ROBERT J. RUBIN & CHERYL AYER, Plaintiffs,
AQUAFORTIS ASSOCIATES, LLC & RICHARD SMITH Defendants.
was conducted in this matter on December 21 & 22, 2018 on
the Plaintiffs' claim for nuisance. The Plaintiffs have
proven at trial that the drop in water level of Clary-Lake
was the result of the condition of the dam owned by Pleasant
Pond Mill, LLC ("PPM"). The drop in the water level
in the lake, beginning in 2011 and continuing until the time
of trial, caused an interference with the Plaintiffs use and
enjoyment of their property to such an extent that they have
established all of the necessary elements of nuisance. The
court is also satisfied that the Plaintiffs have established
damages in the amount of $50, 000, based on the credible
testimony of Plaintiff Cheryl Ayer and Appraiser Stanley
were still a defendant in this action, the court would have
no difficulty entering judgment for $50, 000 in compensatory
damages and moving on to determine if any amount of punitive
damages would be appropriate.
PPM is no longer a defendant in this action. Instead the
Plaintiffs seek judgment against Aquafortis Associates, LLC
("Aquafortis") and Richard Smith. The Plaintiffs
argue that the operations of PPM and Aquafortis have been so
intertwined that Aquafortis is effectively an
"alter-ego" for PPM and should be held liable for
damages caused by PPM.
"corporations are separate legal entities with limited
liability .... courts are generally reluctant to disregard
the legal entity and will cautiously do so only when
necessary to promote justice." Johnson v. Exclusive
Props. Unlimited, 1998 ME 244, ¶ 5, 720 A.2d 568
(quoting Anderson v. Kennebec River Pulp & Paper
Co., 433 A.2d 752, 756 n.5 (Me. 1981)). Despite this,
courts may pierce the corporate veil and disregard the
corporate entity when equity demands it, such as "when
[the entity has been] used to cover fraud or illegality, or
to justify a wrong." Johnson, 1998 ME 244,
¶ 5, 720 A.2d 568.
pierce the corporate veil, a plaintiff must show both:
"(1) the defendant abused the privilege of a separate
corporate identity; and (2) an unjust or inequitable result
would occur if the court recognized the separate corporate
existence." Id. ¶ 6. The Law Court has
not adopted specific factors that must be considered or found
in order to determine whether the defendant abused the
privilege of a separate corporate identity, but it has cited
with approval twelve factors that the Massachusetts courts
use. Those factors are:
(1) common ownership; (2) pervasive control; (3) confused
intermingling of business activity[, ] assets, or management;
(4) thin capitalization; (5) nonobservance of corporate
formalities; (6) absence of corporate records; (7) no payment
of dividends; (8) insolvency at the time of the litigated
transaction; (9) siphoning away of corporate assets by the
dominant shareholders; (10) nonfunctioning of officers and
directors; (11) use of the corporation for transactions of
the dominant shareholders; [and] (12) use of the corporation
in promoting fraud.
Id. ¶ 7 (citing The George Hyman Constr.
Co. v. Gateman, 16 F.Supp.2d 129, 149-50 (D. Mass.
1998). A finding of fraud or illegality is not required for
the court to determine that an unjust or inequitable result
would occur if the court recognized the separate corporate
existence of the LLC. See Johnson, 1998 ME 244,
¶ 8, 720 A.2d 568.
Court has not directly addressed this issue of when one
corporation or LLC may be held liable for the actions of
another. However, it has been considered in other states and,
relying upon authority from other jurisdictions, the Superior
Court considered when one corporation can be held liable for
another corporation's employee's negligence in
Masi v. Keeley Crane Services & Keeley Construction
Co., No. CV-08-303, 2011 Me. Super. LEXIS 38, (Mar. 18,
2011). There, Nick Masi, who owned Masi Builders, had
contracted Keeley Crane to provide a crane and operator for
part of its building project. Id. at *3. During the
work, Nick Masi was injured and the plaintiffs claimed that
his injuries stemmed from the negligent operation of the
crane. Id. Plaintiffs brought suit against both
Keeley Crane Service and Keeley Construction Company and
moved for partial summary judgment declaring that the
companies "were operated as though they were a single
enterprise without material regard to their separate
corporate existences." Id. Therefore, the
plaintiffs argued "[t]hey should thus be liable in
equity as a unitary business and the sole employer of [the
crane operator]." Id.
undisputed facts showed that the companies were listed as
separate corporations with Maine's Secretary of State and
that both were wholly owned by James Keeley, who was also the
president of both companies. Id. at *3-4. James
Keeley was paid only by Keeley Construction. Id. at
*4. The companies shared the same mailing address and were
housed at the same location. Id. Keeley Construction
paid seventy-five percent of the rent. Id. As he saw
fit, James Keeley had the authority to change the amount of
rent and wages each company paid. Id. At one time,
Keeley Construction filed a statement of intention to do
business under the name Keeley Crane Service, before it was
formed as a separate entity. Id. Both companies
shared the same Federal Employer Identification Number.
Id. Keeley authorized the Construction company to
guaranty loans taken by the Crane company and the
Construction company had acted as the Crane company's
guarantor. Id. Both companies were covered by the
same workers' compensation insurance policy, but by
different general liability policies. Id. n.2. The
Crane company earned $6 million in business per year and had
forty employees, while the Construction company earned $2
million in business per year and had six employees. Despite
this, the Crane company had a general liability policy of $1
million, but the Construction company had a policy of $2
million, with an additional $3 million umbrella insurance
policy that included the Crane company's underlying
Employers' Liability coverage. Id. at *6-7.
Crane company had no separate employee handbook, policies, or
forms but instead used the Construction company's
materials. Id. A person employed by the Construction
company managed payroll for both operations. Id.
James Keeley would freely move employees back and forth
between the Crane and Construction companies by way of
promotion, demotion, or otherwise. Id.
Employees' paychecks reflected whether they were being
paid by the Crane company or the Construction company.
Id. Although the crane operator applied for
employment on forms that bore the Construction company's
name, he was officially employed by the Crane company.
Id. The crane operator reported to James Keeley7 s
son, Ben, who worked for both companies, but was only paid by
the Construction company. Id.
argued that "Keeley Crane and Keeley Construction's
separate corporate personalities ha[d] merged so that one
corporation [was] a mere adjunct of the other or the two
companies form[ed] a single enterprise." Id. at
*8-9 (citations omitted). The Plaintiffs relied on the
"alter ego" doctrine enunciated by the California
courts that allowed them to apply "classic veil-piercing
principles to sister corporations rather than
shareholders." Id. at *11.
Superior Court (York County, Brennan, J.) quoted the
California Court of Appeal as explaining that:
[u]sually, a disregard of the corporate entity is sought in
order to fasten liability upon individual stockholders. . . .
However, only a difference in wording is used in stating the
same concept where the entity sought to be held liable is
another corporation instead of an individual....
Generally, alter ego liability is reserved for the
parent-subsidiary relationship. However, under the
single-enterprise rule, liability can be found between sister
companies. ... 'In effect what happens is that the court,
for sufficient reason, has determined that though there are
two or more personalities, there is but one enterprise; and
that this enterprise has been so handled ...