Whoa, No Alter Ego

The supreme court provided guidance about the limits of “alter ego” liability in JNM Express, LLC v. Lozano, holding:

     The “injustice” prong requires more than a judge’s or juror’s “subjective perception of unfairness.”  Instead, it references “the kinds of abuse . . . that the corporate structure should not shield,” like “fraud, evasion of existing obligations, circumvention of statutes, monopolization, criminal conduct, and the like.” “Such abuse is necessary before disregarding the existence of a corporation as a separate entity.” A “plaintiff must prove that he has fallen victim to a basically unfair device by which a corporate entity has been used to achieve an inequitable result.”
    The court of appeals erred because it did not address the injustice prong. Had it done so, it would have recognized that the evidence here does not satisfy that prong’s standard. The Lozanos point to nothing in the record showing that the Marins abused the corporate form such that failing to pierce the corporate veil would result in “injustice” in the sense that our alter ego cases describe that concept. One relevant consideration in the tort context is whether the corporation was “reasonably capitalized in light of the nature and risk of its business.” Yet the Lozanos produced evidence at trial to demonstrate that the companies did have the resources to protect their drivers.

No. 21-0853 (April 19, 2024) (per curiam) (citations and footnotes omitted, emphasis added). (In the graphic, DALL-E illustrates “piercing the corporate veil”).