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CMLawLibraryBlog

The CM Law Library Blog seeks to inform the Cleveland-Marshall College of Law community about key legal education, research, practice, and law library news, with a particular focus on Cuyahoga County and Ohio as well as faculty research interests.

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Ouch! Tougher to Pierce the Corporate Veil

Jan Novak, Associate Director jan.novak@law.csuohio.edu | October 01, 2008 - 08:35

Piercing the corporate veil in Ohio just got a little bit harder: In Dombroski v. WellPoint, Inc., Slip Opinion No. 2008-Ohio-4827 the Ohio Supreme Court yesterday modified the three pronged test announced in 1993’s Belvedere Condominium Unit Owners’ Assn. v. R.E. Roark Cos. Inc , 67 Ohio St 3d 274, 617 NE2d 1075. The Belvedere court’s second prong had permitted actions against individual shareholders when their control of the corporation was exercised in such a way as to commit “fraud or an illegal act” against the plaintiff. Subsequent appellate decisions had broadened the definition of that phrase to include “other unjust or inequitable acts.” The Court found that such an expansion ran contrary to the concept of limited shareholder liability, yet recognized that misuses of the corporate form other than fraud or illegal acts should not be protected:

“Accordingly, we hold that to fulfill the second prong of the Belvedere test for piercing the corporate veil, the plaintiff must demonstrate that the defendant shareholder exercised control over the corporation in such a manner as to commit fraud, an illegal act, or a similarly unlawful act. Courts should apply this limited expansion cautiously toward the goal of piercing the corporate veil only in instances of extreme shareholder misconduct.”

Read the Court’s summary here.


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