The U.S. District Court for the Northern District of Illinois denied defendants’ motion to dismiss, ruling that, among other things, plaintiff properly pled the elements for piercing the corporate veil where there were particular allegations demonstrating a “unity of interest” between the individual and corporate defendants.
The key corporate defendant managed properties owned and operated by federal and municipal housing authorities. Defendant entered into a contract that delineated the appropriate uses of funds—defendant was explicitly prohibited from funneling government money for personal purposes. Plaintiff, during the course of her employment by the defendant corporation, began to notice a series of accounting irregularities and was asked by her employer on numerous occasions to reconcile bank accounts “as if the [missing] money were there.” Plaintiff eventually left her employment and later filed a qui tam action to, among other things, recover the misappropriated government funds.
Defendants moved to dismiss plaintiff’s claims, including a veil piercing count, on the ground that the piercing allegations in the complaint were “purely formulaic.” Defendants relied primarily on the Supreme Court’s recent pleading decisions in Ashcroft v. Iqbal, 556 U.S. ---, 129 S.Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The court denied the motion to dismiss the veil piercing cause of action, finding sufficient factual allegations in “several portions” of the complaint, including that the corporate defendant had transferred funds to a third-party corporation that was owned by the individual defendants, and that the individual defendants were part of a small group that exercised control over the missing funds. (US ex rel Howard v. Urban Investment Trust, Inc., et al., No. 03 C 7668, 2010 WL 148643 (N.D.Ill. Jan. 14, 2010))