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Kinney Shoe Corp. v. Polan

United States Court of Appeals for the Fourth Circuit
939 F.2d 209 (4th Cir. 1991)


Facts

Lincoln M. Polan (defendant) incorporated Industrial Realty Company (Industrial) and Polan Industries, Inc. (PI) under the laws of West Virginia. Polan made no capital investment into either company. Further, Polan did not hold initial meetings or elect directors, and no stock was ever issued. Kinney Shoe Corporation (Kinney) (plaintiff) had a long-term lease on a building, which Kinney subleased to Industrial. Industrial then subleased a portion of the building to PI, with Polan signing the relevant documents. Polan made a single rental payment to Kinney from his personal account before Industrial defaulted on the lease. Kinney sued and obtained a judgment of $166,400 against Industrial. Kinney then sued Polan personally. The district court concluded that Kinney had “assumed the risk of Industrial’s undercapitalization” and refused to pierce the corporate veil. Kinney appealed to the United States Court of Appeals for the Fourth Circuit.

Rule of Law

Issue

Holding and Reasoning (Chapman, J.)

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