Superhero Corporations II: Piercing the Corporate Veil

So a couple of days ago we talked about superhero corporations and respondeat superior. This time we’re taking a look at the opposite situation, where corporate actions can result in personal liability for the owners of a corporation.

I. Basic Doctrine

This is significantly less common than respondeat superior liability, as the whole point of corporate entities is limited liability. Corporations were invented to permit investors in trade missions to limit their liability to the money they had actually invested—ships were lost pretty frequently, so this was a big deal. Without the joint stock company, the Age of Exploration just wouldn’t have happened. These let the risk of investment be spread not only among multiple investors, but across multiple voyages. So while a particular ship may go down with all hands, but not only can the creditors not proceed directly against the investors for anything owed, but the debtors can use the profits of another voyage they’ve funded to make good the debt. Everybody’s happy.

The basic point here is that while it’s pretty easy for a company to be liable for the actions of its employees, it’s very difficult for an executive or owner to be personally liable for the actions of the corporation. When that happens, it’s called “piercing the corporate veil”. In US law, there are a series of factors that courts look at to determine whether the veil should be pierced. This isn’t a checklist, and it’s not the kind of thing where if you have more than half of the factors you win. Even a single factor can result in piercing if it’s bad enough, particularly when we’re talking about undercapitalization, i.e. when the investor hasn’t actually put enough money into the corporate entity to cover its debts. The courts do recognize that the point of corporations is to limit liability, but they aren’t very happy with people who create corporations solely for that purpose, particularly when the risk to be avoided is less just the ups and downs of business than avoidance of a known debt. The law lets you limit your liability for business purposes, but it won’t let you play games.

II. Superheroes and Piercing the Corporate Veil

So then, might it be that actions of various superhero corporations could result in personal liability for the superheroes that own them? Again, this is a fact-intensive analysis. But going with the examples above, we can again see something of a spectrum.

Remember, now we’re talking about something the corporation does, not something that the superheroes do as a result of their connection to the corporation. Products liability is perhaps the most obvious example, but it can come up with contracts, too. Basically, we’re now thinking about a situation in which the corporation, as a corporation, has gotten itself into trouble, completely independent of any superhero activities.

First, Batman. Here it seems very unlikely that the actions of Wayne Industries could result in personal liability for Wayne himself. Again, we’re talking about a multinational conglomerate with legitimate business operations in multiple continents, most of which have absolutely nothing to do with Wayne personally. The corporation is certainly well capitalized, and Wayne doesn’t appear to be doing much in the way of co-mingling of funds, though he may be guilty of siphoning away corporate assets for personal purposes as part of his Batman sideline. Still, the facts would probably have to be related to Batman in particular for that last one to matter, in which case Wayne would be personally liable anyway.

Tony Stark seems to be in almost the same position. Here we’ve got a major corporation, and though his identity as Iron Man is well-known, Stark Industries appears to be a healthy, well-run defense contractor with little in the way of corporate irregularities. Piercing again seems unlikely.

But just as with respondeat superior, the Fantastic Four seem a lot more susceptible to this. Fantastic Four, Inc. exists almost solely to let them operate as superheroes, and it doesn’t do all that much aside from licensing Reed’s patents and manufacturing goods based on them. There’s also a sense that personal and corporate assets may not be kept very distinct, in that while both Wayne and Stark are said to be independently wealthy apart from their role in the corporation, the FF’s money seems to be entirely based on the corporation. Wayne and Stark both own mansions, boats, sports cars, etc., and frequently show off their personal wealth. The FF live a lot more modestly and while they really don’t seem to worry about money, a lot of their material comfort really does seem to be linked directly to their corporate activities. So if FF Inc. is sued for products liability, this isn’t going to look good. It’s entirely possible that Reed and potentially the rest of the family could be on the hook personally.

III. Conclusion

Piercing the corporate veil is strongly disfavored by the courts, and plaintiffs really need to show that the corporate investors/owners are trying to pull off some kind of manifest injustice before the courts are going to put the investors/owners on the hook personally. But it can happen, particularly in situations like the Fantastic Four where the corporation is basically just a front for personal activities.  With Wayne and Stark, by contrast, it’s unlikely to happen unless Wayne or Stark personally ordered or oversaw something seriously illegal.

13 responses to “Superhero Corporations II: Piercing the Corporate Veil

  1. IANAL, but should Wayne or Stark use corporate propriety for “personal” reasons (Batman didn’t pay for the batmobile, did it?), this would not justify piercing the veil in case the corporation was sued for damages caused by those?

    • Read the previous post on vicarious liability.

      The corporate veil wouldn’t need to be pierced here. Bruce Wayne, as Batman, is already personally liable for anything he does. The real question is whether liability can go the other way, i.e. can Wayne Industries be sued for things that Batman does while using corporate property.

      • Since Wayne’s gone public to the extent of admitting to financing Batman’s operations this past year via Batman, Incorporated…?

  2. Good legal analysis and I agree completely. I’m more baffled by why people seem to *care* so much about whether Bruce committed any corporate crimes through his Batman activities. He’s a masked vigilante who beats up criminals with Miranda or other forms of Due Process on a regular basis. Not your fault at all, but the fans need to just accept that Batman will commit malum prohibitum crimes in the interest of preventing malum in se crimes. Simple.

    • The fans might accept it in a comic, but this exists for analyzing the real life laws* and how they would probably apply to these characters. Quite a bit of what Batman does is simply illegal and if I was a high ranking figure in Wayne Industries I would be obligated to worry that Bruce Wayne’s actions might potentially hurt the company.

      *Presuming that the real life law and comic law are the same until noted otherwise of course.

      • Ryan Davidson

        It’s certainly the kind of thing that shareholders would have a cow about if they found out. Helps that he seems to be a majority stakeholder.

      • Martin Phipps

        *cough*CEO of Themyscira Industries told Wonder Woman the same thing in the unaired pilot*cough*

  3. Okay, so what about when Iron Man fights a supervillain and the property values mount up and Iron Man tells bystanders that Tony Stark will cover the damages. What if Tony Stark sends a check and the people he sends the check to don’t consider it enough. Can they sue Tony Stark personally or does the fact that he was Iron man at the time mean they can only go after the assets of either Stark Industries or the Maria Stark Foundation? Based on your analysis of FF Inc. I would say that Tony Stark would be in the same situation as Reed Richards if somebody were to try to sue the Maria Stark Foundation as opposed to Stark Industries. The MSF could be seen as “basically just a front for personal activities” and in that case Tony Stark would be on the hook personally.

    It is worth mentioning that there does not appear to be a Maria Stark Foundation in the upcoming Avengers movie, that the Avengers seem to be working for SHIELD as opposed to being their own corporate entity working in co-operation with governments around the world. In the movies, the Avengers are unquestionably state actors and they would certainly (I would think) get a different kind of protection from lawsuits: the government would have to pay for damages and, unless they wanted to sue the U.S. government, the victims would have to be happy with what they got.

  4. Could you please give me an example of a “piercing the veil” case that is on-going and has not been decided yet? Perhaps direct me to an article or some other source? Thanks!

    • “Piercing the veil” cases, also known as “disregarding the corporate form”, are rare and invariably involve closely-held corporations. Publicly-traded companies, while not immune per se, are practically immune to having their veil pierced.

  5. For a while, the FF’s expenses (largely repair and reconditioning of the Baxter building) were outpacing the income, and Reed worried rather frequently that the FF would spiral into bankruptcy. I want to say this happened around issue 150 or so, but I could be way off.

    Also, when Spiderman originally tried to join the FF (in one of, if not THE first issue of Amazing Spider-Man, he was told that the members of the FF draw no salary at all.

  6. This is really in relation to the above post about th avengers being agents of shield. It would be great if you did an article about the federal tort claims act and how it would apply to the avemgers for damages in their encpunters. Also interesting would be the related discussion of limited immunity (debatable because althoug no cases exist about a federal super powered agent being liable for doing x on their job, it also seems reasonable that abnormally dangeroous activity could result in potentially strict liability) and also immunity via necessity

  7. Pingback: The Dark Knight: Embezzlement | Law and the Multiverse

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