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Legal Memorandum: Doctrine of Piercing the Corporate Veil

Issue: What must a party show in order to be entitled to summary judgment when seeking permission to pierce the corporate veil?

Area of Law: Corporate & Securities, Litigation & Procedure
Keywords: Doctrine of piercing the corporate veil; Corporate formalities
Jurisdiction: Federal, Minnesota, Virgin Islands
Cited Cases: 296 F.3d 164; 695 N.W.2d 153; 19 F.3d 1503; 225 F.3d 330; 51 F. Supp. 2d 542; 800 F. Supp. 1210; 850 F. Supp. 1239; 558 N.W.2d 746
Cited Statutes: None
Date: 01/01/2006

The Court of Appeals for the Third Circuit has described the doctrine of piercing the corporate veil:

The “‘classical’ piercing of the corporate veil is an equitable remedy whereby a court disregards ‘the existence of the corporation to make the corporation’s individual principals and their personal assets liable for the debts of the corporation.'”  We have commented that “Pennsylvania, like New Jersey, does not allow recovery unless the party seeking to pierce the corporate veil on an alter ego theory establishes that the controlling corporation wholly ignored the separate status of the controlled corporation and so dominated and controlled its affairs that its separate existence was a mere sham. . . . In other words, both Pennsylvania and New Jersey require a threshold showing that the controlled corporation acted robot- or puppet-like in mechanical response to the controller’s tugs on its strings or pressure on its buttons.” 

 

E. Minerals & Chem. Co. v. Mahan, 225 F.3d 330, 333 n.6 (3d Cir. 2000) (citations omitted).  See also Killian v. McCulloch, 850 F. Supp. 1239, 1247 (E.D. Pa. 1994) (to pierce the corporate veil in the Third Circuit, the plaintiff must show, inter alia, “failure to observe corporate formalities, . . . and that the corporation is merely a façade for the operations of the dominant shareholders”).  The court may pierce the corporate veil to hold an individual liable for corporate wrongs.  “The alter ego theory comes into play in piercing the corporate […]

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