..a parent corporation may be liable on a contract signed by its subsidiary if the subsidiary is shown to be a mere shell dominated and controlled by the parent for the parent’s own purposes....The court explained that:
The corporate veil will be pierced (1) to achieve equity, even absent fraud, where the officers and employees of a parent corporation exercise control over the daily operations of a subsidiary corporation and act as the true prime movers behind the subsidiary’s actions, and/or (2) where a parent corporation conducts business through a subsidiary which exists solely to serve the parent.
Sbarro, 91 A.D.2d at 614 (citations omitted).
Additionally, where a shareholder uses a corporation for the transaction of the shareholder’s personal business, as distinct from the corporate business, the courts have held the shareholder liable for acts of the corporation. See Rapid Tr. Subway Constr. Co. v. City of N.Y., 259 N.Y. 472 (1932). The determinative factor is whether “the corporation is a ‘dummy’ for its individual stockholders who are in reality carrying on the business in their personal capacities for purely personal rather than corporate ends.” Walkovszky v. Carlton, 18 N.Y.2d 414, 418 (1966).
Apart from the foregoing rules, a parent corporation can be held liable for the actions of its subsidiary under veil piercing or alter ego liability principles.
The alter ego doctrine has been applied to pierce the veil between corporations when subsidiary corporations are used by a dominating parent corporation to engage in fraudulent or wrongful conduct. Under New York law, a corporation is considered to be a “mere alter ego when it ‘has been so dominated by . . . another corporation . . . and its separate identity so disregarded, that it primarily transacted the dominator’s business rather than its own.’” Trabucco v. Intesa Sanpaolo, S.p.A, 695 F. Supp. 2d 98, 107 (S.D.N.Y. 2010). When that occurs, “the dominating corporation will be held liable for the actions of its subsidiary ….” Id.
Courts consider a wide array of factors in assessing the degree of domination and control exercised by the parent company. Such factors include: overlap in ownership, officers, directors, and personnel; common office space, address and telephone numbers of the corporate entities; whether the related corporations deal with the dominated corporation at arm’s length; and whether the corporation in question had property that was used by other of the corporations as if it were its own. Shisgal v. Brown, 21 A.D.3d 845, 848 (1st Dept. 2005) (internal citation omitted). Because the decision whether to pierce the corporate veil depends “on the attendant facts and equities” (Matter of Morris v. N.Y. State Dep’t of Taxation & Fin., 82 N.Y.2d 135, 141 (1993)), and because said facts can apply to an “infinite variety of situations” (Wm. Wrigley Jr. Co. v. Waters, 890 F.2d 594, 601 (2d Cir. 1989)), no one factor controls the consideration. N.Y. Dist. Council of Carpenters Pension Fund v. Perimeter Interiors, Inc., 657 F. Supp. 2d 410, 421 (S.D.N.Y. 2009)
Subsidiary's creditors may look to Parent's assets if Subsidiary is thinly capitalized or other facts cause a court to "pierce the corporate veil." Some of Subsidiary's statutory liabilities may attach to Parent's assets. (page 433)
AI
