Case Law

"Piercing the corporate veil has become the most litigated issue in corporate law today. In every case, the plaintiff’s intent is to acquire the personal and business assets of the company, and at least half of them win."

Wake Forest, Law Review

Many of the cases involving "piercing the corporate veil" focus on smaller, privately held corporations in which the individuals constituting the shareholders have ignored corporate formalities. In these cases, it is fairly easy to reach the conclusion that the corporate entity should be disregarded.

In recent years, the IRS has made use of corporate veil piercing arguments as a means of recapturing income, estate and gift tax revenue. Since owners of U.S business entities created for asset protection and estate purposes often fail to maintain proper corporate compliance, the IRS has achieved multiple high-profile court victories.

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The Stone v. Frederick Hobby Associates II, LLC, 2001 Conn. Super Docket No.#CV00181620S
The court found that the "instrumentality and identity rules" could be applied, under the facts of the case, to "pierce the corporate veil" of an LLC and hold the individual members personally liable.
Opinion: The court reasoned that because of a lack of observance of formalities between the entities the court reasoned that because there was such unity of ownership and interest, Hobby II’s existence as a separate entity had never really existed or had been terminated, and the existence of Hobby II as an LLC with a separate identity.
Miles v. CEC Homes
There was evidence of inadequate corporate records and failure to maintain Minutes; the corporate veil was pierced.
Cohen v. Williams, 294 Ala. 417, 318 So.2d 279
The sole stockholder did not keep corporate minutes: the court held that such a circumstance justified a disregard of the corporate entity.
DeWitt Truck Brokers, Inc, Appellee W. Ray Flemming Fruit Company and No.75-1653, United States Court of Appeals, Fourth Circuit May 13, 1976
Question: Can the debt of the corporation fall directly onto its officers and/or shareholders?
Decision: Yes
Opinion: Flemming owned most of the stock. He never had a shareholder meeting, and he was the only real director. No one except Flemming ever got paid by the corporation. Flemming kept withdrawing whatever money the corporation had for his personal use. The corporation basically had no capital of its own. Given all this, plus Flemming’s personal assurance to the plaintiff creditor, the appellate court has no problem upholding the district court’s findings of fact.
John C. CULPEPPER, Jr. and Culpepper Properties, Inc., Respondents Supreme Court of Texas Dec 12, 1990
Mancorp, Inc. sued John C. Culpepper, Jr. and Culpepper Properties, Inc. for breach of a construction contract. Mancorp alleged that it had performed the contract by completing work on the First Bank of Galleria building in Bryan, Texas, and that is was owed $510,650, the unpaid balance under the contract.
Question: Was Culpepper Properties simply an alter ego of John C. Culpepper, Jr.
Decision: Yes
Opinion: The jury found that Culpepper Properties, Inc. was the alter ego of John C. Culpepper, Jr.Culpepper and Culpepper Properties, Inc. moved for judgment non obstante veredicto on the jury’s alter ego finding. The trial court rendered judgment for Mancorp in the amount of $221,273.10.
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