NYLJ725202457760Lambert

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July 24, 2024

formalities are not enough. The plaintiff did not

prove that this control had been utilized by the

owner to commit a wrong against the plaintiff.

The Second Department found that there was no

evidence that the owner used corporate funds

for personal use. In other words, the plaintiff did

not prove that the owner looted the company.

Successfully Asserted Claims

In Cortland St. Recovery Corp. v. Bonderman, 31

N.Y.3d 30, 73 N.Y.S.3d 95 (2018), the Complaint

alleged that the owners engaged in a complex

series of transactions which would not have

been possible but for their domination and con-

trol of the company. In affirming denial of a

motion to dismiss, the critical allegation the

Court of Appeals referred to was that the own-

ers used this domination and control to siphon

off assets of the corporation for their own

benefit, leaving the corporation unable to pay

creditors. That is the type of “looting” referred

to above. (Subsequently, on summary judg-

ment, as affirmed by the Appellate Division, First

Department, the case was dismissed as against

certain defendants based on a lack of evidence

to support certain allegations in the Complaint.

2024 N.Y. App. Div. Lexis 1201, 2024 NY Slip Op

01250 (1st Dep’t 2024)).

In Webmediabrands, Inc. v. Latinvision, Inc., 46

Misc. 3d 929, 3 N.Y.S.3d 262 (Sup. Ct. NY County

2014), the corporation’s sole shareholder, offi-

cer and director took the corporation’s money

for his personal use, by making extensive cash

withdrawals and using the corporate credit card.

While he characterized these transactions as

“loans”, he admitted the “loans” were open-

ended and subject to his unilateral right to cancel

them. This is about as clear cut a case of “loot-

ing” as could exist, and the Court granted sum-

mary judgment in favor of the creditors. While

the decision discusses the failure to hold meet-

ings and keep books and records, none of these

failures was the wrong which resulted in liability.

The wrong was the looting; the failure to follow

formalities were facts which facilitated commis-

sion of the wrong.

In Inner Harbor Phase I L.P. v. COR Inner Harbor

Co. LLC, 211 A.D.3d 1475, 182 N.Y.S.3d 821

(4th Dep’t 2022), the Complaint alleged that the

owners caused the company to transfer assets

to another company they controlled without

receiving any consideration in return, leaving

the company without sufficient assets to meet

its obligations to the plaintiff. In other words,

the owners looted the company. The Appellate

Division, Fourth Department affirmed the lower

Court’s denial of a motion to dismiss.

In Goodwill Toys MFG, Ltd. v. I-Star Entertainment,

LLC, 214 A.D.3d 628, 184 N.Y.S.3d 827 (2d Dep’t

2023), the plaintiff submitted evidence showing

that the company’s principals operated several

related companies out of the same address and

that the other companies had expanded their

operations while the subject company became

insolvent. That supported the inference that

the owners were taking value out of the com-

pany without seeing to it that the company

received consideration in return, rendering the

company unable to pay the plaintiff. The Second

Department found that allegation to be enough

to sustain the Complaint.

In Gold v. 22 St. Felix, LLC, 219 A.D.3d 588,

195 N.Y.S.3d 207 (2d Dep’t 2023), the Appellate

Division, Second Department reversed the lower

court’s dismissal of a claim to pierce the veil

where the defendant used his domination and

control to distribute the company’s money to the

owners and thereby render the company judg-

ment proof. While there is no specific mention

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