In the realm of corporate litigation, recovering losses from a seemingly impenetrable corporate structure can be a daunting task. Enter the legal strategy known as “piercing the corporate veil,” a concept aimed at proving that the corporation is not a genuine protective entity for its principals. However, piercing the corporate veil is a challenging legal hurdle, prompting attorneys and clients to explore alternative methods to hold corporate officers accountable for their actions.

Understanding the Corporate Veil and Its Challenges

When a lawsuit is filed against a corporation with elusive assets or concealed finances, the traditional route may involve attempting to pierce the corporate veil. This involves demonstrating that the corporation functions more as a tool for personal gain by its officers than as a legitimate business entity. Unfortunately, this process can be legally intricate and difficult to navigate successfully.

An Alternative Legal Avenue: Individual Liability Through Fraud Claims

A recent article by attorney Kevin Schlosser sheds light on a compelling alternative – holding corporate officers individually liable through fraud claims. This legal approach, decided in a 2022 case, emphasizes that a corporate officer participating in fraudulent activities can be held accountable irrespective of the traditional concept of piercing the corporate veil.

The Legal Theory at Play

The crux of this legal theory lies in proving that an officer or employee participated in fraudulent or tortious conduct that directly caused the plaintiff’s losses. Instead of dissolving the corporate shield, this strategy identifies individual actors within the corporation as co-defendants, making them personally responsible for the damages.

Case Example: Fraudulent Inducement

The referenced case in 2022 exemplifies the efficacy of this strategy. The plaintiff claimed fraudulent inducement, asserting that the defendant – a corporate officer – made false representations that resulted in negative consequences for the plaintiff. This approach allowed the plaintiff to pursue a claim against the individual officer without necessarily piercing the corporate veil.

Implementing the Alternative Strategy: A Two-Pronged Approach

Successfully executing this alternative strategy involves a two-pronged approach:

  1. Legal Representation:
    • Seek legal advice from an experienced attorney who can evaluate the viability of this strategy for your specific case.
    • Ensure that your attorney is well-versed in the nuances of fraud claims and has a strategic plan for presenting the case.
  2. Evidence Gathering:
    • Conduct a thorough investigation to gather evidence of the individual’s participation in fraudulent or tortious conduct.
    • Document voicemails, emails, witness interviews, or any tangible proof that connects the individual to the actions causing the losses.

The Role of Evidence in Strengthening Your Case

Presenting a strong case necessitates compelling evidence that clearly establishes the individual’s involvement in the fraudulent activities. Evidence-backed claims provide a more persuasive argument and increase the likelihood of success in court.

Client Empowerment: Taking Charge of Your Legal Strategy

Clients can play an active role in shaping the legal strategy by being proactive:

  • Research the Attorney:
    • Investigate the attorney’s track record, including their success with fraud claims.
    • Ensure alignment between your desired legal approach and the attorney’s preferred strategies.
  • Evidence-Driven Approach:
    • Consider conducting an investigation before or alongside hiring an attorney.
    • Armed with evidence, collaborate with your attorney to build a case that maximizes your chances of recovery.

A Strategic Path to Recovery

While piercing the corporate veil remains a complex legal maneuver, the alternative strategy of holding individual corporate officers liable for fraud provides a viable and potentially more straightforward path to recovery. By combining legal expertise with compelling evidence, clients can navigate the complexities of corporate litigation with confidence and increase their chances of a favorable outcome.

In your pursuit of justice, consulting with legal professionals and proactively contributing to your case’s strategy empowers you to make informed decisions and enhances the effectiveness of your legal representation.