When Can You “Pierce the Corporate Veil” and Hold a Corporate Owner Personally Liable for Negligence?
Personal injury lawsuits are often complicated by the presence of corporate defendants. It can be difficult to unwind the complex web of ownership interests in a business entity. And under most circumstances, it is difficult to “pierce the corporate veil” and hold individual owners and managers personally responsible for negligent acts that injure or even kill people.
Federal Judge Allows Wrongful Death Lawsuit Against Nursing Home Owners to Proceed
Difficult–but not impossible. A Tennessee federal judge recently issued a ruling allowing a wrongful death and healthcare liability lawsuit to proceed against the individual owners of a nursing home. The case, Sanders v. Allenbrooke Nursing and Rehabilitation Center, involves a patient who died while under the care of the Allenbrooke nursing home in Memphis. The patient’s widow (the plaintiff) subsequently sued Allenbrooke as well as its management company, Aurora Cares, LLC.
The plaintiff also sued two New York-based LLCs and their individual owners, Donald T. Denz and Norbert A. Bennett. Denz and Bennett co-own both Allenbrooke and Aurora Cares through their respective intermediary LLCs, known as DTD and D&N. These “non-facility defendants” moved to dismiss the plaintiff’s claims against them, maintaining that only Allenbrooke could be sued.
The defendants’ arguments broke down into two parts. The first was their claim that the Tennessee federal court could not exercise “personal jurisdiction” over the non-facility defendants, all of whom were based in New York. The second was that Tennessee law does not permit a healthcare liability action against the “passive investors” who happen to own a nursing home.
U.S. District Judge Samuel H. Mays, Jr., rejected both lines of reasoning and said the plaintiff could proceed with her lawsuit for now against all defendants. With respect to personal jurisdiction, Mays explained that when a subsidiary business is effectively the “alter ego” of a parent company, that parent company can be held to answer for the subsidiary’s actions in court. Under this theory, the plaintiff could sue both DTD and D&N, as the corporate parents of Allenbrooke and Aurora Cares. As far as Denz and Bennett go, Mays said that since the plaintiff plausibly alleged both men were “actively and personally involved in the conduct” leading to the victim’s death, they were not automatically shielded from suit simply because they were corporate officers.
As noted above, the non-facility defendants also claimed they could not be held responsible for Allenbrooke’s negligence under the Tennessee Health Care Liability Act. The Act does, in fact, limit the potential defendants in a wrongful death case like this one to the nursing home (Allenbrooke), its management company (Aurora Cares), and any “managing employees” of the nursing home. Bennett and Denz maintain they were simply “passive investors” rather than managing employees. But again, Mays said the plaintiff plausibly alleged otherwise, specifically citing how both Denz and Bennett “actively” managed Allenbrooke and Aurora Cares through their alter-ego LLCs.
Speak with a Tennessee Personal Injury Attorney Today
Negligent business owners often try and hide behind their corporate shields to escape personal responsibility. That is why, if you or someone in your family has been harmed, it is important to work with an experienced Knoxville personal injury lawyer who can assist you in fully investigating any corporate defendants before proceeding with legal action. Contact the offices of Fox Farley Willis & Burnette, today to schedule a free consultation with a member of our personal injury legal team.