The hallmark of the corporate form is its limited liability, which ensures that a judgment recovered against a corporation generally cannot be enforced against its shareholders. But ‘generally’ is an important qualifier. When the corporate form is used to commit fraud and the corporation has no assets to satisfy a judgment, a creditor may “pierce the corporate veil” and hold otherwise immune shareholders personally liable for the corporation’s debts.

Though the details may vary somewhat, these general principles are settled in New York and across all of the federal circuits and state courts. But the critical question of who should decide whether to pierce the corporate veil is anything but settled; indeed, it would be hard to find a question on which federal and state courts are more widely split. This is in large part because the historical roots of veil piercing reach into courts of both law and equity. Some courts, like the U.S. Court of Appeals for the Second Circuit, have determined that juries should decide whether to pierce the corporate veil. But many others, including the U.S. Court of Appeals for the Seventh Circuit, have assigned the task to judges. We believe that judges are better suited for the task and that New York should follow the lead of several states that have recently concluded as much.

Right to Trial by Jury

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]