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Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Mgmt., Inc - 519 F.2d 634 (8th Cir. 1975)

Rule:

A corporation's existence is presumed to be separate but can be disregarded if: (1) the corporation is undercapitalized, (2) without separate books, (3) its finances are not kept separate from individual finances, individual obligations are paid by the corporation, (4) the corporation is used to promote fraud or illegality, (5) corporate formalities are not followed or (6) the corporation is merely a sham.

Facts:

Plaintiff Lakota Girl Scout Council planned a fund-raising drive to help finance its activities. The Council decided to enlist the help of a professional fundraiser. After negotiating with several firms, the Council contracted with Defendant Havey Fund-Raising Management, Inc. to raise $345,000 in return for a fee paid to the firm of $28,000.  The campaign fell short of its goal, and the Council filed an action for breach of contract for failing to provide fund-raising services, and which also named the owner, Francis P. Havey, as a defendant on the basis that the firm was simply Havey's alter ego. The jury found for the Plaintiff, and Defendants appealed.

Issue:

Is there a valid ground to pierce the corporate veil of the fundraising firm?

Answer:

Yes.

Conclusion:

The court affirmed the findings of the jury against the firm. The determination to pierce the corporate veil was proper because there was ample evidence to find that the firm was merely an alter ego for the owner. The court also found that the lost profit determination was proper and was supported by the evidence elicited from the expert witness.

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