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It's Time to Pierce the Corporate Veil in Discrimination Cases

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It's Time to Pierce the Corporate Veil in Discrimination Cases

Posted by: Kevin Costello

One of the most frustrating doctrines of law for attorneys representing victims in discrimination and harassment cases is called the "corporate veil," which is a way of colorfully describing the legal "barrier" that exists between a corporation on the one hand and its owners, employees and agents on the other. Put very simply, the CEO of Exxon was not going to be personally liable for the oil spills, no matter how highly positioned in the company the CEO was, no matter how much money the CEO had, and no matter how much the CEO benefited from the practices that lead to the spill. The company was certainly liable, but not him, not unless his independent actions would subject him to other criminal or civil liability. Absent that special scenario, the fact that he was the "titular head" of the company didn't mean anything.

Here's an example closer to home.

Say you hire a contractor who works for a company that has a hand full of contracting employees. Say that they further operate out of a location that the business itself does not own, but that the owner of the company does own, through a third corporation. Say further that the contractor and his company cheat you and charge you great deal of money for either substandard or non-existent work.

You approach a lawyer and you wish to sue. The lawyer investigates the company and initiates the suit, only to find that the company immediately declares bankruptcy. After all, bankruptcy is a pretty easy thing for companies to declare. The company had virtually nothing in terms of real property, because the contracting company you contracted with does not own the business premises, it rents it. The company owns a couple of trucks with very little equity and very little book value, and perhaps some tools.

The owner of the company is loaded, has three homes and two boats, but you cannot get to him, even though he may be the guy that was undertaking the wrongful conduct in the name of his company.

Does that seem fair to you?

It does if you're a corporate type. "It's good for business," those people say, not really caring to explain or even confront the repeated unfairness that this works when individuals are victimized by "the corporate veil," shielding from ultimate responsibility the people who benefited from the wrongful practices by arguing that "the company" undertook them, not the person..

Often, application of the corporate veil can result in judgment proof companies and very rich owners simply declaring bankruptcy and moving on the next corporate shell game. It stinks.

The apologists for this system will continue to tell you that what's good for business is good for the economy, what's good for the economy is good for the country, etc. They might dress it up in terms of patriotism, they might call people who have objections to this system "communists" or "socialists," and who knows what other nonsense. At the end of the day, they simply do not like the idea that individual "fat cats" who benefit from corporate practices can then be made personally responsible for the consequences of those actions.

We see this a lot in small businesses where the tyrannical owners are sexists, homophobes, racists and other types of bigots. They act, and then claim that they did so in the name of the corporation only. So, despite the hateful and bigoted way that they acted, they attempt to separate themselves from individual liability simply because they were doing whatever they did in the name of the corporation at the time.

It's time to end this doctrine. I call on voters to discuss the issue with their representatives. Individuals ought always be responsible for what they do.

At least, that's how I feel.

JOURNEY TO JUSTICE

DISCLAIMER: This web log is not legal advice, nor should it be construed to be legal advice or the offering of legal advice. It should not be read as guaranteeing or suggesting any particular outcome in any Court will occur in any particular case. It is not, and should be read as, a complete or authoritative analysis of the state of law, which is constantly subject to change.

"Journey to Justice" - The Web Log of Civil Rights Trial Lawyer Kevin M. Costello, Esq. (www.costellomains.com).