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Court Determines Discovery Needed on Alter Ego Defense (NY)

January 6, 2017

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<p style="text-align: justify;">In <a href="">Pringle v. AC Bodyworks &amp; Sons, Inc</a>., decedent was fatally crushed by an unmanned, flatbed truck that unexpectedly moved forward, pinning him against a wall. At the time, decedent was working on the truck as an auto detailer in the employ of AC Bodyworks &amp; Sons, <strong>Inc.</strong> The truck was owned by defendant, AC Bodyworks &amp; Sons, <strong>LLC</strong>.</p>
<p style="text-align: justify;">In September 2014, the administrators of decedent's estate applied for workers' compensation benefits and received an award for his work-related death. Thereafter, they commenced an action against, among others, AC Bodyworks &amp; Sons, LLC, to recover damages for his wrongful death. AC Bodyworks &amp; Sons, LLC moved for summary judgment asserting that the claim was barred by the exclusivity provision of Workers' Compensation Law § 11. Although documents established that AC Bodyworks &amp; Sons, <strong>Inc.</strong> was decedent's employer on the date of the accident, AC Bodyworks &amp; Sons, <strong>LLC</strong> contended it was also shielded from this action because it was a dissolved, predecessor entity that transferred "all ownership and operation of the business, including ownership of all business vehicles" to its successor, AC Bodyworks &amp; Sons, Inc. The Supreme Court granted the motion, holding that this exclusivity provision extended to defendant and rejecting plaintiffs' contention that the motion was premature.</p>
<p style="text-align: justify;">On appeal, the court held that AC Bodyworks &amp; Sons, LLC’s motion should have been denied as premature. "A determination as to whether two entities are alter egos of each other requires a far more detailed record than is present here.” Notably, defendant proffered no documentary proof of any transfer of assets between the two entities, while plaintiffs furnished admissible proof in the form of certified records from the Department of Motor Vehicles indicating that defendant obtained title to the truck 10 weeks after dissolution, and put new license plates on it 16 months after dissolution, and held title and registration on the date of the accident.</p>
<p style="text-align: justify;">As such, the court found that there were questions of fact as to whether the title and registration reflected administrative errors or, as suggested by plaintiffs, the continued operation of defendant as of the date of the accident. The court determined that discovery was needed to review decedent's employment records and documents substantiating the relationship between the two entities and the transfer of assets from defendant to AC Bodyworks &amp; Sons, Inc., as well as deposition testimony.  The decision was therefore reversed.</p>
<p style="text-align: justify;">Thanks to Paul Vitale for his contribution to this post and please write to <a href="mailto:">Mike Bono </a>if you would like more information.</p>


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