New York is highly protective of corporate shareholders, shielding them from the liabilities of their corporations.1 Indeed, eliminating the potential personal liability of corporate principals is viewed as the primary “and completely legitimate” purpose of incorporating.2 If misused, however, this privilege is revocable. In rare circumstances, courts may pierce the corporate veil to impose a corporation’s liabilities on its shareholders to avoid fraud or other wrongful conduct.3 Although the party seeking to pierce a corporation’s veil bears a “heavy burden,”4 such an action may be justified when it is proven that (1) a principal of a corporation, through complete domination, abuses the corporate form, and (2) such abuse was used to commit a fraud, wrong or injustice against the plaintiff seeking to pierce the veil.5
As recent Commercial Division decisions make clear, abuse of the corporate form is not enough. Not only does a party seeking to pierce the corporate veil also need to prove a fraud, wrong or injustice committed against it, that party must also establish a causal connection between the abuse of the corporate form and the wrongful conduct for which relief is sought.
Abuse of the Corporate Form
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