Kansas District Court Rejects "Reverse Alter Ego" Liability Theory

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Plaintiffs entered into a Funding Agreement with defendant Gary Hall that directed the parties to create lending entities to facilitate real estate investments. The Funding Agreement provided that the parties would divide profits received by the lending entities. Defendant Bentley Investments of Nevada LLC was a lending entity Mr. Hall created pursuant to the Funding Agreement. Plaintiffs asserted that defendants failed to advance the profits contractually allocated to them, and thereby breached the Funding Agreement.

Defendant Bentley moved to dismiss plaintiffs' complaint on the basis that it failed to plead a breach of contract claim, because Bentley was not a party to the Funding Agreement. Plaintiffs contended that Bentley should be held liable under a "reverse alter ego theory" because it was responsible for Mr. Hall's breaches.

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Published In: Business Organization Updates, General Business Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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