Veil Piercing Claims Should Have Been Dismissed

On June 12, 2018, the First Department issued a decision in Shawmut Woodworking & Supply, Inc. v. ASICS America Corp., 2018 NY Slip Op. 04291, holding that veil piercing claims should have been dismissed, explaining:

There is no basis in the complaint and supporting materials for applying the doctrine of piercing the corporate veil, which indeed plaintiff did not rely on. The complaint does not allege that ASICS and Windsor had any corporate relationship or overlapping ownership. It does not allege that Windsor was a dummy corporation or that ASICS had complete control over Windsor and used that control to perpetrate a fraud or wrong against plaintiff.

To the extent plaintiff relies on agency principles to hold ASICS liable on the contract with Windsor, the complaint fails to allege actual or apparent agency. It does not allege that ASICS actually authorized Windsor to enter into the contract on behalf of ASICS. To the contrary, the master retail agreement between ASICS and Windsor makes clear that Windsor was an independent contractor, did not have the authority to bind ASICS, and was not authorized to act as ASICS's agent, and that ASICS would not assume Windsor's liabilities.

Nor does the complaint allege that plaintiff relied on any representations or conduct by ASICS that would give rise to the appearance and belief that Windsor possessed authority to enter into the contract on ASICS's behalf.

(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 or the business that defrauded you 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.