Panam Management Group, Inc. v. Pena, et al., No. 08-CV-2258(JFB)(ARL) (E.D.N.Y. Aug. 2011), addresses a common issue faced in interntional litigation: which law to apply to the resolution of an international dispute. The District Court found that the central issues to be adjudicated against the individual defendants — being sued in their official capacity as officers of Yuma Bay Development Corp. — involved issues of corporate governance. As a result, the law of the state of incorporation governed the question of whether the corporate form would be disregarded. Said the Court:
The law of the state of incorporation applies to the veil-piercing analysis even if ther is a choice-of-law provision in a contract that governs the relationship between the parties.
The relevant law of incorporation was that of Panama. At the same time, the Court decided that the law of veil piercing of each of the other two possible jurisdictions — the Donomican Republic and New York — did not dictate a different result. The Court determined non-U.S. law pursuant to Fed. R. Civ. P. 44.1 and utilized the evidence presented by experts retained by the parties to do so.
The Court articulated the law of veil piercing under New York law as:
“Generally . . . piercing the corporate veil requires a showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff’s injury.
The factors looked at by the Court included:
(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space,address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, . . . (8) whether the corporations ar treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own.