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Posted: May 6, 2017

No Veil Piercing Jurisdiction Unless Defendant Used Corporate Form to Harm or Defraud

On April 25, 2017, Justice Singh of the New York County Commercial Division issued a decision in Gliklad v. Deripaska, 2017 NY Slip Op. 50549(U), holding that there could be no personal jurisdiction based on veil piercing unless the corporate form had been used to harm or defraud the plaintiff, explaining:

There is an insufficient nexus with New York to subject the Institute to our jurisdiction. The evidence provided by plaintiffs is inadequate to justify disregarding the separate legal existence of the Institute and the Gallery. This evidence does not establish the complete domination of one entity by the other with respect to the transaction being challenged to justify piercing the veil, and that such domination was used to perpetrate a wrong against the plaintiff causing the plaintiff’s injury. There is no evidence that the Gallery abused the privilege of doing business in the corporate form to perpetrate the harm such as would invoke exercise of the court’s equity jurisdiction.

As Shaltiel clearly demonstrates, the First Department will not allow a plaintiff to pierce the corporate veil as a basis for personal jurisdiction over a defendant unless there is some evidence that the defendant used the corporate form to harm or defraud a party. As in Shaltiel, there are no allegations that the corporation in issue, Basic Element, was ever used to injure or defraud Gliklad. Thus, even assuming for the sake of argument that Basic Element was the alter ego of Deripaska, the allegations are insufficient as a matter of law as a basis for jurisdiction over Deripaska.

(Internal quotations and citations omitted) (emphasis added).

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