Mortimer v. McCool

The Pennsylvania Supreme Court  examined the doctrine of piercing the corporate veil, which the Court glossed as an area “among the most confusing in corporate law.” In 2007, Mortimer was permanently injured when a drunk driver hit her car. The driver had been served by employees of the Famous Mexican Restaurant. The Restaurant owners had a contractual management agreement with the Restaurant’s liquor license owner, Appellee 340 Associates, LLC. The Restaurant was located in a building owned by Appellee McCool Properties, LLC. At the time of the injury, Appellees The McCools were the sole owners of 340 Associates. With their father, Raymond McCool, they also owned McCool Properties. Mortimer obtained a combined judgment of $6.8m against 340 Associates and numerous other defendants in an underlying dram shop action. Under the Liquor Code, 340 Associates as licensee was jointly and severally liable for Mortimer’s entire judgment. 340 Associates had no significant assets beyond the License itself and neither carried insurance for such actions nor was required by law to do so. To collect the balance of the judgment, Mortimer sought to pierce the corporate veil to hold some or all of the individual McCool defendants and McCool Properties liable for her judgment. To reach McCool Properties, the focus of this appeal, Mortimer wished to avail herself of a doctrine, novel to Pennsylvania law, known as “single-entity,” “enterprise,” or “horizontal” liability. The thrust of the doctrine is that, just as a corporation’s owner may be held liable for judgments against the corporation when equity requires, so may affiliate or “sister” corporations—corporations with shared ownership, engaged in a unitary commercial endeavor—be held liable for each other’s debts or judgments. The Court concluded that a narrow form of “enterprise liability” may be available. However, it did not apply under the facts of this case. The Court ruled that if it allowed Mortimer to invoke enterprise liability, Raymond McCool’s interests would suffer tremendously, and there was no evidence he was implicated in any wrongful conduct. Piercing may occur only when the rights of innocent parties are not prejudiced.

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