US Third Circuit Senior Judge Jane Richards Roth issued a bizarre pronouncement in a recent veil piercing opinion:
... it is unclear that merely using a corporation to limit personal liability rises to the level of fraud required to pierce the corporate veil.
Indagro SA v. Nilva, 16-3226, 2018 WL 2068660, at *3 (3d Cir. May 3, 2018). (HT: Joshua Fershee)
As Todd Henderson and I point out in our treatise on limited liability,
... the law allows entrepreneurs and investors to incorporate their businesses for the purpose of obtaining the benefit of limited liability. Indeed, the law allows one not just to incorporate one’s business for that purpose, but also to minimally capitalize the corporation so as to limit the amount the entrepreneur puts at risk.
New Jersey courts have recognized this principle. See, e.g., State, Dept. of Envtl. Protec. v. Ventron Corp., 468 A.2d 150, 164 (N.J. 1983) ("a primary reason for incorporation is the insulation of shareholders from the liabilities of the corporate enterprise"); Rose Containerline, Inc. v. Omega Ship. Co., Inc., CIV. 10-4345 WHW, 2011 WL 1253849, at *3 (D.N.J. Mar. 28, 2011) ("Here, the plaintiff's allegation that the defendants 'inten[ded] to limit their individual liability' is meaningless, because 'individuals may incorporate for the very purpose of avoiding personal liability.'”).
If the law permits one to incorporate one's business for the purpose of avoiding personal liability, how could it be fraud to do so?