COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL.
The Second Department determined plaintiff had stated a cause of action under the “pierce the corporate veil” theory. Weaver was the developer of a construction project and Andrea was the general contractor. Defendant Weinberg was a member of Weaver and a shareholder of Andrea. Plaintiff had obtained a unpaid judgment against Andrea. Plaintiff alleged Weinberg abused the privilege of doing business in corporate form and sought to pierce the corporate veil and hold Weinberg liable for Andrea’s debts. The court noted that, although the contention that New York does not recognize a cause of action for piercing the corporate veil was not raised below, the question could be considered on appeal because it involves a question of law which appears on the record and which could not have been avoided if raised at the proper time:
To survive a motion to dismiss the complaint, a party seeking to pierce the corporate veil must allege facts that, if proved, establish that the party against whom the doctrine is asserted (1) exercised complete domination over the corporation with respect to the transaction at issue, and (2) through such domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the plaintiff such that a court in equity will intervene … . “Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to [corporate or] LLC formalities, inadequate capitalization, commingling of assets, and the personal use of [corporate or] LLC funds” … .
“Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego” … . A cause of action under the doctrine of piercing the corporate veil is “not required to meet any heightened level of particularity in its allegations … .
Here, the plaintiff adequately pleaded allegations that Weinberg dominated Andrea, and that he engaged in acts amounting to an abuse of the corporate form to perpetrate a wrong or injustice against the plaintiff. In this regard, the plaintiff alleged that Andrea was inadequately capitalized, that Weinberg commingled the assets of Andrea with the assets of Weaver, that Weinberg failed to adhere to corporate formalities with respect to Andrea, that Weinberg kept assets out of Andrea to avoid paying its debts and the judgment to the plaintiff, and that Weinberg used the account of Weaver to partially pay the debts of Andrea to the plaintiff. The plaintiff also sufficiently pleaded allegations that Weaver was the alter ego of Andrea. Olivieri Constr. Corp. v WN Weaver St., LLC, 2016 NY Slip Op 07302, 2nd Dept 11-9-16
CORPORATION LAW(COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)/PIERCING THE CORPORATE VEIL (COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)/APPEALS (COMPLAINT SUFFICIENTLY ALLEGED A CAUSE OF ACTION UNDER THE DOCTRINE OF PIERCING THE CORPORATE VEIL, ISSUE NOT RAISED BELOW PROPERLY CONSIDERED ON APPEAL)