Plaintiff Fails to State Claim for Alter Ego or Successor Liability

On November 16, 2015, Justice Scarpulla of the New York County Commercial Division issued a decision in Weinheimer v. Lower Brule Community Development Enterprise, LLC, 2015 NY Slip Op. 32168(U), dismissing claims based on alter ego or successor liability, explaining:

Those seeking to pierce a corporate veil of course bear a heavy burden of showing that the corporation was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences. Domination alone is not sufficient without an additional showing that it led to inequity, fraud or malfeasance. The plaintiff must state 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 plaintiffs' injury.

Courts have examined various indicia of a veil-piercing situation, including:

(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arms length, (8) whether the corporations are treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own.

(Internal quotations and citations omitted) (emphasis added). Applying those tests, the court found that the plaintiff had not alleged alter ego or successor liability.