Opinion ID: 703160
Heading Depth: 3
Heading Rank: 4

Heading: Veil Piercing/Alter Ego

Text: 20 In some instances, the corporate relationship between a parent and its subsidiary are sufficiently close as to justify piercing the corporate veil and holding one corporation legally accountable for the actions of the other. As a general matter, however, a corporate relationship alone is not sufficient to bind a nonsignatory to an arbitration agreement. See Keystone Shipping, 782 F.Supp. at 30-31. Nonetheless, the courts will pierce the corporate veil in two broad situations: to prevent fraud or other wrong, or where a parent dominates and controls a subsidiary. Carte Blanche (Singapore) Pte., Ltd. v. Diners Club Int'l, Inc., 2 F.3d 24, 26 (2d Cir.1993); see also Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 138-39 (2d Cir.1991) (Liability ... may be predicated either upon a showing of fraud or upon complete control by the dominating corporation that leads to a wrong against third parties.). While the district court below noted that, [c]ounsel for E & S also denied at oral-argument that its claim was properly articulated as veil-piercing, E & S now asserts that an alter ego relationship between Thomson and Rediffusion may exist. While E & S concedes that it can make no showing of fraud, it argues that Thomson sufficiently dominated Rediffusion as to justify veil piercing. 21 Veil piercing determinations are fact specific and differ[ ] with the circumstances of each case. American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir.), cert. denied, 488 U.S. 852, 109 S.Ct. 136, 102 L.Ed.2d 109 (1988). This Court has determined that a parent corporation and its subsidiary lose their distinct corporate identities when their conduct demonstrates a virtual abandonment of separateness. See Carte Blanche, 2 F.3d at 29 (No bank accounts, offices, stationery, transactions, or any other activities were maintained or carried on in the name of [the subsidiary].); Wm. Passalacqua, 933 F.2d at 139 (corporate veil is pierced where, among other things, parent and subsidiary 1) share common office and staff; 2) are run by common officers; 3) intermingle funds; 4) do not deal at arms length with each other; and 5) are not treated as separate profit centers); see also Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 53 (2d Cir.1984) (absence of corporate formalities relevant factor in piercing corporate veil). [T]he factors that determine the question of control and domination are less subjective than 'good faith'; they relate to how the corporation was actually operated. Carte Blanche, 2 F.3d at 28-29. 22 E & S has not demonstrated that Thomson exerted the degree of control over Rediffusion necessary to justify piercing the corporate veil. While the district court found that Thomson has common ownership with [Rediffusion]; that Thomson actually controls [Rediffusion]; ... [and] that Thomson incorporated [Rediffusion] into its own organizational and decision-making structure, the district court did not find an abandonment of the corporate structure. E & S has not shown an absence of corporate formalities, nor has it shown an intermingling of corporate finances and directorship. Rather, as the district court found, Rediffusion continued to function as a distinct entity closely incorporated into the existing corporate structure of its parent company, Thomson. Accordingly, in light of the totality of the circumstances, Thomson cannot be bound by Rediffusion's arbitration agreement under a veil piercing/alter ego theory.