United States District Court, N.D. New York
For RONALD S. BIENSTOCK, ESQ., BRENT M. DAVIS, ESQ., OF COUNSEL, BIENSTOCK & MICHAEL, P.C., Attorneys for Plaintiffs, Continental Plaza, Hackensack, NY.
MICHAEL S. BANKS, Defendant, Pro se, Liverpool, NY.
DAVID N. HURD, United States District Judge.
MEMORANDUM-DECISION and ORDER
On June 10, 2013, a Decision and Order was entered permitting plaintiffs to make a proffer of evidence that would establish the second prong of the only remaining cause of action against the defendant Michael S. Banks (" Banks" or " defendant" ), piercing the corporate veil. Plaintiffs made such proffer and defendant responded. This matter was taken on submission without oral argument.
Where " a reasonable jury would not have a legally sufficient evidentiary basis to find" in a party's favor, judgment as a matter of law may be entered against that party. Fed. R. of Civ. P. 50(a)(1). The issue here is whether plaintiffs have proffered sufficient evidence such that a reasonable jury could find in their favor as to the second prong of their piercing the corporate veil cause of action. If yes, the question of whether the corporate veil should be pierced and defendant Banks, as shareholder of the corporation, be held liable for acts of Aloha Events, LLC would be presented to a jury. If not, then this action will be dismissed.
A corporation, and not its shareholders, is presumed to be liable for corporate acts. Freeman v. Complex Computing Co., 119 F.3d 1044, 1052 (2d Cir.1997). However, an owner may be held liable where it is established that (1) " the owner exercised complete domination over the corporation with respect to the transaction at issue," such that it is an alter ego of the corporation, and (2) " such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil." MAG Portfolio Consultant, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58, 63 (2d Cir. 2001). An individual controls a corporation to the extent that it may be considered an alter ego when the individual conducts business for personal purposes, rather than to further the business of the corporation. Kirno Hill Corp. v. Holt, 618 F.2d 982, 985 (2d Cir. 1980). A showing of complete control, standing alone, is insufficient to pierce the corporate veil. Freeman, 119 F.3d at 1053. Rather, that control exercised by the shareholder must have been used to perpetrate " fraud or other wrong that resulted in unjust loss or injury." Id. A party's breach of contract alone is insufficient to pierce the corporate veil; there must be evidence of fraud or corporate misconduct. Ross Univ. Sch. of Med. v. Brooklyn-Queens Health Care, Inc., No. 09-cv-1410, 2013
WL 1334271, at * 16 (E.D.N.Y. Mar. 28, 2013) (citing Sheridan Broadcasting Corp. v. Small, No. 603681/2003, 2004 WL 5833748 (Sup. Ct. N.Y. Co., July 30, 2004), aff'd, 19 A.D.3d 331, 798 N.Y.S.2d 413 (1st Dep't 2005)).
As set forth in the Decision and Order of June 10, 2013, questions of fact remain as to the first prong of the cause of action. Again, only the second prong is at issue here.
As there is no allegation of fraud, plaintiffs must prove some other wrong against them by Banks resulting in injury to them. Plaintiffs proffered evidence that Aloha Events, LLC entered into the contract in June 2010 and at no point in time did it have the capital required to pay the full deposit required by the contract. Plaintiffs further proffered that defendant failed to inform them that Aloha Events, LLC would not be able to fulfill its requirements under the contract until August 3, 2010, approximately two days before the performance was to occur. However, it is not disputed that the contract required an additional payment of $5,000 by June 11, 2010 and a payment ...