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Tagged Posts: Veil piercing’

Personal Liability for Environmental Violations (Part III)

December 15, 2016

In State v. Pure Tech Systems, Inc.,[1] the property at issue had been used for petroleum and hazardous substance operations dating back to the 1880s and was already subject to the state’s closure order by the time it was transferred to Pure Tech Systems, Inc. (“Pure Tech”).  Subsequently, the City of Cleveland issued a citation to close the facility for the city and state fire code violations, followed by a consent order to address the violations.  The state’s environmental agency also began regulatory compliance actions against Pure Tech, which resulted in two additional consent orders. … Read the rest

Personal Liability for Environmental Violations (Part II)

December 8, 2016

In Morello v. State,[1] White Lion Holdings, L.L.C. (“White Lion”), a company owned by Morello, bought a piece of real property that was previously used as a pipe-manufacturing facility.  The previous owner of the property had a state-issued compliance plan to clean up groundwater contamination at the facility, which was also transferred to White Lion after the purchase.  A few years later, the State of Texas sued White Lion for failure to adhere to the requirements of the compliance plan and sought to hold Morello individually liable as the manager and operator of the company. … Read the rest

Personal Liability for Environmental Violations (Part I)

December 6, 2016

As you know, one of the principal advantages of forming a limited liability company or corporation is that it offers protection from liability for business debts and obligations.  As you also know by now, however, this liability shield is not absolute.  We explained in our previous blog series “LLC Update: Piercing the Corporate Veil” that in certain limited situations, courts may “pierce the corporate veil” to hold LLC members liable for business debts and obligations, especially when they operate the business without the requisite corporate formalities, commingle personal and business finances, and/or use the business entity to avoid creditors. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 6)

March 1, 2016

We have looked at the laws governing veil piercing in New York, Wyoming, Texas, and Maryland.  Veil piercing is available in most other states in varying degrees, but it bears repeating that limited liability is the rule and piercing is the rare exception to be applied only in cases involving exceptional circumstances.[1]  The cases we discussed here are merely a snapshot of veil piercing laws in different states and examples of situations where courts allowed veil piercing, not necessarily indicative of that particular state’s business-friendliness, as veil piercing is highly fact-intensive. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 5)

February 25, 2016

Maryland.

In recent years, Maryland has become one of the most difficult states in which to pierce the corporate veil, with a success rate at about 25.81%.[1]  This is an interesting reversal, given that the state had a relatively liberal 40% rate until 1986.[2]  Under Maryland law, where there is no allegation of fraud, a court may still disregard the corporate entity and establish personal liability to enforce the so-called a “paramount equity,”[3] but this seems to be a pretty tough standard to meet.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 4)

February 18, 2016

Texas.

In Texas, veil piercing is in large part governed by the statute.  Specifically, a shareholder is not liable to the corporation or its creditors with respect to, among other things, contractual obligations of the corporation on the basis that the shareholder was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory.[1]  As in Wyoming, a shareholder is also not liable for the corporation’s failure to observe any corporate formality, including the failure to comply with the statute or the certificate of formation or bylaws of the corporation.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 3)

February 11, 2016

Wyoming.

Wyoming courts allow veil piercing in about 61.90% of cases, far exceeding the national average, though the small size of the dataset (21) makes it difficult to say that the rate is statistically meaningful.[1]  In Wyoming, veil piercing law was also modified by statute around the time this number came out, so that failure of an LLC to observe any particular corporate formalities is no longer a ground for imposing liability on the members or managers for the liabilities of the company.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 2)

February 4, 2016

New York.

According to a 2010 study of a dataset of 2908 cases from 1658 to 2006, New York courts allow veil piercing in about 49.81% of cases and is among the most prominent producers of veil piercing cases.[1]

In Agai v. Diontech Consulting, Inc.,[2] a recent case, a creditor sought to pierce the veil of a corporation, arguing that the principals operated the consulting business without corporate formalities for their own unjust enrichment and to avoid the judgments obtained by the creditor. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.