Commercial Division Blog

Posted: May 18, 2017 / Categories Commercial, Fraud/Misrepresentation, Veil-piercing

Court Will Ignore Corporate Form When it is Used to Perpetrate a Fraud

On April 7, 2017, Justice Dufficy of the Queens County Commercial Division issued a decision in Nandlal v. Al-Pros Construction, Inc., 2017 NY Slip Op. 50620(U), disregarding the corporate form because it was used to perpetrate a fraud, explaining:

Having been barred from performing home-improvement work in the State of New York, the individual defendant, Yussuf Ali a/k/a Yussuf Au, formed a new corporation with a slightly different spelling to its name. His intention was clearly to circumvent the proscription on performing home-improvement work. The corporate form will be disregarded when it has been used to achieve fraud or where the corporation has been so dominated by an individual or another corporation (usually a parent corporation), and its separate identity so disregarded, that it primarily transacted the dominator's business, rather than its own, and can, therefore, be considered the other's alter ego. The Court finds that the corporate entity was misused by Ali, for his own personal ends, to commit a fraud or wrongdoing or avoid his obligations. Since the new corporation was formed with a fraudulent purpose, Ali cannot avail himself of the protection of the corporate forum. Hence, the individual defendant shall be jointly and severally liable for the amount awarded in this trial.

(Internal citations omitted).