Opinion ID: 741800
Heading Depth: 2
Heading Rank: 2

Heading: Corporate Veil-Piercing Defense

Text: 10 Lingenfelter moved for a new trial, asserting that the district court erred in striking his proposed corporate veil-piercing defense through which he intended to show that T.G. Morgan received value for its payments to him. We review the district court's conclusions of law de novo. Friends of the Boundary Waters Wilderness v. Thomas, 53 F.3d 881, 885 (8th Cir.1995). Whether to pierce a corporate veil is a legal determination that, in our circuit, is governed by state law. See Minnesota Power v. Armco., Inc., 937 F.2d 1363, 1367 (8th Cir.1991). Under Minnesota law, deciding whether to allow a corporate veil to be pierced requires a court to 1) analyze whether the corporation functioned as the mere instrumentality of the principals a party is attempting to reach by piercing the corporate veil, and 2) determine whether injustice or fundamental unfairness would occur if the corporate veil were left intact. Id. (citing Victoria Elevator Co. v. Meriden Grain Co., 283 N.W.2d 509, 512 (Minn.1979)). Whereas the first prong involves questions of fact, National Bond Fin. Co. v. General Motors Corp., 341 F.2d 1022, 1023 (8th Cir.1965), the second prong raises equitable considerations, Roepke v. Western Nat'l Mutual Ins. Co., 302 N.W.2d 350, 352 (Minn.1981); Victoria Elevator, 283 N.W.2d at 512 (corporate veil properly pierced where, after making the necessary factual determinations, leaving the corporate veil intact would be inequitable). The district court did not address whether Lingenfelter's requested defense had factual support, determining that there were no equitable considerations to support a veil-piercing defense in this case. We agree. 11 Lingenfelter argues that T.G. Morgan's corporate veil should be pierced to show that Blodgett and Keys to History were actually alter egos of T.G. Morgan, and, as such, T.G. Morgan received value when it purchased historical documents and delivered them to either Blodgett or Keys to History. Traditionally, piercing a corporate veil is conducted to show that a principal hiding behind a fictitious corporation is liable to creditors of the corporation. What Lingenfelter requests, however, in effect constitutes a reverse piercing of the corporate veil in that it would show that the principal behind the purportedly fictitious corporation received value from him. Lingenfelter's approach is inconsistent with the proper application of the doctrine. 12 Minnesota courts do not apply the doctrine where nonprincipals, such as T.G. Morgan's innocent creditors, will be harmed. 4 See In re: Bellanca Aircraft Corp., 56 B.R. 339, 399 (Bankr.D.Minn.1985), aff'd in part and remanded in part, 850 F.2d 1275 (8th Cir.1988); Cargill, Inc. v. Hedge, 375 N.W.2d 477, 479 (Minn.1985). Further, even if the doctrine were applicable to this case, Lingenfelter was unable to convince the jury that he took payments from T.G. Morgan in good faith. Thus it was not necessary for the jury to decide whether one of the corporations was an alter ego of another principal. In the absence of a finding of good faith on Lingenfelter's part, leaving the corporate veil intact is not fundamentally unfair.