that James Simpson’s clicking through agreements for the Corporation may equate to him personally entering into a contract with Amazon Lending, in order for a principal’s signature to constitute a personal guarantee there must be a manifest intent as shown by a separate clause and second signature in the principal’s individual capacity. [5] Corporation’s actions “cannot be simply imputed to a corporate officer or employee for purposes of determining whether there are minimum contacts necessary to establish jurisdiction.” [6] In the present case, James Simpson signed solely on behalf of the Corporation.
Furthermore, there is a longstanding concept in contract law, contra proferentem, i.e. interpretation against the draftsman:
“In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.” [7]
The decisions rendered and Restatement position, taken together, lead only to the conclusion that James Simpson signed in his capacity as the Corporation’s principal and not individually.
As a result of the aforementioned, Mr. Simpson cannot be held personally liable for Charon International’s debts. Furthermore, Mr. Simpson never agreed to relinquish his right to a trial by jury and be bound by a private entity like the AAA. As such, all claims against Mr. Simpson personally should be dismissed.
IV. Amazon has no grounds to pierce the corporate veil.
Amazon’s only means by which they may establish personal jurisdiction over James Simpson would be to pierce the corporate veil. However, Amazon has made not claims as of yet to pierce the corporate veil and furthermore, there are no grounds to do so under Washington law.
Washington courts identify two prongs to the test for piercing the corporate veil:
“First, the corporate form must be intentionally used to violate or evade a duty; second, disregard must be necessary and required to prevent unjustified loss to the injured party.” [8]
Factors in determining whether there was an intent to violate or evade duty are as follows:
- Improper, or absence of corporate meetings and records of the meetings
- Using Corporate accounts as the personal account
- Initial undercapitalization of corporation together with failure to follow formalities or other misconduct by shareholders
- Commingling corporate assets and personal assets
- Removal of all corporate funds in the form of wages or other withdrawals. [9]
Amazon failed to allege grounds to pierce the corporate protections and failed to provide any evidence of any other factors. Amazon has presented no evidence and raised no allegations that Charon International Trading Co. and its principal are in violation of any of these factors that could potentially permit piercing of the corporate veil.
V. Conclusion: Amazon Lending Agreement
By the terms of Amazon’s contract and Washington law, Mr. Simpson and Charon International Trading, Inc. are separate entities by the laws of Washington state, the governing law in this matter. James Simpson’s signature on the Amazon Lending Agreement, therefore, was merely as a representative of the corporation; he never entered into a personal contract with Amazon or personally relinquished his due process rights to a private entity such as the AAA. Lastly, there are no grounds by which Amazon may attempt to pierce the corporate veil and Amazon has raised no such legal claim.
In summation, the arbitrator should dismiss Mr. Simpson from having any sort of personal liability in this dispute between Charon International Trading, Inc. and Amazon.
Submitted Respectfully,
Robert C. Segall, Esq.
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[1] See Amazon Loan Agreement ¶1 and Registration Form cover page (attached as Exhibit A).
[2] State v. Nw. Magnesite Co., 28 Wash. 2d 1, 41 (1947).
[3] Grayson v. Nordic Const. Co., 92 Wash. 2d 548, 553 (1979).
[4] U.S. Const. amend. XIV § I.
[5] Wilson Court Ltd. P’ship v. Tony Maroni’s, Inc., 134 Wash. 2d 692, 699 (1998).
[6] Failla v. FixtureOne Corp., 181 Wash. 2d 642, 651 (2014) (noting that exercise of jurisdiction over corporate officers is to be done on a case-by-case basis).
[7] Restatement (Second) of Contracts § 206 (1981).
[8] Meisel v. M & N Modern Hydraulic Press Co.,645 P.2d 689, 692 (Wash. 1982).
[9] Id.