USA Law and Practice Contributed by: Steven Molo, Robert Kry, Megan Cunniff Church and Walter Hawes, MoloLamken
ants are persons that cannot be identified by the plaintiff before a lawsuit is filed. Given that the statute of limitations for fraud can be short, a litigant is under a certain amount of pressure to file a claim, even if all the alleged fraudsters are not known at the time of filing. Generally, filing a claim against a fictitious defendant tolls the statute of limitations. The plaintiff may later substitute the name of the true defendant for the fictitious defendant once that information is known. Once the complaint is filed, however, a plaintiff must work quickly to determine the true identity of the fraudsters. If the plaintiff’s delay in doing so is unreasonable, the court may not allow amendment of the com - plaint, and any claim may become barred by the statute of limitations. 2.9 Compelling Witnesses to Give Evidence A party may serve a subpoena on a non-party, compelling them to testify or produce docu - ments or other evidence, either before or at trial. If a witness defies the subpoena, including by refusing to give testimony or produce docu - ments, they can be held in contempt. 3. Corporate Entities, Ultimate Beneficial Owners and Shareholders 3.1 Imposing Liability for Fraud on to a Corporate Entity Under US law, corporations that commit fraud may be held liable in the same manner as an individual who committed fraud. The doctrine of respondeat superior is applicable to corpora - tions, so a corporation can be held criminally and civilly liable for actions taken by its employ - ees or agents – including its officers or direc -
tors – as long as the action occurs within the scope of the employee’s employment and is for the benefit of the corporation. This rule reflects the basic idea that a corporation can only act through its employees and agents. A corporation is not liable, however, for fraudu - lent acts of an officer, agent or employee taken outside the scope of the person’s employment, unless they were ratified by the corporation. Likewise, if a fraudulent action was taken solely to benefit the individual and not the corporation, the corporation ordinarily will not be held liable. 3.2 Claims Against Ultimate Beneficial Owners A fundamental tenet of US corporate law is that a company – which includes not only corpora - tions, but also limited liability companies and limited liability partnerships – is separate and distinct from its owners. The corporate form was created to allow shareholders and owners to invest without incurring personal liability for actions taken by the corporate entity. In certain instances, however, courts may exer - cise the equitable doctrine known as “piercing the corporate veil” to disregard the separation between entity and individual, and hold the own- ers liable for the actions of the company. The doctrine of piercing the corporate veil is rarely invoked and applies only in exceptional circum - stances, including cases where the corporate form was abused to effect fraud or injustice. Claims seeking to pierce the corporate veil and hold individuals liable for the actions of the com - pany are generally governed by the law of the state of incorporation. Most jurisdictions have recognised multi-factor tests that must be met to determine if veil-piercing is appropriate.
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