D.R. Horton Inc.–New Jersey v. Dynastar Development, L.L.C.

In April 1996, various entities signed a contract governing cost-sharing for improvements related to the signatories’ construction of a planned residential-retirement community in New Jersey. In February 1998, one of the signatories, Lehigh Corp., conveyed its interests in the construction project to Esplanade L.L.C. (defendant), a New Jersey limited-liability company (LLC). Esplanade’s members were Dynastar Development, L.L.C. (Dynastar) (defendant) and Melville Borne, Jr. (defendant). Esplanade subsequently breached the contract by failing to reimburse D.R. Horton Inc.–New Jersey (Horton NJ) (plaintiff) for improvement costs. Horton NJ sought to pierce Esplanade’s veil and impose liability for the breach of contract on Dynastar and Borne. Horton NJ asserted that Borne controlled both Esplanade and Dynastar and had failed to distinguish the two entities. There was evidence that Borne used a central office, common employees, and a common telephone line for both entities and had failed to correct Horton NJ’s misimpressions about the companies’ roles in informal correspondence when Borne used incorrect stationery. However, there was also evidence that Borne identified the correct entities in formal contracts and in fulfilling payment obligations. The trial court considered the proper legal standard and the evidence in deciding whether to allow veil-piercing.