disputing limited liability
Christina L. Boyd and David A. Hoffman. 2010. "Disputing Limited Liability" Northwestern University Law Review. 104(3): 853-916.Using a newly collected set of data, we examine veil piercing lawsuits brought in the federal district courts over six years. We find that plaintiffs succeed quite often in veil piercing litigation, if success is defined as winning on motions that do not terminate a case. A variety of legal and extra-legal factors predict such interstitial veil piercing success. Voluntary creditor causes of action promote veil piercing; LLCs are in very limited circumstances better insulated from veil piercing claims than corporations; undercapitalization is strongly associated with success while conclusory grounds like "facade" and "sham" are not; and defendants' legal sophistication is predictive of plaintiff failure. Extra-legal factors play a more striking and counterintuitive role. Plaintiffs suing small companies are much more likely to win veil piercing motions and obtain case-level relief than those suing larger companies.
Our findings call into question existing approaches to the disputation of limited liability and contribute to more general scholarship about selection effects and judicial behavior. They do not provide any easy answers to the questions of what defendants can do to insulate themselves from veil piercing. Our analysis suggests: very little, apart from being very big.
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