Opinion ID: 1395914
Heading Depth: 3
Heading Rank: 1

Heading: Alter Ego Doctrine

Text: Krause, as the president, only officer, and only member of the board of directors of TSF, had complete control over TSF's operations. Krause, and no one else, represented TSF. Krause used TSF to further his own personal goal: the construction of a new soccer stadium to increase the value and prestige of The Menace. Krause developed an elaborate plan to build a stadium to maximize his profits while shedding any liability or risk: (1) TSF, a nonprofit corporation without any capital, was to raise funds to pay for the stadium and assume all the risk associated with its construction; (2) The Menace, a limited liability company controlled by Krause, would be the primary beneficiary of the stadium, yet, would contribute nothing towards the cost of construction; (3) Calcio, a for-profit business owned by Krause, would earn a profit by operating the stadium, yet like The Menace, would contribute nothing towards the cost of construction; and (4) the City of Urbandale would assume the costs associated with owning and maintaining the stadium, yet would receive only a nominal rent payment from Calcio. When the proprietor of a for-profit business establishes a nonprofit corporation to assume a liability or risk that otherwise, in the ordinary course of business, would have been assumed by a for-profit business, and when the nonprofit corporation accrued liabilities without any means to satisfy the liabilities, a reasonable jury may easily decide that allowing the for-profit business (or its owner) to escape the liability would be sanctioning a fraud and promoting an injustice. See Cent. Nat'l Bank & Trust Co. of Des Moines v. Wagener, 183 N.W.2d 678, 681 (Iowa 1971) (affirming the trial court's decision to disregard the corporate form when [t]he evidence clearly shows the use of the corporation as a tool to juggle assets and liabilities). A reasonable jury had a sufficient evidentiary basis on which to conclude Krause incorporated TSF as a nonprofit corporation to avoid risk and the payment of legal obligations. Sufficient evidence supports imposing liability on Krause under the alter ego doctrine.