Com'r of Env. Prot. v. State Five Indus.
37 A.3d 724
Conn.2012Background
- Case asks whether reverse veil piercing is a viable Connecticut remedy.
- 2001 judgment against Joseph Farricielli and five related corporations totaled about $3.8 million in civil penalties and remediation costs.
- 1999 action by the commissioner, town, and town zoning officer sought enforcement and penalties for solid waste violations.
- State Five Industrial Park, Inc. and Jean Farricielli (Jean) were sued to extend liability for the 2001 judgment.
- Trial court applied reverse veil piercing to hold State Five liable for the 2001 judgment and then applied traditional piercing to hold Jean liable for State Five’s liability.
- This Court reversed, holding the evidence did not support reverse veil piercing and thus no liability could be imposed on State Five or Jean under that doctrine.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reverse veil piercing is viable in Connecticut. | Plaintiffs advocate reverse piercing to reach State Five assets for Joseph's judgment. | Defendants urge that reverse piercing is not recognized in Connecticut. | Reverse piercing not warranted; doctrine not supported by facts. |
| Whether facts support applying reverse veil piercing to State Five for the 2001 judgment. | State Five improperly benefited from Joseph's control and distraint would collect the judgment. | No clear evidence that transfers or control caused collection failure or harmed third parties. | Insufficient, clearly erroneous, or inequitable under statutory framework. |
| Whether the trial court properly extended veil piercing from Joseph to State Five, then to Jean. | Agency/instrumentality principles justify piercing. | Facts do not show requisite control or misdeeds to justify piercing. | Reversal on reverse piercing renders these issues moot. |
| Whether the sons’ ownership in State Five undermines the reverse piercing claim. | Sons’ passive ownership should not shield assets from piercing. | Sons’ involvement absent; ownership should not justify piercing. | Findings about sons were not supported; cannot pierce based on lack of involvement. |
| Whether third-party creditors would be harmed by piercing State Five’s assets. | Direct attachment harms third-party creditors relying on corporate form. | Piercing would not adequately protect creditors; remedies exist. | Precluded; piercing would prejudice innocent creditors. |
Key Cases Cited
- Angelo Tomasso, Inc. v. Armor Construction & Paving, Inc., 187 Conn. 544 (Conn. 1982) (traditional veil piercing test; extent of control and proximate cause)
- Saphir v. Neustadt, 177 Conn. 191 (Conn. 1979) (corporate veil piercing generally allowed to prevent injustice)
- Postal Instant Press, Inc. v. Kaswa Corp., 162 Cal. App. 4th 1510 (Cal. Ct. App. 2008) (distinguishes traditional vs. reverse piercing; cautions against abuse of doctrine)
- Cascade Energy & Metals Corp. v. Banks, 896 F.2d 1557 (10th Cir. 1990) (reverses piercing concerns; jurisdictional caution about extending to corporate assets)
- In re Phillips, 139 P.3d 639 (Colo. 2006) (limits reverse piercing to clear alter ego and equitable results)
- Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133 (Conn. App. 2002) (first Connecticut reversal of reverse piercing; discusses viability)