Misreading Menetti: The Case Does Not Help You Avoid Liability for Your Own Fraud

Abstract

Several decades ago, an incorrect legal idea surfaced in Texas jurisprudence: that business entity actors are immune from liability for fraud that they themselves commit, as if the entity is solely responsible. Though the Supreme Court of Texas has rejected that result several times, it keeps coming back. The most recent manifestation is as a construction of Texas’s unique veil-piercing statute. Many lawyers have suggested that this view of the veil-piercing statute originated in Menetti v. Chavers, a San Antonio Court of Appeals case decided in 1998. Menetti has in fact played a prominent role in the movement to construe the statute this way. This Article shows that Menetti held no such view of the veil-piercing statute. Menetti has been misread.

Keywords: fraud, agency, tort, business entity, corporation, limited liability company

JEL Classification: K13,K22