Monday, August 11, 2008
Walkovsky v. Carlton is a great case. It always generates a good discussion of the public policy issues surrounding the limited liability protections attendant to the corporate form. The facts are simple; the law is complex. Guy gets hit by a cab. The cab is operated by a small cab company. That company is owned by Carlton. Carlton owns a lot of cab companies, each of which has only one or two cabs in it so that he can take full advantage of the benefits of limited liability.
In a rather deflating finding, the court dismissed the claim based on a strict application of New York's heightened pleading standards for fraud or fraud-like allegations. The court found that Walkovksy had not made adequate allegations to go after Carlton either through enterprise liability (i.e., treating all of the small cab companies as one big cab company) or by piercing the corporate veil.
I like this case so much, I wrote two Limericks about it.
Walkovsky v. Carlton
Walkovsky had his eye on the grail
Of piercing the corporate veil.
But Carlton won't yield
His liability shield:
The complaint was lacking detail.
Walkovsky was hit by a cab.
Would Carlton pick up the tab?
No, limited liability
Has social utility;
Undercaptialization is fab!