Michaels v. Banks
901 F. Supp. 2d 354
N.D.N.Y.2012Background
- Banks and Patrick LaPage formed Aloha Events, LLC, with 50/50 ownership as of March 31, 2010, and an operating agreement requiring a majority vote.
- Banks removed LaPage as a member on April 22, 2010, without prior notice or a majority vote, and transferred LaPage’s interest to Banks and Kingston, giving Banks 90% and Kingston 10%.
- Banks used Aloha LLC funds and assets for personal purposes and mixed funds with his other businesses, including using a corporate debit card for non-company expenditures.
- Kingston used her personal computer for Aloha LLC business; Banks used shared office space and equipment across Aloha LLC and his other ventures, with funds transferred between entities to pay expenses.
- Aloha LLC breached the contract with Michaels and Last Child Productions by failing to pay the required $100,000 for the August 5, 2010 Syracuse concert; only $5,000 was paid.
- Michaels arrived for the concert to find no stage or equipment, and defendants acknowledge the breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the corporate veil can be pierced | Domination and control over Aloha LLC by Banks and Kingston. | No such domination or misuse to justify piercing the veil; acts were for corporate purpose. | Not proven; plaintiff failed to show complete control used to commit a wrong. |
Key Cases Cited
- MAG Portfolio Consultant, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58 (2d Cir. 2001) (factors for piercing the corporate veil)
- Freeman v. Complex Computing Co., 119 F.3d 1044 (2d Cir. 1997) (alter ego considerations and domination must be linked to wrongdoing)
- Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131 (2d Cir. 1991) (policy balance on piercing corporate veil)
- American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130 (2d Cir. 1997) (domination and improper use must be shown)
- Kirno Hill Corp. v. Holt, 618 F.2d 982 (2d Cir. 1980) (alter ego concept in corporate context)
- Morris v. New York State Dep’t of Taxation & Fin., 82 N.Y.2d 135 (N.Y. 1993) (limitations on piercing where domination exists but not used for wrong)