obligations holder for a corp CASE 36.1 1 STATE COURT CASE Shareholder\'s Limite
ID: 417372 • Letter: O
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obligations holder for a corp CASE 36.1 1 STATE COURT CASE Shareholder's Limited Liability Menendez v. O'Niell 986 So.2d 255 (2008) Court of Appeal of Louisiana Issue "As a general rule, a corporation is a distinct legal is the sole shareholde entity, separate from the individuals who comprise Is Fraioli personally liable for the dehts a corporation of which he is the sole them, and individual shareholders are not liable for the debts of the corporation." Language of the Court a general rule, corporation is a d legal entity, separate from the individu -Welch, Judge net comprise them, and individual are not Facts 1 vehicle driven by Michael O'Niell crashed while liable for the debts of the uulreholde traveling on Louisiana Highway 30. Vanessa Savoy, a Mr Fraioli met his burden of provi 19-year-old guest passenger in the vehicle, sustaine severe injuries as a result of the collision. O'Niell, who virate's corporate existence. Plaintiff st' was under the legal drinking age, had been drinking ofer any evidence identified by law as ind at Fred's Bar and Grill prior to the accident. Fred's that Mr:. Fraioli and Triumvirate are n Bar is owned by Triumvirate of Baton Rouge, Inc., a ally separate entities. The involvement o corporation. Mare Fraioli is the sole shareholder and or majority shareholder in a corporation is not president of Triumvirate. Fraioli was not at Fred's sufficient alone, as a matter of law, t o esta bl Bar the night that O'Niell was served alcohol at the a basis for disregarding the corporate ent bar. Savoy, through a legal representative, brought a lawsuit against O'Niell, O'Niell's automobile in- Decision surance company, Triumvirate, and Fraioli seeking The court of appeal held that Fraioli was not person damages for her injuries. Savoy alleged that O'Niell ally liable for the debts of the Triumvirate corpora- was intoxicated at the time of the accident and that tion of which he was the sole shareholder. The cout his drinking caused the collision. Savoy alleged that of appeal affirmed the trial court's grant of summary Triumvirate corporation was liable for serving ONiell judgment dismissing Fraioli from the case alcohol when he was underage and that Fraioli was liable as the owner of Triumvirate. Fraioli filed a motion for summary judgment as serting that, as the shareholder of Triumvirate, he was Whatr not liable for the corporation's debts. The trial court his granted summary judgment to Fraioli and dismissed propr him as a defendant in the case. Savoy appealed Ethics Questions easons could there be for Fraioli to operate business as a corporation rather than as a sole ietorship? Was it ethical for Fraioli to assert corporate shield to avoid liability in this caseExplanation / Answer
Facts:
On 2/22/2004, Michael O’Niell caused an automobile crash in East Baton Rouge, LA, severely injuring 19-year-old passenger Vanessa Savoy.
Procedures:
On 4/20/2004, Lissette Savoy Menendez, Vanessa’s tutrix, filed suit to recover damages for Vanessa. Menendez named as defendants O’Niell, Friends Enterprises, LLC, the owners of the car O’Niell was driving, and Progressive Security Insurance Co. Menendez alleged that O’Niell’s intoxication caused the accident. Menendez then filed a supplemental and amending petition, in which she named Triumvirate of Baton Rouge, d/b/a Fred’s Bar & Grill, and Marc Fraioli, the bar owner, as defendants. Menendez argued that, because O’Niell was under age when he became intoxicated at Fred’s, Triumvirate was liable for Vanessa’s injuries under the theory of respondeat superior and Fraioli was liable personally under thealter ego doctrine.
Fraioli filed a motion for summary judgment, arguing that Triumvirate’s corporate shield precluded his liability and that Menendez offered no support of her allegation that Triumvirate was Fraioli’s alter ego. The trial court entered summary judgment for Fraioli and Menendez appealed.
Issue:
Did Plaintiff offer sufficient matters of law to justify piercing of the corporate veil?
Holding:
No. Plaintiff offered no material facts to Fraioli’s liability on alter ego theory.
Rationale:
The laws on shareholder liability for the debts of the corporation are well-settled. Corporations are separate, legal entities from the individual shareholders, and the corporate veil can be pierced only when shareholders engage in fraud.
A shareholder who asserts the corporate shield as a defense must prove the existence of the corporation. Fraioli furnished the court an affidavit stating that he was Triumvirate’s only shareholder, and he furnished a certificate from the LA Secretary of State stating that Triumvirate was in good standing since 1982.
When the shareholder has proven the existence of the corporation, the plaintiff then bears the burden to demonstrate reasons to pierce the corporate veil. Menendez deposed Fraioli, but her claim that he was liable because he was the sole stockholder was unpersuasive and insufficient as a matter of law. That the corporation has only one shareholder is not in itself reason to pierce the veil.
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