Clarity on Piercing the Corporate Veil

“ Thus far our fortune keeps an upward course,

   And we are graced with wreaths of victory.”

        -          3 Henry VI  I,1; King Edward to nobles

          I am pleased to write that we recently prevailed in a case before the Supreme Court of Tennessee.   For those of you wanting to pierce the corporate veil, or at least to assert the proper allegations to do so in your pleadings, this is an important case.

          The case, Youree v. Recovery House of East Tennessee, No. M2021-01504-SC-R11-CV (Tenn. Jan. 22, 2025), originated from a plaintiff’s attempt to enforce a judgment that it had obtained for the liability of one corporation against two related companies under the doctrine of piercing the corporate veil. The trial court granted a default judgment for the plaintiff when the two related corporations initially failed to respond to the lawsuit, and it denied the companies’ later motion to set the default aside.

          The two companies appealed to the Court of Appeals on the grounds that the default judgment should have been set aside because the plaintiff’s complaint had failed to state requisite facts for piercing the corporate veil. The Court of Appeals agreed and reversed the decision of the Trial Court.

          The Supreme Court, in a unanimous opinion, affirmed the decision of the Court of Appeals. It also clarified the appropriate test to be applied in actions that seek to pierce the corporate veil in Tennessee.

          Jacob Vanzin presented the oral argument to the Supreme Court on May 29, 2024. You can watch the full video of the oral argument here.

          The Supreme Court of Tennessee issued its opinion on January 22, 2025. You can read the full opinion here.