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Supreme Court Permits Amendment to Complaint to Allow “Veil-Piercing” Claim Against Sole Member of Corporation

10 Nov 2011
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By Lewis Tesser, Partner, and Timothy Nolen, Associate

A decision from the New York County Supreme Court demonstrates the dangers associated with failing to follow corporate formalities. The case involved issues of civil practice, business law, corporate law and real estate law.

The case, Labgold v. Soma Hudson Blue, LLC, 2011 N.Y. Misc. LEXIS 3956 (Sup. Ct. N.Y. County, August 9, 2011), concerned the sale of a condominium to the plaintiff. The defendant corporation had been assigned the contract for sale. The plaintiff argued that he should be able to amend to complaint to “pierce the corporate veil,” or hold the corporation’s owner liable for the contract. The Court allowed the amendment, noting that plaintiff might be able to establish a veil-piercing claim if he could show that the owner exercised dominion and control over the corporation, commingled personal funds with the business’ funds, and used his control over the defendant corporation to commit a fraud.

Labgold should provide caution to many corporate owners concerned with personal liability for the corporation’s acts. At Tesser, Ryan & Rochman, LLP, our attorneys’ expertise in business and corporate law allows us to identify issues which may arise concerning corporate owners’ personal liability and to litigate, if necessary, claims arising from such issues.

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About Post Author

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Lewis Tesser is a senior partner in the New York law firm of Tesser, Ryan & Rochman, LLP, concentrating his practice in litigation and mediation, representing licensed professionals and professional practices, administrative law and commercial law. Lew Tesser is Vice-President of the New York County Lawyers’ Association and Director of its Ethics Institute. Prior to private practice, Mr. Tesser was an Assistant United States Attorney in the Eastern District of New York. In that capacity, he represented various agencies of the United States government in litigation in the United States District Court and United States Court of Appeals. Mr. Tesser also served as a Judge Advocate in the United States Army where he prosecuted and defended criminal cases and was the chief legal advisor to the Commanding General of the U.S. Army War College, Carlisle, Pennsylvania. He also has served as an Arbitrator for the American Arbitration Association, New York City Civil Court, a Judge for the Environmental Control Board of the City of New York and a lecturer for various Bar Associations and New York area law schools. Mr. Tesser, who was admitted to practice in 1971, is a 1970 Honors graduate from the National Law Center, George Washington University, a Masters graduate from the Wharton Business School, University of Pennsylvania (l974) and a graduate of the Harvard Law School Program of Instruction for Lawyers. He is a past President of Congregation Sons of Israel, Nyack, NY. Publications and Speaking Engagements Editor-In-Chief, “The New York Rules of Professional Conduct Annotated”, Oxford University Press, New York, 2010. A complete list of Mr. Tesser’s speaking engagements and publications is available if you would like to learn more about Mr. Tesser’s work. Representative Cases In Re Zhang, 376 Fed. Appx. 104 (2d Cir. 2010) Continental Casualty Co. v. JBS Construct. Mgmt., 2010 U.S. Dist. LEXIS 85467 (S.D.N.Y. 2010)

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Tesser, Ryan, & Rochman Blog

At Tesser, Ryan, & Rochman we are committed to keeping current, former, and future clients up to date. Here on our blog we will have news regarding our firm, as well as business analysis, various cases, case studies, and legal findings for the benefit of our clients.