William Carlton was a shareholder in ten New York City corporations, including Se on Cab Corporation. Each corporation owned two taxicabs, and each cab was covered by only the minimum $10,000 automobile liability insurance required by New York law. A taxicab owned by Seon Cab struck and severely injured John Walkovszky, who sued for damages.
Walkovszky named all ten corporations, as well as the individual driving the cab that hit him, as defendants.
The plaintiff alleged that the corporations, although seemingly independent of one another, "operated . . . as a single entity, unit and enterprise" with regard to financing, supplies, repairs, employees, and garaging. The plaintiff asserted that the multiple corporate structure constituted an unlawful attempt "to defraud members of the general public" who might be injured by the cabs. He therefore sought to hold Carlton, their sole shareholder, personally liable for his injury.
Is there any theory under which the sole shareholder could be held personally liable? If so, were sufficient facts alleged to state a valid claim? Forming multiple corporations, each owning one or two taxicabs carrying the minimum required insurance, was common in New York during the 1960s. Is this practice, which can result in a corporation being undercapitalized, the equivalent of fraud upon the general public? Why or why not? Suppose William Carlton's name was conspicuously displayed on the sides of the taxicabs owned by the corporations and that he, the sole shareholder, actually serviced, inspected, repaired, and dispatched the taxicabs. Would that make a difference as to whether he could be held personally liable?