Mere Affiliation and Co-ownership, Without More, are Not Sufficient Bases to Pierce Corporate Veil

March 25, 2015

OP obtained dismissal of all claims brought by a plaintiff-attorney against OP’s client, a loan servicer who had no relationship with the attorney.  The plaintiff-attorney alleged he had a charging lien on a default judgment he obtained for his former client in an action on a second lien mortgage on real property.  The default judgment was later sold to an affiliate of the loan servicer and then satisfied as part of a sale of the real property securing the judgment lien.  The plaintiff-attorney alleged the loan servicer was liable on his charging lien and that the servicer concealed information relating to the sale of the property, upon which plaintiff-attorney relied, and that the servicer wrongfully released the judgment debtor and collected a portion of the judgment without regard to the charging lien.  The attorney-plaintiff asserted causes of action for fraudulent concealment, unjust enrichment, aiding and abetting fraud, and charging lien.  OP moved to dismiss on the ground, among other reasons, that the loan servicer was not the assignee of the judgment and thus not a proper party defendant.  But plaintiff-attorney countered that the servicer was a viable defendant because the servicer and assignee were “closely related” in that the servicer had an ownership interest in the assignee and there was a servicing agreement between the assignee and the servicer; in essence, a veil piercing argument.  OP successfully argued that the servicer was merely an affiliate or shareholder of the assignee and that there were no facts alleged in the complaint to support a theory of veil piercing.  Commercial Division Justice Platkin agreed and granted the motion to dismiss.  The court reasoned that the plaintiff-attorney failed to plead facts demonstrating the servicer “exercised complete domination” of the assignee.  More importantly, it agreed with OP that the complaint be dismissed and future attempt to amend the complaint against OP’s client be precluded.

The OP team consisted of litigation partner Robert O’Hare and associate Veronika Reizin.

Ganje v. Yusuf, et al., Index No. 2121/2014 (Sup. Ct., Albany County)

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O’Hare Parnagian LLP’s main office is located at 82 Wall Street, Suite 300, New York, NY 10005-3686. The firm’s practices include litigation, business and finance, and real estate. Please call Robert A. O’Hare Jr. at (212) 425-1401 if you have any questions about this article or about the firm’s Litigation Practice Group.

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