## Facts

- Bagel Bros. Maple, Inc. (“Maple”) was a New York corporation operating a Bagel Brothers store in the Buffalo, New York area and was part of a larger group of separately incorporated Bagel Brothers entities owned by two brothers.
- Beginning in 1993, the owners formed and operated multiple Ohio Bagel Brothers stores and a commissary, each as a separate Ohio corporation.
- The affiliated corporations maintained separate corporate records and observed corporate formalities.
- Ohio Farmers, Inc. (“Ohio Farmers”) supplied food and dairy products to the Ohio Bagel Brothers corporations between 1993 and 1998.
- Ohio Farmers invoiced and was paid by checks drawn on accounts held in the names of the individual Ohio corporations.
- After the Ohio operations failed, Ohio Farmers asserted it was owed approximately $34,000 on unpaid invoices attributable to the Ohio corporations.
- Ohio Farmers filed a proof of claim in Maple’s bankruptcy case seeking to hold Maple liable for the Ohio corporations’ unpaid trade debt.

## Issues

1. Whether Maple could be held liable for trade debt incurred by separate Ohio Bagel Brothers corporations under veil-piercing/alter-ego principles.
2. Whether the bankruptcy court applied the correct legal standards, including any required choice-of-law analysis, in disregarding corporate separateness.
3. Whether the bankruptcy court made sufficiently specific factual findings to support allowance of Ohio Farmers’ claim against Maple.

## Decision

- The district court reversed the bankruptcy court’s order allowing Ohio Farmers’ claim against Maple.
- The court remanded for further proceedings because the claim allowance rested on an erroneous legal and factual basis as articulated.
- The court indicated that imposing affiliate liability required application of proper veil-piercing standards and adequate supporting findings, not merely proof of operational integration or common ownership.

## Legal Principles

- Corporate separateness is respected absent a legally sufficient basis to disregard the corporate form.
- Veil-piercing generally requires proof of domination and control plus misuse of the corporate form resulting in fraud or other inequitable consequences to the creditor.
- Common ownership, shared trade name, or integrated operations alone do not justify holding one corporation liable for another’s debts.
- A creditor seeking to impose affiliate liability must connect the debtor entity to the obligation through contract, agency, veil-piercing, or another recognized doctrine supported by specific factual findings.

## Conclusion

The district court held that a bankruptcy court may not impose liability on a debtor for an affiliate’s trade debt without applying the correct veil-piercing framework and making detailed findings that justify disregarding corporate separateness, and it therefore reversed the claim allowance and remanded for further proceedings.


Bagel Bros. Maple, Inc. v. Ohio Farmers, Inc., 279 B.R. 55 (W.D.N.Y. 2002)