Friday, March 14, 2014
Jonathan Macey and Joshua Mitts have a new article, The Three Justifications for Piercing the Corporate Veil, forthcoming in the Cornell Law Review. The article smartly employs empirical research of judicial opinions to shed light on the long-convoluted and "mysterious" doctrine of corporate veil piercing. According to the abstract, the article:
[D]evelop[s] a new theoretical taxonomy which postulates that veil-piercing decisions fall into three categories: (1) achieving the purpose of a statutory or regulatory scheme, (2) preventing shareholders from obtaining credit by misrepresentation, and (3) promoting the bankruptcy values of achieving the orderly, efficient resolution of a bankrupt’s estate. We analyze the facts of several veil-piercing cases to show how the outcomes are explained by the three theories we put forth and show that undercapitalization is rarely, if ever, an independent grounds for piercing the corporate veil. In addition, we employ modern quantitative machine learning methods ....to analyze the full text of 9,380 judicial opinions. We demonstrate that our theories systematically predict veil-piercing outcomes, the widely-invoked rationale of “undercapitalization” of the business poorly explains these cases, and our theories most closely reflect the textual structure of the opinions.