Legal Memorandum: Piercing the Corporate Veil

Issue: What standard is used to determine whether a court should permit a party to pierce the corporate veil of another?

Area of Law: Business Organizations & Contracts
Keywords: Piercing the corporate veil; Burden of proof
Jurisdiction: New Jersey
Cited Cases: None
Cited Statutes: None
Date: 10/01/2007

When a party seeks an exception to the fundamental rule that a corporation is a distinct legal entity, such as piercing the corporate veil, that party bears the burden of proof.  See Tung v. Briant Park Homes, Inc., 287 N.J. Super. 232, 240 (App. Div. 1996); Touch of Class Leasing v. Mercedes-Benz Credit of Canada, Inc., 248 N.J. Super. 426, 441 (App. Div.), certif. denied, 126 N.J. 390 (1991). 

In New Jersey, whether the corporate existence should be disregarded is a question peculiarly for the factfinder.  See Verni ex rel. Burstein v. Stevens, 387 N.J. Super. 160, 199 (App. Div. 2006) (citing G–I Holdings, Inc. v. Bennett, 380 F. Supp. 2d 469, 477-78 (D.N.J. 2005)), certif. denied, 189 N.J. 429 (2007).  In Verni, the plaintiffs were seriously injured in an accident caused by a man who had gotten extremely drunk at a football game at Giants Stadium.  The lower court allowed them to amend the complaint, late in the proceedings, to include corporate entities related to the concessionaire.  In permitting joinder, the lower court concluded either that the corporations functioned as a single corporate entity, or that the court could pierce the corporate veil.  The Appellate Division reversed on this point.  Among other things, it noted that, “[t]he issue of piercing the corporate veil is submitted to the factfinder unless there is no evidence sufficient to justify disregard of the corporate form.”  Id. at 199 (emphasis added).  In other words, the issue cannot be decided as a […]

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