Kraft Power: Veil Piercing And The Survival of Actions Statute Collide

Where a plaintiff has been harmed by a company, and the principal of that company exercises “pervasive control” over it, a court may “disregard” the corporate form allowing the plaintiff to recover directly from the principal. What if the corporate principal has died? Can a plaintiff still pursue claims under a so-called “veil piercing” theory against the principal’s estate? In Kraft Power Corporation v. Merrill, the Massachusetts Supreme Judicial Court concluded that certain claims survive the death of the corporate principal, and others do not. The Court also held for the first time that a plaintiff cannot recover multiple damages for unfair and deceptive business practices under M.G.L. c. 93A where the defendant has died.

The SJC considered the following facts: Marino was the sole shareholder, sole director, president, and treasurer of Power Wiring. Kraft sold equipment to Power Wiring, which failed to pay Kraft. Kraft obtained a default judgment (roughly $260,000) against Power Wiring for breach of contract. But Kraft was unable to enforce the judgment because Power Wiring had no assets. Marino died before entry of the default judgment, and Kraft brought an action in the Superior Court against Marino’s estate, among other defendants. Kraft’s complaint alleged that Marino was responsible for the contractual obligations of Power Wiring because he abused the corporate form in that he caused Power Wiring to become insolvent by transferring all of its assets to Integrated — another corporation he owned and controlled; used Power Wiring and Integrated as sham corporations for his personal benefit; and used Integrated to deny Kraft the means to enforce its judgment against Power Wiring. Kraft’s complaint asserted claims against the estate based on breach of contract, violation of the Uniform Fraudulent Transfer Act (“UFTA”), violations of G.L. c. 93A, unjust enrichment, and fraud. The Superior Court dismissed all of the claims against Marino’s estate.

Looking to the “Survival of Actions” statute (G.L. c. 228, § 1) the SJC held that only the fraud count should have been dismissed, because fraud is a tort “not enumerated” in the statute. The SJC reasoned that Kraft’s contract, UFTA, and even its unfair and deceptive business practices claims were all “contractual in nature” and therefore survive pursuant to G.L. c. 228, § 1. Similarly, the SJC ruled that the unjust enrichment claim survives because it too was premised on the plaintiff’s contractual right to the money retained by Marino’s estate.

Although it supported Kraft’s ability pursue its c. 93A claim, the SJC held that “multiple damages may not be sought under G.L. c. 93A when the defendant has died.” The majority found that it would not effectuate the purposes of c. 93A to impose “punitive” damages after the defendant’s death. In a dissenting opinion Justice Duffly questioned the c. 93A ruling arguing, among other things, that the multiple damages provision of c. 93A may serve to deter unfair business practices by persons other than the deceased wrongdoer.

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