1. What is meant by the remedy of piercing the corporate veil?

2. In the history of the doctrine, what terms have been used to capture the concept of loss of separate corporate existence?

Inter-Tel is an Arizona corporation that designs, manufacturers, and sells telecommunication services primarily to businesses. Inter-Tel Technology Inc. (Technologies) operates Inter-Tel’s retail division. On July 2, 1998, Technologies purchased Integrated Telecom Services Corp. (ITS), with Inter-Tel, the Arizona parent, paying for the stock. ITS was Inter-Tel’s first retail branch in Kentucky, selling Inter-Tel’s products from an office building in Louisville it leased from Linn Station Properties. After ITS was acquired by Technologies, ITS no longer possessed any financial independence. ITS could not maintain a bank account, hold any funds, or pay any bills. All of ITS’s regional offices were transformed from independent dealers of communications equipment into direct sales “branches” of Inter-Tel. ITS employees became employees of Inter-Tel and were paid by Inter-Tel from its headquarters in Arizona. When a customer purchased a telecommunications system from ITS the payment went directly into a “lock box” or depository account controlled by Inter-Tel. Once the funds were placed in this account, they belonged to Inter-Tel. Inter-Tel paid all the vendors who provided ITS with goods and services. Inter-Tel paid ITS’s rent for the Linn Station Road property from the time Technologies acquired ITS until ITS abandoned the premises in 2002. Linn Properties sued ITS for unpaid rent and failure to maintain the property, and a default judgment was entered against ITS for $332,900. ITS was a defunct corporation without any assets, so Linn Properties sought to pierce the corporate veil to collect the debt from Technologies and Inter-Tel.

JUDICIAL OPINION

Abramson, J.… Limited liability for corporate entities is described by some scholars as springing from both democratic and economic principles in the early days of the United States. The “imposition of limited liability was perceived as a means of encouraging the small-scale entrepreneur, and of keeping entry into business markets competitive and democratic,” assuring that the corporate world was not dominated by industrialists who had the immense personal wealth to withstand any business risk. The economic rationale was that the public would benefit from investment by shareholders who would be willing to take risks in industry,  manufacturing and general commercial development if personal liability could be avoided should their ventures not succeed. By the twentieth century, deliberate misuse of the corporate form by shareholders who were either individuals or other corporations had led courts to authorize piercing the corporate veil.…

….Judge Cardozo noted that “[w]e say at times that the corporate entity will be ignored when the parent corporation operates a business through a subsidiary which is characterized as an ‘alias’ or ‘dummy.’” Berkey, 155 N.E. at 61. In the ensuing years courts have invoked other, often colorful, terms in an attempt to capture the concept of loss of separate corporate existence including “dry shell,” “puppet,” “stooge,” “conduit” and “marionette,” among dozens of others. Peter B. Oh, Veil–Piercing, 89 Tex. L.Rev. 81, 83 n. 7 (2010). This Court, then the Court of Appeals, joined in the vivid descriptions in one of the Commonwealth’s earliest piercing cases, Veterans Service Club v. Sweeney, 252 S.W.2d 25 (Ky.1952), a case with somewhat curious facts. Mrs. Sweeney apparently gambled $1,535.00 of family funds in games of chance at the “veterans” club, causing her displeased husband to bring suit under a Kentucky anti-gaming statute that allowed “the loser or his creditor” to recover treble damages against gambling winners. Without extensive discussion, this Court found the Chancellor correctly “swept aside the legal fiction of separate corporate personality” to hold the three individual incorporators of the Veterans Service Club liable for their “unlawful acts.” 252 S.W.2d at 27. In so doing, the Court stated: …………..