Veil-Piercing Unbound

Peter B. Oh

University of Pittsburgh - School of Law

April 8, 2012

Boston University Law Review, Vol. 90, p. 89, 2013
U. of Pittsburgh Legal Studies Research Paper No. 2011-24

Veil-piercing is an equitable remedy. This simple insight has been lost over time. What started as a means for corporate creditors to reach into the personal assets of a shareholder has devolved into a doctrinal black hole. Courts apply an expansive list of amorphous factors, attenuated from the underlying harm, that engenders under-inclusive, unprincipled, and unpredictable results for entrepreneurs, litigants, and scholars alike.

Veil-piercing is misapplied because it is misconceived. The orthodox approach is to view veil-piercing as an exception to limited liability that is justified potentially only when the latter is not, a path that invariably leads to examining scenarios based on different types of creditors/claims, corporations, and shareholders. But the occasion to seek derivative relief from a shareholder arises only when a claim cannot be enforced against a defendant corporation. Veil-piercing is thus a secondary remedy, detached from limited liability and its rationales.

To fix veil-piercing, corporate law must look beyond itself. For centuries the law of restitution has featured the constructive trust, an equitable remedy that disgorges misappropriated assets from unjustifiably enriched parties. This Article novelly re-conceives veil-piercing as constructive trust and demonstrates how its application to judgment-proof corporations can yield more coherent and effective results.

Number of Pages in PDF File: 50

Keywords: Constructive Trust, Contract v. Tort, Corporate Disregard, Corporate Groups, Enterprise Liability, Limited Liability, Piercing the Corporate Veil, Restitution, Unjust Enrichment, Veil-Piercing, Voluntary v. Involuntary Creditors

JEL Classification: K00, K10, K12, K13, K22, K42

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Date posted: September 10, 2011 ; Last revised: February 26, 2013

Suggested Citation

Oh, Peter B., Veil-Piercing Unbound (April 8, 2012). Boston University Law Review, Vol. 90, p. 89, 2013; U. of Pittsburgh Legal Studies Research Paper No. 2011-24. Available at SSRN: https://ssrn.com/abstract=1925009 or http://dx.doi.org/10.2139/ssrn.1925009

Contact Information

Peter B. Oh (Contact Author)
University of Pittsburgh - School of Law ( email )
3900 Forbes Avenue
Pittsburgh, PA 15260-6900
United States
412.648.1101 (Phone)
412.648.2648 (Fax)
HOME PAGE: http://www.law.pitt.edu/people/peter-b-oh

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