On January 10, 2023, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Krigsman v. Columbia Capital Auto Fleet Inc., 2023 NY Slip Op. 30069(U), holding the veil piercing claims cannot be based on conclusory allegations of domination, explaining:
To succeed on a claim to pierce the corporate veil the plaintiff must demonstrate that (1) the owners exercised complete dominion of the corporation in respect to the transaction attacked; and (2) that such dominion was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury. As the Court of Appeals observed, at the pleading stage a plaintiff must do more than merely allege that defendant engaged in improper acts or acted in bad faith while representing the corporation. Rather, the plaintiff must allege facts demonstrating such dominion over the corporation and that through such domination, abused the privilege of doing business in the corporate form to perpetuate a wrong or injustice against the plaintiff such that a court in equity will intervene. Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to corporate or LLC formalities, inadequate capitalization, comingling of assets, and the personal use of corporate or LLC funds. Thus, mere conclusory statements that the individual dominated the corporation are insufficient to defeat a motion to dismiss.
In this case the Verified First Amended Complaint states in conclusory fashion that “Kelenzon, as the sole shareholder, director, and officer of Columbia, at all times has exercised complete domination and control over Columbia and has used such domination and control to commit a fraud on Plaintiff” and “Shaulov, as the sole shareholder, director, and officer of OROM, at all times has exercised complete domination and control over QROM and has used such domination and control to commit a fraud on Plaintiff. However, there are no facts whatsoever supporting those allegations. The Verified First Amended Complaint does further state that the the corporate structures as used by Defendants were mere facades for improper, unlawful and unauthorized business operations. Notwithstanding, those allegations are further conclusory, since they fail to allege even one fact or recite those allegations in a more descriptive manner. Merely reciting the legal standard without any supporting facts renders the cause of action conclusory. In Albstein v. Elany Contracting Corp., 30 AD3d 210, 818 NYS2d 8 [1st Dept., 2006] the court granted the motion seeking to dismiss the piercing of the corporate veil cause of action on the grounds the plaintiff alleged nothing more than that the corporation was undercapitalized and functioned as the individual’s alter ego. The court further noted the plaintiff failed to plead any facts to substantiate such conclusory claims and did not sufficiently allege that the corporate form was used to commit a fraud against her.
(Internal quotations and citations omitted).