Responding to a complaint alleging alter ego in California is the topic of this article. The pleadings are also known in the legal field as piercing the corporate veil pleadings because they are used to “pierce the corporate veil” and cause a court to ignore the corporate entity, allowing a plaintiff to add an individual person or persons, or even another corporation as a defendant and try to hold them liable for the debts or other liabilities of the parent corporation.

Alter ego charges are typically used against smaller corporations, particularly corporations with only one or two owners. In the author’s experience, many creditors will file a lawsuit with alter ego allegations with little or no evidence to support the claims in the lawsuit in the hope that this will give them some leverage.

A party cannot completely avoid the possibility that someone would seek to hold him personally liable for the debts of a corporation he owns or controls, particularly in California. But they must file an answer to any claim that seeks to impose alter ego liability on them, and be sure to seek damages from the corporation in the answer, and possibly also in a cross-suit, pursuant to Code Section 317 subdivisions aac. of California Corporations, as many, if not most, California corporate statutes allow corporate directors and officers to seek compensation from the corporation to the fullest extent permitted by law.

Anyone responding to an alter ego complaint should include any specific information they have in their affirmative defenses as to why the Court should not deviate from the standard legal doctrine of separate corporate and individual legal identity and existence, as if They didn’t do it personally. guarantee any debt owed to the Claimant, etc. They should also be sure to send specially prepared interrogatories to the claimant asking him to state all the facts that support his alter ego allegations, identify all persons with personal knowledge of those facts and all documents, etc. Also ask to inspect all documents that support your alter ego allegations as well.

Often times, the Plaintiff will respond with a boilerplate response, such as the allegations are made with the advice of counsel, information and beliefs, etc. Submitting additional discovery requests a month or two later to ask if new information has been received that requires additional responses to interrogatories or document requests is a smart move in such situations. This is so because a party who responds that their previous answers are still true and correct basically admits that they have no proof, no facts, no person with personal knowledge, and no documents to support their allegations. In that case, one of the parties might want to consider filing a motion for summary adjudication on the issue of alter ego liability, or perhaps even summary judgment. In the opinion of the author, anyone who responds to a supplemental discovery request that they do NOT have new information, documents, or anything else, is only asking for a motion for adjudication/summary judgment. They should have thought of that before making those accusations without supporting evidence.

The author sincerely hopes that you have enjoyed this article and found it informative.

Sincerely,

stan burman