Source: https://www.damicopettinicchi.com/scholarly-articles/piercing-the-corporate-veil-in-connecticut.html
Timestamp: 2019-04-23 20:14:19+00:00

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From practical origins more than 4,000 years ago, the veil gradually became the most meaningful article of clothing. Badge of prestige, symbol of modesty, signifier of oppression, it has had many meanings to different cultures across the globe.
In the law, the veil is a standard metaphor for limited liability protection. In that sense, all you need to know is how and when the corporate veil may be pierced in Connecticut courts-knowledge that could mean the difference between declining a case and taking it and obtaining a recovery for your client.
Though the facts in McCarthy were complex, and the piercing-reverse piercing combination unusual, the result is not extraordinary. It is a reminder that the "guiding concept behind . . . veil piercing cases is the need for the court to avoid an over-rigid preoccupation with questions of structure ... and apply the preexisting and overarching principle that liability is imposed to reach an equitable result."14 Though there are no hard and fast rules for determining when the corporate shield should be disregarded, a key factor is the degree of control or influence exercised over the entity. The common thread in Connecticut's case law is an intolerance of shell games.
In Tomasso, the individual defendants, the president and secretary-treasurer of a paving company (Armor) had guaranteed a line of credit on which the company had defaulted, and were sued as guarantors. The president and secretary-treasurer were figureheads, serving under duress with little real authority of their own. They feared that if they did not do as the man behind the business (Lemieux) instructed them, that he would shut down the corporation all together, costing them their paying jobs as estimator and office manager.
When sued on the guarantee, the president and secretary-treasurer in turn made third party veil-piercing claims against Lemieux, that Armor was actually a sole proprietorship. They claimed Lemieux should be made to indemnify them since they were merely acting as his agents.
In Stone, a Superior Court considered an application for prejudgment remedy, applied the identity rule, and found the veil-piercing claim would probably succeed because the individual defendants had " used [the llc] interchangeably with their own personal identities and with identities of other entities under their control, and failed to observe formalities for the limited liability company."40 The corporation's attorney's statement-"Go ahead and sue us. There is no money [in the llc]. Why do you think we set it up as an llc in the first place?"41-undermined the defense of the claim, to be sure.
Though piercing the corporate veil is not a separate cause of action,49 facts satisfying each element of either the instrumentality or identity rule must nonetheless be specifically pleaded.
Fishman v. L & M Development, Inc.53 also demonstrates how fact-pleading requirements with respect to a veil-piercing claim may be satisfied. There, a Superior Court denied a motion to strike counts against the individual defendant on an instrumentality theory. Plaintiff alleged the individual defendant dominated transactions involving the purchase and sale of property so that corporation had no separate existence, and that he used his control to breach the parties' contract and to divest the corporation of assets. The individual defendant's faulty construction and rendering the corporation insolvent was alleged to have caused the plaintiff's injury.
By contrast, in Emma Rosina llc v. Bilides Building & Excavating, llc56 a Superior Court granted a motion to strike because simply stating there was a unity of interest, without allegations concerning conduct claimed to create such unity, was insufficient. A Superior Court in Regulbuto v. General Health Management, Inc.,57 likewise granted a motion to strike for failure to allege sufficient facts to satisfy the first element of the instrumentality rule (control). In Weinberg v. Isom,58 another Superior Court granted a motion to strike a veil-piercing claim that expressed legal conclusions only-"completely control the finances and business practices" and "there is such a unity of interest"-without any factual support.
In some cases it may be more efficient to wait until after a judgment is obtained to start a separate action seeking to pierce the corporate veil in order to enforce the judgment, but given the occasionally rapid evanescence of documentary evidence in shadow enterprises, and the natural waning of memory, there are risks inherent in waiting. A statute of limitations is not one of them,60 but you should nonetheless assess the viability of a veil-piercing claim as early as possible so you can tailor discovery accordingly.
Consider applying for a prejudgment remedy. Obtaining one is not difficult, and could significantly alter the settlement leverage.61 Otherwise, because a veil-piercing claim is fact-intensive, it will not typically be resolved until trial.
Connecticut courts apply the doctrine of piercing the corporate veil flexibly in order to achieve equity. The veil-piercing inquiry is fact-intensive. Assess the viability of a claim early, plead specific facts, and tailor discovery efforts to determine control. Be creative, exhaustive, and tireless-your efforts to lift up, pull down, unravel, pierce, or otherwise set aside the corporate veil will be rewarded.
* Of the Connecticut, Massachusetts and Hawaii Bars.
 See Toshiba America Medical Systems v. Mobile Medical Systems, 53 Conn. App. 484, 492 cert. denied, 249 Conn. 930 (1999) (affirming the trial court's disregard of corporation that was an alter ego of sole stockholder).
 Zaist v. Olson, 154 Conn. 563, 574-75 (1967) (seminal case discussing veil piercing and affirming liability of controlling stockholder and related corporation that used the corporate defendant for their benefit). On the other hand, when the entity functions in the normal manner contemplated and permitted by law, there is nothing insidious in stockholder control, interlocking directorates or identity of officers. Id. at 574.
 See Hershey v. Lonrho, 73 Conn. App. 78, 87 (2002) (piercing the corporate veil is equitable; courts should apply the doctrine only under exceptional circumstances); SPA Folio Collections, Inc. v. Bannon, 217 Conn. 220, 230, cert. denied, 501 U.S. 1223, 111 S. Ct. 2839, 115 L.Ed.2d 1008 (1991) (exceptional circumstances include "where the corporation is a mere shell, serving no legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice.") (Internal quotation and citation omitted.).
 See Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 147, cert. denied, 261 Conn. 911 (2002). For ease of reference, the terms "corporation," "llc," and "entity" are used interchangeably, as are "stockholder" and "shareholder."
 See Turner Murphy Co. v. Specialty Constructors, 659 So. 2d 1242, 1245 (Fla. Dist. Ct. App. 1995) ("[p]iercing a corporate veil is not itself a cause of action any more than the doctrine of respondeat superior is.").
 E.g. Davenport v. Quinn, 53 Conn. App. 282 (1999) (sole shareholder liable for tort judgment against his alter ego corporation according to the identity rule); Donarumo v. Rappe, 1994 WL 228572, *2-3 (Conn. Super.) (DeMayo, J.T.R.) (imposing personal liability for contract breach and CUTPA violations on majority stockholder and sole corporate representative); see also McCarthy v. State Five Industrial Park, Inc., 2009 WL 104287 (Conn. Super.) (Bentivegna, J.) (disregard of corporate shield to enforce judgment stemming from environmental contamination liability).
 E.g., Toshiba, 53 Conn. App. 484 (shareholder liable for corporation's breach of contract); Greene v. HMP Industries, Inc., 2001 WL 950979, *4 (Conn. Super.) (Nadeau, J.) (breach of contract veil-piercing allegations sufficient to withstand motion to strike).
 Be sure to at least assess a veil-piercing claim early, as there are risks inherent in waiting such as loss of evidence.
 See, e.g., Utzler v. Braca, 2008 WL 2068200, *15-18 (Conn. Super.) (Tyma, J.) (developer personally responsible for his actions because he used his corporate entities as a conduit to receive funds used in his sole discretion for business and personal reasons).
It is not necessary to prove actual fraud however. Nor does it matter whether the plaintiff was aware of the circumstances justifying application of the doctrine. See Zaist, 154 Conn. at 572-73 (1967) ("The facts indicate that [plaintiffs] were unaware of, and probably indifferent to, the identity of the owners of the property, who were to receive the actual benefit of [plaintiffs'] work," holding individual defendant and the other corporation he completely dominated and controlled).
 E.g., Litchfield Asset Management Corp., 70 Conn. App. at 158, 150-51 (also noting other contexts in which reverse piercing has arisen).
 2009 WL 104287 (Conn. Super.) (Bentivegna, J.).
 The court found both the instrumentality and identity rules satisfied with respect to his relationship with State Five. Id. at *26-28 (instrumentality), *28-29 (identity).
 The court also found both the instrumentality and identity rules satisfied with respect to her relationship with State Five. Id. at *29-31 (instrumentality), *31-32 (identity).
 Litchfield Asset Management Corp., 70 Conn. App. at 151 (quoting LiButti v. United States, 107 F.3d 110, 119 (2d Cir. 1997)).
 United Electrical Contractors, Inc. v. Progress Builders, Inc., 26 Conn. App. 749, 755 (1992).
 Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., 187 Conn. 544, 578 (1982) ("Tomasso") (Borden, J., dissenting).
See, e.g., Saphir v. Neustadt, 177 Conn. 191, 209-12 (1979) (no error in referee's conclusion that entity was a corporation in name only such that corporate structure was properly disregarded under either rule); Zaist, 154 Conn. at 573 (both rules satisfied); Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 148, n. 11, cert. denied, 261 Conn. 911 (2002) (trial court properly concluded both rules were satisfied, but meeting either is sufficient); Toshiba, 53 Conn. App. at 489-92 (same); Stone v. Frederick Hobby Assocs. II, llc, 2001 WL 861822, *5-8 (Conn. Super. July 10, 2001) (Mintz, J.) (ordering prejudgment remedy on likelihood of veil-piercing claim's success under both rules).
 Old Farms Associates v. Commissioner of Revenue Services, 279 Conn. 465, 488-89 (2006); Season-All Industries, Inc. v. R.J. Grosso, Inc., 213 Conn. 486, 490 (1990). Note that because of the fact determinative nature of the inquiry, the appellate decisions discussing veil piercing have typically applied the highly deferential "clearly erroneous" standard of review. See, e.g., Falcone v. Night Watchman, Inc., 11 Conn. App. 218, 223 (1987).
 Tomasso, 187 Conn. at 553 (Emphasis in original).
 108 Conn. App. 633 (2008) (Borden, J., writing for all of the justices).
 Thus, "[t]here was ample evidence that [the llc] had no separate existence, that [the individual defendant] treated it as such and that [he] used it to perpetrate an unjust act in contravention of the plaintiff's legal rights." Id. at 641.
 177 Conn. at 211; see also Tomasso, 187 Conn. at 555-57 (cautioning that ownership, while important, is not a prerequisite to piercing the corporate veil but is merely one factor to be considered in evaluating the entire situation, observing that "the element of control or influence exercised" is the "key factor").
 See 187 Conn. at 549-52, 558-59.
 The conduct need not have reached the level of actual fraud or a CUTPA violation. See Toshiba, 53 Conn. App. at 491.
 Litchfield Asset Management Corp., 70 Conn. App. at 154-56.
 2009 WL 104287, *28-29, *30; see also Fishman v. L & M Development, Inc., 2009 WL 104287, *3-4 (Conn. Super.) (Pickett, J.) (denying motion to strike where complaint alleged wrongful divestiture of assets).
 Toshiba, 53 Conn. App. at 492.
 Saphir, 177 Conn. at 210-11 (1979) (holding individual liable under identity theory).
 53 Conn. App. at 490-91.
 53 Conn. App. 282, 299-303 (1999) (affirming liability of sole shareholder liable for tort judgment against his alter ego corporation).
 2008 WL 861822, at *39.
 2009 WL 104287, *28-29, 31-32.
 Id. at 574-81. Justice Borden also considered the case for veil piercing even more persuasive under the identity rule than pursuant to the instrumentality rule. Id. at 574-75; see pp. 7-10, infra.
 See Tomasso, 187 Conn. at 575-78 (dissent).
 See Zaist, 154 Conn. at 578 (controlling stockholder and a related corporation liable for another corporation's debt; corporate structure could have been disregarded under either rule despite the fact that debtor corporation maintained an office and checking account, kept corporate and financial records, filed corporate returns and had employees); Saphir, 177 Conn. at 209-10 (affirming where trial court had concluded that individual and corporation were alter egos and holding both liable); Miller v. Guimaraes, 78 Conn. App. 760, 772 (2003) (two companies properly treated as if the same).
 See Turner Murphy Co. v. Specialty Constructors, 659 So. 2d 1242, 1245 (Fla. Dist. Ct. App. 1995) (applying statute of limitations to action to enforce a judgment against alleged alter ego of the judgment debtor).
 76 Conn. App. 627 (2003).
 1992 WL 220134, *2-3 (Conn. Super.) (Pickett, J.).
 2001 WL 950979, *4 (Conn. Super.) (Nadeau, J.) (denying portion of motion to strike directed at breach of contract / veil-piercing count but sustaining it as to misrepresentation / veil-piercing count since it merely alleged individual was acting as corporate representative).
 2002 WL 31898066, *3-4 (Conn. Super.) (Zoarski, J.T.R.).
 1991 WL 28095, *3 (Conn. Super. 1991) (Clark, J.).
 1995 WL 299339, *5 (Conn. Super. 1995) (Karazin, J.).
 O'Connell v. Bridgeport Hospital, 2000 WL 728819, *5 (Conn. Super.) (Skolnick, J.) (a "pleading must be held to satisfy the requirement of the Practice Book if the facts set forth therein, including all facts necessarily to be implied therefrom, support the essential elements....") (Internal citation omitted.).
 See CHRO v. Travel & Tour Services, Inc., 1994 WL 386082 (Conn. Super.) (Hennessey, J.) (rejecting defendant's argument that tort statute of limitations should apply to veil-piercing claim, agreeing with plaintiff that claim was an action to enforce a prior judgment governed by 20-year statute of limitations in Conn. Gen. Stat. 52-598).
 Conn. Gen. Stat. 52-552 et seq.; Shawmut Bank v. Brooks Development Corp., 46 Conn. App. 399, 407 (1997) (Internal quotation and citation omitted.). A party claiming a conveyance is fraudulent must prove so by clear and convincing evidence. Tessitore v. Tessitore, 31 Conn. App. 40, 43 (1993). For a detailed discussion of this subject see Edward A. Weiss, Connecticut Fraudulent Conveyance Law, 11 Bridgeport L. Rev. 3 (1991).
 See, e.g., Kilduff v. Adams, Inc., 219 Conn. 314, 331-332 (1991) (holding that corporate officers "were personally liable for their participation in the fraud, regardless of whether the corporate veil should have been pierced."); Scribner v. O'Brien, Inc., 169 Conn. 389, 404 (1975) ("...[w]here, however, an agent or officer commits ... a tort, whether or not he acts on behalf of his corporation, he is liable to third persons injured thereby").

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