Question
Spotlight on Smart InventionsPiercing the Corporate Veil. Thomas Persson and Jon Nokes founded SmartInventions, Inc., to market household consumer products.The success of their first product,
Spotlight on Smart InventionsPiercing the Corporate Veil. Thomas Persson and Jon Nokes founded SmartInventions, Inc., to market household consumer products.The success of their first product, the Smart Mop, continued with later products, which were sold through infomercials.Persson and Nokes were the firm's officers and equal shareholders, with Persson responsible for product developmentand Nokes in charge of day-to-day activities. By 1998, they hadbecome dissatisfied with each other's efforts. Nokes represented the firm as financially "dying," "in a grim state,... worsethan ever," and offered to buy all of Persson's shares for$1.6 million. Persson accepted.On the day that they signed the agreement to transfer theshares, Smart Inventions began marketing a new productthe Tap Light. It was an instant success, generating millionsof dollars in revenues. In negotiating with Persson, Nokes hadintentionally kept the Tap Light a secret. Persson sued SmartInventions, asserting fraud and other claims. Under what principle might Smart Inventions be liable for Nokes's fraud? Is SmartInventions liable in this case? Explain. [Persson v. Smart Inventions, Inc., 125 Cal.App.4th 1141, 23 Cal.Rptr.3d 335 (2 Dist. 2005)](See Corporate Powers.)
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