## Facts

- Kenny and Peggy Baatz were injured in 1982 when a car driven by Roland McBride crossed the center line and hit their motorcycle in Sioux Falls, South Dakota.
- McBride was uninsured and allegedly judgment-proof.
- Baatz alleged that earlier that day Arrow Bar served McBride alcoholic beverages while he was already intoxicated, contributing to the accident.
- An affidavit from Jimmy Larson stated he observed McBride being served alcoholic beverages at Arrow Bar while intoxicated before the accident, but did not identify who served him.
- Arrow Bar operated through Arrow Bar, Inc., formed in 1980 by Edmond and LaVella Neuroth; Edmond was president and Jacquette Neuroth managed the bar.
- The Neuroths contributed capital to the corporation, and Edmond and LaVella personally guaranteed corporate purchase and financing obligations for the bar business.
- Arrow Bar, Inc. did not maintain dram shop liability insurance based on statutory reliance and advice of counsel.

## Issues

1. Whether the individual defendants (Edmond, LaVella, and Jacquette Neuroth) could be held personally liable for the alleged negligent service of alcohol absent evidence of their personal participation.
2. Whether the corporate veil of Arrow Bar, Inc. should be pierced to impose personal liability on the Neuroths for the alleged tort.

## Decision

- The Supreme Court of South Dakota affirmed summary judgment dismissing Edmond, LaVella, and Jacquette Neuroth as individual defendants.
- The record contained no evidence that any Neuroth personally served McBride while intoxicated or otherwise personally committed a tortious act causing plaintiffs’ injuries.
- Plaintiffs failed to produce evidence supporting veil-piercing factors such as undercapitalization, disregard of corporate formalities, or misuse of the corporate form to cause an inequitable result.

## Legal Principles

- Summary judgment is proper only when no genuine issue of material fact exists; once the movant shows an absence of evidence on an essential element, the nonmovant must present specific facts showing a triable issue.
- Corporate officers, shareholders, and employees may be personally liable for their own torts, but personal liability requires evidence of personal participation or a direct breach of duty by the individual.
- Veil piercing requires an evidentiary showing that the corporation is a mere instrumentality or alter ego and that recognizing the corporate form would sanction misuse or produce an inequitable result.
- Personal guarantees of corporate debt and close ownership/control, without additional misuse-related facts, do not justify imposing personal tort liability on shareholders or officers.

## Conclusion

The court held that the plaintiffs’ claims against the individual shareholders/manager failed because the record did not connect them to the alleged negligent service and did not support disregarding the corporation’s separate existence.


Baatz v. Arrow Bar, 452 N.W.2d 138 (S.D. 1990)