Piercing the Corporate Veil - Torts Flashcards
In order to maintain a cause of action for piercing the corporate veil, the plaintiff must allege that a ___________ used the corporate ____ to conduct business in his __________ capacity.
In order to maintain a cause of action for piercing the corporate veil, the plaintiff must allege that a SHAREHOLDER used the corporate FORM to conduct business in his INDIVIDUAL capacity.
May a party maintain a cause of action to pierce the corporate veil without alleging that a shareholder used the corporate form to conduct business in an individual capacity?
No. Under New York law, courts will pierce the corporate veil when necessary to prevent fraud or achieve equity. Agency-law principles guide the inquiry into possible abuse of the corporate form. If a corporation functions merely as an agent of its shareholder, courts will hold the principal vicariously liable for the corporation’s conduct on the theory of respondeat superior. At the pleadings stage, it is insufficient to state that a corporation lacked a separate identity, was part of a single enterprise, and was deliberately undercapitalized. Rather, the plaintiff must show that a shareholder used the corporation as his agent to conduct business in an individual capacity.
A plaintiff may ordinarily pierce the corporate veil and bring a ______ corporation into a case against a __________ where the __________ was operating while undercapitalized.
A plaintiff may ordinarily pierce the corporate veil and bring a PARENT corporation into a case against a SUBSIDIARY where the SUBSIDIARY was operating while undercapitalized.
May a plaintiff pierce the corporate veil to bring a parent corporation into a case against a subsidiary where the subsidiary was undercapitalized in a traditional accounting sense, but was provided with more than adequate liability insurance?
No. A plaintiff may not pierce the corporate veil and bring a parent corporation into a case against a subsidiary if the subsidiary was undercapitalized in a traditional accounting sense, but was provided with more than adequate liability insurance. A person injured by a corporation or its employees may generally recover only from the assets of the employee or the employer corporation, and not from the shareholders of the corporation or its parent corporation.
o As found in Collet v. American National Stores, Inc., 708 S.W.2d 273 (Mo.App. 1986), to pierce the corporate veil and make corporate shareholders liable a plaintiff must show:
(1) complete domination and control over the finances, policy, and business of the corporation, so that the corporation at the time of the transaction had no separate mind, will, or existence of its own;
(2) the control was used by the defendant to commit fraud, to violate a legal duty, or to act dishonestly or unjustly in violation of the plaintiff’s legal rights; and
(3) the control and breach of duty proximately cause the plaintiff’s injury. Undercapitalizing a subsidiary satisfies the second element of the Collet test, since creating a business and operating it without sufficient funds to be able to pay bills or satisfy judgments against it implies a deliberate or reckless disregard of the rights of others.
to pierce the corporate veil and make corporate shareholders liable a plaintiff must show:
1.
2.
3.
(1) complete domination and control over the finances, policy, and business of the corporation, so that the corporation at the time of the transaction had no separate mind, will, or existence of its own;
(2) the control was used by the defendant to commit fraud, to violate a legal duty, or to act dishonestly or unjustly in violation of the plaintiff’s legal rights; and
(3) the control and breach of duty proximately cause the plaintiff’s injury. Undercapitalizing a subsidiary satisfies the second element of the Collet test, since creating a business and operating it without sufficient funds to be able to pay bills or satisfy judgments against it implies a deliberate or reckless disregard of the rights of others.
