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One Way a Principal Can Be Liable in NY - Without Piercing the Veil

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Jonathan Cooper
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Although, as a general rule, New York law disfavors piercing the corporate veil, as a result of which there are several hurdles that a claimant needs to overcome before being permitted to do so, and hold the principals of the other company personally liable for the claim, there are some circumstances where this rule doesn't apply.

Here's one example: where there is a specific statute providing for the principal's personal liability, such as the The Perishable Agricultural Commodities Act, which states that a trust is formed at the moment the buyer receives the produce and remains in effect until the seller is paid in full.

Importantly, as noted by a New York Federal court in Taylor & Fulton Packing, LLC v. Marco International Foods, LLC, "the standard for a breach of fiduciary duty under PACA is distinct from the standard for piercing the corporate veil ... Under PACA, the question is whether the trustee was 'in a position to control the assets of the PACA trust.'  If the trustee 'in any way encumbered the funds or rendered them less freely available to PACA creditors,' then he may be personally liable."

Category: General