PA Supreme Court weighs novel doctrine of enterprise liability


By: Sean Riley

In the case of Mortimer v. McCool, No. 37 MAP 2020 (Pa. July 21, 2021), the Pennsylvania Supreme Court addressed a doctrine of piercing the corporate veil previously novel to Pennsylvania law, known variously as “single-entity,” “enterprise,” or “horizontal” liability. The matter arose out of injuries sustained by the plaintiff as a result of an intoxicated driver. The driver recently had been served by employees of a nearby restaurant. The owners of the restaurant, in turn, had a contractual management agreement with the owner of the restaurant’s liquor license, 340 Associates, which was solely owned by two brothers. The mixed-use building in which the restaurant was located was owned by a separate corporate entity, McCool Properties, which was owned by the brothers and their father. In the underlying dram-shop action, the plaintiff secured a combined verdict of $6.8 million against the driver, the restaurant and 340 Associates. However, 340 Associates had no significant assets beyond the liquor license itself and did not carry insurance for such actions (nor was it required to do so under Pennsylvania law). 

Seeking to collect the balance of the judgment, the plaintiff filed a separate suit against 340 Associates and McCool Properties, as well as against the brothers individually and against their father’s estate, who died after the accident at issue.  To reach McCool Properties, the plaintiff argued that, just as a corporation’s owner or owners may be held liable for judgments against the corporation when equity requires, so may affiliated or “sister” corporations—corporations with common ownership, engaged in a unitary commercial endeavor—be held liable for each other’s debts or judgments. The Supreme Court declined to extend enterprise liability to McCool Properties, noting that in order to do so, a plaintiff would have to establish “at least substantially common ownership,” which was absent given the fact that the father was not an owner of 340 Associates. However, in reaching this conclusion, the Supreme Court emphasized that there is no per se preclusion of enterprise liability in Pennsylvania, encouraging lower courts to further consider such arguments.  

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