Is Alter Ego Coming To A City Or Town Near You?

Historically, the alter ego doctrine has been applied to hold a shareholder or shareholders liable for the claims made against the corporation.  In general, two requirements must be met for the doctrine to be applied.  First, there must be such a unity of
interest and ownership between the corporation and its shareholder(s) that the separate personalities of the corporation and the
shareholder(s) do not in reality exist.  Second, failure to disregard the separate personalities must promote a fraud or injustice.  

Yesterday, the Second District Court of Appeal held that the alter ego doctrine could be applied to hold a city liable for the actions of a joint powers authority.  CAM-Carson, LLC v. Carson Reclamation Authority, 2022 WL 3593158.   A city does not, of course, own a joint powers authority in the same way that a shareholder owns shares of a corporation.  Nevertheless, the Court of Appeal found that a "unity of interest" could exist between two governmental entities under comparable circumstances.  According to the Court, 

The complaint alleges facts that, if proved, would allow a court to conclude that, so far as the development of the site was concerned, the City and the CRA [Carson Reclamation Authority]  “were operated with integrated resources in pursuit of a single business purpose” and that the City “so dominated the finances, policies and practices” of the CRA that the CRA “had no separate ‘mind, will or existence’ of [its] own, but [was] merely [a] conduit[] through which” the City conducted its business. . . .   The complaint likewise alleges facts that, if proved, would allow a court to conclude an inequitable result would follow if the acts in question are treated as those of the CRA alone.


Tags: Alter Ego