Tuesday, November 04, 2008

Judgment not necessary to pierce corporate veil

In Drury Development v. Foundation Insurance, the South Carolina Supreme Court answered the following certified question: whether a judgment against a corporation is a prerequisite to an alter ego claim. This question has come up often in South Carolina. Frequently, plaintiffs attempt to demand many financial documents of a corporation early in discovery on the basis of an alter ego claim. Defendants often counter that this discovery is premature and improper because no judgment has been entered against the corporation and therefore the issue of veil piercing cannot come up.

Noting that veil-piercing is a form of equitable relief, the South Carolina Supreme Court refused to impose "rigid rules of law to seek substantial justice." The court ultimately held that "so long as the plaintiff has pled facts sufficient to survive a motion to dismiss as to the corporate liability claims and the alter ego claim, the trial court should move forward to determination of both matters."

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