In Veil-Piercing Claim, First Department Holds “Transaction Attacked” Does Not Need To Be Transaction From Which Judgment Debtor’s Liability Arose

Posted: October 16, 2026 / Written by: Ian Weiss / Categories Motion to Dismiss, Commercial

In Veil-Piercing Claim, First Department Holds “Transaction Attacked” Does Not Need To Be Transaction From Which Judgment Debtor’s Liability Arose

On September 24, 2026, in UBS Securities LLC v. Dondero, Index No. 650744/23, Case No. 2025-02596, the Appellate Division, First Department, largely affirmed an order of Justice Melissa A. Crane of the New York County Commercial Division denying motions to dismiss a turnover petition asserting a veil-piercing claim. UBS, a judgment creditor, alleged that James Dondero dominated the judgment debtors and used that domination to strip them of their assets and render them judgment proof. A veil-piercing plaintiff must show that the owner dominated the entity “in respect to the transaction attacked.” Dondero argued that the transaction attacked was the underlying transaction that gave rise to UBS’s judgments (the Knox Transaction), and that UBS had not alleged that he dominated the judgment debtors with respect to that transaction. The Court disagreed, explaining:

We reject Dondero’s contentions that the “transaction attacked” for the purposes of ascertaining alter ego liability was necessarily the Knox Transaction itself, and that UBS’s failure to plead that Dondero dominated the judgment debtors with respect to the execution or initial breach of that transaction is fatal to UBS’s veil piercing/alter ego claim. Case law supports the conclusion that the “transaction attacked” need not be the underlying transaction itself, but can be a subsequent transaction designed to frustrate a party’s ability to recover for obligations stemming from the underlying transaction, such as a judgment. This conclusion is consistent with the fundamental purposes of veil piercing, which are preventing fraud and achieving equity. Additionally, accepting [respondents’] position that the “transaction attacked” must necessarily be the underlying transaction itself would perversely encourage abuse of the corporate form to avoid judgment debts. Ultimately, a plaintiff or petitioner will identify the “transaction attacked,” and bear the burden of pleading, and subsequently proving, the elements of a veil-piercing claim as to that transaction.

(Citations omitted.)

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning veil-piercing and alter ego claims in judgment-enforcement proceedings.

To read more about veil-piercing claims, see Schlam Stone & Dolan’s related Commercial Division Blog posts on a decision holding that allegations that a debtor moved its assets to a new entity to keep them from creditors sufficiently pleaded alter ego liability and a decision sustaining a veil-piercing claim based on allegations that the defendants used sham corporate transactions to strip the plaintiff’s collateral and loan proceeds.