cbareport-dec12 - page 7

December 2012 CBA REPORT
l
7
cover article
owner, and if a plaintiff wants to hold
one corporation responsible for the acts
of the other on the basis of the common
ownership, the plaintiff will lose because
the Court has categorically preempted
the imposition of liability on that basis.
Do the Same Rules Apply
to LLCs?
The Ohio Revised Code clearly pro-
vides that LLCs enjoy the liability shield’s
protection.
20
The state’s case law is not
as clear about whether the same rules
for corporate veil piercing also apply to
LLCs. Nonetheless, many practitioners
believe that the same rules should and
do apply, and at least one federal court,
interpreting Ohio law, has expressly de-
clared that they do.
21
Therefore, although
the paucity of supporting authority war-
rants caution, those seeking to uphold or
to pierce an LLC’s liability shield in Ohio
are probably safe in relying on the same
veil piercing rules as apply to corpora-
tions in the state:
Belvedere
,
Dombroski
,
Minno
, and their progeny.
Conclusion
The liability shield for corporations
and LLCs in Ohio, as elsewhere, does not
provide absolute protection. But the Ohio
rules for piercing the veil to impose li-
ability on owners are relatively restrictive
in most respects. Still, the seminal deci-
sions in this area are rich and nuanced,
and practitioners with real-world plan-
ning or litigation problems to solve will
likely find it useful to read those cases as
part of their research.
Stewart-Pirone is an associate in the tax, benefits, and
entrepreneurial services practice group of Frost Brown
Todd LLC. Based in the firm’s Cincinnati office, he
counsels clients in matters involving corporate and tax
law, and he is a 2012 graduate of Northern Kentucky
University’s Salmon P. Chase College of Law.
1 Ohio Revised Code §§ 1701.18(J) and
1701.883.
2 Ohio Revised Code § 1705.48(B).
3 4 Ohio St. 3d 1, 445 N.E.2d 1106 (Ohio 1983) (“It is
true that Section 3,Article XIII does generally provide
limited liability, the ‘corporate veil,’ for its stockhold-
ers and, as such, the limited liability so provided by the
Constitution for shareholders of private corporations
may not be varied by the General Assembly or by this
court.”).
4 67 Ohio St. 3d 274, 617 N.E.2d 1075 (Ohio 1993).
5
Id.
at 289.
6 478 F.3d 718 (6th Cir. 2007).
7 Because of this,
Corrigan
is an interesting precedent for
situations where the potential defendants are insulated
by multiple layers of corporate ownership.The Sixth
Circuit suggested that, to prevail, a plaintiff must show
that the veil should be pierced at each level. So if
Company C is a subsidiary of Company B, which is a
subsidiary of Company A, and the plaintiff wants to get
at Company A for something that Company C did, the
plaintiff cannot just show that Company A controlled
Company C and the
Belvedere
test was satisfied. In-
stead, the plaintiff must show that the
Belvedere
test is
satisfied to pierce the veil between C and B, and then
again that it is satisfied to pierce the veil and get from
B to A.
See
id.
at 725.
8 77 Ohio App. 3d 417, 602 N.E.2d 685 (Ohio Ct.App.
1991).
9 103 Ohio St. 3d 337, 815 N.E.2d 658 (Ohio 2004).
10
Corrigan
, 478 F.3d at 726;
LeRoux’s
, 77 Ohio App. 3d at
422-23.
11
Danziger
, 103 Ohio St. 3d at 342.
12
Belvedere
, 67 Ohio St. 3d at 289.
13 119 Ohio St. 3d 506, 895 N.E.2d 538 (Ohio 2008).
14
Dombroski
, 119 Ohio St. 3d at 513.
15
Id.
at 513-14 (“Insurer bad faith is a straightforward
tort, a basic example of unjust conduct; it does not
represent the type of exceptional wrong that piercing
is designed to remedy.”).
If you’re a litigator,
chances are you’re
working on at least a couple cases right
now that could benefit from mediation.
I can help.
Robert S. Kaiser,
Senior Mediator
(513) 721-4466
(Office)
(513) 383-1992
(Cell)
Over 850 cases mediated
Former Mediator, U.S. District Court, S.D. Ohio
Mediating since 1999, Full-time since 2007
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v
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v
Bankruptcy
16
Belvedere
, 67 Ohio St. 3d at 289.
17
Id.
at 288-89.
18
See
State ex rel. Petro v. Mercomp, Inc., 167 Ohio App.
3d 64, 853 N.E.2d 1193 (Ohio Ct.App. 2006) (third
prong satisfied where no actual injury or loss shown,
but where landfill operator failed to comply with
monitoring requirements of state statute governing
landfill closure and where testing showed elevated
levels of certain potentially harmful substances may
have resulted); State v.Tri-State Group, Inc., 2004 Ohio
4441 (Ohio Ct.App. 2004) (third prong satisfied where
no actual contamination shown, but where industrial
waste disposal site located above groundwater aquifer
and where corporation’s noncompliance “with [state]
permits may have contaminated the ground water
and prevents the [state regulator] from determining
whether there is any contamination”).
19 121 Ohio St. 3d 464, 905 N.E.2d 613 (Ohio 2009).
20 Ohio Revised Code § 1705.48(B).
21 Ruffing v. Masterbuilt Tool & Die, LLC, No. 1:08–CV–
01264, 2009WL 185950 (N.D. Ohio 2009) (“Indeed,
Red Rock and Hawthorn do not cite a single case that
has ever differentiated an LLC from a corporation for
purposes of veil piercing and there is no reason to
believe that Ohio would reach such a unique result.”).
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