After granting a motion for summary judgment in favor of Kangadis Food Inc.’s (KFI’s) owners, a New York federal court has issued an order further explaining its decision to dismiss the owners from a false-labeling class action. Ebin v. Kangadis Family Mgmt. LLC, No. 14-1324 (U.S. Dist. Ct., S.D.N.Y., order entered December 1, 2014). Additional information about the initial dismissal appears in Issue 543 of this Update.
The court held that the plaintiffs “totally failed” to properly argue that the court should pierce the corporate veil and hold the owners liable for KFI’s actions. To satisfy the second prong of the piercing-the-veil test, the plaintiffs had to show that the owners, “through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice” against the plaintiffs. The court found that rather than providing an argument satisfying the second prong, the plaintiffs merely provided a “wholly conclusory statement” that a “reasonable jury could certainly find that the class members who purchased a tin labeled ‘100% Pure Olive Oil,’ but instead received pomace oil, suffered an injury that was caused by Kangadis’s [sic] domination of KFI.” They failed to argue, the court said, that the owners “used their domination as a means to accomplish a fraud that justifies holding defendants derivatively liable for the claims for relief, as opposed to the corporation itself. Logically, the fraud or wrong that a party must show when trying to pierce the veil must be independent from the wrongs that it seeks to remedy in the underlying causes of action. Otherwise, upon a showing of domination, the mere existence of valid causes of action would usurp the entire second prong of the analysis.”