Rome is Burning: Piercing the Corporate Veil and the Injustice of Equity

Jonathan A. Marcantel, Charleston School of Law

Abstract

Ordinarily, individual shareholders are immune from the liability arising from a corporation's activities through the doctrine of limited liability. That is, absent a personal breach of duty either in contract or tort, an individual shareholder is only financially exposed to judgments against or debts of the corporation up to the shareholder's investment. All rules, of course, have exceptions. The most frequently litigated of those exceptions is the doctrine of piercing the corporate veil.

Notwithstanding the frequent litigation surrounding the doctrine and notwithstanding the "bright-line rules" courts have created to cabin the doctrine, disparate results frequently occur both internally within a jurisdiction and externally between jurisdictions, as, in most cases, the courts use a factually specific factors analysis to determine when piercing is proper. This disparate treatment is concerning as a matter of justice, as a matter of logical consistency, and more practically as a matter of counseling clients to avoid this unruly beast.

This Article will argue the beast could be tamed by three mechanisms. First, piercing should be an action at law. Second, piercing should be limited to a test only permitting its use when evidence of siphoning, fraud, or violations of public policy exists. Finally, courts should require a causal relationship between the corporation's wrongful conduct and the plaintiff's damages.