July 21, 1983 saw two very important opinions from the Supreme Court. One of them, Application of Matthews, 94 N.J. 59 (1983), was the first major opinion regarding a Committee on Character issue. That case was discussed, indirectly, here.
The other decision, State v. Ventron, 94 N.J. 473 (1983), was and still is the leading New Jersey case regarding the criteria for piercing the corporate veil. The case involved liability for pollution. The lower courts had pierced the corporate veil and, on that basis, held a parent company liable. Justice Pollock’s unanimous opinion in Ventron held that the parent would be liable, but not based on piercing the corporate veil. Instead, the Court relied on a 1979 amendment to the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. as the basis for the parent’s liability.
In addressing the corporate veil issue, Justice Pollock began by observing that “[e]ven in the case of a parent corporation and its wholly-owned subsidiary, limited liability normally will not be abrogated” and “[e]xcept in cases of fraud, injustice, or the like, courts will not pierce a corporate veil.”
“Under certain circumstances, courts may pierce the corporate veil by finding that a subsidiary was ‘a mere instrumentality of the parent corporation.'” Such an action, Justice Pollock said, “depends on a finding that the parent so dominated the subsidiary that it had no separate existence but merely a conduit for the parent.” But even where there is corporate dominance, “liability generally is imposed only when the parent has abused the privilege of incorporation by using the subsidiary to perpetrate a fraud or injustice, or otherwise to circumvent the law.” Incorporating a subsidiary for an improper purpose would justify veil-piercing, but in Ventron there was no evidence of an improper purpose. “Contrary to the implication of the trial court opinion, it is proper to establish a new corporation for the sole purpose of acquiring the assets of another corporation and continuing its business.”
In addition to its discussion of piercing the corporate veil, Ventron is notable for citing and discussing in some detail the 1868 English case of Rylands v. Fletcher. That case, a standard of law school torts classes, is one of the foundation stones of the American law of nuisance. By 1983, there were not many decisions that harked back to nineteenth-century English rulings. In his typically complete fashion, however, Justice Pollock did go back that far.