Piercing the Corporate Veil: “Enterprise ” vs. “Single Entity” Theory

Mortimer v. McCool, 2019 WL 6769733 (Pa. Super. 2019) (unreported), allocatur granted June 22, 2020, appeal dockets 37 and 38 MAP 2020

Mortimer secured a judgment in a dram shop action against the liquor license holder under whose authority the intoxicated driver who caused Mortimer’s injuries had been served.  The license holder was 340 Associates, a limited liability company whose principals are the McCool brothers. Mortimer eventually executed on the liquor license, the value of which partially satisfied the judgment. Mortimer then pursued the McCool’s other assets. In addition to 340 Associates, the McCool brothers were principals of a separate LLC in which 340 Associates was not a member, known as McCool Properties.

In the present action, Mortimer sued 340 Associates and McCool Properties to recover the balance of the judgment, seeking to pierce the corporate veil of 340 Associates to hold the McCool brothers personally liable for the judgment. The trial court refused to pierce the corporate veil, and the Superior Court affirmed.

One of Mortimer’s theories for piercing the veil, rejected by both the trial court and the Superior Court, was the “enterprise entity” or “single entity” theory. As the Superior Court explained:

While Appellant may present a meaningful case that 340 Associates and McCool Properties should be treated as one entity, Pennsylvania has repeatedly refused to adopt the “enterprise entity” or “single entity” theory of piercing the corporate veil. Advanced Telephone Systems, 846 A.2d at 1278 n.9 (“‘single entity’ theory has yet to be adopted in Pennsylvania”); Miners, 722 A.2d at 695 (“the enterprise entity theory or the single entity theory . . . , however, has yet to be adopted in Pennsylvania”). “It is not the prerogative of an intermediate appellate court to enunciate new precepts of law or to expand existing legal doctrines. Such is a province reserved to the Supreme Court.” In re M.P., 204 A.3d 976, 986 (Pa. Super. 2019) (citation omitted). For this reason, we cannot consider Appellant’s arguments for piercing the corporate veil pursuant to the enterprise entity or single entity theory.

Slip Op. at 37-38 (footnotes omitted).

The Superior Court observed, however, that “if the ’enterprise entity’ or ‘single entity’ theory of piercing the corporate veil were available in Pennsylvania, some of McCool Properties’ assets would be accessible to Appellant.” Id. at n. 22.

The issue, as stated by petitioner, is:

 Whether, in this matter of first impression, the Supreme Court should adopt the “enterprise theory” or “single entity” theory of piercing the corporate veil to prevent injustice when two or more sister companies operate as a single corporate combine?

For more information, contact Kevin McKeon or Dennis Whitaker.