Opinion ID: 2302698
Heading Depth: 1
Heading Rank: 3

Heading: Piercing the Limited-Liability Veil

Text: We now determine whether the defendant may be held liable for the LLC's debts under the so-called veil-piercing doctrine. We review summary judgment rulings by considering the affidavits and other evidence in the light most favorable to the non-moving party. First Berkshire Bus. Trust v. Comm'r, N.H. Dep't of Revenue Admin., 161 N.H. 176, 179, 13 A.3d 232 (2010). If this review does not reveal any genuine issues of material fact, i.e., facts that would affect the outcome of the litigation, and if the moving party is entitled to judgment as a matter of law, we will affirm. Id. We review the trial court's application of law to the facts de novo. Id. Turning to the merits, although we have yet to address whether the members and managers of an LLC can be held personally liable for its debts under the veil-piercing theory we have applied to corporations, the parties have assumed for analytical purposes that our corporate veil-piercing cases apply to LLCs, and we will do the same. Ordinarily, corporate owners, like LLC members and managers, are not liable for a company's debts. Norwood Group v. Phillips, 149 N.H. 722, 724, 828 A.2d 300 (2003); see RSA 304-C:25. The company and its owners are considered separate legal entities. See Norwood Group, 149 N.H. at 724, 828 A.2d 300. In particular cases, however, a corporation and those owning all of its stock and assets will be treated as identical. Id. Thus, for instance, we will pierce the veil and assess individual liability where the owners have used the company to promote an injustice or fraud upon the plaintiff, as is argued here. Id. In such a case, we will disregard the fiction that the corporation is independent of its stockholders and treat the stockholders as the corporation's alter egos. Id. (quotation omitted). Here, the plaintiff argues that the LLC's transfer of its accounts to a new company after the plaintiff brought her claims and its failure to insure itself adequately create genuine issues of material fact as to whether the veil should be pierced. The defendant counters that he had a right to establish a new LLC and move his accounts to it and that a failure to insure cannot, in itself, justify veil piercing. Because we conclude that genuine issues of material fact surrounding the LLC's transfer of its accounts to the new company made summary judgment improper, we do not address what impact, if any, the LLC's failure to insure has upon the veil-piercing analysis. In Terren v. Butler, 134 N.H. 635, 639-41, 597 A.2d 69 (1991), and Druding v. Allen, 122 N.H. 823, 827-28, 451 A.2d 390 (1982), we addressed the circumstances under which a company's distribution of assets after a claim had been brought against it permitted piercing of the corporate veil. In both cases, the individual defendants were the sole officers and shareholders of the corporations. Terren, 134 N.H. at 640, 597 A.2d 69; Druding, 122 N.H. at 824, 451 A.2d 390. In both cases, the officers disregarded some corporate formalities, while complying with others. Terren, 134 N.H. at 640, 597 A.2d 69 (defendants never paid stated consideration for their shares in the corporation); Druding, 122 N.H. at 827-28, 451 A.2d 390. In Terren, 134 N.H. at 641, 597 A.2d 69, we upheld the trial court's decision to hold the officers personally liable for corporate obligations, but in Druding, 122 N.H. at 828, 451 A.2d 390, we overturned the trial court's decision to pierce the veil. The different outcomes resulted from how the officers handled assets when a lawsuit jeopardized corporate solvency. In Terren, 134 N.H. at 641, 597 A.2d 69, the corporation continued to distribute its assets at a time when several claims had been made against it. In Druding, 122 N.H. at 825, 828, 451 A.2d 390, by contrast, during the period between the initial filing of the ... actions and the rendering of the judgments, corporate assets remained constant. In this case, the defendant argues that the LLC never had many assets, and that he simply decided to cease operations and move his largest clients to a new LLC also managed by himwith a different name, but with the same address and telephone number. When asked to justify this unusual and ostensibly arbitrary business decision, the defendant explained that he [j]ust wanted to start fresh. To be sure, the defendant correctly argues that he had every right to establish a new LLC and to transfer the original LLC's clients to it. However, that the defendant made this fresh start when his company remained a party to this case, could permit a finding that the limited liability identity was used to promote an injustice upon the plaintiff. Thus, based upon our review of the depositions and other evidence in the light most favorable to the plaintiff, we cannot conclude that the defendant is entitled to judgment as a matter of law. Accordingly, the trial court erred in granting summary judgment. Affirmed in part; reversed in part; and remanded.