Pennsylvania Supreme Court Review In Mortimer Could Significantly Expand Litigants' Ability To Pierce The Corporate Veil

• Published date: 30 June 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Duane Morris LLP
• Author: Mr Robert Byer, Thomas R. Schmuhl, Jessica Priselac and Jonathan Aronchick

On June 22, 2020, the Pennsylvania Supreme Court granted allowance of appeal in Mortimer v. McCool, et al.¹ The appeal, which centers on whether the Court should adopt the so-called enterprise or single entity theories of corporate veil piercing, has the potential to dramatically change existing Pennsylvania law, which presumes the legal form of two distinct but affiliated business entities must be preserved. In stark contrast, under the enterprise or single entity theories, a business organization that so much as shares a "common business purpose"² with an affiliated business entity could be held liable for damages stemming from the affiliated entity's actions, essentially negating the limited liability nature of most business organizations. Accordingly, Mortimer has the potential to make it easier for Pennsylvania litigants to pierce the corporate veil of affiliated businesses and expose them to expanded liability if the Court takes the novel step of adopting these doctrines.

The facts in Mortimer stem from a dram shop action: Mortimer was struck by a drunk motorist and left permanently injured.³ The restaurant that served the motorist was operated by 340 Associates, LLC, a limited liability company with two members'Michael Andrew McCool and Raymond Christian McCool'and was formed for the purposes of purchasing and holding a license to sell and distribute liquor.⁴ The McCools were also members of a separate limited liability company, McCool Properties, LLC, which owned the building that housed the restaurant in which the motorist who struck Mortimer was served alcohol prior to the accident.⁵ Mortimer sought damages against 340 Associates under a theory of dram shop liability as the operator of the restaurant and prevailed at trial.⁶ McCool Properties was not a defendant in the dram shop action.

The case in which the Supreme Court granted review was begun by Mortimer after she prevailed in the dram shop action. Mortimer was unable to recover the full amount of the judgment from 340 Associates and sought to recover the remaining damages from McCool Properties and the McCools personally.⁷ Among the theories advanced by Mortimer was that, under the enterprise or the single entity⁸ theories, 340 Associates and McCool Properties should be treated as a single enterprise for purposes of liability, thereby allowing her to access McCool Properties' assets in order to satisfy the judgment against 340 Associates.⁹ Mortimer argued that under these theories, McCool Properties' LLC form should be disregarded because of its "overlapping ownership and management" with 340 Associates.¹⁰

Both the trial court and the Superior Court rejected Mortimer's claims based on the enterprise and single entity theories. In affirming the trial court's judgment, the Superior Court noted that...