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November 18, 2004

Wisconsin Statute Automatically Pierces Corporate Veil

On November 10, in the case of Rayner v. Reeves Custom Builders Inc., the Wisconsin Court of Appeals, held that the consumer protection provisions of Wis. Admin. Code sec. ATCP 110 autmotically pierced the corporate viel due to the way in which the code defines "seller."

In the case, Reeves Custom Builders, Inc had been hired by the plaintiffs to perform remodeling services on their house.  The plaintiffs became dissatisfied with the work and eventually sued not only the company itself, but Arthur and Beth Reeves in their capacity as owners and officers of the company.

Arthur and Beth claimed that they were protected from being held personally liable under the theory of limited liability.  The court, however, saw it differently.  In making its decision, the court relied on the consumer protection provisions in the Wisconsin Administrative Code.  The section the court relied on defined sellers as "persons engaged in the business of making or selling home improvements and includes corporations...and any other form of business organization or entity, and their officers, representatives, agents and employees."  The section also made sellers personally liable for their actions.  The court held that the definition of seller in the section specifically pierces the corporate veil and held Arthur and Beth personally liable due to the fact that they were officers of the company.

While the Reeves claimed this holding would abrogate centuries of corporation limited liability law and give plaintiffs carte blanche to sue even mere employees, the court disagreed.  The court pointed out that its holding only made individuals liable as sellers when they commit violations of their own volition and not for any wrongdoing that can be imputed to the corporate entity.

While the case certainly weakens corporate veil, it is important to note that the court didn't come to its decision lightly.  While the court held felt the legislature had intended to pierce the corporate veil with the statute, it seems as though it may not have come to the same decision if it didn't think it was making the right policy decision.

Posted by Matt Rutlin at 07:54 AM in Corporations | Permalink


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