Alter Ego – “Easy To State But Difficult To Apply”

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Yesterday, the California Court of Appeal found substantial evidence in the record to uphold a trial court’s decision to add an affiliated corporation as a judgment debtor under the “single enterprise” theory.  Toho-Towa Co., Ltd. v. Morgan Creek Productions, Cal. Ct. Appeal Case No. B242095, July 11, 2013.  Some of the factors cited were:

  • The entities were owned by the same person;
  • The entities exploited the same assets;
  • The “work” of the entities was performed by employees of one of the entities; and
  • Payments were made by one of the entities’ lender.
Notably, the case did not involve any corporations incorporated in California.  The two judgment debtors were organized in Bermuda and the Netherlands while the company added to the judgment was incorporated in Delaware.  The court, however, applied California law.