Dear YouDig? Pierce the Veil and Get to Mr. Shade

Buckingham, Doolittle & Burroughs, LLC

Buckingham, Doolittle & Burroughs, LLC

Dear YouDig?

When we first met, the contractor’s owner pulled into the site in his tricked out red pickup and promised us the stars and the moon. Unfortunately, all we ended up with was the pits! We ended up with a leaky roof, subcontractor liens, delays, deviation from the plans, lack of communication, over billings and just plain old shiftiness. The flippin’ ceilings were cut short by 8 inches! We canned them and hired a replacement – at a much higher price! Now we want to sue for the extra cost but, low and behold, Mr. Shade’s Ohio corporation went belly up. Can we sue and collect against Mr. Shade individually? I’ll take that red pickup to start.

-Played by Mr. Shade

Dear Played,

You might have mitigated the risk of getting played by Mr. Shade through common sense business due diligence, before you signed the deal. You learned this lesson the hard way.

Surely, Mr. Shade knows all too well that the Ohio corporation code provides shareholders like him a “veil” of protection from the personal liability for the corporation’s business operations. Getting after Mr. Shade personally is very difficult but you do have a chance. You can pierce his veil of protection and collect damages against Mr. Shade if you can prove that (1) Mr. Shade is the alter ego of the corporation, (2) Mr. Shade used the corporation to commit fraud, an illegal act or similar unlawful act against you, and (3) Mr. Shade damaged you in the process.

Did Mr. Shade’s corporation observe corporate formalities such as regular board and shareholder meetings? Were corporate records kept? Did Mr. Shade commingle corporate and personal funds? Did Mr. Shade use corporate property for his own use? Did Mr. Shade issue false bills to you or misrepresent credentials?

Don’t let the chase play you too though. Consult counsel and weigh the investment of time and litigation costs and time against collectability and either press on or move on. YouDig?

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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Buckingham, Doolittle & Burroughs, LLC

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