Court Finds Nevada Corporate Law To Be No Bar To Alter Ego Claim

The gist of an alter ego claim is that that there is no separation between the corporation and its owners.  As a result the distinct personality of the corporation may be disregarded and the shareholders held to account for the corporation's liabilities.  A recent ruling by Chief Judge Gloria M. Navarro departs from this paradigm, finding that a corporation not yet in existence may have liability for the obligations of a dissolved corporation.   Bd. of Trs. of the Painters & Floorcoverers Joint Comm. v. Super Structures Inc., 2019 U.S. Dist. LEXIS 47681.

The case involved a collective bargaining agreement between the plaintiffs and a corporation ,SS1.  About three years after SS1 was dissolved, its now erstwhile owners incorporated a new entity, SS2.  SS2 had the same street address as SS1 and virtually the same name (the only difference being a comma).  The defendants moved to dismiss, contending that NRS 78.050 et seq. shields SS2 from liability for SS1's debts because Nevada law respects them as distinct entities. 

Judge Navarro disagreed, asserting "Were the Court to adopt Defendants' construction of NRS Chapter 78, a corporation in Nevada could perpetually shield itself from alter ego claims by merely changing its name".  However, the case involved more than a mere name change; it in fact involved a gap of about three years and a new entity.  In any event, Judge Navarro found that "while state law may provide guidance in the context of alter ego disputes under ERISA, federal law is controlling". 

I am nonetheless discomfited by the court's conclusion that a corporation formed years later can be the alter ego of a defunct corporation.