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COA Gives Green Light To Corporate Veil Piercing Claim

By Sean E. Andrussier

The NC COA reversed a trial court's dismissal of a corporate veil piercing claim. The case is Fischer Inv. Capital, Inc. v. Catawba Dev. Corp.

In Fischer, the trial court dismissed the creditor plaintiff's claim, among other things, for piercing the corporate veil of defendant Catawba Development Corporation. The plaintiff alleged Catawba was dominated and controlled by defendant Mark Lewis, who was in default on debt to the plaintiff. The plaintiff alleged that Lewis, through Catawba, fraudulently transfered property to escape creditors, including the plaintiff. The trial court dismissed for failure to state a claim, and the COA reversed.

The COA held that the complaint alleged all the necessary elements for piercing the corporate veil: 1) complete domination and control such that the corporate entity is merely an alter-ego; 2) use of that control for an improper purpose; and 3) proximate cause of the plaintiff's injuries.

The court rejected the defendants' theory that NC law doesn't support corporate veil piercing outside the personal jurisdiction context. The court also rejected the defendants' theory that because Catawba was not a party to the debt transcation, it could not be held liable for the debt to plaintiff; the court noted that Lewis was a party to the transaction, he was allegedly Catawba's dominator, and, if Catawba were pierced, Lewis would be on the line.

Full post as published by North Carolina Appellate Blog on November 04, 2009 (boomark / email).