USA Law and Practice Contributed by: Steven Molo, Robert Kry, Megan Cunniff Church and Walter Hawes, MoloLamken
Under New York law, a plaintiff seeking to pierce the corporate veil must show that the owners exercised complete domination over the corpo - ration with respect to the complained-of trans - action or action, and that such domination was used to commit a fraud or wrong against the plaintiff that resulted in injury. The party seeking to pierce the corporate veil must establish that the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will inter - vene. 3.3 Shareholders’ Claims Against Fraudulent Directors A shareholder derivative action is a lawsuit brought by a shareholder, or group of share - holders, on behalf of a corporation. Shareholder derivative actions allow individual shareholders to bring a lawsuit to enforce a corporate cause of action against officers, directors or third parties. Generally, a shareholder can only bring a suit on behalf of a corporation when the corpora - tion itself has refused to bring a valid cause of action, unless the shareholder can show ade - quate grounds for not demanding action from the corporation first. This most frequently occurs when the defendants are corporate directors or officers. If a derivative action is successful, any damages or proceeds go to the corporation and not directly to the shareholder who brought the lawsuit. 4. Overseas Parties in Fraud Claims 4.1 Joining Overseas Parties to Fraud Claims The Federal Rules of Civil Procedure allow for flexibility in pursuing fraud claims against mul -
tiple parties, including those outside the United States, as long as jurisdictional requirements are met and the party is properly served. Indeed, where an absent party holds a significant interest in the case, joinder of the party may be required. Permissive Joinder Rule 20 of the Federal Rules of Civil Procedure allows for the joinder of additional parties after the litigation has begun, as long as the claims relating to the party arose from the same trans - action or occurrence and involve common ques - tions of law or fact. Under Rule 14, a defendant may implead an absent third party who may be liable to the defendant for the plaintiff’s claim. Finally, other interested parties may intervene in the action under Rule 24. Required Joinder Federal Rule of Civil Procedure 19 may require the joinder of other parties to the case. That rule serves to protect the interests of absent parties, and also protects the parties from being sued in multiple jurisdictions. Courts consider a number of factors in determin - ing whether an absent party should be joined in the action, and the effects of not joining the party if doing so is impossible or impractical. For example, a court considers: • whether the party’s absence would prevent complete relief among the existing parties; • whether the party claims an interest relating to the subject of the lawsuit and is situated in a way that the party’s absence would prevent that party from protecting that interest; and • whether failure to join the party may expose another party to multiple or inconsistent obli - gations.
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