Academic journal article Texas International Law Journal

An Empirical Research on Piercing the Corporate Veil and Enforcement of Foreign Judgment

Academic journal article Texas International Law Journal

An Empirical Research on Piercing the Corporate Veil and Enforcement of Foreign Judgment

Article excerpt

TABLE OF CONTENTS

INTRODUCTION..................104

I. BACKGROUND................108

A. Piercing the Corporate Veil.................108

B. Enforcement of Foreign Judgment in the United States..............109

C. The Four Possible Scenarios............111

1. Scenario 1...............111

2. Scenario 2...............111

3. Scenario 3...............112

4. Scenario 4...............112

D. Conflict Issues with Enforcement Piercing............113

1. Choice-of-Law.............113

a. First Approach-FI Piercing Law................114

b. Second Approach-Same Approach as First-Instance Piercing...............114

c. Third Approach - Lex Fori.............115

2. Personal Jurisdiction............116

3. Subject Matter Jurisdiction.............119

4. Notice............120

5. Res Judicata............121

6. State Procedural Rule..............122

II. METHODOLOGY...............123

A. Survey Period............123

B. Types of Cases...........124

C. Covered Jurisdiction..........124

D. Related Research.........125

E. Limitation..........125

III. FINDINGS OF EMPIRICAL RESEARCH.........125

A. Choice of Law.............131

B. Enforcement Limitations............134

1. Personal Jurisdiction...........136

2. Subject Matter Jurisdiction...........136

3. Notice............136

4. Res Judicata...........137

5. State Procedural Rule...........137

6. International Cases...........138

7. Tort v. Contract..........139

CONCLUSION............141

INTRODUCTION

Piercing the corporate veil, a judicial process whereby the separate legal personality of a company is disregarded, has long attracted academic discussion due to its dramatic impacts on the liability of shareholders.1 Most of the time, a shareholder is sued for piercing the corporate veil in the same trial in which the defendant company is sued for the underlying cause of action (for example, the company's breach of contract).2 The piercing claim will be successful only if the plaintiff succeeds on both the underlying claim against the company and the piercing claim against the shareholder.1 Nonetheless, plaintiffs do not necessarily seek to pierce the corporate veil in the same trial as the underlying substantive cause of action.4 The plaintiff may eliminate the legal personality of the defendant company in the first trial and then pierce the corporate veil in a subsequent proceeding to enforce a judgment against the shareholder of the company.' Thus, discussions on piercing the corporate veil should consider both the substantive underlying liability in the original trial (first-instance piercing), and subsequent enforcement proceedings.'1 Enforcement of a judgment by piercing the corporate veil ("Enforcement Piercing") is rarely examined in detail by academics.7 Through an empirical study of Enforcement Piercing cases, this Article explores the various conflict-of-laws aspects that impact Enforcement Piercing cases as compared to standard first-instance piercing cases.

Enforcement Piercing is not uncommon. It is often employed in cases where the plaintiff finds out only during or after the original trial that there exists a close relationship between the defendant company and the shareholder," or in cases where the defendant company's assets have been removed by the shareholder after the defendant company lost the case.4 However, Enforcement Piercing is a worthwhile topic to discuss not only because of its frequency,1" but also because of the potential advantages it could bring to the plaintiff in his or her piercing-the-corporate-veil claim. An illustration will be helpful.

In Bank of Montreal v. SK Foods, LLC," the plaintiff bank first obtained a judgment against the defendant company for its liability as a guarantor of a default loan in the U.S. District Court for the Northern District of Illinois. …

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