Cohen v. Schroeder, 248 F. Supp. 3d 511

Background

Cohen, Schroeder, Bocra, and Stroy incorporated Skoop (Del.) in 2007; Cohen served as CEO/chair, Schroeder as president/CTO. Skoop never issued stock, produced a product, or operated meaningfully after 2007 and became void in Delaware.
Article 7 of Skoop’s certificate promised advancement and indemnification to officers/directors under Del. Gen. Corp. Law § 145; Cohen later sued Skoop in Delaware Chancery to enforce advancement and indemnification and won summary judgment in 2015 (Skoop has not paid).
Schroeder sued Cohen (and others) in related litigation alleging misappropriation of IP leading to the creation of Pinterest; that litigation is pending in New York state court and involves disputed ownership of the relevant IP between Schroeder and Skoop.
Cohen sued Schroeder in federal court (this case) seeking to pierce Skoop’s corporate veil and hold Schroeder personally liable for the Delaware judgment, alleging Skoop was Schroeder’s alter ego and was judgment‑proof.
On summary judgment, the court applied Delaware alter‑ego law (choice‑of‑law) and found no genuine dispute that Skoop and Schroeder operated as a single economic entity or that an injustice meriting veil‑piercing occurred.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Skoop and Schroeder operated as a single economic entity (alter‑ego first prong)	Cohen: Skoop was a defunct shell, Schroeder blurred personal/corporate IP ownership and effectively siphoned/used Skoop for his benefit	Schroeder: No siphoning of funds; he pursued litigation to preserve Skoop’s only potential asset (the IP); co‑founders agreed to share proceeds; lack of formalities is typical for small startups	Held for Schroeder — undisputed record shows no siphoning, no evidence Skoop was set up to fail; failures in formality insufficient alone to create genuine issue
Whether there was an overall element of injustice or unfairness from abuse of corporate form (alter‑ego second prong)	Cohen: Schroeder revived and used Skoop to avoid standing challenges and to evade indemnification obligations, causing injustice	Schroeder: Cohen is an insider who knew Skoop’s insolvency; no deliberate judgment‑proofing or fraud; any alleged harm is the underlying dispute, not a separate injustice	Held for Schroeder — Cohen, as insider, cannot show the required injustice to third parties; failure to advance fees alone does not justify piercing
Whether Skoop’s insolvency/undercapitalization supports piercing	Cohen: Insolvency and lack of capitalization show Skoop was a sham protecting Schroeder	Schroeder: Insolvency alone is insufficient; no evidence Skoop was deliberately undercapitalized to evade liabilities	Held for Schroeder — insolvency/undercapitalization without intent to defraud or shield assets is insufficient
Whether failures to observe corporate formalities warrant piercing	Cohen: No stock issuance, no meetings, inconsistent filings, and unilateral filings by Schroeder show disregard for corporate form	Schroeder: Small closely held entities often lack formal trappings; evidence shows he acted to protect corporate interests and shared proceeds arrangement exists	Held for Schroeder — lack of formalities in small start‑ups insufficient to pierce without other proof of misuse

Key Cases Cited

NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537 F.3d 168 (2d Cir. 2008) (sets out two‑prong alter‑ego test under Delaware law)
Fletcher v. Atex, Inc., 68 F.3d 1451 (2d Cir. 1995) (veil‑piercing is difficult and may be resolved on summary judgment where evidence is lacking)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Supreme Court 1986) (standard for genuine dispute at summary judgment)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (Supreme Court 1986) (nonmoving party must present evidence from which a reasonable inference may be drawn)
Zubik v. Zubik, 384 F.2d 267 (3d Cir. 1967) (insolvency alone does not justify piercing; protects limited liability absent deliberate fraud)