Procedure at the Intersection of Law and Equity: Veil Piercing and the Seventh Amendment

Notre Dame Law Review Notre Dame Law Review

Volume 98 Issue 4 Article 13

5-2023

Procedure at the Intersection of Law and Equity: Veil Piercing and Procedure at the Intersection of Law and Equity: Veil Piercing and

the Seventh Amendment the Seventh Amendment

Samuel Haward

J.D. Candidate, Notre Dame Law School, 2024; B.A., McGill University, 2021.

Follow this and additional works at: https://scholarship.law.nd.edu/ndlr

Part of the Civil Procedure Commons

Recommended Citation Recommended Citation

Samuel Haward,

Procedure at the Intersection of Law and Equity: Veil Piercing and the Seventh

Amendment

, 98 Notre Dame L. Rev. 1799 (2023).

Available at: https://scholarship.law.nd.edu/ndlr/vol98/iss4/13

This Note is brought to you for free and open access by the Notre Dame Law Review at NDLScholarship. It has

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PROCEDURE AT THE INTERSECTION OF LAW

AND EQUITY: VEIL PIERCING AND THE

SEVENTH AMENDMENT

Samuel Haward*

INTRODUCTION

The corporate form is one of the world’s greatest legal innova-

tions when measured in terms of its contribution to modern economic

growth and prosperity. With roots in medieval law,

beginning in the

seventeenth century, corporations emerged as a method of resource

pooling and investor protection that enabled business ventures on a

level never before seen outside state-controlled enterprises.

Corpora-

tions are “individuals” in the truest sense, being able to do almost an-

ything that a natural person could, from holding assets to entering

contracts and notably, having judgments entered against them while

remaining functionally distinct entities from individual shareholders.

The benefits of the corporate form when taking on business risk are

obvious, but it is just as clear how a corporation is capable of being

used to defraud and shield ill-meaning shareholders from their credi-

tors.

In such cases, creditors have recourse to the doctrine of “piercing

the corporate veil” that permits courts to hold shareholders personally

liable for the debts of their corporation. As leading articles on this

topic have identified, veil piercing is a “vexing” concept that exists in

* J.D. Candidate, Notre Dame Law School, 2024; B.A., McGill University, 2021.

Thank you to Professor Samuel L. Bray and his civil procedure class for inspiring my fasci-

nation with the civil jury trial, the members of the Notre Dame Law Review for their editing

excellence, and my friends and family for their unwavering support. Any remaining errors

are my own.

1 See generally John Morley, Essay, The Common Law Corporation: The Power of the Trust

in Anglo-American Business History, 116 COLUM. L. REV. 2145 (2016). While the corporate

form itself is a relatively recent phenomenon, humans have formed partnerships and simi-

lar entities that can take on some independent legal activities throughout history.

2 See Giuseppe Dari-Mattiacci, Oscar Gelderblom, Joost Jonker & Enrico C. Perotti,

The Emergence of the Corporate Form, 33 J.L. ECON & ORG. 193, 198–99, 203–13 (2017).

3 See generally id.

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a murky area on the fringes of law and equity.

This aspect of veil pierc-

ing has a notable interplay with the Seventh Amendment that demar-

cates the line beyond which plaintiffs have a right to a civil jury trial

directly in the murky area that veil piercing occupies.

This Note addresses the multicircuit split that veil piercing’s “vex-

ing” nature has created.

The First, Second and Fifth Circuits, on var-

ying theories, have found that there exists a federal right to a jury trial

on veil-piercing issues.

Conversely, the Sixth and Seventh Circuits

have disagreed, holding that veil piercing is an action sounding pri-

marily in equity outside the scope of the Seventh Amendment.

Part I

will briefly discuss the Supreme Court’s Seventh Amendment jurispru-

dence and explain how veil piercing falls into the Court’s awkward de-

marcation of law and equity. Part II will explore the legal and equita-

ble history of veil-piercing actions, a topic that “courts and commenta-

tors rarely address . . . at length.”

Part III will lay out the current Fed-

eral precedent on the issue. Finally, Part IV will argue that history and

policy support putting veil-piercing questions to juries, that juries are

well suited to this task, and address counterarguments by showing that

judges and parties retain an array of tools to manage and control juries.

I. THE RIGHT TO A JURY TRIAL

The split in authority regarding the right to a jury trial in veil-

piercing actions comes directly from the difficulty in applying the Su-

preme Court’s Seventh Amendment jurisprudence to an action that is

neither a claim nor a remedy, and that does not sound clearly in either

law or equity. Before evaluating the origins of veil piercing in courts

4 Brian D. Koosed, Anthony P. Badaracco & Erica R. Iverson, Disregarding the Corpo-

rate Form: Why Judges, Not Juries, Should Decide the Quiddits and Quillets of Veil Piercing, 13

N.Y.U. J.L. & BUS. 95, 96 (2016).

5 Id.

6 See Wm. Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 933 F.2d 131, 134–37

(2d Cir. 1991) (finding that an action to pierce the corporate veil “does not sound solely in

equity,” and the nature of the plaintiff’s relief (money damages) is the controlling factor in

Seventh Amendment analysis); Am. Protein Corp. v. AB Volvo, 844 F.2d 56, 59 (2d Cir.

1988) (“[T]he issue of corporate disregard is generally submitted to the jury.”); Crane v.

Green & Freedman Baking Co., 134 F.3d 17, 22 (1st Cir. 1998) (holding that “it is princi-

pally the jury’s function . . . to decide whether or not the . . . veil-piercing standards were

met”); FMC Fin. Corp. v. Murphree, 632 F.2d 413, 421–24 (5th Cir. 1980) (holding that the

decision to pierce the corporate veil must be decided on facts put to a jury).

7 See Int’l Fin. Servs. Corp. v. Chromas Techs. Can., Inc., 356 F.3d 731, 737 (7th Cir.

2004) (holding that an underlying action for money damages does not automatically entitle

a plaintiff to a jury trial on the question of veil piercing because “[a] jury trial does not have

to include all or nothing”); CNH Cap. Am. LLC v. Hunt Tractor, Inc., 568 F. App’x 461,

467 (6th Cir. 2014) (holding that veil piercing is an action arising in equity).

8 Passalacqua, 933 F.2d at 135.

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of law and equity, it is worthwhile to examine the Seventh Amendment

and its application in the Supreme Court to give context as to where a

veil-piercing action falls.

The Seventh Amendment states in relevant part that “[i]n suits at

common law, where the value in controversy shall exceed twenty dollars,

the right of trial by jury shall be preserved.”

In practical terms, the

Seventh Amendment preserves the right to a civil jury trial only in ac-

tions that would have been brought at law in English courts in 1791,

carving out an exception for equitable claims.

A. Competing Tests

The Seventh Amendment does not limit the availability of a civil

jury to only those actions that would have been heard in front of a jury

in 1791. Instead the analysis “depends on the nature of the issue to be

tried rather than the character of the overall action.”

As such, even

if the overall cause of action may have been heard in an English court

of equity in 1791, a civil jury must “be available if the action involves

rights and remedies of the sort typically enforced in an action at law.”

To navigate this assessment, the Court has handed down a two-part

test.

In Chauffeurs, Teamsters & Helpers Local No. 391 v. Terry,

the

Court asked first if the claim was analogous to one that would have

been brought at law or in equity in 1791.

Second, the Court asked if

the remedy sought was legal or equitable.

In resolving disagreements

between answers to each question, the Court stated that the second

question should be given more weight.

The test articulated in Terry, while theoretically good law, has

been superseded by later cases that merge the two-step test into a single

analysis that asks “whether we are dealing with a cause of action that

either was tried at law at the time of the founding or is at least

9 U.S. CONST. amend. VII (emphasis added).

10 See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 333 (1979) (“‘[T]he thrust of the

[Seventh] Amendment was to preserve the right to jury trial as it existed in 1791.’ At com-

mon law, a litigant was not entitled to have a jury determine issues that had been previously

adjudicated by a chancellor in equity.” (alterations in original) (citation omitted) (quoting

Curtis v. Loether 415 U.S. 189, 193 (1974))).

11 Koosed et al., supra note 4, at 101 (quoting Ross v. Bernhard, 396 U.S. 531, 538

(1970)).

12 Id. (quoting Curtis, 415 U.S. at 195).

13 Samuel L. Bray, Equity, Law, and the Seventh Amendment, 100 TEX. L. REV 467, 478

(2022).

14 Chauffeurs, Teamsters & Helpers Loc. No. 391 v. Terry, 494 U.S. 558 (1990).

15 See id. at 565; Bray, supra note 13, at 478–79.

16 See Bray, supra note 13, at 478–79.

17 Id.

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analogous to one that was.”

This new analysis, described as the Mon-

terey test by some academics in reference to the Court’s most recent

Seventh Amendment case City of Monterey v. Del Monte Dunes at Monte-

rey, Ltd.,

removed Terry’s emphasis on the remedy sought and instead

seeks to discern “whether the ‘claim’ or ‘cause of action’ is legal or

equitable” in nature.

The Court added a new part two that asks if

“the particular trial decision must fall to the jury in order to preserve

the substance of the common-law right as it existed in 1791.”

While

this newer test is incompatible with Terry, the Court has never stated

that Terry and its predecessors are no longer good law.

As a result of the Court’s conflicting jurisprudence, the determi-

nation of veil piercing’s place on either side of the Seventh Amend-

ment line has a threshold issue that needs to be resolved before the

substance of the action can be evaluated. A district court facing this

issue would first have to decide which framework it will use to evaluate

a veil-piercing action, and there is a notable variance in which tests

district courts around the country choose to adopt.

Even once a

judge has chosen a test with which to approach the veil-piercing ques-

tion, they are not out of the woods. The judge must then analogize a

veil-piercing action to some common-law writ or equitable doctrine

that existed in 1791.

This course is problematic in and of itself: asking

whether a veil-piercing action is analogous to common-law writs or eq-

uitable doctrines of 1791 likely means looking for something that does

not exist.

Equity does not operate in the same manner as law. At common

law in 1791, there existed a list of writs, each distinct in its own right

and analogous in function to a modern “claim” or “cause of action.”

While some equitable doctrines have developed into their own coher-

ent bodies of substantive law, capable of being listed alongside the

18 Id. at 479 (quoting City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526

U.S. 687, 708 (1999)).

19 Monterey, 526 U.S. 687.

20 Bray, supra note 13, at 480.

21 Monterey, 526 U.S. at 708 (quoting Markman v. Westview Instruments, Inc., 517 U.S.

370, 376 (1996)).

22 While Monterey is the newer precedent, most district courts are bound by circuit

precedent grounded in the Terry analysis. Some circuits have even decided to take elements

from each test and fashion their own tests, further complicating Seventh Amendment juris-

prudence at the district court level. For an example of blurred tests in the veil piercing

context, see G-I Holdings, Inc. v. Bennet, (In re G-I Holdings, Inc.), 380 F. Supp. 2d. 469, 472

(D.N.J. 2005) (citing to a case describing an analysis similar in kind to the Monterey test,

before analyzing a veil piercing claim under a Terry framework); infra Section III.C.

23 See Bray, supra note 13, at 484.

24 See id.

25 Id. at 484–85; see also Anthony J. Bellia Jr., Article III and the Cause of Action, 89 IOWA

L. REV. 777, 784–85 (2004).

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common-law writs, equity generally existed as a supplement to the com-

mon law.

Instead of having a list of writs serving as buckets that a law

judge can group like actions together in, the function of chancery was

to use equitable maxims as “gap fillers” where no adequate law ex-

isted.

Though both Terry and Monterey ask courts to analogize to

“claims” or “causes of action” arising in equity, chancellors in 1791

would not have considered their decisions using this criteria. Instead,

they would have evaluated solely whether there existed a defect in the

available legal remedy that prevented a plaintiff from being justly com-

pensated and applied an equitable maxim in its place.

As Professor

Samuel Bray puts it: “[Terry] requires a separate inquiry into ‘claims’

and ‘remedies’ . . . . This separation of equitable ‘remedies’ from eq-

uitable ‘claims’ has no basis in history or logic.”

The more recent Monterey test also asks courts conducting Seventh

Amendment analysis to evaluate whether “the particular trial decision

must fall to the jury in order to preserve the substance of the common-

law right as it existed in 1791.”

To do so, they need to embark on a

historical analysis to determine whether the issue at hand (or those

analogous to it) were traditionally decided by juries.

Oftentimes, the

historical analysis is inconclusive, and a court must instead address

“precedent and functional considerations,”

inviting a discussion of

the relative merits of judges and juries as decision makers.

As this

Note will discuss, the overwhelming majority of jurisprudence on the

applicability of the Seventh Amendment to veil-piercing actions is

based on interpretations of the Terry test, even though cases that used

a Monterey framework had already been published. For that reason, an

application of the Monterey test to a veil-piercing action is currently a

theoretical endeavor.

B. The Threshold Issue in Practice

In the context of veil piercing and the Seventh Amendment, the

procedural choice of tests is as significant an issue as the substantive

analysis itself. The tests a court chooses to use will have a substantial

26 See Bray, supra note 13, at 484–85 (citing F.W. MAITLAND, EQUITY: A COURSE OF

LECTURES 1–22 (A.H. Chaytor & W.J. Whittaker eds., 2d rev. ed. 1936)).

27 See Paul B. Miller, Equity as Supplemental Law, in PHILOSOPHICAL FOUNDATIONS OF

THE LAW OF EQUITY 92, 101–11 (Dennis Klimchuk, Irit Samet & Henry E. Smith eds., 2020).

28 See Bray, supra note 13, 484–85.

29 Id. at 487.

30 E.g., Markman v. Westview Instruments Inc., 517 U.S. 370, 376 (1996).

31 See Bray, supra note 13, at 468–73.

32 City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 718 (1999)

(citing Markman, 517 U.S. at 384).

33 See Koosed et al., supra note 4, at 96–97.

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impact on the conclusion reached on the analysis of a veil-piercing

claim. Under the Terry test, the remedy is the dominant question. If

a court assumes that veil piercing is not a remedy, but simply a mecha-

nism by which courts can achieve a legal remedy, then it would follow

that veil-piercing actions are covered by the Seventh Amendment (be-

cause the remedy sought is almost certainly damages).

However, if the correct test to use is the Monterey test, the analysis

becomes more complex and requires a deeper look into the history of

veil piercing. The Monterey test requires that a court discern if a claim

or cause of action is legal or equitable in nature. There is no emphasis

on the remedy sought. This is where the competing historical views of

veil piercing become key: is veil piercing more analogous to a credi-

tor’s bill and related actions undertaken by a court of equity? Or is it

simply a process to help resolve an action that is, at its core, seeking to

address a legal right in tort or contract? This Note takes the view that

the use of either test does not preclude the conclusion that veil pierc-

ing can be considered a legal action for the purpose of Seventh

Amendment analysis, but failing to acknowledge this conflicting au-

thority would render the argument inapplicable in many lower courts

bound by circuit precedent.

II. A HISTORY OF LIMITED LIABILITY AND VEIL PIERCING’S

ORIGINS IN LAW AND EQUITY

As this Note’s discussion of the Seventh Amendment has indi-

cated, successful Seventh Amendment analysis is dependent on a

strong understanding of history by those applying it, yet there does not

exist a singular history or explanation of the roots of veil piercing.

The fact that judges, commentators, and academics alike find the con-

cept of veil piercing “among the most confusing in corporate law” is

unsurprising.

The emergence of limited liability, and accordingly

veil piercing, was a crude and piecemeal process,

and as a result the

exact origins of veil piercing are unknown.

When corporations first

emerged in seventeenth-century European nations, they existed as a

34 But see Geltzer v. Kollel Mateh Efraim, LLC (In re Kollel Mateh Efraim, LLC), 406

B.R. 24, 28 (Bankr. S.D.N.Y. 2009) (holding that declaratory judgment was a form of relief

that did not preclude a jury trial on a veil piercing claim).

35 See infra Section III.A.

36 Frank H. Easterbrook & Daniel R. Fischel, Limited Liability and the Corporation, 52 U.

CHI. L. REV. 89, 89 (1985).

37 See Ron Harris, A New Understanding of the History of Limited Liability: An Invitation for

Theoretical Reframing, 16 J. INSTITUTIONAL ECON. 643, 644 (2020) (“[I]t is a mistake to view

limited liability as a well-defined watershed invention . . . .”).

38 Peter B. Oh, Veil-Piercing, 89 TEX. L. REV. 81, 83 (2010).

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vehicle for resource pooling, not to shield owners from liability.

The

British East India Company is the best known example of an early cor-

poration, using a separate legal entity to collect and utilize assets from

multiple investors, distributing profits and pooling risk.

By legislative

charter, the East India Company gained a “full set of legal capacities”

including the ability to own land or other assets, litigate in court, and

enter into contracts.

At no point did the East India Company organ-

ize itself with the intent to shield investors from liability, but the cor-

porate economy in Britain continued to grow, and by the eighteenth

century there is evidence that the English courts and Parliament had

presupposed some notion of limited liability from the separate legal

personality of early corporations.

While English courts refrained

from finding true limited liability before Acts of Parliament gave it stat-

utory existence, Scottish courts as early as 1756 held that shareholders

could not be liable for the debts of a corporation beyond the share of

their contribution.

The American colonies when drafting their own laws took inspira-

tion from the British corporate charter, but there existed no formal

self-incorporation or limited-liability entity classifications until the

early nineteenth century.

Without limited liability, creditors seeking

to recover from entities could simply sue shareholders at common law,

and there existed no formal limitations on recovery. It was not until

1811 that the State of New York implemented the first known bill grant-

ing statutory limited liability rights.

The Act Relative to Incorpora-

tions for Manufacturing Purposes of 1811 was groundbreaking in sev-

eral ways.

It provided for the self-incorporation of manufacturing

businesses in New York (as opposed to formation by legislative charter)

and was the first to formalize rudimentary limited liability for the share-

holders of these newly formed corporations.

In relevant part, the Act

stated that “for all debts which shall be due and owing by the company

at the time of its dissolution, the persons then composing such com-

pany shall be individually responsible to the extent of their respective

39 See Harris, supra note 37, at 644.

40 See id. at 645.

41 Id. at 645, 645–46.

42 See id. at 646, 648.

43 See Stevenson v. Macnair [1757] 5 Brn. 340, 340 (holding that “partners are not

liable beyond their subscriptions [the value of their shares]”)).

44 See The Key to Industrial Capitalism: Limited Liability, ECONOMIST (Dec. 23, 1999),

https://www.economist.com/finance-and-economics/1999/12/23/the-key-to-industrial-

capitalism-limited-liability [https://perma.cc/GKT8-FCHS].

45 See Ronald E. Seavoy, Laws to Encourage Manufacturing: New York Policy and the 1811

General Incorporation Statute, 46 BUS. HIST. REV. 85, 90 (1972).

46 Act of Mar. 22, 1811, ch. 67, 1811 N.Y. Laws 151.

47 See Seavoy, supra note 45, at 90–92.

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shares of stock in the said company, and no further.”

While not all

states were as quick as New York to allow self-incorporation and cap

the liability of shareholders, other states saw the success of New York’s

new scheme, and began to follow suit. New British laws followed in

1855 and 1856. The Limited Liability Act of 1855

and Joint Stock

Companies Act of 1856

fixed the amount that a shareholder could be

liable for the debts of their corporations and expanded the opportu-

nities for investors to register and self-incorporate entities.

With the advent of limited liability statutes rose with them the cri-

tique that limited liability was simply a vehicle by which investors could

fraudulently profit at the expense of those around them. In response,

when such wrongdoing was exceptional, courts would look past the

corporate form and hold shareholders personally liable for corporate

actions. Just as legislatures’ implementation of self-incorporation and

limited-liability statutes differed in timing and substance, judiciaries’

willingness to look past these new corporate forms was anything but a

uniform development. There is no seminal “veil piercing” case in

which the doctrine was first introduced to American jurisprudence, in-

stead there is a gradual development of the doctrine through both

courts of law and courts of equity.

A. Veil Piercing Actions as Actions at Law

Some commentators suggest that it is a “simple insight” that veil

piercing is an equitable remedy.

Such a sweeping statement is inac-

curate in the context of early veil-piercing cases, and it is even inaccu-

rate to describe veil piercing as a remedy as opposed to a “mechanism

that allows a creditor to enforce a judgment against a party able to

48 Act of Mar. 22, 1811, ch. 67, 1811 N.Y. Laws 152. For additional background on the

impacts of the 1811 Act, see generally Stanley E. Howard, Stockholders’ Liability Under the New

York Act of March 22, 1811, 46 J. POL. ECON. 499 (1938); Frederick G. Kempin, Jr., Limited

Liability in Historical Perspective, 4 AM. BUS. L. ASS’N BULL. 11 (1960).

49 Limited Liability Act 1855, 18 & 19 Vict. c. 133 (Eng.).

50 Joint Stock Companies Act 1856, 19 & 20 Vict. c. 47 (Eng.).

51 See Phillip Lipton, The Introduction of Limited Liability into the English and Australian

Colonial Companies Acts: Inevitable Progression or Chaotic History?, 41 MELB. U. L. REV. 1278,

1298–99 (2018).

52 It is likely that the merger of law and equity ongoing throughout state judiciaries in

the United States further muddied the historical origins of veil piercing. With limited lia-

bility not yet well established in 1791, the record date for Seventh Amendment analysis,

there was no basis in law or equity for federal courts to look back to. Instead, much of the

early jurisprudence on the issue came from newly merged courts with both legal and equi-

table powers. See generally Aaron Friedberg, Note, The Merger of Law and Equity, 12 ST.

JOHN’S L. REV. 317 (1938).

53 Peter B. Oh, Veil-Piercing Unbound, 93 B.U. L. REV. 89, 90 (2013).

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satisfy it.”

It is easy to defer to equity’s flexibility and willingness to

look past the corporate form in the pursuit of justice as evidence of a

solely equitable concept, but doing so is to hide a deep body of prece-

dent in courts of law. As early as 1912, the leading article on the topic

of veil piercing was quick to note that “courts of law have, again and

again, refused to be trammeled by scholastic logic and mediæval cor-

porate ideas, which frequently serve only to distort or hide the truth.”

As limited liability became a default standard in the late nine-

teenth and early twentieth century, some investors realized the poten-

tial that limited liability corporations held for shielding assets from

creditors. The phrase “veil piercing” was introduced into American

jurisprudence by the Supreme Court as early as 1809 in Bank of the

United States v. Deveaux,

but in the nineteenth century, claims that

involved piercing the corporate veil generally arose from fraudulent

transfers of assets to evade creditors—tort claims brought in courts of

law.

In Booth v. Bunce,

an action typical of early veil piercing, the New

York Court of Appeals upheld a jury instruction that resulted in a ver-

dict disregarding a corporate form used to shield assets from the in-

corporator’s insolvent partnership.

Booth arose from a dispute be-

tween two creditors. An insolvent partnership of which Booth was a

creditor had transferred a steam engine to a newly formed corporation

that then became indebted to Bunce.

Booth sued on the theory that

the transfer of the steam engine to the new corporation was fraudu-

lent, and his claim to it superseded that of Bunce.

In the context of

Booth, it becomes clear that veil piercing alone cannot be considered a

remedy. The partners and incorporators that owned the steam engine

were not party to the litigation, and Booth did not seek redress in the

form of disregarding the new corporation’s separate existence. Booth

sued in tort and sought a legal remedy in the value of the steam engine,

and veil piercing was simply a mechanism by which the court could

achieve that outcome.

As the court in Booth noted: “Deeds, obliga-

tions, contracts, judgments, and even corporate bodies may be the instru-

ments through which parties may obtain the most unrighteous

54 Koosed et al., supra note 4, at 96.

55 I. Maurice Wormser, Piercing the Veil of Corporate Entity, 12 COLUM. L. REV. 496, 497

(1912).

56 Bank of the U.S. v. Deveaux, 9 U.S. (5 Cranch) 61, 75 (1809) (“[I]t is said that you

may raise the veil which the corporate name interposes, and see who stand behind it.”); see

Koosed et al., supra note 4, at 109.

57 Booth v. Bunce, 33 N.Y. 139 (1865).

58 See id. at 156.

59 Id. at 139–41.

60 Id. at 141.

61 See id.

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advantages. All such devices and instruments have been resorted to to

cover up fraud, but whenever the law is invoked all such instruments

are declared nullities . . . .”

Nineteenth-century courts of law were also willing to pierce the

corporate veil in legal actions brought in contract. In Brundred v.

Rice,

an Ohio court found that a corporation formed solely for the

purpose of entering into an illegal contract could not be used to shield

its owners from liability, writing that “[i]f [the corporation] was orga-

nized by the promoters, the defendants, simply for the purpose of con-

summating the illegal agreement, and shielding themselves from the

consequences of receiving the illegal exactions made under it, the act

of incorporating can be of no avail to them as a defense.”

The Ohio

court further explained its authority to disregard the corporate form

by stating that “[t]he court fairly submitted this question to the jury . . .

and there is nothing so sacred in a certificate of incorporation as to

take it out of the reach of this maxim [that courts of law can act to

rectify fraud].”

It is actions such as those in Booth and Brundred that

represent the “crude system in which any creditor with an unsatisfied

judgment against the corporation sued [shareholders] at common

law,” and the original predecessor to veil piercing actions.

B. Veil Piercing Actions as Actions in Equity

Though we have seen that courts of law routinely looked past the

corporate form in actions brought in tort and contract to prevent col-

lection of legal judgment by resorting to fraudulent corporations, the

remainder of the development of the modern doctrine of veil piercing

does have its origin in courts of equity. As the rise in incorporations

and entity formation statutes proved the disjointed legal system for

holding shareholders liable unworkable, litigants resorted to equity. A

creditor’s bill is an action arising in equity that had in effect the same

function as courts of law refusing to recognize corporations. It is “a

62 Id. at 157 (emphasis added); see also Wormser, supra note 55, at 499 (“In other

words, courts of law do not tolerate any attempt to hinder, delay, or defraud creditors by

means of a resort to ‘the veil of corporate entity.’”). Courts of law were also willing to pierce

the corporate veil in actions brought in contract. See Brundred v. Rice, 32 N.E. 169, 172

(Ohio 1892) (holding that a corporation created solely for the purpose of entering into

unlawful contracts was invalid and holding the incorporators personally liable for such con-

tracts).

63 Brundred, 32 N.E. 169.

64 Id. at 172.

65 Id.

66 Phillip I. Blumberg, Limited Liability and Corporate Groups, 11 J. CORP. L. 573, 603

(1986).

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resort to equitable powers to subject some kinds of assets, or assets un-

der some conditions, to the satisfaction of a judgment.”

Procedure for a creditor’s bill had two parts: a proceeding in eq-

uity to assign the share of remaining assets that each shareholder could

be liable for, and a subsequent legal proceeding to enforce outstand-

ing debts or judgments against the creditors.

The creditor’s bill was

developed by courts of equity not in response to the fact that it was

impossible to disregard the corporate form in a court of law, but be-

cause there was no unified system for all creditors to assess all corpo-

rate liabilities, and which shareholders should be held responsible for

them.

Relief sought in the initial, equitable proceeding “typically in-

cluded the appointment of a receiver for the corporation, the deter-

mination of aggregate corporate liabilities unsatisfied by the assets of

the corporation, and [most importantly] a determination of the liabil-

ity per share of the shareholders for the unsatisfied obligations”—eq-

uitable relief that enabled the collection of outstanding debts and

money judgments.

C. Summary

Over time, the creditor’s bill became a well-established equitable

procedure, and by the 1930s, limited liability’s presence in corporate

spheres became ever present, and the doctrine of shareholder liability

was well established in a form similar to modern veil piercing. In the

leading treatise on the topic at the time, Parent & Subsidiary Corps.,

Frederick Powell attempted to make sense of the doctrine’s blended

origins.

While many courts were quick to state that disregard of the

corporate form is an action sounding in equity, a reference to the for-

mality of the creditor’s bill as opposed to the disjointed legal processes

that preceded it, Powell noted that cases from the time discussed that

it was “well-settled that both law and equity will, when necessary . . . ,

disregard [a corporation’s] distinct existence and treat them as identi-

cal [to their shareholders].”

Powell also singled out federal courts as

a jurisdiction in which courts of law have “evinced no hesitation in

brushing aside the fiction of corporate entity.”

Though veil

67 Charles W. Fornoff, The Creditor’s Bill, 16 OHIO ST. L.J. 32, 32 (1955).

68 See Wm. Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 933 F.2d 131, 136 (2d

Cir. 1991).

69 See Blumberg, supra note 66, at 603.

70 Id.

71 See FREDERICK J. POWELL, PARENT AND SUBSIDIARY CORPORATIONS: LIABILITY OF A

PARENT CORPORATION FOR THE OBLIGATIONS OF ITS SUBSIDIARY 126 (1931).

72 Id. at 128 (quoting Erkenbrecher v. Grant, 200 P. 641, 642 (Cal. 1921)).

73 Id. at 129.

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piercing’s procedure stems from an equitable action, such develop-

ments can only mask, and not destroy its legal roots.

III. THE PRESENT SPLIT OF AUTHORITY

At the time of writing, six circuits (including decisions carried

over from the Fifth/Eleventh Circuit split) have precedent on the issue

of whether a litigant

bringing a veil piercing claim has the right to a

jury trial on the issue.

Four circuits (the First, Second, Fifth, and

Eleventh) have taken the position that veil piercing is an action for

which the right to a jury trial is preserved, while two (the Sixth and

Seventh) have taken the opposite position, holding that veil piercing

is an action of an equitable nature.

In district courts from circuits

without any binding precedent, the split is even more apparent with

an array of conclusions cobbled together from existing circuit court

precedent.

A. Circuits Preserving the Right to a Jury Trial

Of the courts that have determined the right to a jury trial under

the Seventh Amendment is preserved, the Second Circuit’s opinion in

Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc.

is the

most prominent. Passalacqua concerned an action by a contractor to

collect a debt owed by a family-owned development company.

The

two had previously contracted during construction of a condominium

in Florida.

Disputes over the construction were sent to arbitration,

resulting in an award of over one million dollars.

When Resnick De-

velopers failed to pay the entire amount, Wm. Passalacqua sued on a

theory of entity disregard in an attempt to collect the outstanding sum

from Jack Resnick & Sons and other entities that were affiliated with

74 The Seventh Amendment makes no distinction between plaintiffs and defendants,

so this precedent applies equally to defendants seeking to pierce the plaintiff’s corporate

veil. However, defendants seeking veil piercing is less common unless they are acting con-

currently as a counterclaim plaintiff. In some cases, a defendant may seek a strategic jury

trial when being sued by a foreign entity in their home jurisdiction, hoping for a sympa-

thetic jury pool. This was the case in Wm. Passalacqua Builders, Inc. v. Resnick Developers South,

Inc., 933 F.2d 131 (2d Cir. 1991). Passalacqua was a Florida entity seeking to collect an

arbitration award against the owner of a New York entity. Id. at 134.

75 See Koosed et al., supra note 4, at 113–25 (collecting cases).

76 Id.

77 Id. at 125.

78 Wm. Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 933 F.2d 131 (2d Cir. 1991).

79 See id. at 133.

80 Wm. Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 608 F. Supp. 1261, 1263

(S.D.N.Y. 1985), rev’d 933 F.2d 131 (2d Cir. 1991).

81 Id.

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Resnick Developers.

The Southern District of New York held a jury

trial on the issue, with the jury concluding that Resnick Developers was

not the alter ego of the family company and refused to pierce the cor-

porate veil to impose the arbitration amount on Jack Resnick & Sons.

This rendered the outstanding balance of the arbitration award uncol-

lectable.

The ensuing appeal contained several thorny issues but centered

on Wm. Passalacqua’s claim that Resnick Developers should not have

been entitled to a jury trial on the question of entity disregard.

The

Second Circuit’s opinion had no threshold issue confronting courts

today, as the opinion was issued shortly after the Supreme Court

handed down Terry, making it seemingly obvious at the time which test

was to be used.

Given that the Passalacqua court was undertaking the Terry test, it

sought to compare the legal and equitable origins of a veil-piercing

action to eighteenth-century actions brought in English courts and an

emphasis the nature of the remedy sought, placing emphasis on the

remedy.

As the Passalacqua court noted, its analysis was far from straight-

forward.

The Supreme Court, while silent on the issue of the Seventh

Amendment in the context of veil piercing, itself fell into the same trap

as other commentators in assuming that veil piercing was generally a

creature of equity.

The Passalacqua court refused to base its holding

on this dicta, and instead embarked on an examination of veil pierc-

ing’s origins. Many cases cited in Passalacqua are simply those reaching

a broad-strokes conclusion about the equitable nature of a veil-pierc-

ing action, or the fact-intensive nature of the action that makes them

ripe for determination by a jury.

The Second Circuit saw that these

82 See Passalacqua, 933 F.2d at 133–34.

83 See id. at 134.

84 Id.

85 See id. at 134–37. While it is more typical for plaintiffs to seek jury trials on entity

disregard, defendants may do so when it gives them some strategic advantage. See supra

note 74.

86 See Passalacqua, 933 F.2d at 135 (quoting Tull v. United States, 481 U.S. 412, 417–

18 (1987)).

87 See id. (“Applying this analysis is difficult because courts and commentators rarely

address the historic origins of the piercing doctrine at length.”).

88 See Bangor Punta Operations, Inc. v. Bangor & Aroostook R.R. Co., 417 U.S. 703,

713 (1974) (“In [cases disregarding the corporate form], courts of equity, piercing all fic-

tions and disguises, will deal with the substance of the action and not blindly adhere to the

corporate form.”).

89 See United States v. Golden Acres, Inc., 684 F. Supp. 96, 103 (D. Del. 1988) (con-

ducting little historical research but holding that “[p]iercing the corporate veil is an action

that sounds in equity” (citing Bangor, 417 U.S. 703)); Am. Protein Corp. v. AB Volvo, 844

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determinations without historical support were inadequate for the is-

sue at hand and conducted a historical inquiry into the origins of veil-

piercing actions. Of note, the court relied on historical sources to

show that there was no single moment at which veil piercing came into

existence; instead it arose from a “crude system in which any creditor

with an unsatisfied judgment . . . sued any shareholder at common

law.”

Finding evidence that veil piercing began as a legal action, and

was later developed through an equitable procedure, but lacking de-

finitive support for the assertion that veil piercing actions would have

arisen in equity in 1791, the Passalacqua court’s determination hinged

on the relief sought in the action.

The relief sought here was the

enforcement of a money judgment against the holding company. As

such, the court found it to be a legal remedy, dismissing the contention

that an action for the enforcement of a money judgment could be an

equitable proceeding while the action for the money judgment itself

was of a legal nature.

Lastly, the Second Circuit evaluated the “fact

intensive” nature of veil-piercing claims. Drawing on precedent that

supported separating issues of fact and issues of law, and underscoring

the importance of passing disputed issues of fact to impartial juries, the

Passalacqua court held that such an intense factual determination war-

ranted putting the issue to a jury.

B. Circuits Rejecting the Right to a Jury Trial

The leading case rejecting the right to a jury trial in veil-piercing

cases is the Seventh Circuit’s opinion in International Financial Services

Corp. v. Chromas Technologies Canada, Inc.

International Financial Ser-

vices was a corporation with a line of business for financing printing

presses.

In 2000, it advanced nearly one million dollars to Didde Web

Press, a printing press manufacturer that was “well on its way to bank-

ruptcy,” and shared the same parent organization of Chromas Tech-

nologies.

To recover the funds advanced to Didde Web Press from

Chromas, International Financial Services needed to show that there

was no separate corporate existence between each company.

F.2d 56, 59 (2d Cir. 1988) (conducting little historical research but reaching the conclusion

that “the issue of corporate disregard is generally submitted to the jury”).

90 Passalacqua, 933 F.2d at 135–36 (emphasis added) (quoting PHILLIP I. BLUMBERG,

THE LAW OF CORPORATE GROUPS: TORT, CONTRACT, AND OTHER COMMON LAW PROBLEMS

IN THE SUBSTANTIVE LAW OF PARENT AND SUBSIDIARY CORPORATIONS § 2.02, at 52 (1987)).

91 See id. at 136–37.

92 See id.

93 See id.at 137.

94 Int’l Fin. Servs. Corp. v. Chromas Techs. Can., Inc., 356 F.3d 731 (7th Cir. 2004).

95 Id. at 734.

96 Id.

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The district court held a trial on the veil-piercing issue, ultimately

finding that Didde Web Press was the alter ego of Chromas, making

Chromas liable for the funds advanced to its sister entity.

In review-

ing the decision to submit the veil-piercing issue to a jury, the Seventh

Circuit also embarked on a Terry-style analysis, granting more weight

to the remedy sought than the nature of the action itself.

The Sev-

enth Circuit agreed with the Passalacqua court that veil piercing was

neither a purely legal nor purely equitable doctrine, and agreed that it

could not strictly be classified as a remedy, in conflict with some com-

mentators.

This led the Seventh Circuit to the second prong of the

Terry test.

The Seventh Circuit, instead of evaluating the ultimate remedy

sought by International Financial Services (contract damages for fail-

ure to repay the loan it advanced), sought to evaluate the status of veil

piercing under Illinois law.

100

Despite stating at the outset of its opin-

ion that veil piercing was “merely a procedural means of allowing lia-

bility on a substantive claim,” the court went on to hold that veil pierc-

ing was an equitable remedy under Illinois law.

101

Supporting its opin-

ion, the Seventh Circuit explained that there is an intermediate step

before granting money damages: an equitable determination by the

court that not doing so would promote injustice or inequity.

102

C. The Lower Court Landscape

In lower courts, the ambiguity of the determination of veil pierc-

ing’s standing under the Seventh Amendment has become even more

troublesome. Many circuits lack binding precedent on the issue, so

courts are forced to cobble together their own tests from scratch.

103

district court seeking to evaluate a Seventh Amendment demand for a

jury trial in a veil-piercing action would need to first untangle the

97 See id. at 734.

98 Despite the opinion in International Financial Services being written five years after

the Supreme Court’s decision in Monterey, the Seventh Circuit still chose to use the older

Terry precedent. See id. at 735–36 (first quoting Tull v. United States, 481 U.S. 412, 417–18

(1987); and then citing Granfinanciera S.A. v. Nordberg, 492 U.S. 33, 42 (1989)).

99 See id. at 736 (“[Veil-piercing] is merely a procedural means of allowing liability on

a substantive claim . . . .”). Contra Oh, supra note 53, at 90 (arguing that it is a simple insight

that veil piercing is an equitable remedy).

100 See Int’l Fin. Servs., 356 F.3d at 736–37 (“[W]e take issue with the conclusion that,

because a plaintiff pursues a legal remedy (a money judgment), he is entitled to a jury trial

not only on the merits but also on whether the corporate entity should [be] disregarded.”).

101 Id. at 736, 737–38.

102 See id. at 738–40.

103 See Bray, supra note 13, at 480–81.

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Supreme Court’s Seventh Amendment tests, before wading into the

quagmire of competing circuit court analyses of veil piercing’s nature

itself.

An opinion from the District Court of New Jersey, In re G-I Hold-

ings, Inc.,

104

shows exactly how difficult this analysis becomes without

guidance from circuit court precedent or the Supreme Court. The

issue before the court was an appeal from a bankruptcy proceeding

tasked with determining whether a group of subsidiaries could be held

liable for money judgements relating to asbestos claims against their

parent corporation.

105

The court lacked Third Circuit precedent on

the issue of a Seventh Amendment test and put together its own inter-

pretation of the Terry test.

106

A clear example of the Supreme Court’s

disjointed jurisprudence on the Seventh Amendment, the G-I Holdings

court used a more recent case on the issue, Feltner v. Columbia Pictures

Television, Inc.,

107

to introduce the Seventh Amendment test, before re-

verting to an interpretation of Terry and Tull with emphasis placed on

the remedy sought.

108

The district court did this despite the test enu-

merated in Feltner giving no indication that the remedy should bear

more weight in the analysis, only that: “[t]o determine whether [an]

action is more analogous to cases tried in courts of law than to suits

tried in courts of equity or admiralty, we examine both the nature of

the statutory action and the remedy sought.”

109

As a result of the Su-

preme Court’s linguistic choices in Feltner, the district court settled on

the Terry test, without realizing that just a few lines earlier it had cited

a predecessor to the competing Monterey test.

110

The court then embarked on the same historical analysis faced by

the International Financial Services and Passalacqua courts. As the Sec-

ond Circuit did in Passalacqua, the District of New Jersey declined to

blindly follow precedent that had repeated the misconception that veil-

piercing actions sound solely in equity. The District Court recognized

the mixed roots in law and equity of veil piercing, and instead

104 G-I Holdings, Inc. v. Bennet, (In re G-I Holdings, Inc.), 380 F. Supp. 2d 469 (D.N.J.

2005).

105 See id. at 471.

106 See id. at 472.

107 Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998). Feltner was one

of the first cases that redefined the test away from Terry’s two-step analysis. In Feltner, the

test is stated as “[t]o determine whether [an] action is more analogous to cases tried in

courts of law than to suits tried in courts of equity or admiralty, we examine both the nature

of the statutory action and the remedy sought.” Id. at 348. There is no mention of the

remedy being given more weight. See id.

108 See G-I Holdings, 380 F. Supp. 2d at 472 (first quoting Feltner, 523 U.S. at 348; and

then quoting Granfinanciera S.A. v. Nordberg, 492 U.S. 33, 42 (1989)).

109 Feltner, 523 U.S. at 348.

110 See G-I Holdings, 380 F. Supp. 2d at 472.

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highlighted the remedy prong of the Terry test.

111

The court sought to

determine what the “remedy” was in a veil-piercing case. Some courts

have found the “remedy” in a veil-piercing case to be the stripping of

corporate protections itself, an outcome more akin to an injunction or

declaratory relief, and thus an equitable remedy.

112

Rejecting this view,

the G-I Holdings court found it “[c]ommon sense” that “no party seeks

to pierce the corporate veil merely to strip a company of its corporate

protection.”

113

When court procedure is stripped away, the underlying

purpose of the veil-piercing action is to recover money damages free

from the restraints of the corporate form. Accordingly, as in Passalac-

qua, the court used the remedy prong of the Terry test to find that the

veil-piercing actions were appropriate for submission to a jury.

114

It is

far from clear if the same result would have been reached if the court

used the Seventh Amendment test in Feltner (an early version of the

Monterey test).

115

Lastly, the G-I Holdings opinion addressed the Seventh Circuit’s

opinion in International Financial Services. Recall that the Seventh Cir-

cuit considered the decision to permit or deny a jury trial on the issue

of entity disregard as procedural.

116

Accordingly, the court deferred to

state law in evaluating the nature of a veil-piercing action. Under Illi-

nois law, veil piercing is only available where adhering to the corporate

form would result in “inequity,” leading the Seventh Circuit to hold

that it was an equitable remedy not entitled to a jury trial.

117

The G-I

Holdings court refused to extend this holding to New Jersey, evaluating

the definitions of veil piercing under New Jersey law to find that it is

highly fact intensive and there is no discretion vested in New Jersey

courts to determine when a veil-piercing action should be put to a

jury.

118

The court refused to extend the International Financial Services

holding beyond states with statutes or precedent defining when a jury

trial right was available in veil-piercing cases.

119

G-I Holdings discussed the issue in the greatest depth, but bank-

ruptcy courts have also addressed the issue with conflicting results.

Some have followed Passalacqua, using the second prong of the Terry

test to place emphasis on the remedy sought over the nature of veil

111 See id. at 476.

112 See id. at 476–77.

113 Id. at 477.

114 See id. at 477–78.

115 For a discussion of outcomes under each test, see infra Section IV.A.

116 See Int’l Fin. Servs. Corp. v. Chromas Techs. Can., Inc., 356 F.3d 731, 736 (7th Cir.

2004).

117 See id. at 738–39.

118 See G-I Holdings, 380 F. Supp. 2d at 477.

119 See id. at 477–78.

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piercing while others have followed the assumption that the stripping

of corporate protections is a remedy, holding that the second step of

the Terry test weights in favor of denying the right to a jury trial.

120

More recently, in the Ninth Circuit there was a case of intracircuit dis-

agreement, with two conflicting opinions in the Central District and

Eastern District of California. The Central District, in Siegel v. Warner

Bros. Entertainment Inc., found that there was no right to a jury trial in

veil-piercing actions.

121

Siegel is notable as it agreed with the Second Circuit on the blurred

legal and equitable origins of veil piercing, but when addressing the

second prong of the Terry test refused to find that the underlying mon-

etary damages were the determinative factor.

122

According to the Cen-

tral District of California, the test enumerated in Terry provides a qual-

ification on what courts should consider to be a remedy: “it is the na-

ture of the relief sought, not what ultimately results or is to be secured

by the same, that should be dispositive.”

123

For the Siegel court, there

is a step between a finding of fact and a ruling on the veil-piercing

issue: an equitable determination of whether upholding the corporate

form would be unjust. As the court wrote: “whether a corporation is

an alter ego of its corporate sibling rests, in the end, on an exercise of

discretion, not of compulsion, as would be the case, for example, if all

the factual elements of a tort or a contract claim had been estab-

lished.”

124

[E]ven if all the objective factors [that weigh in favor of piercing

the corporate veil] are present, whether the corporate veil should

be shredded still requires an equitable assessment of whether main-

taining the corporate form would be “inequitable,” something that

is ultimately a matter of discretion for which no instruction could

adequately be provided to a jury as to how to perform such a task.

125

Just two years later, the Eastern District of California embraced

Passalacqua and G-I Holdings. In United States v. Vacante,

126

the United

120 Compare Magers v. Bonds (In re Bonds Distrib. Co.), No. 97-52130C-7W, 98-6044,

2000 WL 33682815, at *8 (Bankr. M.D.N.C. Nov. 15, 2000) (holding that the ultimate rem-

edy sought in a veil piercing case as the determinative factor when deciding on the right to

a jury trial), with Martinson v. Towe (In re Towe), 151 B.R. 262, 264 (Bankr. D. Mont. 1993)

(holding that the relief requested in a veil piercing action is the removal of the protections

of the corporate form itself, and accordingly it is an equitable remedy that does not carry

with it a right to a jury trial).

121 Siegel v. Warner Bros. Ent. Inc., 581 F. Supp. 2d 1067, 1076 (C.D. Cal. 2008).

122 See Siegel, 581 F. Supp. 2d at 1071–73.

123 Id. at 1075.

124 Id.

125 Id. at 1075–76.

126 United States v. Vacante, No. 08cv1349, 2010 WL 2219405 (E.D. Cal. June 2, 2010).

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States sought veil piercing to enforce a tax lien against a shareholder.

127

Decided in 2010, Vacante was well positioned to consider and balance

the holdings of Passalacqua and International Financial Services and sum-

marize the analysis conducted in district courts. The Vacante court

spent time in its opinion weighing the opinions reached in Passalacqua

and G-I Holdings that the ultimate remedy sought (money damages)

dominated the analysis with the opinions of the International Financial

Services and Siegel courts that evaluated the nature of veil piercing it-

self.

128

The court ultimately found Passalacqua “persuasive,” following

the reasoning that plaintiffs are rarely, if ever, seeking to pierce the

corporate veil without an underlying remedy.

129

The tax lien, as with

the judgments in Passalacqua and G-I Holdings, was a form of monetary

relief that indicated a legal remedy, dominating the second step of the

Terry test.

130

Notably absent from the district court precedent on this

issue is a case that conducts an analysis of veil piercing using the Mon-

terey framework.

IV. THE CASE FOR THE JURY

A. Veil Piercing’s Nature Preserves the Right to a Jury Trial in These Cases

What is a court confronted with a Seventh Amendment veil-pierc-

ing question to do? Based on the historical analysis from Part II, it

seems evident that veil piercing cannot be accurately classified as either

a legal or equitable doctrine—veil piercing began as an action to hold

shareholders accountable for corporate debts in courts of law, and it

was not until this system proved cumbersome and unworkable that

courts of equity stepped in to define a procedure. This analysis con-

forms with the evidence found by the Second Circuit in Passalacqua.

But Passalacqua hinges on two things: courts continuing to use the

Terry test, and veil-piercing actions that seek explicitly legal remedies.

There exist cases in which a plaintiff is requesting a veil-piercing order

from a court, but there is no underlying legal remedy (e.g., the plaintiff

is seeking declaratory relief or an injunction against a shareholder of

the corporation).

131

There, the analysis may not be so simple, and it

will ultimately hinge on the test chosen by the court in each specific

127 See id. at *3.

128 See id. at *4–5.

129 Id. at *4 (“Plaintiff does not simply seek a determination as to whether the corpo-

rate veil should be pierced. Instead, Plaintiff seeks to reduce the tax liabilities [of entities

controlled by the defendant] to a monetary judgment against the Vacantes.”).

130 Id. (citing Dairy Queen, Inc. v. Wood, 369 U.S. 469, 476 (1962)).

131 See, e.g., Geltzer v. Kollel Mateh Efraim, LLC (In re Kollel Mateh Efraim, LLC), 406

B.R. 24, 28 (Bankr. S.D.N.Y. 2009) (holding that declaratory judgment was a form of relief

that did not preclude a jury trial on a veil-piercing claim).

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case until the Supreme Court explicitly overrules Terry. Using the Terry

test, the remedy will dominate, and as described earlier, veil piercing

is not a remedy. Therefore, the court should look to the fact that the

plaintiff seeks injunctive relief as the determinative factor and con-

clude that there is no right to a jury trial in these cases. Kollel Mateh

Efraim was an anomaly of a case that considered the merits of sending

veil-piercing cases to juries but was seemingly following Terry.

132

seems unlikely that another court applying Terry would see a claim that

does not seek an equitable remedy as one that gives rise to Seventh

Amendment rights.

Using the Monterey test, courts would look at veil piercing in a vac-

uum without regards to the remedy presented and should reach the

same conclusion that veil piercing cannot be neatly defined as legal or

equitable. From there, they should consider the merits of putting veil

piercing actions to juries.

B. Policy Arguments in Favor of the Jury: Preserving the Jury Trial Right

Though the Monterey test requires us to take a practical look at the

efficacy of juries in borderline cases, for decades commentators have

been doubtful of the merits of the civil jury. The common critiques

follow the same line of thinking: juries lack the knowledge necessary

to make determinations in complex cases, and this lack of knowledge

leads to a drain on judicial resources and inconsistent outcomes on

similar facts. The critique of the jury in veil-piercing cases breaks this

critique into three components: (1) juries are unable to understand

the legal fiction of corporate separateness, and facts in veil-piercing

cases are too complex for nonlawyers; (2) juries may reach inconsistent

decisions or find themselves being overturned on appeal; and (3)

charging juries with veil-piercing decisions will drain precious judicial

resources.

133

The argument that a particular case is too difficult for a jury to

understand, and thus warrants submission to a judge, is not new. The

“complexity exception” is a common argument against juries and has

been levied against them in context of patent cases, complex financial

issues and scientific disputes.

134

The Supreme Court has implied that

132 See id. at 27 (citing Chauffeurs, Teamsters & Helpers Loc. No. 391 v. Terry, 494 U.S.

558, 565 (1990)). The opinion does not once cite Monterey or any of the later precedent

that permits courts to evaluate the relative merits of putting a claim to a jury.

133 See, e.g., Koosed et al., supra note 4, at 131–36; Joseph C. Wilkinson, Jr., Frank D.

Zielinski & George M. Curtis, III, A Bicentennial Transition: Modern Alternatives to Seventh

Amendment Jury Trial in Complex Cases, 37 U. KAN. L. REV. 61, 62 (1988) (arguing that juries

be eliminated in complex cases).

134 Kathleen M. O’Malley, Trial by Jury: Why It Works and Why It Matters, 68 AM. U. L.

REV. 1095, 1100 (2019).

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an evaluation of a jury’s competency is not an element of Seventh

Amendment analysis. When evaluating the scope of the Seventh

Amendment, the Supreme Court has stated that the “practical abilities

and limitations” of juries are a factor to consider when submitting an

issue to a jury would interfere with a legislative scheme devised by Con-

gress.

135

There is no mention of this language as a reference to a jury’s

ability as a factfinder.

Predictability of outcomes is shown by the evidence to be an un-

necessary concern as well. Experts in and studies of the issue show that

juries tend to reach the same conclusions as judges, even in complex

cases, and when they do not, it is rarely an issue of comprehension of

the facts and inability to reason to an informed conclusion by the

jury.

136

Speaking on the topic at N.Y.U. Law School in 2016, Justice

Sonia Sotomayor stated that during her time as a district court judge

she often reached the same conclusion as her juries, even in complex

cases.

137

Veil piercing is not the most complex issue that has been suc-

cessfully delegated to juries. While the notion of corporate “person-

hood” is certainly not everyday knowledge, neither is the content of

complex patents, financial fraud, medical malpractice, or mass tort

claims, legal actions for which the right to a jury trial is preserved.

Judicial efficiency is not stymied by delegating complex issues to

juries. Furthermore, the existence of a jury fosters intelligibility and

simplicity in argument and decisionmaking for judges and attorneys

alike. In order to prove a set of facts to a jury, attorneys must distill it

into a digestible argument, instead of bombarding an inquisitorial fact-

finder with discovery under the assumption that their legal education

enables them to understand it without explanation. In especially com-

plex cases, knowing that each piece of evidence must be explained to

a jury of laypeople could serve to prevent frivolous discovery requests,

knowing that these additional materials would have no bearing on out-

comes at trial. Clear and concise jury instructions can further ensure

135 See Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42 n.4 (1989) (noting that cases

identifying “practical abilities and limitations” of juries as a factor in Seventh Amendment

analysis were contemplating compatibility with Congress’ legislative schemes).

136 See O’Malley, supra note 135, at 1102 & n.31 (first citing Jennifer K. Robbennolt,

Evaluating Juries by Comparison to Judges: A Benchmark for Judging?, 32 FLA. ST. U. L. REV. 469,

485–86 (2005); and then citing Neil Vidmar & Shari Seidman Diamond, Juries and Expert

Evidence, 66 BROOK. L. REV. 1121, 1166–67 (2001) (“Although jurors struggle and are occa-

sionally misled, they generally make reasonable use of complex material, utilizing the ex-

pert testimony when it is presented in a form that they can use.”)).

137 See Justice Sonia Sotomayor Reflects on Civil Juries and Is Honored By Annual Survey of

American Law, N.Y.U. L. NEWS (Feb. 12, 2016), law.nyu.edu/news/sonia-sotomayor-su-

preme-court-annual-survey-american-law-civil-jury-project [https://perma.cc/V4F9-3J4P].

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that juries are positioned to weigh complex evidence accurately and

thoroughly.

138

Finally, there are benefits to allowing increased access to juries

that arguments against strengthening Seventh Amendment rights fail

to address. The intention behind the Seventh Amendment was as a

safeguard against governmental power, keeping the lay population in

step with the decisions of the judiciary, and the judiciary accountable

to the population at large.

139

Civil juries promote communal involve-

ment in society—juries keep individuals engaged with the judicial sys-

tem, making it visible and accessible. Reserving actions to bench trials

without clear evidence that they are akin to equitable actions of 1791

alienates judiciaries from the communities they serve.

Attorneys also possess numerous tools for controlling the actions

of juries that provide safeguards as to their decisionmaking. The Fed-

eral Rules of Civil Procedure contain numerous provisions that courts

and attorneys can take advantage of in complex actions such as these,

such as advisory juries and post-trial motions to undo jury verdicts that

are clearly erroneous.

140

C. Incorporation of the Seventh Amendment, Challenges Ahead

This Note does not discuss the right to a jury trial in state veil-

piercing actions in great depth, but differing state laws bear on federal

analysis in a significant fashion. Should the Supreme Court adopt a

procedural interpretation of veil-piercing doctrine dependent on state

law, as the Seventh Circuit did in International Financial Services, the

status of veil piercing under state law becomes a key element of the

Seventh Amendment analysis. In some states, state law considers veil

piercing to be an equitable doctrine not submitted to juries.

141

As dis-

cussed in International Financial Services, Illinois law gives discretion to

trial courts as to the issue of piercing the corporate veil where failing

to do so would promote injustice or inequity: the hallmark of an equi-

table action. In Delaware, for example, veil-piercing actions may only

be heard in the state’s Court of Chancery—one of the few remaining

courts of equity in the United States.

142

Under the International Finan-

cial Services interpretation of the nature of veil-piercing actions, state

138 See Jeffrey M. Pollock, Helping Juries Succeed, LAW.COM: N.J. L.J. (Dec. 18, 2017),

https://www.law.com/njlawjournal/2017/12/18/helping-juries-succeed/ [https://perma.cc

/7JS8-KBTP].

139 See Sheldon Whitehouse, Restoring the Civil Jury’s Role in the Structure of Our Govern-

ment, 55 WM. & MARY L. REV. 1241, 1251–53 (2014).

140 See, e.g., FED. R. CIV. P. 59.

141 See Koosed et al., supra note 4, at 125–27.

142 See Sonne v. Sacks, 314 A.2d 194, 197 (Del. 1973) (“[P]iercing the corporate veil

may be done only in the Court of Chancery . . . .”).

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definitions became a key differentiator in the Terry analysis,

143

and

could tip the scales in favor of denying the right to a jury trial under

Monterey analysis. Using this approach, a litigant could be entitled to a

jury trial on veil-piercing claims in New York, but not in Delaware.

The Seventh Amendment is a procedural right not yet incorpo-

rated against the states. Though states are required to uphold individ-

ual rights to free speech, freedom of religion, and other substantive

rights, there remains no obligation for states to provide baseline access

to civil jury trials. Most states do have constitutional provisions dictat-

ing the availability of jury trials within their borders, but they vary in

scope and applicability.

144

Were the Seventh Amendment incorpo-

rated against states in the same manner as other provisions of the Bill

of Rights, these heterogeneous provisions of state constitutional law

would be heavily scrutinized.

CONCLUSION

The purpose of this Note was to provide some insight into the or-

igins of limited liability and veil piercing and pull it from the “mists of

metaphor”

145

out into the open. It is evident that the gradual and

piecemeal development of limited liability clouded the origins of veil

piercing. While some courts of law took initiative, piercing the corpo-

rate veil in actions brought in tort and contract, courts of equity simul-

taneously developed mechanisms for allocating liability among share-

holders. While the history on the origins of veil piercing is truly split,

other literature on this topic has disregarded the body of precedent

that is courts of law undertaking veil piercing with no regard to equity.

No case or event can be singled out as the origin of the doctrine, and

when contemporary courts sought to define the limit of the Seventh

Amendment’s right to a civil jury in veil-piercing actions, this history

created a “muddled mess of precedent.”

146

Regardless of which Seventh Amendment analysis a court chooses

when deciding on this issue, history is key, and, besides some special

cases (e.g., seeking an equitable remedy through veil piercing), the le-

gal roots and fact-intensive nature of veil-piercing cases suggests that

the analysis should come out that the right to a jury trial is preserved.

Lastly, judges and academics alike agree that juries are capable of, if

not ideal for, making factually intensive decisions.

143 See supra Section III.B.

144 See Eric J. Hamilton, Note, Federalism and the State Civil Jury Rights, 65 STAN. L. REV.

851, 855–59 (2013).

145 Berkey v. Third Ave. Ry. Co., 155 N.E. 58, 61 (N.Y. 1926).

146 Koosed et al., supra note 4, at 135.

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