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13 Cards in this Set
- Front
- Back
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submarine corp
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- same shareholders
- different board for each corp and each corp does something different i. one will do the finances ii. another will deal with leasing the land iii. another with construction iv. another with management - if there is an action agains teh corp dealing with construction, then the entire enterprise isn't screwed because there are other corps to keep it afloat - if there isn't enough money in that one corp, then pierce the corp veil horizontally to another corp in the enterprise, but that's hard to do |
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Alter ego elements
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- Alter ego element
i. Using the corp assets without the formalities ii. A formality is having the board of directors declaring dividends, or borrowing the money from the corp - Inequity i. Another word for unfairness - Harm to the pl i. Because the def was taking money without the authority to do so, the pl could collect and that’s not fair |
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choice of law: internal rule of law
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- one of the two approaches to the choice of law
- Any issue of law regarding the corp comes under the state of incorporation - This generally refers to internal issues of the corp i. Breach of duty by directors to shareholders, or employees ii. Within the corp |
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choice of law: tort and contract issues
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- get law of where they arise
- find the law of jurisdiction for piercing the corp veil |
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instrumentality theory elements
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- all formalities have been complied with
- Shareholders dominate the will of the corp i. This is always going to be true in every corp ii. In small corp, then of course because they put themselves on the directors - Shareholders have used this domination to work an unfairness to the pl i. Bartle v. Co-op owners ii. There, the shareholders were running the corp so that they couldn’t make a profit iii. They were selling at cost and so when something bad happens, the contractors are screwed because there’s no cushion - Harm resulting from the unfair domination of the corp i. The pl was hurt - NY puts the burden on the pl - CA puts the burden on the corp |
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under-capitalization theory elements
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- Under capital element
i. Must be deliberate (Not talking about bad business skills, but shareholders who don’t put in a reasonable amount of capital to ensure the creditors so that they deserve liability) ii. Must be gross i. Look at the business, what’s the extent of liability exposure (How much should we borrow, what’s our tort liability, etc.) ii. The under capitalization should be grossly below the liability level (Shows that the shareholders are deliberately not putting in the capital) - Active participation i. Only pierce to shareholders who actively participate in operating this business - Unfairness - Harm |
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Misrepresentation element
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- like fraud
- Misrepresentation by someone i. Can be implied - Reasonable reliance - Harm i. Pl can’t collect 100 cents on the dollar - Claim can be from the fact that you did contract with one branch of the submarine corp but it was really with another branch |
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Anderson v. Abbott theory
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i. Whenever the def is using the corp structure in order to violate either statutory or case law or some settled public policy
ii. Came up when shareholders held corp, which was a fed bank - Then statutes changed that if the bank fails, then the investors can come after the shareholders for their money and the par value of the stock - So the shareholders created a holding company to hold the stock (The holding company had no money) - Then the bank went under, and when the investors in the bank went to the holding company to get their money, they were stuck because the company didn’t have any money - The court let them go to the shareholders |
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when suing a corp trying to pierce its veil, make sure to
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through discovery/interrogatories, find the shareholders and then add them to the action. this prevents unnecessary litigation/another case once you do get to pierce the veil
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for businesses who usually run credit checks
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they will be held to have known all of the info that its credit check would've turned up, including lack of funds. this means that it's harder for them to pierce the veil. usually applies to banks
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how do you prove cause of harm for any of this
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recover actual account books of the corp through discovery, notice depositions.
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subordination of shareholder debt
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It’s like piercing the corporate veil, only less severe. Under one of the following theories, we find that debts owed to shareholders are subordinated to debts owed to outsiders
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three ways to get subordination of shareholder debt
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undercapitalization
alter-ego instrumentalities |
