Commercial Division Blog

Posted: July 8, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Seth D. Allen, Joshua Wurtzel, Channing J. Turner / Category Commercial Division Justices

Shared Principal Corporate Officer and Allegations that Party Did Not Maintain Separate Offices Not Sufficient to Pierce Corporate Veil

On May 11, 2022, Justice Masley of the New York County Commercial Division issued a decision in Irma C. Pollack LLC v. OP Dev. Corp., 2022 NY Slip Op 31541(U) holding that a complaint failed to properly plead that a party had pierced the corporate veil where the entities shared a principal officer and did not maintain separate offices, stating:

"Piercing the corporate veil generally 'requires a showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury." (Sheridan Broadcasting Corp. v Small, 19 AD3d 331, 332, 798 N.Y.S.2d 45 [1st Dept 2005] [citation omitted].) Plaintiff's burden is heavy and "mere conclusory alter [*8] ego allegations are insufficient to survive a motion to dismiss." (226 [**7] Fifth Ave. LLC v SBF Intl., Inc., 2012 NY Slip Op 33491[U], *11-12 [Sup Ct, NY County 2012] [citations omitted].) The question of control is highly fact-dependent and in determining that question,

"courts have considered factors such as the disregard of corporate formalities; inadequate capitalization; intermingling of funds; overlap in ownership, officers, directors and personnel; common office space or telephone numbers; the degree of discretion demonstrated by the alleged dominated corporation; whether the corporations are treated as independent profit centers; and the payment or guarantee of the corporation's debts by the dominating entity. . . [n]o one factor is dispositive."  (Tap Holdings, LLC v Orix Fin. Corp., 109 AD3d 167, 174, 970 N.Y.S.2d 178 [1st Dept 2013]), citing TNS Holdings v MKL Sec. Corp., 243 A.D.2d 297, 300, 663 N.Y.S.2d 144, revd on other grounds, 92 N.Y.2d 335,703 N.E.2d 749, 680 N.Y.S.2d 891 [1998].)

Pollack's allegations are woefully inadequate to pierce the corporate veil to hold Benenson liable for any breach of the Lease by OP. Even accepting the allegations as true, Pollack fails to meet its heavy burden. A shared principal officer and allegations that OP did not maintain its own office and occasionally paid or collected rent are not enough to show that Benenson exercised complete domination of OP. Further, plaintiff must sufficiently allege that the domination was used to commit a fraud [*9] or wrong against it (Sheridan Broadcasting Corp., 19 AD3d at 332), and "a simple breach of contract, without more, does not constitute a fraud or wrong warranting the piercing of the corporate veil." (Skanska USA Bldg. Inc. v Atl. Yards 82 Owner, LLC, 146 A.D.3d 1, 12, 40 N.Y.S.3d 46 [1st Dept 2016] [citation omitted], affd 31 NY3d 1002, 74 N.Y.S.3d 805, 98 N.E.3d 720 [2018] [internal quotation marks and citation omitted].)

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