PLAINTIFF’S MOTION TO AMEND THE COMPLAINT TO ADD ALLEGATIONS SUPPORTING “PIERCING THE CORPORATE VEIL” SHOULD HAVE BEEN GRANTED, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to amend the complaint to add allegations supporting “piercing the corporate veil” in this breach of contract action should have been granted:

“Broadly speaking, the courts will disregard the corporate form, or, to use accepted terminology, pierce the corporate veil, whenever necessary to prevent fraud or to achieve equity” … . “Because a decision whether to pierce the corporate veil in a given instance will necessarily depend on the attendant facts and equities, the New York cases may not be reduced to definitive rules governing the varying circumstances when the power may be exercised” … . However, “[g]enerally, 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 plaintiff must adequately allege the existence of corporate obligation and that defendant exercised complete domination and control over the corporation and abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice” … . “[T]he 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. In determining whether to pierce the corporate veil, [g]enerally considered are such factors as whether there is an overlap in ownership, officers, directors and personnel, inadequate capitalization, a commingling of assets, or an absence of separate paraphernalia that are part of the corporate form” … . Another factor to be considered is whether the corporation and its owners shared “common office space” … . “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” … , and “a fact-laden claim to pierce the corporate veil is unsuited for resolution on a pre-answer, pre-discovery motion to dismiss” … . HLI Rail & Rigging, LLC v Franklin Exhibit Mgt. Group, LLC, 2025 NY Slip Op 02330, Second Dept 4-23-25

Practice Point: Consult this decision for a concise description of the criteria for “piercing the corporate veil” in the context of a motion to amend the complaint to add the relevant allegations.