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THE COMPLAINT ADEQUATELY ALLEGED FACTS SUPPORTING PIERCING THE CORPORATE VEIL; THE CAUSES OF ACTION FOR UNJUST ENRICHMENT AND BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined (1) the complaint sufficiently alleged the corporate veil should be pierced, and (2) the unjust enrichment and breach of the implied covenant of good faith and fair dealing causes of action should not have been dismissed:

… [A] plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury” … . “The decision whether to pierce the corporate veil in a given instance depends on the particular facts and circumstances” … . “Factors to be considered in determining whether the owner has abused the privilege of doing business in the corporate form include whether there was a failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use” … . 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 … .

… [T]he plaintiffs adequately pleaded allegations that [the individual defendants] dominated [the corporations], and that they engaged in acts amounting to an abuse of the corporate form to perpetrate a wrong or injustice against the plaintiffs … . …

Where, as here, the existence of a contract, in this case, the alleged agreements [are] in dispute, a plaintiff may allege a cause of action to recover damages for unjust enrichment as an alternative to a cause of action alleging breach of contract (see CPLR 3014 …). Consequently, the cause of action alleging unjust enrichment was not duplicative of the breach of contract cause of action … . Furthermore, the cause of action alleging breach of the implied covenant of good faith and fair dealing was not duplicative of the breach of contract cause of action since it alleged that the defendants engaged in additional conduct to realize gains from the plaintiffs, while depriving the plaintiffs of the benefits of the parties’ agreements … . F&R Goldfish Corp. v Furleiter, 2022 NY Slip Op 06112. Second Dept 11-2-22

Practice Point: The facts alleged in the complaint supported piercing the corporate veil, criteria explained.

Practice Point: Because the existence of the agreements was in dispute, the unjust enrichment cause of action should not have been dismissed as duplicative of the breach of contract cause of action.

Practice Point: The facts alleged supported a cause of action for breach of the implied covenant of good faith and fair dealing.

 

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