A District Court denied a motion for summary judgment claiming that related defendant corporations were alter egos. Defendant PSNet agreed to purchase 70% of the equity in the plaintiff corporation for $10 million. When PSNet failed to fund the transaction, plaintiffs sued and asserted that PSNet, which was created to find investments for PSNet Communications, was a mere alter ego of PSNet Communications and sought summary judgment against PSNet Communications.
Plaintiffs argued that PSNet never had any capital, revenue, insurance or employees and never did any business other than a single failed real estate transaction and the transaction at issue. In rejecting this argument, the Court found that plaintiffs had failed to demonstrate that PSNet had intermingled funds or that PSNet Communications had failed to respect the corporate form of PSNet. The Court therefore held that, while PSNet might have been an undercapitalized start-up company, it could not find as a matter of law that it was a mere alter ego of the cell phone company. Therefore, the court held that this was an “intensely fact-driven inquiry” and denied plaintiffs’ summary judgment motion. (Needa Parts Mfg., Inc. v. PSNet, Inc., 2009 WL 1543390 (E.D. Mich June 2, 2009))