Joseph Kubican v. The Tavern, LLC, d/b/a Bubba's Bar and Grill , 232 W. Va. 268 ( 2013 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2013 Term
FILED
November 6, 2013
No. 12-0507 released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
JOSEPH KUBICAN,
Plaintiff Below, Petitioner
V.
THE TAVERN, LLC d/b/a BUBBA’S BAR AND GRILL,
AND HARRY WISEMAN
Defendants Below, Respondents
Certified Question from the Circuit Court of Harrison County
Honorable Thomas A. Bedell, Judge
Civil Action No. 11-C-231-2
CERTIFIED QUESTION ANSWERED
Submitted: September 25, 2013
Filed: November 6, 2013
Edmund L. Wagoner Gregory H. Schillace
David E. Goddard Schillace Law Office
Goddard & Wagoner Clarksburg, West Virginia
Clarksburg, West Virginia Attorney for the Respondent,
Attorneys for the Petitioner The Tavern, LLC
d/b/a Bubba’s Bar and Grill
JUSTICE DAVIS delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “The primary object in construing a statute is to ascertain and give effect
to the intent of the Legislature.” Syllabus point 1, Smith v. State Workmen’s Compensation
Commissioner, 159 W. Va. 108, 219 S.E.2d 361 (1975).
2. “When a statute is clear and unambiguous and the legislative intent is
plain, the statute should not be interpreted by the courts, and in such case it is the duty of the
courts not to construe but to apply the statute.” Syllabus point 5, State v. General Daniel
Morgan Post No. 548, Veterans of Foreign Wars, 144 W. Va. 137, 107 S.E.2d 353 (1959).
3. “A statute that is ambiguous must be construed before it can be applied.”
Syllabus point 1, Farley v. Buckalew, 186 W. Va. 693, 414 S.E.2d 454 (1992).
4. “In the interpretation of statutory provisions the familiar maxim
expressio unius est exclusio alterius, the express mention of one thing implies the exclusion
of another, applies.” Syllabus point 3, Manchin v. Dunfee, 174 W. Va. 532, 327 S.E.2d 710
(1984).
i
5. W. Va. Code § 31B-3-303 (1996) (Repl. Vol. 2009) permits the
equitable remedy of piercing the veil to be asserted against a West Virginia limited liability
company.
6. “[T]o ‘pierce the corporate veil’ in order to hold the shareholder(s)
actively participating in the operation of the business personally liable . . . , there is normally
a two-prong test: (1) there must be such unity of interest and ownership that the separate
personalities of the corporation and of the individual shareholder(s) no longer exist (a
disregard of formalities requirement) and (2) an inequitable result would occur if the acts are
treated as those of the corporation alone (a fairness requirement).” Syllabus point 3, in part,
Laya v. Erin Homes, Inc., 177 W. Va. 343, 352 S.E.2d 93 (1986).
7. To pierce the veil of a limited liability company in order to impose
personal liability on its member(s) or manager(s), it must be established that (1) there exists
such unity of interest and ownership that the separate personalities of the business and of the
individual member(s) or managers(s) no longer exist and (2) fraud, injustice, or an
inequitable result would occur if the veil is not pierced. This is a fact driven analysis that
must be applied on a case-by-case basis, and, pursuant to W. Va. Code § 31B-3-303(b)
(1996) (Repl. Vol. 2009), the failure of a limited liability company to observe the usual
ii
company formalities or requirements relating to the exercise of its company powers or
management of its business may not be a ground for imposing personal liability on the
member(s) or manager(s) of the company.
iii
Davis, Justice:
This action presents this Court with a certified question from the Circuit Court
of Harrison County asking whether “West Virginia’s version of the Uniform Limited liability
Company Act, codified at W. Va. Code § 31B[-1-101] et seq., afford[s] complete protection
to members of a limited liability company against a plaintiff seeking to pierce the corporate
veil?” After considering the parties’ briefs, their oral arguments and the relevant law, we
answer this certified question in the negative.
I.
FACTUAL AND PROCEDURAL HISTORY
Following an altercation that allegedly took place at Bubba’s Bar and Grill in
Bridgeport, West Virginia, on February 7, 2011, petitioner Joseph Kubican, who is the
plaintiff below (hereinafter “Mr. Kubican”), filed a complaint, on May 27, 2011, naming as
defendants Bubba’s Bar and Grill and Harry Wiseman.1 The complaint asserted three counts
against Bubba’s Bar and Grill: (1) negligence; (2) negligent training and supervision of bar
staff and security personnel; and (3) gross negligence, willful, wanton and reckless
misconduct. Mr. Kubican subsequently learned that Bubba’s Bar and Grill was a fictitious
1
Mr. Wiseman allegedly had been involved in the February altercation. Two
counts were asserted against Mr. Wiseman: (1) assault and battery and (2) malicious, willful,
wanton and reckless misconduct. Mr. Wiseman is not participating in this appeal insofar as
none of the issues herein raised pertain to the claims asserted against him.
1
name used for business purposes by the respondent, The Tavern, LLC (hereinafter “The
Tavern”). Additionally, Mr. Kubican learned that James Paugh and Lawson Mangum were
the only members of The Tavern. Following the exchange of written discovery and the
deposition of Lawson Mangum pursuant to Rule 30(b)(7) of the West Virginia Rules of Civil
Procedure, Mr. Kubican sought leave to amend his complaint.2 The purpose of the proposed
amended complaint was to: (1) utilize the proper company name; (2) add as defendants the
individual members of The Tavern, James Paugh and Lawson Mangum (hereinafter “Paugh
and Mangum”); and (3) assert a veil piercing count against Paugh and Mangum. The
proposed amended complaint also reasserted the three negligence counts against the business
entity that had been included in the original complaint.3
The proposed amended complaint’s veil piercing count against Paugh and
Mangum alleged that Paugh and Mangum: (1) as the only members of The Tavern, exercised
full control over the company and actively participated in its management; (2) held
themselves out to others as the owners of The Tavern d/b/a Bubba’s Bar and Grill; (3) held
themselves out as personally responsible for the debts of the company; (4) commingled
personal funds with those of the company; (5) used the company to conduct personal
business; (6) used the company as a conduit to procure business and services for related
2
See W. Va. R. Civ. P. 15(a).
3
The proposed amended complaint likewise reasserted the counts pertaining
to Mr. Wiseman; however, those claims are not relevant to this appeal. See supra note 1.
2
entities; (7) failed to adhere to legal formalities necessary to maintain limited liability
company status; (8) diverted the company’s assets to their own benefit and use; (9) failed to
maintain records of the company’s corporate and business activities; (10) failed to insure the
company and left it grossly undercapitalized for the reasonable risks of owning and operating
a bar; and (11) operated the company as a mere alter ego of themselves. Based upon these
allegations, Mr. Kubican asserted that the circuit court was entitled to disregard the corporate
fiction and hold Paugh and Mangum personally liable for the debts of The Tavern.
Defendant, The Tavern, filed a response to Mr. Kubican’s motion to amend the
complaint resisting the same and arguing that the sole purpose for adding Paugh and
Mangum as defendants was to pierce the veil of their West Virginia limited liability company
(hereinafter “LLC”), which, according to The Tavern, is prohibited by West Virginia law.
Relying on W. Va. Code § 31B-3-303 (1996) (Repl. Vol. 2006),4 The Tavern argued that
members of an LLC are not personally liable for any debt, obligation or liability of the
company solely by reason of being or acting as a member or manager. The Tavern pointed
out that Count 6 of the amended complaint, titled “Veil Piercing,” was the only count
purporting to assert a claim against Paugh and Mangum. Thus, no allegations of wrongdoing
on the part of Paugh and Mangum have been asserted by Mr. Kubican. Rather, according to
4
The full text of W. Va. Code § 31B-3-303 (1996) (Repl. Vol. 2009), which
is titled “Liability of members and managers,” is quoted in the discussion section of this
opinion. See Section III, infra.
3
The Tavern, the claims are based solely on Paugh’s and Mangum’s status as members and/or
managers of the LLC. Thus, The Tavern argued, the circuit court should refuse the motion
to amend the complaint.
Mr. Kubican filed a reply to The Tavern’s response to his motion to amend his
complaint. In his reply, Mr. Kubican challenged the defendant’s interpretation of cases it
cited in support of its argument that members of an LLC may not be held liable for any debt,
obligation or liability of the company. According to Mr. Kubican, none of the cases cited by
The Tavern stood for the proposition asserted by the defendant. In addition, Mr. Kubican
noted that, on November 1, 2011, the West Virginia Secretary of State issued a “Certificate
of Administrative Dissolution” certifying that The Tavern had failed to file its annual report
and/or pay the annual report fee as required by West Virginia law. Finally, Mr. Kubican filed
a supplemental reply in support of his motion to amend his complaint wherein he presented
the circuit court with copies of The Tavern’s banking records. Mr. Kubican argued that the
banking records established that The Tavern was a sham company insofar as the records
demonstrated that, throughout The Tavern’s existence, company funds were being used to
purchase personal items, including chiropractic services, and to pay for numerous purchases
at various restaurants. Mr. Kubican further asserted that, although Bubba’s Bar & Grill was
purportedly closed in June 2011, and The Tavern has also ceased to exist, use of The
Tavern’s credit card and bank account have not stopped. Mr. Kubican stated that subpoenaed
4
bank records showed the accounts were still in use in February 2012, the most recent records
he could obtain by subpoena.5 According to Mr. Kubican, those records indicated that in
February 2012 more than 115 transactions were made using the company checking account
at locations such as grocery stores, convenience stores, restaurants, medical providers, hair
stylists, and amusement parks. Mr. Kubican asserted that the records also reflect a trip to
Myrtle Beach, South Carolina.
Instead of ruling on Mr. Kubican’s motion to amend his complaint, the circuit
court determined that it had been presented with an issue of first impression and, therefore,
certified the following question to this Court by order entered April 12, 2012:
Does West Virginia’s version of the Uniform Limited
Liability Company Act, codified at W. Va. Code § 31B[-1-101]
et seq., afford complete protection to members of a limited
liability company against a plaintiff seeking to pierce the
corporate veil?
The circuit court answered this question in the affirmative based upon its conclusion that
such an answer was in accord with the plain language of W. Va. Code § 31B-3-303.6
5
Mr. Kubican’s supplemental reply appears to have been filed on March 20,
2012.
6
For the full text of W. Va. Code § 31B-3-303, see the discussion section of
this opinion. See infra Section III.
5
II.
STANDARD OF REVIEW
We exercise de novo review of the instant certified question: “The appellate
standard of review of questions of law answered and certified by a circuit court is de novo.”
Syl. pt. 1, Gallapoo v. Wal-Mart Stores, Inc., 197 W. Va. 172, 475 S.E.2d 172 (1996).
Furthermore, to the extent that reaching an answer to the question herein certified requires
us to interpret a statutory provision, our review is likewise de novo. “Where the issue on an
appeal from the circuit court is clearly a question of law or involving an interpretation of a
statute, we apply a de novo standard of review.” Syl. pt. 1, Chrystal R.M. v. Charlie A.L.,
194 W. Va. 138, 459 S.E.2d 415 (1995).” Accordingly, we proceed with our plenary
analysis.
III.
DISCUSSION
Mr. Kubican argues that this Court should answer the certified question in the
negative and conclude that West Virginia’s Uniform Limited Liability Company Act does
not afford complete protection to members of an LLC against a plaintiff seeking to pierce the
corporate veil. Mr. Kubican explains that West Virginia adopted its version of the act from
the 1996 Uniform Limited Liability Company Act (hereinafter “ULLCA”) drafted by the
6
National Conference of Commissioners on Uniform State Laws.7 According to Mr. Kubican,
numerous other jurisdictions that also have adopted the ULLCA have addressed the question
of whether the Act precludes veil piercing. Mr. Kubican submits that “not a single court has
concluded that the act prohibits” veil piercing. Finally, Mr. Kubican opines that adopting a
rule that the LLC business form affords complete protection to LLC members would render
West Virginia a safe haven for corporate irresponsibility and fraud.
The Tavern8 argues that W. Va. Code § 31B-3-303 expressly provides that
members or managers of West Virginia LLCs are not personally responsible for any liability
7
Mr. Kubican submits that W. Va. Code § 31B-3-303, which pertains to
liability of members and managers of limited liability companies, is identical to the
corresponding section of the 1996 Uniform Limited Liability Company Act, § 303, and
nearly identical to the corresponding section of the Revised Uniform Limited Liability
Company Act adopted in 2006 (hereinafter “2006 RULLCA”), which is § 304.
For a full copy of the 1996 ULLCA, see:
http://www.uniformlaws.org/shared/docs/limited%20liability%20company/ullca96.pdf (last
visited October 24, 2013).
8
The Tavern first responds that the circuit court correctly refused to allow the
amendment of the complaint as the claims in the amendment against the members of The
Tavern would not have permitted the presentation of the merits of the action.
It should be noted that this case is before this Court on a certified question and
not an appeal from a ruling of the circuit court denying a motion to amend the complaint.
Thus, this argument asserted by The Tavern is not relevant to the issue before the Court.
Furthermore, it does not appear that the circuit court has ruled on the motion to amend the
complaint. Presumptively, such a ruling would be made only after the herein certified
question has been answered by this Court. Otherwise, this Court’s endeavor to answer the
certified question would be an act of futility.
7
of the company. Therefore, The Tavern contends, a plain reading of the statute supports the
position that piercing the veil of an LLC is not allowed.
In the LLC context, the purpose of piercing the corporate veil would be to hold
members and/or managers of the LLC personally liable for the wrongful actions of the
business.9 Cf. 18 C.J.S. Corporations §14, at 319 (2007) (“‘Piercing the corporate veil’ is
the judicial act of imposing personal liability on otherwise immune corporate officers,
directors, and shareholders for the corporation’s wrongful acts.” (footnote omitted)). Thus,
we first must determine whether West Virginia law allows an LLC member or manager to
be held liable in this manner.
We begin our analysis with an examination of W. Va. Code § 31B-3-303, the
provision of the West Virginia Uniform Limited Liability Act that addresses the liability of
LLC members and managers. In doing so, we recognize that “[t]he primary object in
construing a statute is to ascertain and give effect to the intent of the Legislature.” Syl. pt.
9
This type of liability is distinguishable from holding an LLC member or
manager personally liable based upon his or her own tortious actions. See 51 Am. Jur. 2d
Limited Liability Companies § 16, at 848 (2011) (“Whereas managers of limited liability
companies may not be held liable for the wrongful conduct of the companies merely because
of their manager status, they may nonetheless be held accountable for their personal
participation in tortious or criminal conduct, even when performing their duties as manager.”
(footnote omitted)).
8
1, Smith v. State Workmen’s Comp. Comm’r, 159 W. Va. 108, 219 S.E.2d 361 (1975). The
initial step in ascertaining the intent of the Legislature is to consider the language of the
statute at issue. “When a statute is clear and unambiguous and the legislative intent is plain,
the statute should not be interpreted by the courts, and in such case it is the duty of the courts
not to construe but to apply the statute.” Syl. pt. 5, State v. General Daniel Morgan Post No.
548, Veterans of Foreign Wars, 144 W. Va. 137, 107 S.E.2d 353 (1959). Nevertheless, “[a]
statute that is ambiguous must be construed before it can be applied.” Syl. pt. 1, Farley v.
Buckalew, 186 W. Va. 693, 414 S.E.2d 454 (1992). In other words, “‘[a] statute is open to
construction only where the language used requires interpretation because of ambiguity
which renders it susceptible of two or more constructions or of such doubtful or obscure
meaning that reasonable minds might be uncertain or disagree as to its meaning.’” Mace v.
Mylan Pharms., Inc., 227 W. Va. 666, 673, 714 S.E.2d 223, 230 (2011) (quoting Hereford
v. Meek, 132 W. Va. 373, 386, 52 S.E.2d 740, 747 (1949)).
With the foregoing canons in mind, we turn now to the particular language of
W. Va. Code § 31B-3-303, which states in part:
(a) Except as otherwise provided in subsection (c) of this
section, the debts, obligations and liabilities of a limited liability
company, whether arising in contract, tort or otherwise, are
solely the debts, obligations and liabilities of the company. A
member or manager is not personally liable for a debt,
obligation or liability of the company solely by reason of being
or acting as a member or manager.
9
....
(c) All or specified members of a limited liability
company are liable in their capacity as members for all or
specified debts, obligations or liabilities of the company if:
(1) A provision to that effect is contained in the articles
of organization; and
(2) A member so liable has consented in writing to the
adoption of the provision or to be bound by the provision.
W. Va. Code § 31B-3-303. The language of this provision is unambiguous insofar as it
declares that, with the exception noted in subsection (c), “[a] member or manager is not
personally liable for a debt, obligation or liability of the company solely by reason of being
or acting as a member or manager.” The key language relevant to the issue presented in the
instant action, which is italicized in the foregoing quote, proscribes liability “solely by reason
of being or acting as a member or manager.”10 By proscribing liability on the sole basis of
being a member or manager of an LLC, the Legislature implicitly has left intact the prospect
10
To be clear, liability based solely on being or acting as a member or manager
of an LLC is subject to the exception set out in subsection (c) of W. Va. Code § 31B-3-303.
Pursuant to that exception, a manager or member of an LLC is personally liable “solely by
reason of being or acting as a member or manager” when:
(1) A provision to that effect is contained in the articles
of organization; and
(2) A member so liable has consented in writing to the
adoption of the provision or to be bound by the provision.
W. Va. Code § 31B-3-303 (emphasis added).
10
of an LLC member or manager being liable on grounds that are not based solely on a
person’s status as a member or manager of an LLC. Our reasoning is supported by the
maxim expressio unius est exclusio alterius: “In the interpretation of statutory provisions the
familiar maxim expressio unius est exclusio alterius, the express mention of one thing
implies the exclusion of another, applies.” Syl. pt. 3, Manchin v. Dunfee, 174 W. Va. 532,
327 S.E.2d 710 (1984). See also State ex rel. Riffle v. Ranson, 195 W. Va. 121, 128, 464
S.E.2d 763, 770 (1995) (“Expressio unius est exclusio alterius (express mention of one thing
implies exclusion of all others) is a well-accepted canon of statutory construction.” (citations
omitted)). Furthermore, this conclusion is in accord with the manner in which other courts
have interpreted similar statutes. See Bowen v. 707 On Main, No. CV020282643S, 2004 WL
424501, at *3 (Conn. Super. Ct. Feb. 24, 2004) (“The principle of piercing the corporate
veil . . . also is applicable to limited liability companies and their members. General Statutes
§ 34-133.” (quotations and citations omitted));11 Kaycee Land & Livestock v. Flahive, 46
11
Similar to the West Virginia statute, Connecticut’s limited liability statute
states:
“(a) Except as provided in subsection (b) of this section,
a person who is a member or manager of a limited liability
company is not liable, solely by reason of being a member or
manager, under a judgment, decree or order of a court, or in any
other manner, for a debt, obligation or liability of the limited
liability company, whether arising in contract, tort or otherwise
or for the acts or omissions of any other member, manager,
agent or employee of the limited liability company.”
Bowen v. 707 On Main, No. CV020282643S, 2004 WL 424501, at *2 n.4 (Conn. Super. Ct.
(continued...)
11
P.3d 323, 325-26 (Wyo. 2002) (“[W]e are asked to broadly pronounce that there are no
circumstances under which this court will look through a failed attempt to create a separate
LLC entity and prevent injustice. We simply cannot reach that conclusion and believe it is
improvident for this court to prohibit this remedy [of piercing the veil] from applying to any
unforeseen circumstance that may exist in the future.”).12 See also Filo Am., Inc. v. Olhoss
Trading Co., L.L.C., 321 F. Supp. 2d 1266, 1269 (M.D. Ala. 2004) (observing that
“commentators who have discussed the issue as a nationwide matter have concluded that the
‘veil-piercing’ doctrine applies to LLCs. . . . Further, the courts in other States that have
considered whether the ‘veil-piercing’ doctrine applies to LLCs have concluded that it does,”
and collecting authorities). Accordingly, we hold that W. Va. Code § 31B-3-303 permits the
11
(...continued)
Feb. 24, 2004) (quoting Connecticut General Statutes § 34-133(a)).
12
The relevant Wyoming statute provides that:
“Neither the members of a limited liability company nor
the managers of a limited liability company managed by a
manager or managers are liable under a judgment, decree or
order of a court, or in any other manner, for a debt, obligation or
liability of the limited liability company.”
Kaycee Land & Livestock v. Flahive, 46 P.3d 323, 326 (Wyo. 2002) (quoting Wyo. Stat. Ann.
§ 17–15–113 (LexisNexis 2001)). In support of finding the foregoing language allowed for
piercing the veil of an LLC, the Kaycee court expressed its agreement that “‘[i]t is difficult
to read statutory § 17–15–113 as intended to preclude courts from deciding to disregard the
veil of an improperly used LLC.’” Kaycee, 46 P.3d at 326 (quoting Harvey Gelb, Liabilities
of Members and Managers of Wyoming Limited Liability Companies, 31 Land & Water
L. Rev. 133 at 142 (1996)). In 2010, Wyoming repealed this statute and adopted the 2006
RULLA. The current Wyoming statute addressing the liability of LLC members and
managers is Wyo. Stat. Ann. § 17-29-304.
12
equitable remedy of piercing the veil to be asserted against a West Virginia Limited Liability
Company.
Although the language employed by the Legislature has preserved the ability
to pierce the veil of an LLC to hold a member or manager liable, the Legislature has failed
to identify the circumstances under which the imposition of such liability is proper. Thus,
in this regard, W. Va. Code § 31B-3-303 is ambiguous and must be interpreted. Subsection
(b) of W. Va. Code § 31B-3-303 does provide a starting point for our analysis by specifying
that “[t]he failure of a limited liability company to observe the usual company formalities or
requirements relating to the exercise of its company powers or management of its business
is not a ground for imposing personal liability on the members or managers for liabilities of
the company.” (Emphasis added). Thus, while is it clear that the failure of a limited liability
company to observe “usual company formalities” is not sufficient grounds upon which to
pierce the LLC veil and hold its members personally liable, we must, nevertheless, endeavor
to identify those grounds upon which the veil of an LLC may be pierced in order to fully
answer the certified question presented in this action. Because this is a novel question in
West Virginia, we find it helpful to consider the criteria used by other courts to determine
when it is appropriate to pierce the veil of an LLC.
13
The State of Illinois has enacted statutory provisions identical to those
contained in W. Va. Code § 31B-3-303. See 805 ILCS 180/10–10 (a), (c), & (d) (West
2008). In Seater Construction Company, Inc. v. Deka Investments, LLC, No. 2–12–1140,
2013 WL 3272487, at *8 (Ill. Ct. App. June 24, 2013), the Appellate Court of Illinois
acknowledged that “no Illinois case has held that the doctrine of piercing the corporate veil
applies to an Illinois limited liability company (LLC).” Nevertheless, the court observed that
“‘while the [Illinois Limited Liability Company] Act provides specifically that the failure to
observe the corporate formalities is not a ground for imposing personal liability on the
members of an LLC, it does not bar the other bases for corporate veil piercing, such as alter
ego, fraud or undercapitalization.’” Seater, 2013 WL 3272487, at *8 (quoting Westmeyer
v. Flynn, 382 Ill. App. 3d 952, 960 (2008)).
In determining whether to pierce the veil of an LLC, the Seater court applied
the existing Illinois two-prong analysis for piercing the veil of a corporation. The two-part
test considered: (1) unity of interest and ownership and (2) fraud, injustice or inequitable
consequences. Observing that numerous factors are applicable to an analysis pertaining to
the unity of interest and ownership prong of the test, but also noting that several of the factors
are inapplicable to piercing the veil of an LLC, the Seater court commented:
Ordinarily, in determining whether the “unity of interest
and ownership” prong of the piercing-the-corporate-veil test is
met, a court considers many factors, including: (1) inadequate
capitalization; (2) failure to issue stock; (3) failure to observe
14
corporate formalities; (4) nonpayment of dividends; (5)
insolvency of the debtor corporation; (6) nonfunctioning of the
other officers or directors; (7) absence of corporate records; (8)
commingling of funds; (9) diversion of assets from the
corporation by or to a stockholder or other person or entity to the
detriment of creditors; (10) failure to maintain arm’s-length
relationships among related entities; and (11) whether, in fact,
the corporation is a mere facade for the operation of the
dominant stockholders. Fontana[ v. TLD Builders, Inc.], 362
Ill. App. 3d [491,] 503 [(2005)]. Several of the factors are
inapplicable to piercing the veil of an LLC, because they deal
with adherence to corporate formalities. 805 ILCS
180/10–10(c) (West 2008).
Seater, 2013 WL 3272487, at *8. Based upon the arguments presented to the Seater court
by the appellant, the court addressed factors (1), (8), (9) and (10) to ultimately conclude that
grounds did not exist to warrant piercing the veil of the LLC at issue under the facts
presented in that case.
Other courts similarly have applied the same basic analysis to piercing the veil
of an LLC that would be applied in the context of piercing the corporate veil, but with the
acknowledgment that some factors may not apply. In Filo America, Inc. v. Olhoss Trading
Co., L.L.C., 321 F. Supp. 2d 1266, the United States District Court concluded that,
under Alabama law, it is possible to “pierce the veil” of an LLC
in some situations. The factors that Alabama courts consider in
deciding whether it is appropriate to “pierce the veil” of a
corporation are: (1) inadequacy of capital; (2) fraudulent
purpose in conception or operation of the business; (3) operation
of the corporation as an instrumentality or alter ego. Culp v.
Economy Mobile Homes, Inc., 895 So. 2d 857, [859-60,] 2004
WL 541818 (Ala.) (internal citations omitted). While some of
15
these factors may not apply to LLCs in the same way they apply
to corporations, see [Bradley J. Sklar and W. Todd Carlisle, The
Alabama Limited Liability Company Act, 45 Ala. L. Rev. 145,
202 (1993)] (“Inadequacy of capital should provide less of a
basis for piercing the LLC veil than the corporate veil”), a
fraudulent purpose in the conception or operation of an LLC
should certainly be a valid reason for “piercing” the LLC’s
“veil.” Eric Fox, Note, Piercing the Veil of Limited Liability
Companies, 62 Geo. Wash. L. Rev. 1143 (1994) (“If it is in the
public interest to disregard the legal fiction when those
benefitting from that fiction commit fraudulent conduct, it
should not matter to the court whether the legal fiction is used
by corporate shareholders or LLC members”).
Filo Am., Inc., 321 F. Supp. 2d at 1269-70.13
13
In reaching this conclusion, the district court reasoned that
[b]ecause the LLC borrows its limited liability characteristics
from the law applicable to corporations, the “veil-piercing”
exception applicable to corporations should also apply to LLCs.
In other words, since a stockholder or owner of a corporation
can be held liable for the debts and obligations of the
corporation in the rare case in which “piercing the corporate
veil” is appropriate, a member of an LLC should be similarly
liable when it is appropriate for the “veil” of the LLC to be
“pierced.” See [Bradley J. Sklar and W. Todd Carlisle, The
Alabama Limited Liability Company Act, 45 Ala. L. Rev. 145,
200 (1993)] (stating that corporate precedents on veil piercing
will probably apply to LLCs in Alabama).
Filo Am., Inc. v. Olhoss Trading Co., L.L.C., 321 F. Supp. 2d 1266, 1269 (M.D. Ala. 2004).
16
The Court of Appeals of Utah also applied a corporate veil piercing analysis
to an LLC in d’Elia v. Rice Development, Inc., 147 P.3d 515 (Utah Ct. App. 2006). The
d’Elia court observed that,
[i]n Ditty v. CheckRite, Ltd., 973 F. Supp. 1320 (D. Utah
1997), a federal district court determined that under Utah law
the corporate veil piercing doctrine equally applies to Utah
liability companies. See id. at 1335 (noting that although “there
is little case law discussing veil piercing theories outside the
corporate context, most commentators assume that the doctrine
applies to limited liability companies” and citing a number of
commentators).
d’Elia, 147 P.3d at 521 n.5. Accordingly, the d’Elia court applied the same analysis it would
have used to determine whether a non-LLC corporate entity’s veil should be pierced and
ultimately concluded that “[t]he record reveals that substantial evidence exists to support the
trial court’s decision not to pierce the corporate veil.” 147 P.3d at 523 (emphasis added).
Thus, it appears that most courts addressing the question of whether to pierce
the veil of an LLC apply the same test used to analyze piercing the corporate veil. See, e.g.,
Thomas v. Bridges, 120 So. 3d 338, 342 (La. Ct. App. 2013) (applying “five-factor test [for
piercing corporate veil] supplied by the Louisiana Supreme Court in Riggins v. Dixie Shoring
Co., Inc., 590 So. 2d 1164, 1168 & n.5 (La. 1991)” to an LLC; elements of five factor test
“include, but are not limited to: 1) commingling of corporate and shareholder funds; 2)
failure to follow statutory formalities for incorporating and transacting corporate affairs; 3)
undercapitalization; 4) failure to provide separate bank accounts and bookkeeping records;
17
and 5) failure to hold regular shareholder and director meetings, Riggins, 590 So. 2d at
1168.”).14 These courts, however, often recognize that certain elements of the test may not
apply at all, while other elements may apply to an LLC in a different manner than they would
apply to a corporation.
Some courts additionally have cautioned that a veil piercing analysis is a fact
driven analysis that must be engaged on a case-by-case basis. For example, in Kaycee Land
14
For examples of other tests applied by courts deciding whether to pierce the
veil of an LLC, see Restaurant of Hattiesburg, LLC v. Hotel & Rest. Supply, Inc., 84 So. 3d
32, 39 (Miss. Ct. App. 2012) (holding that “to pierce the veil of an LLC the complaining
party must prove LLC membership as well as (a) some frustration of contractual
expectations, (b) flagrant disregard of LLC formalities by the LLC members, and (c) fraud
or misfeasance by the LLC member”); Thomas & Thomas Court Reporters, L.L.C. v. Switzer,
283 Neb. 19, 27-28, 810 N.W.2d 677, 685 (2012) (“[T]he individual members and managers
of a limited liability company are generally not liable for a debt, obligation, or liability of the
company. And a court will disregard such a company’s identity only where the company has
been used to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act in
contravention of the rights of another. The company’s identity as a separate legal entity will
be preserved, as a general rule, until sufficient reason to the contrary appears. And a plaintiff
seeking to impose liability on an individual member or manager has the burden of proving
that the company’s identity should be disregarded to prevent fraud or injustice to the
plaintiff.” (footnotes omitted)). But see White v. Longley, 358 Mont. 268, 280 n.2, 244 P.3d
753, 761 n.2 (2010) (“Some commentators and courts have advocated application to LLCs
of the rules regulating piercing the corporate veil to impose individual liability. See[,] e.g.[,]
[Steven C. Bahls, Application of Corporate Common Law Doctrines to Limited Liability
Companies, 55 Mont. L. Rev. 44, 59–66 (1994)]. Because § 35–8–304, MCA, clearly does
not establish blanket liability protection for members of LLCs, and because the intent of that
section is to allow liability in a situation in which the member acting individually would be
liable, it is not necessary to engraft the veil piercing law from the corporate arena to resolve
this issue.”).
18
& Livestock v. Flahive, 46 P.3d 323, the Supreme Court of Wyoming addressed a certified
question asking:
In the absence of fraud, is a claim to pierce the Limited
Liability entity veil or disregard the Limited Liability Company
entity in the same manner as a court would pierce a corporate
veil or disregard a corporate shield, an available remedy against
a Wyoming Limited Liability Company under Wyoming’s
Limited Liability Company Act, Wyo. Stat. §§ 17–15–101
through 17–15–144 (2000)?
Id. at 324.15 The Kaycee court observed that “Wyoming courts, as well as courts across the
country, have typically utilized a fact driven inquiry to determine whether circumstances
justify a decision to pierce a corporate veil.” Id. at 325 (citation omitted). Because the case
had come “as a certified question in the abstract with little factual context,” the court opined
that “[i]t would be inadvisable in this case, which lacks a complete factual context, to attempt
to articulate all the possible factors to be applied to LLCs in Wyoming in the future.” Id. at
325 & 328.16
15
“Wyoming was the first state to enact LLC statutes.” Kaycee Land &
Livestock v. Flahive, 46 P.3d 323, 326. The language of the particular statute at issue in
Kaycee is quoted supra at note 12.
16
Nevertheless, as with the other cases cited earlier in this opinion, the Kaycee
court indicated that most courts have, in general, applied to LLCs the existing common law
factors for piercing the veil in the corporate context. The court in Kaycee also recognized
that, “[c]ertainly, the various factors which would justify piercing an LLC veil would not be
identical to the corporate situation for the obvious reason that many of the organizational
formalities applicable to corporations do not apply to LLCs.” Kaycee Land & Livestock v.
Flahive, 46 P.3d 323, 328. Nevertheless, a subsequent Wyoming case provided some
guidance as to the general factors that would be relevant to an LLC veil piercing analysis by
observing that
(continued...)
19
New Jersey has agreed with the analysis utilized by the Wyoming court in
Kaycee Land & Livestock. After favorably discussing the Kaycee opinion, the Superior
Court of New Jersey commented that
the particular standard [for piercing the veil of an LLC] should
be developed over time, as courts address concrete cases. It is
not for this court, solely on the facts presented to it in this case,
to formulate a generally-applicable standard. It is sufficient for
this court to conclude that in this case, Borne’s failure to
scrupulously identify the entity through which he was acting, his
dominion and control of Esplanade L.L.C., and the entity’s
undercapitalization should not loom as large as it might were the
entity a corporation.
D.R. Horton Inc.-New Jersey v. Dynastar Dev., L.L.C., No. MER-L-1808-00, 2005 WL
1939778, at *36 (N.J. Super. Ct. Law Div. Aug. 10, 2005).17 The New Jersey court
16
(...continued)
“[t]he LLC veil piercing factors used from the corporate arena
can be reduced to four categories:
1. Fraud;
2. Inadequate capitalization;
3. Failure to observe company formalities; and
4. Intermingling the business and finances of the
company and the member to such an extent that there is no
distinction between them[.]”
Gasstop Two, LLC v. Seatwo, LLC, 225 P.3d 1072, 1077 (Wyo. 2010) (quoting Phillip L.
Jelsma and Pamela Everett Nollkamper (Phillip P. Whynott), The Limited Liability Company,
§ 11-130 (2009)).
17
The New Jersey LLC statute provides, in relevant part:
(continued...)
20
ultimately applied the common law test for piercing the veil of a corporation, tempered by
the fact that the business at issue was an LLC, and concluded that the circumstances
presented did not warrant piercing the LLC veil:
under the . . . two-part test, Horton NJ must prove that (1)
Esplanade L.L.C. was a mere instrumentality or alter ego of
Borne; and (2) Borne abused the business form to perpetrate a
fraud, injustice, or otherwise circumvent the law. Particularly
given the lesser weight assigned to the formalities, and
dominion-and-control factors, Horton NJ has failed to prove the
first prong. Moreover . . . the court finds no injustice or
circumvention of law, notwithstanding that Esplanade L.L.C.
ultimately lacked sufficient capital to fulfill its obligations.
D.R. Horton Inc., 2005 WL 1939778, at *36. Notably, however, the New Jersey court
cautioned that
persuasive authorities indicate that corporate veil-piercing
doctrine should not be mechanically applied to cases involving
limited liability companies. In particular, a court should view in
17
(...continued)
“Except as otherwise provided by this act, the debts,
obligations and liabilities of a limited liability company, whether
arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the limited liability company; and
no member, manager, employer or agent of a limited liability
company shall be obligated personally for any such debt,
obligation or liability of the limited liability company, or for any
debt, obligation or liability of any other member, manager,
employee or agent of the limited liability company, by reason of
being a member, or acting as a manager, employee or agent of
the limited liability company.”
D.R. Horton Inc.-New Jersey v. Dynastar Dev., L.L.C., No. MER-L-1808-00, 2005 WL
1939778, at *31-32 (N.J. Super. Ct. Law Div. Aug. 10, 2005) (quoting N.J.S.A. § 42:2B-23).
21
a different light the factors of adherence to corporate
formalities, and scrutiny of owners’ dominion and control.
....
. . . [C]ourts that have expressly considered the
differences between the two business forms have concluded that
veil-piercing doctrine should be molded to accommodate the
differences. . . .
....
As noted by the Wyoming Supreme Court, adherence to
formalities is one factor that should weigh differently in the case
of a limited liability company. Kaycee Land and Livestock v.
Flahive, supra, 46 P.3d at 328. Vandervoort concurs for two
reasons. [J. Vandervoot, Piercing the Veil of Limited Liability
Companies: The Need For A Better Standard, 3 DePaul Bus. &
Com. L.J. 51, 68-70 (2004)]. First, a small-business owner’s
failure to adhere to formalities may simply reflect disregard of
formalities “irrelevant to their actual operation”, and lack of
funds to hire lawyers and others to keep track of statutory
obligations. None of that may evidence misuse of the statute.
Ibid. Second, “LLC’s [sic] have relatively few statutorily
mandated formalities and have a considerable amount of
freedom and flexibility as to the management structure of the
entity.” This informality, encouraged by statute, should not then
be a basis to avoid statutory limited liability. Ibid. See [David
L. Cohen, Theories of the Corporation and the Limited Liability
Company: How Should Courts and Legislatures Articulate Rules
for Piercing the Veil, Fiduciary Responsibility and Securities
Regulation for the Limited Liability Company?, 51 Okla. L. Rev.
427, 457 (2004)] (“[T]o allow piercing for disregarding LLC
formalities . . . will make the promise of limited liability for
LLCs empty by definition.”).
D.R. Horton Inc., 2005 WL 1939778, at *33-35.
22
Similarly, in Bowen v. 707 On Main, 2004 WL 424501, the Superior Court of
Connecticut explained that
“[T]he determination of whether to pierce the corporate
veil . . . to disregard the protections afforded a limited liability
company requires the same analysis [as that of a corporate
entity].” KLM Industries, Inc. v. Tylutki, 75 Conn. App. 27, 28
n.2, 815 A.2d 688, cert. denied, 263 Conn. 916, 821 A.2d 770
(2003).
....
“The concept of piercing the corporate veil is equitable
in nature and courts should pierce [it] only under exceptional
circumstances.” (Internal quotation marks omitted.) Hershey v.
Lonrho, 73 Conn. App. 78, 87, 807 A.2d 1009 (2002). Such
exceptional circumstances would include instances “where the
corporation is a mere shell, serving no legitimate purpose, and
used primarily as an intermediary to perpetuate fraud or promote
injustice.” (Internal quotation marks omitted.) SFA Folio
Collections, Inc. v. Bannon, 217 Conn. 220, 230, 585 A.2d 666,
cert. denied, 501 U.S. 1223, 111 S. Ct. 2839, 115 L. Ed. 2d 1008
(1991).
Bowen, 2004 WL 424501, at *2.18 Finally, the court noted that
18
The Bowen court described the test for piercing the corporate veil as follows:
“When determining whether piercing the corporate veil
is proper, our [courts have] endorsed two tests: the
instrumentality test and the identity test. The instrumentality
rule requires . . . proof of three elements: (1) Control, not
merely majority or complete stock control, but complete
domination, not only of finances but of policy and business in
respect to the transaction attacked so that the corporate entity as
to this transaction had at the time no separate mind, will or
existence of its own; (2) that such control must have been used
(continued...)
23
“One of the principal reasons to use an L.L.C. is that the owners
and managers, if the owners so elect, have limited liability from
contract and tort claims of third parties. M. Pruner, A Guide to
Connecticut Liability Companies, § 3.1.1, p. 9 (1995).” Stone
v. Frederick Hobby Assoc. II, Superior Court, judicial district of
Stamford/Norwalk at Stamford, Docket No. CV 00 0181620
(July 10, 2001, Mintz, J.). . . .
“No hard and fast rule, however, as to the conditions
under which the entity may be disregarded can be stated as they
vary according to the circumstances of each case.” (Internal
quotation marks omitted.) Angelos Tomasso v. Armor
Construction & Paving, Inc., 187 Conn. 544, 555-56, 447 A.2d
406 (1982).
18
(...continued)
by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or a
dishonest or unjust act in contravention of the plaintiff’s legal
rights; and (3) that the aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.”
(Internal quotation marks omitted.) [Mountview] Plaza, Inc. v.
World Wide Pet Supply, Inc., [76 Conn. App. 627,] 633-34[, 820
A.2d 1105, 1110 (2003)]. “The identity rule has been stated as
follows: If a plaintiff can show that there was such a unity of
interest and ownership that the independence of the corporations
had in effect ceased or had never begun, an adherence to the
fiction of separate identity would serve only to defeat justice and
equity by permitting the economic entity to escape liability
arising out of an operation conducted by one corporation for the
benefit of the whole enterprise.” (Internal quotation marks
omitted.) Litchfield Asset Management Corp. v. Howell, [70
Conn. App. 133,] 156[, 799 A.2d 298, 315, cert. denied, 261
Conn. 911, 806 A.2d 49 (2002)].
Bowen, 2004 WL 424501 at *2.
24
Bowen, 2004 WL 424501, at *4. See also Martin v. Freeman, 272 P.3d 1182, 1184
(Colo. App. 2012) (“To pierce the LLC veil, the court must conclude (1) the corporate entity
is an alter ego or mere instrumentality; (2) the corporate form was used to perpetrate a fraud
or defeat a rightful claim; and (3) an equitable result would be achieved by disregarding the
corporate form. . . . The third prong, in particular, recognizes that veil piercing is a
‘fact-specific’ inquiry.” (internal citation omitted)).
Based upon the foregoing authority, this Court will consider West Virginia
common law standards for piercing the corporate veil in order to establish guidance for lower
courts deciding whether to pierce the veil of an LLC. In doing so, we are mindful that the
analysis necessarily is fact based and must be applied to LLCs on a case-by-case basis. See
Southern Elec. Supply Co. v. Raleigh Cnty. Nat’l Bank, 173 W. Va. 780, 787, 320 S.E.2d
515, 523 (1984) (“[D]ecisions to look beyond, inside and through corporate facades must be
made case-by-case, with particular attention to factual details.” (footnote omitted)).
With regard to corporate veil piercing in general, this Court has held that “[t]he
law presumes . . . that corporations are separate from their shareholders.” Syl. pt. 3, in part,
Southern Elec. Supply Co., 173 W. Va. 780, 320 S.E.2d 515. Nevertheless,
“[w]hile, legally speaking, a corporation constitutes an
entity separate and apart from the persons who own it, such is a
fiction of the law introduced for purpose of convenience and to
subserve the ends of justice; and it is now well settled, as a
25
general principle, that the fiction should be disregarded when it
is urged with an intent not within its reason and purpose, and in
such a way that its retention would produce injustices or
inequitable consequences.” Syl. pt. 10, Sanders v. Roselawn
Mem’l Gardens, Inc., 152 W. Va. 91, 159 S.E.2d 784 (1968).
Syl. pt. 2, Laya v. Erin Homes, Inc., 177 W. Va. 343, 352 S.E.2d 93 (1986). More
specifically, we held in Laya that
to “pierce the corporate veil” in order to hold the shareholder(s)
actively participating in the operation of the business personally
liable . . . , there is normally a two-prong test: (1) there must be
such unity of interest and ownership that the separate
personalities of the corporation and of the individual
shareholder(s) no longer exist (a disregard of formalities
requirement) and (2) an inequitable result would occur if the
acts are treated as those of the corporation alone (a fairness
requirement).
Syl. pt. 3, in part, id.19 Although the Laya test was applied in the context of a breach of
contract, a subsequent case has made clear that the test applies in other contexts as well. See
St. Peter v. Ampak-Div. of Gatewood Prod., Inc., 199 W. Va. 365, 484 S.E.2d 481 (1997)
(addressing veil piercing analysis in connection with retaliatory discharge and discrimination
claims).
19
We do not perceive the characterization of the first element of the Laya test
as a “disregard of formalities requirement” to be identical to the “usual company formalities
or requirements” that are prohibited as a grounds for personal liability of an LLC member
under W. Va. Code § 31B-3-303. While some considerations of these two types of
formalities may be the same or similar, we find the Laya test to be more broad. The broader
application of the Laya test is demonstrated by the non-exclusive list of factors that may be
considered in conducting a veil piercing analysis under Laya. Those factors are quoted infra
in this opinion.
26
In reaching the foregoing holding in Laya, we set out a non-exhaustive list of
factors that might be relevant in determining whether to pierce a corporate veil. Those
factors included:
(1) commingling of funds and other assets of the
corporation with those of the individual shareholders;
(2) diversion of the corporation’s funds or assets to
noncorporate uses (to the personal uses of the corporation’s
shareholders);
(3) failure to maintain the corporate formalities necessary
for the issuance of or subscription to the corporation’s stock,
such as formal approval of the stock issue by the board of
directors;
(4) an individual shareholder representing to persons
outside the corporation that he or she is personally liable for the
debts or other obligations of the corporation;
(5) failure to maintain corporate minutes or adequate
corporate records;
(6) identical equitable ownership in two entities;
(7) identity of the directors and officers of two entities
who are responsible for supervision and management (a
partnership or sole proprietorship and a corporation owned and
managed by the same parties);
(8) failure to adequately capitalize a corporation for the
reasonable risks of the corporate undertaking;
(9) absence of separately held corporate assets;
(10) use of a corporation as a mere shell or conduit to
operate a single venture or some particular aspect of the
business of an individual or another corporation;
27
(11) sole ownership of all the stock by one individual or
members of a single family;
(12) use of the same office or business location by the
corporation and its individual shareholder(s);
(13) employment of the same employees or attorney by
the corporation and its shareholder(s);
(14) concealment or misrepresentation of the identity of
the ownership, management or financial interests in the
corporation, and concealment of personal business activities of
the shareholders (sole shareholders do not reveal the association
with a corporation, which makes loans to them without adequate
security);
(15) disregard of legal formalities and failure to maintain
proper arm’s length relationships among related entities;
(16) use of a corporate entity as a conduit to procure
labor, services or merchandise for another person or entity;
(17) diversion of corporate assets from the corporation by
or to a stockholder or other person or entity to the detriment of
creditors, or the manipulation of assets and liabilities between
entities to concentrate the assets in one and the liabilities in
another;
(18) contracting by the corporation with another person
with the intent to avoid the risk of nonperformance by use of the
corporate entity; or the use of a corporation as a subterfuge for
illegal transactions;
(19) the formation and use of the corporation to assume
the existing liabilities of another person or entity.
Laya, 177 W. Va. at 347-48, 352 S.E.2d at 98-99. See also St. Peter, 199 W. Va. at 372-73,
484 S.E.2d at 488-89 (“‘Decisions to “pierce” involve multifarious considerations, including
28
inadequacy of capital structures, whether personal and corporate funds have been
commingled without regard to corporate form by a sole shareholder, whether two
corporations have commingled their funds so that their accounts are interchangeable; whether
they have failed to follow corporate formalities, siphoning funds from one corporation to
another without regard to harm caused either entity, or failed to keep separate records. Other
reasons to disregard the structure are: total control and dominance of one corporation by
another or a shareholder; existence of a dummy corporation with no business activity or
purpose; violation of law or public policy; a unity of interest and ownership that causes one
party or entity to be indistinguishable from another; common shareholders, common officers
and employees, and common facilities.’” (quoting Southern Elec. Supply Co., 173 W. Va. at
788, 320 S.E.2d at 523)).
While many of the foregoing factors, among others, may be relevant to a court
deciding whether to pierce the veil of an LLC, we hesitate to adopt a test that sets out specific
factors insofar as this Court and others have cautioned that such an analysis must be applied
on a case-by-case basis considering the particular facts presented therein. Consequently, we
establish a more general test following the lead of the Court in Laya, and hold that, to pierce
the veil of a limited liability company in order to impose personal liability on its member(s)
or manager(s), it must be established that (1) there exists such unity of interest and ownership
that the separate personalities of the business and of the individual member(s) or managers(s)
29
no longer exist and (2) fraud, injustice, or an inequitable result would occur if the veil is not
pierced. This is a fact driven analysis that must be applied on a case-by-case basis and,
pursuant to W. Va. Code § 31B-3-303(b), the failure of a limited liability company to observe
the usual company formalities or requirements relating to the exercise of its company powers
or management of its business may not be a ground for imposing personal liability on the
member(s) or manager(s) of the company.20
The certified question presented in this cases asks whether “West Virginia’s
version of the Uniform Limited liability Company Act, codified at W. Va. Code § 31B[-1­
101], et seq., afford[s] complete protection to members of a limited liability company against
a plaintiff seeking to pierce the corporate veil?” Applying our foregoing analysis to this
question, we answer in the negative.
IV.
CONCLUSION
For the reasons set out above, we answer the question certified to this Court
by the Circuit Court of Harrison County in the negative and hold that W. Va. Code
§ 31B-3-303 (1996) (Repl. Vol. 2009) permits the equitable remedy of piercing the veil to
20
Because we are addressing a certified question, we do not apply our holding
to the case sub judice to determine whether the LLC veil should be pierced in this instance.
Such a determination must be made by the circuit court.
30
be asserted against a West Virginia limited liability company. Furthermore, to pierce the veil
of a limited liability company in order to impose personal liability on its member(s) or
manager(s), it must be established that (1) there exists such unity of interest and ownership
that the separate personalities of the business and of the individual member(s) or managers(s)
no longer exist and (2) fraud, injustice or an inequitable result would occur if the veil is not
pierced. This is a fact driven analysis that must be applied on a case-by-case basis, and,
pursuant to W. Va. Code § 31B-3-303(b), the failure of a limited liability company to observe
the usual company formalities or requirements relating to the exercise of its company powers
or management of its business may not be a ground for imposing personal liability on the
member(s) or manager(s) of the company.
Certified Question Answered.
31