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76 Cornell L. Rev. 1036 (1990-1991)
Piercing the Corporate Veil: An Empirical Study

handle is hein.journals/clqv76 and id is 1058 raw text is: PIERCING THE CORPORATE VEIL: AN EMPIRICAL STUDY Robert B. Thompson t I INTRODUCTION Piercing the corporate veil is the most litigated issue in corpo- rate law' and yet it remains among the least understood. As a gen- eral principle, corporations are recognized as legal entities separate from their shareholders, officers, and directors. Corporate obliga- tions remain the liability of the entity and not of the shareholders, directors, or officers who own and/or act for the entity. Piercing the corporate veil refers to the judicially imposed exception to this principle by which courts disregard the separateness of the corpora- tion and hold a shareholder responsible for the corporation's action as if it were the shareholder's own. The boundaries of this excep- tion are usually stated in broad terms that offer little guidance to judges or litigants in subsequent cases. In 1926, Benjamin Cardozo described this corner of the law as enveloped in the mists of meta- phor,'2 and courts and commentators have been even less kind in t Professor of Law, Washington University. Research support for this project was provided by a Treiman Fellowship of the Washington University School of Law. Arbi Ben Abdallah provided invaluable assistance in the statistical aspects of this project, and Deborah Rush provided research assistance. The paper benefited from the comments of Charles Adams, Ian Ayers, Doug Branson, James Cox, John Drobak, Theodore Eisen- berg, Ed Greenberg, Frank Kennedy, Stephen Presser, Larry Ribstein, Roberta Romano, Tom Sullivan, and William Wang. The paper was presented at the first meeting of the American Law and Economics Association in May, 1991. I am responsible for any re- maining deficiencies. I This project started with about 2000 cases found in Westlaw, using the search terms, piercing the corporate veil and disregard! the corporate entity and four Westlaw key numbers. A similar search of Lexis inJuly, 1990 also turned up about 2000 cases. By comparison, corporate takeover and hostile takeover (among the hottest corporate law topics in recent years) appear in fewer than 300 cases. A search for fidu- ciary duty and corporate or director turned up more than 4000 cases, but that topic includes a multitude of different issues. 2 Berkey v. Third Ave. Ry., 244 N.Y. 84, 155 N.E. 58 (1926) (opinion by Cardozo, J.), reh'g denied, 244 N.Y. 602, 155 N.E. 914 (1927). Justice Cardozo wrote: The whole problem of the relation between parent and subsidiary corpo- rations is one that is still enveloped in the mists of metaphor. Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it. We say at times that the corpo- rate entity will be ignored when the parent corporation operates a busi- ness through a subsidiary which is characterized as an 'alias' or a 'dummy'. All this is well enough if the picturesqueness of the epithets 1036

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