Building on the foundational concepts from Episode 1, Professor Seth C. Oranburg examines the specific legal tests courts apply when deciding whether to pierce the corporate veil. Using real appellate cases, the episode unpacks common factors such as undercapitalization, commingling of assets, failure to observe formalities, and using the corporate form as an instrumentality for personal gain. The discussion begins with Sea-Land Services v. Pepper Source (7th Cir. 1993), where the owner’s personal use of corporate funds and deliberate asset stripping left creditors with worthless judgments. It then turns to Wallace v. Wood (Del. Ch. 1999), a limited partnership case involving overlapping roles, related entities, and an apparent effort to circumvent contractual borrowing limits, illustrating the “instrumentality” theory of veil-piercing. From these examples, Oranburg distills the two-part test used in many jurisdictions: Unity of interest / alter ego – assessing whether the entity and its owners are genuinely separate. Injustice or wrongdoing – determining whether maintaining the corporate form would sanction inequity, whether or not outright fraud is present. The episode also explores the difference in how courts treat contract creditors (who can negotiate protections) versus tort victims (who cannot choose their risk exposure), a theme that recurs throughout the series.

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“What did the council decide on item 42?” — answered with the speaker and the moment.

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