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

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.