The modern doctrine of enterprise liability is usually traced to a law review article by Professor Adolf Berle,[1] in which he wrote that
In effect what happens is that the court, for sufficient reason, has determined that though there are two or more personalities, there is but one enterprise; and that this enterprise has been so handled that it should respond, as a whole, for the debts of certain component elements of it. The court thus has constructed for purposes of imposing liability an entity unknown to any secretary of state comprising assets and liabilities of two or more legal personalities; endowed that entity with the assets of both, and charged it with the liabilities of one or both.[2]
In fact, however, Berle’s theory differs considerably from the modern doctrine. Most notably, under Berle’s formulation, “a high degree of unity alone would be sufficient to justify piercing without any additional requirement of unfair injury arising from the unity.”[3] In fact, however, the test for enterprise liability—like the test for veil piercing—requires something more than a mere showing of control or unity.
[1] See Stephen B. Presser, The Bogalusa Explosion, "Single Business Enterprise," "Alter Ego," and Other Errors: Academics, Economics, Democracy, and Shareholder Limited Liability: Back Towards A Unitary "Abuse" Theory of Piercing the Corporate Veil, 100 Nw. U. L. Rev. 405, 420 (2006) (“To a great extent, this ‘single business enterprise’ language is traceable to the landmark article by Columbia law professor Adolf A. Berle, which advocated the removal of limited liability when there had been ‘excessive fragmentation’ of a business into presumably artificial corporate forms.”).
[2] Adolf A. Berle, The Theory of Enterprise Entity, 47 Colum. L. Rev. 343, 350 (1947).
[3] Mary Elisabeth Kors, Altered Egos: Deciphering Substantive Consolidation, 59 U. Pitt. L. Rev. 381, 435 (1998).
