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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 17, 2021

Overlapping Ownership and Common Office Space Alone Insufficient to Support Veil Piercing Claim

On February 11, 2021, the First Department issued a decision in Suverant LLC v. Brainchild, Inc., 2021 NY Slip Op. 00918, holding that overlapping ownership and common office space alone were insufficient to support a veil piercing claim, explaining:

The allegations in the complaint do not warrant piercing the corporate veil to hold KVK, Vepuri, or Holdings liable. Although the complaint alleges that there was overlapping ownership and common office space, it does not allege that KVK, Vepuri or Holdings completely dominated and controlled Brainchild and that this domination was used to commit a fraud or wrong causing injury to plaintiff. There is no allegation that KVK, Holdings, or Brainchild were not legitimate businesses or were created for the improper purpose of making it impossible for plaintiff to collect on the contracts, or that corporate funds were purposefully diverted to make Brainchild judgment-proof. The complaint does not allege that Vepuri acted in his individual capacity or that he transferred personal funds in and out of corporate defendants without regard to formality and to suit his immediate convenience. With the exception of his involvement in one meeting, the complaint is silent about what Vepuri did or said or how he allegedly controlled any of the decisions made by the corporate defendants.

(Internal quotations and citations omitted).

An issue that is not uncommon in commercial litigation is how do you collect on a judgment when the counter-party to your contract has no assets. In certain circumstances, discussed in this decision, you can attempt to pierce the corporate veil and recover from a business’s owner or operators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding whether you can seek to hold a business’s owner or operators liable for the business’s debts.

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