Law School Case Brief
Perpetual Real Estate Servs., Inc. v. Michaelson Props., Inc. - 974 F.2d 545 (4th Cir. 1992)
Proof that some person may dominate or control the corporation, or may treat it as a mere department, instrumentality, agency, etc. is not enough to pierce the veil. Something more is required to induce the court to disregard the entity of a corporation. Plaintiff must also establish that the corporation was a device or sham used to disguise wrongs, obscure fraud, or conceal crime.
Perpetual Real Estate Services, Inc. (“PRES”) and defendants, Michaelson Properties, Inc. (“MPI”) and sole shareholder Aaron Michaelson, were business partners. PRES filed suit against defendants over business matters, and sought to pierce MPI’s corporate veil to impose liability on Michaelson. The jury found for PRES and Michaelson appealed.
Was PRES able to establish that MPI was a sham to disguise legal wrongs by Michaelson?
The court reversed, holding that PRES was required to establish that MPI was a sham used by Michaelson to disguise some wrongdoing or crime. The jury instruction failed to state the applicable burden of proof and PRES’ evidence failed to show that Michaelson used the corporate form to disguise legal wrongs.
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