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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 14, 2020

Domination of Corporation Without Abuse of Corporate Form Insufficient Basis for Veil Piercing Claim

On October 30, 2020, Justice Schecter of the New York County Commercial Division issued a decision in W. & M. Operating, L.L.C. v. Bakhshi, 2020 NY Slip Op. 33597(U), domination of a corporation without the abuse of the corporate form is an insufficient basis for a veil piercing claim, explaining:

Veil piercing on this record is not an option for many reasons. To start, the entities have not been named as defendants or served and there is no pleading that alleges the nonparty entities’ veils should be pierced. Porco would have this court dispense with all of these requirements simply based on his summary-judgment submissions. In these submissions, he has not sufficiently asserted a basis for veil piercing for the very same reasons his initial veil-piercing claim failed; domination without corporate form abuse and fraud is inadequate. Porco again does not satisfy the fraud prong with proof of wrongdoing distinct from the underlying claim. Whether Mullineaux misused his position at the Company has nothing to do with potential abuse of the corporate form of his other companies, Perk and BTM. DCL and veil piercing claims are not the same, the former being more easily proven when, as alleged here, a transfer is made to an insider’s company from an insolvent company.

(Internal citations omitted).

This decision discusses an issue that is common in complex commercial litigation: whether an individual or another company can be held liable for a company’s actions. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a third-party can be held liable for a company’s misconduct.

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