Piercing Corporate Veil Without Establishing Fraudulent Conduct

Fraudulent conduct intersects with and permeates many areas and aspects of the law—even apart from actual causes of action for fraud. It is easy to understand why courts may be willing to afford victims of fraudulent conduct with legal accommodations given fraud’s evil foundation. All the elements of a legally-cognizable claim for civil fraud may not need to be alleged, for example, to get the benefit of some of the favorable legal treatment that courts apply when fraudulent conduct is involved.

For example, I have explained that while the statute of limitations for a cause of action fraud is rather liberal and can be extended past the base six-year period, the statute of limitations for other civil causes of action can also be extended if fraudulent conduct is involved. See, e.g., Fraud Breathes New Life Into Otherwise Time-Barred Causes of Action. If fact, when a cause of action for fraud is not even alleged in the case, allegations of fraud can be used to extend the statute of limitations. See Breach of Fiduciary Duty Claims Get Six-Year Limitation Period Even Without Separate Cause of Action for Actual Fraud.

When it comes to piercing the corporate veil, fraud can form the basis of expanding liability of persons and entities, but it is not an essential element of the doctrine. In fact, a recent decision of the New York Appellate Division, First Department, shows that the grounds for piercing the corporate veil can be established without proof of any fraud involved at all.

Read the full blog post here.