The legal system can be a mine field even for attorneys. It can be downright cruel to individual filers. Small things like names can cause your business to lose thousands of dollars.
For example, Sperring Law Firm has recently defended several lawsuits filed by or against an incorrect party. In these cases, the individuals filing suit against Sperring Law Firm’s clients 1) filed as individuals instead of as their businesses, 2) sued our client personally rather than our client’s business, or 3) filed as the business against our client but used the incorrect business name to file the lawsuit.
Sperring Law Firm has successfully dismissed these cases because a failure to name the correct party robs the court of jurisdiction. The following is a short excerpt from a recent memorandum Sperring Law Firm filed with the Court on this issue (names have been changed to protect identities):
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"Plaintiff’s Complaint must be dismissed because Plaintiff failed to name multiple indispensable parties when Plaintiff filed suit in her individual capacity against John Doe personally, not John Doe, LLC.
Under 15 Pa. C.S. Section 8818, a limited liability company is an entity distinct from its member(s). Therefore, under Section 8819(b), a limited liability company has the power to sue and be sued in its own name.
The general rule is that a corporation shall be regarded as an independent entity even if its stock is owned entirely by one person. Mark Hershey Farms, Inc. v. Robinson, 171 A.3d 810 (Pa. Super. 2017). The corporate entity should be upheld unless specific, unusual circumstances call for an exception. Id. The separate corporate status can only be disregarded if the “corporate veil” is pierced in extremely limited circumstances such as fraud, undercapitalization, failing to adhere to formalities, undercapitalization and/or intermingling corporate and personal affairs. Lumax Indus., Inc. v. Aultman, 669 A.2d 893, 895 (PA. 1995). Without the ability to pierce the corporate veil, individuals are insulated from personal liability. Mark Hershey Farms, Inc. 171 A.3d at 816-17.
Unless all indispensable parties are made parties to an action, a court is powerless to grant relief. Sprague v. Casey, 520 Pa. 38, 48-49, 550 A.2d 184, 189 (1988) (internal citations omitted). A party is indispensable when his or her rights are so connected with the claims of the litigants that no decree can be made without impairing those rights. Id. (internal citations omitted).
Here, this matter pertains to an oral contract between John Doe LLC and Jane Doe LLC. Plaintiff (Jane Doe) sued in her individual capacity, not on behalf of Jane Doe LLC. Jane Doe LLC is the only entity with the right to enforce the alleged contract because Jane Doe LLC was the alleged party, not Jane Doe. As such, Jane Doe LLC is an indispensable party and this Court lacks jurisdiction to hear Plaintiff’s claim.
John Doe LLC is likewise an indispensable party because John Doe LLC was the alleged party to the alleged contract. Defendant John Doe cannot be sued because John Doe LLC has a separate legal existence.[1] Jane Doe has failed to demonstrate facts to this Court demonstrating why the corporate veil should be pierced and judgment entered against John Doe personally.
Although Plaintiff sued John Doe d/b/a John Doe LLC, her Complaint must still be dismissed. Plaintiff has sued Defendant as an individual doing business under a “fictitious name.” Per 54 P. C.S. Section 301, et seq., a fictitious name is just the name that a person or business conducts business. The fictitious name itself does not create a separate legal existence like the filing of a limited liability corporation.
For these reasons, Plaintiff’s Complaint must be dismissed, and judgment entered in Defendant’s favor."
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The Plaintiff in the above case could have easily avoided being thrown out of court outright if she had hired an attorney. A business attorney would have understood the separate legal existence of both Jane Doe LLC and John Doe LLC from their individual owners. The business attorney would have also understood the great burden of evidence required to pierce the corporate veil and would have either pled the facts necessary, or would have avoided making the claim.
Instead, Jane Doe robbed her business of its day in court and her business' chance to seek the money it alleged our client owed. Jane Doe lost her company the chance to seek thousands of dollars. Attorneys are costly. However, avoiding hiring an attorney to enforce your business’ rights can cost you significantly more than hiring the attorney.
If your business needs an attorney, don’t hesitate to contact Sperring Law Firm at (484)-250-9058 or at csperring@sperringlegal.com. We can help your business navigate the legal minefield so you can focus on what you do best – running your business and making money.