To Pierce Corporate Veil, there Needs to be Sufficient Findings of Improper Conduct
A trial court’s decision whether to pierce the corporate veil is reviewed under a de novo standard of appellate review because it presents a pure issue of law. Flooring Depot FTL, Inc. v. Wurtzebach, 2021 WL 5348903, *2 (Fla. 4th DCA 2021).
The recent decision in Flooring Depot FTL demonstrating that piercing a corporate veil is not so easy, and really, far from it. In this case, homeowners did not receive approximate 1,912 square feet of purchased flooring. The homeowners sued the flooring company for not providing all of the flooring they paid for and claimed fraud. The homeowners attempted to pierce the corporate veil against the president of the flooring company. The homeowners prevailed at trial after a non-jury trial including prevailing on piercing the corporate veil. On appeal, the decision to pierce the corporate veil was reversed because piercing the corporate veil is NOT EASY.
To pierce the corporate veil, a party must prove three factors by a preponderance of evidence:
(1) the shareholder dominated and controlled the corporation to such an extent that the corporation’s independent existence,
was in fact non-existent and the shareholders were in fact alter egos of the corporation;
(2) the corporate form must have been used fraudulently or for an improper purpose; and
(3) the fraudulent or improper use of the corporate form caused injury to the claimant.
Flooring Depot FTL, supra, at *2 (citation omitted).
The Flooring Depot FTL Court explained there needs to be sufficient findings of improper conduct in order to pierce the corporate veil. Id. The allegations supporting the improper conduct was that the president commingled business and personal assets and used business monies for personal purchases. But this alone was not sufficient to carry the day or prove an improper purpose or even satisfy the first factor to pierce the corporate veil. Id. The most important factor—that the person used the corporate form fraudulently or for an improper purposes- was not proven with any evidence. Id. (“In fact, the trial court specifically found that [the president’s] actions alone were not fraudulent, a finding which was antithetical to its decision to pierce the corporate veil.”)
This case also dealt with a separate issue which as a mathematical computational error in the judgment against the flooring company. Such mathematical errors are also reviewed under a de novo standard of appellate review. Flooring Depot FTL, supra at *1. The appellate court found that the homeowners only received 50.76% of their flooring order, meaning 49.24% was not received and represented the undelivered flooring. (The trial court had used the wrong undelivered flooring percentage.) Therefore, the undelivered flooring percentage should have been multiplied by the amount the flooring company was paid to determine the principal judgment award for the undelivered flooring.
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