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Gunderson v. Harrington9/6/2001
is not without bounds. In certain circumstances, it is possible to "pierce the corporate veil" and hold a shareholder personally liable where there is fraud or where the shareholder is the "alter ego" of the corporation. Victoria Elevator Co., 283 N.W.2d at 512. When the courts use the alter ego theory to impose liability, they are "concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to that operation." Id. In Victoria Elevator, we held that where the formalities of corporate existence are disregarded, the corporate existence cannot be allowed to shield the individual from liability for damages incurred by those dealing with the corporation. Id. But, in this case, Gunderson is not seeking to pierce the corporate veil; rather, she is simply asking that a co-employee be held personally accountable for his intentional torts.
The majority reasons that Harrington is not personally responsible for his own intentional tort because of his status as the "sole principal and shareholder" and that the corporation is "completely dominated by and identified with Harrington." The majority argues Harrington should be transformed into being the employer when applying the WCA even though Harrington Orthodontics, a duly authorized Minnesota corporation, is the employer under the law. The reasoning that the majority uses in making its argument is the type of reasoning usually used by the courts when applying an equitable remedy, such as an alter ego theory, in order to pierce the corporate veil to attach liability to the individual shareholder. See id. Instead, the majority uses this same equitable reasoning here to shield Harrington from the consequences of his own active wrongful conduct. It concludes that Harrington is the employer for the purposes of the WCA. Therefore, he is personally immune from liability for his intentional assault on an employee. Even though the majority might not label it as such, this is an inappropriate application of the alter ego theory. The alter ego theory was never meant to shield either sole proprietors or co-employees from liability for intentional torts.
The majority's decision also violates one of the maxims of equity: "he who seeks equity must do equity, and he who comes into equity must come with clean hands." Gully v. Gully, 599 N.W.2d 814, 825 (Minn. 1999) (quoting Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 715 (Minn. 1985)). Although Harrington is seeking equity, he is not coming to this court with clean hands and has not done equity to his long-time loyal receptionist. However, in granting Harrington equity, the majority holds that an individual employee of a corporation can escape liability for a variety of tortious conduct toward a fellow corporate employee, as long as that individual dominates the corporate entity.
The majority's rhetoric about changing the form and not the substance of Harrington's business upon incorporation is added without citing to any authority. This statement is in fact contrary to Minn. Stat. ยง 302A.161 (2000), which lists the powers held by a corporation independent of its shareholders, and case law where we have stated that "a closely held corporation is still a corporation with all of the rights and limitations proscribed by the legislature." Wessin v. Archives Corp., 592 N.W.2d 460, 466 (Minn. 1999). Importantly, the notion that because a corporation "is so completely dominated by and identified with Harrington, he must be considered Gunderson's employer for the purposes of the WCA" is a totally new judicial principle added for effect, but again, without any authority. In the past, the corporate form has only been disregarded when corporate formalities have been
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