Law School Resources
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.
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