Court Opinion

ID: 9877265
Source: CourtListenerOpinion
Date Created: 2023-09-27 15:52:37.305334+00
Date Added: 2024-06-11T07:47:20.423616
License: Public Domain

Curran, J.
(concurring). I concur with the result reached by the majority and with the analysis of my colleagues, but I write separately to underscore what, in my view, is an underdeveloped issue in this area of the law. In order to pierce the corporate veil, a plaintiff must show that “(1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury” (Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]). “Additionally, ‘the corporate veil will be pierced to achieve equity . . . [w]hen a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego’ ” (Williams v Lovell Safety Mgt. Co., LLC, 71 AD3d 671, 672 [2010], lv denied 14 NY3d 713 [2010]).
I agree with the majority that the allegations in the amended complaint against defendant Robert McDonald are sufficient to meet these standards. I further agree with the majority’s dif*1198ferent result with respect to defendant Joseph Francabandiero, i.e., that plaintiff failed to allege facts sufficient to establish that Francabandiero “ ‘dominated and controlled [the LLC] to such an extent that [he] may be considered an equitable owner’ ” (Roohan v First Guar. Mtge., LLC, 97 AD3d 891, 891 [2012]).
Significantly, the only difference in the allegations in the amended complaint against the respective defendants is that Francabandiero is alleged to be “an equitable owner,” while McDonald is alleged to be “a legal owner and member” of Hyperion Recovery, LLC (Hyperion). The remaining allegations with respect to seeking to pierce Hyperion’s veil pursuant to an alter ego theory are identical against both defendants. Thus, this Court is drawing a distinction between “an equitable owner” and “a legal owner and member” for the purposes of piercing the corporate veil pursuant to an alter ego theory. I agree with the majority that, even at the pleading stage, a distinction exists between a non-owner who is alleged to be an “equitable owner” and an owner for purposes of piercing the corporate veil. Specific facts must be alleged demonstrating that the defendant non-owner has so dominated and controlled the business such that the non-owner may be considered an “equitable owner” of the business. In other words, as the majority’s determination demonstrates, it is not enough to allege the elements of a claim to pierce the corporate veil premised on an alter ego theory and merely state that the defendant is an “equitable” owner.
All of this, of course, presumes that the concept of an “equitable owner” fits within the alter ego theory, which is an issue that none of the parties in this case raised on appeal. While the principle that a nonshareholder may be liable as an equitable owner has been used by other courts in cases involving piercing the corporate veil (see Roohan, 97 AD3d at 891; M&A Oasis v MTM Assoc., 307 AD2d 872, 874 [2003]; Trans Intl. Corp. v Clear View Tech., 278 AD2d 1, 1-2 [2000]; Guilder v Corinth Constr. Corp., 235 AD2d 619, 619-620 [1997]; Lally v Catskill Airways, 198 AD2d 643, 644-645 [1993]; see also Matter of Morris v New York State Dept. of Taxation & Fin., 183 AD2d 5, 8 [1992], revd on other grounds 82 NY2d 135 [1993] [recognizing that a nonshareholder’s liability under an “ ‘alter ego’ theory . . . has not been definitively addressed by the courts of this State”]), the Court of Appeals has not expressly decided the issue (see Morris, 82 NY2d at 142 [determining that it is “not necessary to decide the question” of whether “a nonshareholder could be personally liable under a theory of *1199piercing the corporate veil”]). The adoption of that concept by the Court of Appeals would involve wide-ranging policy considerations inasmuch as it would expand the pool of potential defendants subject to an alter ego theory to include non-owners (such as affiliated business entities, managers and employees), and could potentially reduce the protections afforded when forming a business entity. That concern may be even more significant to a limited liability company that, if the members so provide in their articles of organization, may be under the control of a manager or managers, rather than under the control of the members (see Limited Liability Company Law § 408 [a]).
Present — Whalen, P.J., Smith, Carni, Curran and Scudder, JJ.