On March 11, 2022, Justice Cohen of the New York County Commercial Division issued a decision in Salesmark Ventures, LLC v. Singh, 2022 NY Slip Op. 30836(U), rejecting veil-piercing claims, explaining:
As SalesMark acknowledges, its contract claim against Singh (the first cause of action) is viable only to the extent Singh can be held liable under the contract as JJHM’s alter ego (the fourth cause of action).
New York law disfavors disregard of the corporate form. Those seeking to pierce a corporate veil of course bear a heavy burden of showing that the corporation was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences. While complete domination of the corporation is the key to piercing the corporate veil, especially when the owners use the corporation as a mere device to further their personal rather than the corporate business, such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.
Here, the allegations in support of SalesMark’s veil-piercing theory are speculative, conclusory, and unaccompanied by allegations of consequent wrongs. SalesMark alleges, upon information and belief, that JJHM is a shell corporation having no assets, that Singh is JJHM’s sole principal, and that Singh and JJHM have not respected [JJHM’s] corporate form, so that they are one and the same. These allegations recite the elements of veil-piercing without providing specific factual assertions to substantiate them. The allegations added in the amended complaint- that JJHM is a Delaware corporation not registered to do business in New York and that it has a website containing minimal information about the company – do not move the needle.
At bottom, SalesMark bases its veil-piercing theory on the suspicion that something is rotten here because JJHM utterly failed to deliver the goods SalesMark contracted for. But without specific factual allegations suggesting Singh’s domination and abuse of the corporate form, the alleged breach by JJHM does not entitle SalesMark to proceed on a theory of piercing the corporate veil. As a result, the first cause of action is dismissed as to Singh, and the fourth cause of action is dismissed in its entirety. If evidence comes to light during discovery giving rise to a viable claim against Mr. Singh, SalesMark can seek leave to amend.
(Internal quotations and citations omitted).
The court also explained in a footnote:
As Defendants point out, the fourth cause of action is not, in any event, recognized as a standalone claim. An attempt of a third party to pierce the corporate veil does not constitute a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners.
(Internal quotations and citations omitted).