In CA, what facts are looked at to determine if a corporate or LLC veil can be pierced? I am a member of a LLC and the LLc has been sued and I have too as an individual. How can the employee sue me if he only worked for the LLC? Thank you.
3 Answers from Attorneys
Well depending on what he is suing for, he may be asserting you have personal liability independent of the LLC. Just by way of example, in sexual harassment cases, the harasser is personally liable, and the employer is liable if they permitted it to go on. So each is sued for different wrongful conduct. You may also have been sued individually out of an abundance of caution by the plaintiff's attorney, in case the LLC didn't really exist or for some other reason the LLC is not a viable entity and you really are just part of a partnership. If they are, in fact, pleading that the LLC's "veil" should be "pierced," they are making an equitable claim and a large number of factors can be considered in deciding whether basic fairness requires looking behind the entity to its owners. The number one question, however, is always does the entity have sufficient assets to answer for the claim. If the entity can satisfy a judgement out of its own assets it is almost never appropriate to pierce the liability protections of the entity. If the entity has no meaningful assets, or will be put out of business and unable to pay a judgment in full, then the court has to look at a whole laundry list of factors to decide if the entity was operated as a completely arms length business independent of its owners, or if it was basically just run as a sole proprietorship or partnership with no genuine good faith existence separate and apart from the owners. A good article on what is considered can be found here: http://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html
California law does not use the term "piercing the corporate veil." The concept is similar, but it is called "alter ego."
If the organization fails to properly conduct and document their management, it and the directors and responsible officers can get sued. If serious about hiring counsel to help in this, and if this is in SoCal courts, feel free to contact me. Iíll be happy to help fight and get the best outcome possible, using whatever defenses and sympathies there may be. It may be a situation you can get dismissed if the plaintiff doesn't have proper grounds for the case.
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