| Defendants may try to hide assets by placing | | | | thus satisfying the first element of piercing the |
| them in a corporation. In such cases, the attorney | | | | corporate veil. Associated Vendors, Inc. v. Oakland |
| is forced to attempt to "pierce the corporate veil". | | | | Meat Co., Inc., 26 Cal.Rptr. 806, 813-815 (Cal., |
| The rule at common law was that, "officers, | | | | 1962) cited by Murdock v. Ventures Trident II |
| directors or shareholders of a corporation are not | | | | (Not Reported in Cal.Rptr.2d) 2003 WL 21246596. |
| personally liable for the tortuous conduct of the | | | | Generally, courts in Hawai'i have allowed for |
| corporation or its other agents, unless there can | | | | piercing of the corporate veil when there are |
| be found some active or passive participation in | | | | enough factors satisfied to show that there were |
| such wrongful conduct by such persons." Cahill v. | | | | no separate identities between the corporation |
| Hawaiian Paradise Park Corp., 56 Haw. 522, 526 | | | | and an individual. For example, the Hawaii Supreme |
| (1975). However, in 1973, the Hawaii Supreme | | | | Court allowed for the "piercing of the corporate |
| Court held that a "corporate entity should be | | | | veil" when; (1) two shareholders owned all stock, |
| disregarded because of circumstances that reveal | | | | (2) corporation was undercapitalized, and (3) |
| that the shareholders treated and regarded the | | | | shareholders' behavior in lease negotiations |
| corporation as their alter ego." Kahili, Inc. v. | | | | suggested they were acting for their behalf |
| Yamamoto, 54 Haw. 267, 271 (1973). This | | | | rather than for the corporation. Kahili, Inc. at |
| exception has since been called the "piercing the | | | | 269-272. |
| corporate veil" doctrine because it permits | | | | As mentioned, it is important to also provide |
| officers, directors, or shareholder to be found | | | | evidence that will convince the court that if it |
| personally liable for their actions regardless of the | | | | does not pierce the corporate veil, inequity and |
| general rule at common law. | | | | injustice or fraud will prevail. For example, if there |
| There are two overarching elements required by | | | | is evidence that an individual was "manipulating the |
| most jurisdictions (including Hawai'i) to pierce the | | | | corporation" to "foster" her individual interests to |
| corporate veil. Id. First, there must be evidence | | | | the disadvantage of other members of her |
| that an individual in a corporation "treated and | | | | corporation, then it is only fair that she be found |
| regarded the corporation" as his/her "alter ego", | | | | liable (personally) for her actions rather than the |
| and "using the corporation as an agency or | | | | corporation. Riddle at 112. Furthermore, the Hawaii |
| instrumentality or a conduit through which they | | | | Supreme Court held that evidence that an |
| were conducted his/her personal business." Kahili, | | | | individual used the corporation to commit fraud or |
| Inc. at 271. Second, the circumstances must | | | | another illegal act constitutes promoting inequity |
| indicate that "recognition of the fictional | | | | and injustice therefore justifies piercing of the |
| corporation" would sanction a fraud or promote | | | | corporate veil. Chung v Animal Clinic Inc., 63 Haw. |
| "injustice and inequity". Id. | | | | 642, 646-647 (1981). Finally, actual fraud does not |
| There are many factors to consider in | | | | need to be shown, just that by "piercing of the |
| determining whether "the separate personalities of | | | | corporate veil" the Court will prevent fraud or |
| the corporation and the individual no longer exist" | | | | injustice. Associated Vendors, Inc. at 813. |