The court said “the complaint was silent” about TPR`s involvement in negotiating the credit accounts the plaintiff had created with the defendant girls. Slip op. to *1. In fact, the court said, although it “appears that TPR Holdings initially approached the plaintiff to obtain three separate credit accounts for its three subsidiaries. there was no claim as to who was negotiating the prices or terms and conditions of each transaction. And, according to the court, “the plaintiff acknowledged that the orders were placed separately by the defendants of the subsidiary.” The alter ego doctrine has been used to break the veil between companies when subsidiaries are used by a dominant parent company to commit fraudulent or illegal behavior. Under New York law, a company is considered a “mere alter ego if it has been so dominated … another company.. and her distinct identity, which was so ignored that she was dealing with the Affairs of the Dominator in the first place, not her own.
Trabucco v. Intesa Sanpaolo, S.p.A. 695 F. Supp. 2d 98, 107 (S.D.N.Y. 2010). When this happens, “the dominant company will be held liable for the actions of its subsidiary… In general, the corporate identities of the parent company and its regular subsidiaries should not be ignored. However, the courts will look beyond the corporate form if necessary to prevent fraud or obtain justice. For example, a parent company may become a party to the contract of its subsidiary if the conduct of the parent company indicates the intention to be bound by the contract. Such an intention arises from the circumstances of the transaction, including the parent company`s participation in the contractual negotiations. In fact, a parent company that negotiates a contract but has its subsidiary signed may be held liable as a party if the subsidiary is “a fool to the parent company.” A.W. Fiur Co.c.
Ataka & Co., 71 A.D.2d 370 (1st Dept. 1979). In addition, there was no claim or evidence in World Wide Packaging to support the imposition of the piercing of the veil or the responsibility of the alter ego. As the World Wide Packaging court has recognized, control and control claims without allegation or evidence of fraud, inequality, or other misconduct are not sufficient to support an alter-ego/veil-piercing liability claim against a parent company. Under New York law (and elsewhere), a parent company can be held liable for the actions of its subsidiaries if “the alleged injustice appears to be traceable to the parent company by the management of its own staff and management” and the parent company has interfered in the operations of the subsidiaries in a manner that exceeds a parent company`s control as an ownership incident. See e.B. United States v. Bestfoods, 524 U.S. 51, 64 (1998) (citation omitted). As the Court held in the World Wide Packaging case, there was no allegation or evidence that TPR had interfered in the actions of its subsidiaries.
Companies are different legal entities from their managers. As such, a company, like any shareholder or investor, can buy shares of another company. When a company purchases enough voting shares of another company to control that company, a parent-subsidiary relationship is formed. Apart from the above rules, a parent company may be held liable for the acts of its subsidiary under the principles of veil piercing or alter ego liability. In particular, if a company buys less than 100% but more than 50% from another company, the latter becomes a regular subsidiary of the first. If the company acquires 100% of the voting shares of another company, the acquired company becomes a wholly-owned subsidiary of the other. The difference between a subsidiary and a wholly-owned subsidiary is therefore the amount of voting control held by the parent company. The courts take into account various factors when assessing the degree of control and control exercised by the parent company […].
gepubliceerd op 25 januari 2022