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Pleading Alter Ego Liability In Commercial Lease Disputes
The COVID-19 pandemic has challenged commercial landlords to rely on various legal theories to protect their legitimate rights. As federal, state and local governments enact laws to protect tenants from evictions and/or the enforcement of personal lease guarantees, a landlord's counsel must seek avenues to press its clients' rights against any entity who may be liable for outstanding rent arrears due and owing under a commercial lease.
One such theory is the equitable ownership doctrine or the "alter ego" rule of liability. Often, a corporate entity, which did not sign as a tenant under the subject lease, nevertheless assumed responsibility for negotiating on behalf of, making key business decisions for, and paying rents for, the named tenant. In doing so, the former entity has taken dominion and control over the tenant to such an extent that it has become the alter ego of the tenant. Consequently, as the alter ego, it may be responsible for the tenant's breaches of the lease.
Pleading the Alter Ego Liability
A complaint that alleges alter ego liability will likely be confronted with a motion to dismiss, under CPLR §3211. However, the defendant's analysis in the context of CPLR §3211 is often incomplete and potentially misleading.
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