Intellectual Property Law

Judge Sleet: No Corporate Veil Piercing Without Allegations of Injustice

By Karen E. Keller, Andrew A. Lundgren et al.

Chief Judge Sleet recently issued a memorandum opinion on a motion to dismiss and transfer in CNH America LLC v. Kinzenbaw, C.A. No. 08-945-GMS (D. Del. Nov. 9, 2009) (mem.), a patent infringement case. Defendants in the case include Kinzenbaw, an Iowa resident, and his Delaware corporation (based in Iowa), Kinze Manufacturing. Id. at 1, 5.

The Court granted the motion to dismiss as to Kinzenbaw the individual, based on lack of personal jurisdiction. Id. at 2-3. Plaintiff had alleged jurisdiction on Kinzenbaw based on corporate veil piercing of his Delaware corporation, because Kinzenbaw failed to uphold many corporate formalities (traditionally a key factor in veil piercing), and because he had the "capacity" to siphon money from the corporation. Id. According to the Court, plaintiff was correct that "[a]lter ego liability and corporate veil piercing theories function to prevent an independent corporation from being used to accomplish injustice or evade the law," but it failed to show any injustice or evasion of the law here. Id. Disregard of formalities is only one factor in a veil piercing analysis, and "capacity" to siphon money is different from actually siphoning money. Id.

Kinze Manufacturing, however, remained in the case. As usual, the Court denied Kinze's motion to transfer, despite Kinze's arguments regarding the location of witnesses and documents. Id. at 3-5.

CNH America LLC v. Kinzenbaw, C.A. No. 08-945-GMS (D. Del. Nov. 9, 2009) (mem.)

Full post as published by Delaware IP Law Blog on November 10, 2009 (boomark / email).