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Kinney Shoe Corp. v. Polan, (1991)

1. Kinney Shoe Corp. v. Polan, (1991); pg. 350, briefed 2/24/97


2. Facts: Kinney subleased a building to Industrial, Inc., a no-asset corporation set up by Polan.  Industrial, Inc. in turn subleased half of the warehouse to another of PolanĂs corporations, Polan Industries, Inc.  All of the assets were placed into Polan Industries, Inc.  Industrial thereafter defaulted on the sublease to Kinney.  Neither of PolanĂs corporations observed the corporate formalities required.


3. Procedural Posture:  The district court held that Kinney had assumed the risk of Industrial’s undercapitalization and was not entitled to pierce the corporate veil.  Kinney appeals.

4.  Issue: Whether there was sufficient unity of interest and other equitable factors present to pierce the corporate veil under these facts.


5.  Holding: Yes.


6.  Reasoning:  West Virginia has a two-pronged test: 1) is the unity of interest and ownership such that the separate personalities of the corporation and the individual shareholder no longer exist; and 2) would an equitable result occur if the acts are treated as those of the corporation alone.  Industrial was clearly undercapitalized, and used solely as a shield layer to Polan Industries’ assets.  Combined with the fact that neither corporation observed any formalities such as to give the corporation a separate existence from its owner (i.e. no stock, no meetings, no elected officers, etc.), it would be inequitable not to pierce the corporate veil in this case.