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Piercing Your Corporate Veil – Part II: An Illustrative Case is Worth a Thousand Words

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Starting Up Smarter

It is remarkable to note how many major lawsuits result from a failure to attend to “minor details”—precisely, of the sort of details that many busy entrepreneurs don’t have time for.  The recent case of Moras v. Marco Polo Networks, Inc. is just one of many that illustrate this point.  

Moras, decided on May 31, 2012, by Federal Judge Paul Engelmayer of the Southern District of New York, illustrates just what can go wrong when individuals don’t attend to corporate formalities and leave themselves open to corporate veil-piercing arguments. 

Plaintiff, Moras, after he was fired, sued his employer for breach of an employment agreement, fraud and unjust enrichment.  He also sued Ramgopal, the CEO and single largest shareholder of the parent company of his employer, on a veil-piercing theory.  In defining the issue on Ramgopal’s motion for summary judgment, the Court asked, “can Ramgopal be held individually liable for the corporate defendants' non-payment of wages by piercing the corporate veil and imposing shareholder liability?” 

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Case Law Update: Trade Secret Confidentiality Outside the UTSA Context

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Because trade secrets often have to be disclosed in connection to a litigation, it is extremely important to take the necessary precautions to prevent them from losing any chance of protection.

As an illistration of this point, last week, the Court of Appeals of California, Second Appellate District, Division Seven, rejected Respondents’ argument that court records from a 1998 California case should remain under seal because they contained documents relating to trade secrets.

In relevant part, the Court held:

Trade Secrets and Intellectual Property Rights. Courts have recognized trade secrets as a potential overriding interest for restricting public access to information. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292.) However, a trade secret does not in itself require confidentiality as required by law unless the action is initiated pursuant to the Uniform Trade Secret Act. (Id. at p. 288.)

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Protecting Trade Secrets – Basic Practical Considerations

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The protection of trade secrets involves a combination of business and legal acumen.

The best way to protect a trade secret is not to disclose it to anybody.  This should be the default position – keep it secret!  But, in the real world, that is rarely possible or practical.  Often, trade secrets must be disclosed to be able to benefit from them.

Trade secret disclosures can generally be broken down into three categories: (1) Disclosure to employees; (2) Disclosure to potential strategic partners and (3) Disclosure to potential sources of financing.