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Avoiding the Single Enterprise Theory

December 11, 2015

The Corporate Form May Not Be Enough to Prevent Extracorporate Liability Without Careful Planning

The single enterprise theory is used to hold multiple legal personalities liable as a single entity, thereby disregarding the statutory protection from extracorporate liability. In California, the doctrine is called the “single enterprise theory,” but it is known in other states in somewhat similar terminology. Whatever the name, the theory increasingly is being alleged in plaintiffs’ complaints, particularly against real estate developers. This article will discuss the state of the single enterprise theory among the different jurisdictions where it is recognized and will provide tips for entities to avoid liability. It also will discuss litigation issues when a plaintiff alleges single enterprise liability in a complaint–in particular, whether a plaintiff has carte blanche access to a defendant’s sister corporation’s financial records merely by alleging the single enterprise theory in the complaint.

Read the full article here as published in the Journal of American Law, Summer/Fall 2015, on pp 15-20.

 

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