18 N.Y.2d 414, 223 N.E.2d 6, 276 N.Y.S.2d 585 (N.Y. 1966)
Walkovszky v. Carlton is a cornerstone New York case on piercing the corporate veil.
Does mere undercapitalization and the use of multiple, thinly capitalized corporations to operate a taxicab business justify piercing the corporate veil or imposing enterprise liability on a shareholder for a tort judgment?
In New York, piercing the corporate veil requires a showing that the corporation is dominated and controlled by its owners and that such domination was used to commit a fraud or wrong resulting in injury. Mere undercapitalization or the multiplication of corporations, standing alone, is insufficient. Courts will not aggregate separate corporations under an enterprise liability theory absent allegations and proof that the corporate form was so misused that the shareholder was effectively conducting personal business through a corporate dummy.
No. Allegations of undercapitalization and a multi-corporate structure alone do not state a claim to pierce the corporate veil or impose enterprise liability on the shareholder. The court affirmed dismissal of the complaint against Carlton individually but granted plaintiff leave to replead to allege that the corporation was his alter ego and used to conduct his personal business.
Walkovszky is frequently cited to teach that undercapitalization alone is not enough to pierce the corporate veil in New York and that courts require both domination and its use to commit a fraud or wrong. It delineates the boundary between judicial veil piercing and legislative regulation of minimum financial responsibility, and it rejects enterprise liability absent proof that separate corporations are mere instrumentalities of a single alter ego. For students, it clarifies pleading strategy: generic assertions of thin capitalization will not suffice; specific facts showing alter ego, domination, and misuse directly tied to the injury are required.