Radaszewski v. Telecom Corp.
981 F.2d 305 (8th Cir. 1992)
Radaszewski was run over by a
truck belonging to a corporation called Contrux.
Contrux used to have
insurance, but their insurance company went out of business a few months
before the accident.
Contrux was a subsidiary of
Unable to get money for his
injuries from Contrux, Radaszewski went to court and asked them to pierce
the corporate veil so he could get to
cannot be held liable for claims against the corporation, but sometimes
courts with pierce the corporate veil
and hold shareholders liable.
The Trial Court found for
Radaszewski and said that he could hold Telecom liable for his injuries.
The Trial Court found that
Contrux was undercapitalized.
The idea of undercapitalization is that the subsidiary corporation was
purposely not provided with enough assets to be able to legitimately do
business in order to limit the amount of assets the parent corporation
had at risk if someone made a claim against the subsidiary.
The Trial Court found that undercapitalization should be defined as having less than what
would constitute an appropriate level of financial responsibility.
The Appellate Court reversed.
The Appellate Court found
that courts can only pierce the corporate veil if the parent corporation:
Has complete control of the
The control was used to
commit a fraud or wrong, or to avoid a positive legal duty, (aka improper
The control and breach of
duty must be the proximate cause of the injury or unjust loss.
Radaszewski argued that
Contrux's undercapitalization was
evidence of improper motivation. However, the Court found that Contrux was not undercapitialized because it had a lot of insurance that could
be used to pay claims. Therefore they were being financially responsible.
The Court found that it
wasn't Telecom's fault that the insurance company was insolvent and
couldn't pay claims. Even though the insurance company was also a
wholly-owned subsidiary of Telecom!