Piercing the Corporate Veil: Single Business Enterprise Theory After the Mortimer Decision

Description

Litigants in business disputes often look beyond the corporation to related entities as potential sources of liability and recovery. Related entities include subsidiaries, affiliates, shareholders, partners, owners, or directors.

A simultaneously ubiquitous and arcane doctrine, piercing the corporate veil is subject to extensive commentary and critique. While the Pennsylvania Supreme Court admitted that this is already "among the most confusing" areas of corporate law, its recent decision Mortimer v. McCool, Nos. 37 MAP 2020, 38 MAP 2020 (Pa. July 21, 2021) adds yet another layer of intricacy to this knotty enigma. With Mortimer, Pennsylvania has joined a growing number of jurisdictions that explicitly allow for the so-called enterprise theory of liability.

Counsel should be familiar with the court's five-point test for determining enterprise theory and be prepared to advise clients on maintaining operations with affiliates that provide a liability shield. Companies must address the Pennsylvania test of enterprise liability versus the California determination that liability is established as between two or more corporations under common ownership if one corporation is "but an instrumentality or conduit of another in the pursuit of a single business venture." Counsel must be aware of the difference in liability determination for enterprise theory and how it varies from an alter ego determination.

Listen as our expert panel discusses single business enterprise theory, corporate liability, and the best corporate governance practices to avoid a claim to "pierce the corporate veil." The panel will address the outcome of the Mortimer case and how Pennsylvania, California, and other states have applied the enterprise theory.