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Judges disagree over use of summary judgment to pierce corporate veil

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One Court of Appeals judge believed the “only reasonable inference” that could be drawn from the evidence in a collections case is that a former company was a “sham corporation,” so the trial court properly pierced the corporate veil on summary judgment.

In Konrad Motor and Welder Service, Inc., Konrad Lambrecht, and Sharon Lambrecht v. Magnetech Industrial Services, Inc., 45A04-1203-CC-109, Judge Terry Crone dissented from his colleagues on the corporate veil issue, writing, “Although piercing the corporate veil is, and should be, a rare occurrence on summary judgment because of the highly fact-sensitive nature of the inquiry involved, I believe that it is appropriate when the relevant facts are undisputed and lead to only a single reasonable conclusion. The trial court reached the right conclusion here.”

Magnetech Industrial Services Inc. sued Konrad Motor & Welder Service Inc. and husband and wife Konrad and Sharon Lambrecht to recover a $35,000 judgment entered against a former company, Kondrad Electric, which was owned by Sharon Lambrecht. She shut down Konrad Electric in 2008. Her husband formed the corporation Konrad MWS in 2006.

The lawsuit at issue began in 2005 when a company sued Konrad Electric after problems arose with work Magnetech performed. Konrad Electric subcontracted the work to Magnetech. Konrad Electric then filed a third-party against Magnetech, leading to Magnetech’s counterclaim for payment of services.

While the lawsuits were pending, Sharon Lambrecht – who was sole shareholder and president – decided to close Konrad Electric and her husband launched Konrad MWS. Konrad Lambrecht worked for Konrad Electric as its general manager.

After Magnetech won the $35,000 judgment, it sued Konrad MWS and the Lambrechts in 2011 to recover the money. Konrad Electric was without assets to satisfy the judgment. The trial court granted summary judgment for Magnetech, piercing the corporate veil of Konrad Electric to hold the Lambrechts liable and finding Konrad MWS is the alter ego of Konrad Electric.

Judges Nancy Vaidik and Cale Bradford reversed on the corporate veil ruling, finding “While it may be that Konrad Electric’s corporate veil should be pierced, this determination should not have been made on summary judgment,” Vaidik wrote. The majority believed more than one inference can be drawn from the facts of this case.

The three judges upheld summary judgment regarding the finding Konrad MWS is the alter ego of the former corporation, finding significant similarities between the two corporations, including names, similar business services, and the timing of the shutting down of Konrad Electric and creating Konrad MWS.

“Konrad Electric tried to avoid paying the judgment to Magnetech while still conducting the same business under a new name, Konrad MWS. Konrad MWS offers no other reasonable inference,” Vaidik wrote.

The majority noted that on remand, if Konrad Electric’s corporate veil is pierced, Konrad Lambrecht, even though not a shareholder, may be held individually liable along with his wife.

 

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  1. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  2. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  3. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

  4. Why in the world would someone need a person to correct a transcript when a realtime court reporter could provide them with a transcript (rough draft) immediately?

  5. This article proved very enlightening. Right ahead of sitting the LSAT for the first time, I felt a sense of relief that a score of 141 was admitted to an Indiana Law School and did well under unique circumstances. While my GPA is currently 3.91 I fear standardized testing and hope that I too will get a good enough grade for acceptance here at home. Thanks so much for this informative post.

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