## Facts

- C M Corporation and related plaintiffs (CM) provided advice and management services connected to nursing-home construction projects, and CM’s executives were experienced businessmen.
- CM contracted with Enco, Inc. and Anco, Inc. (predecessors of Gold Key Builders, Inc. (Gold Key)) to construct nursing homes in Piper City and Newman, Illinois, and West Liberty, Iowa.
- For the West Liberty project, CM separately retained Creative Construction Company (Creative) to provide design services.
- Oberer Development Company (Oberer Development), Gold Key (through its predecessors), and Creative were among roughly 10–15 corporations owned by George Oberer and his family.
- Gold Key was a subsidiary of Oberer Development.
- Oberer Development and Creative had common stockholders and directors until Creative merged into Oberer Development in 1977.
- The construction projects were completed before 1977.
- CM sued Gold Key and Oberer Development for breach of contract and breach of warranty arising from the projects.
- Gold Key was insolvent, so CM sought to hold Oberer Development liable by piercing Gold Key’s corporate veil.
- CM relied mainly on two themes: (1) alleged confusion between Creative and Gold Key’s predecessors, and (2) references to the Oberer-owned companies as “Oberer Enterprises,” even though no such legal entity existed.
- On “confusion,” CM introduced evidence of isolated instances in which third parties confused entities; in at least one instance Creative corrected the misunderstanding.
- CM did not introduce evidence that Creative or Gold Key’s predecessors lacked separate operations (such as separate financial records or bank accounts), failed to hold corporate meetings, or did business only with affiliated companies.
- CM also did not introduce evidence that Creative or Gold Key’s predecessors were grossly undercapitalized, were controlled as mere shells, or were used to avoid obligations through misuse of the corporate form.
- On “Oberer Enterprises,” CM emphasized a letter from George Oberer stating he viewed a problem involving a Gold Key predecessor as an “Oberer” problem, but CM did not show that the companies functioned as one enterprise (e.g., cross-ownership of stock, intercompany financing that erased separateness, or disregard of corporate formalities).
- A jury found veil-piercing appropriate, but the district court granted Oberer Development’s motion for judgment notwithstanding the verdict (JNOV). CM appealed.

## Issues

1. Whether the evidence was sufficient to pierce Gold Key’s corporate veil and hold Oberer Development liable for Gold Key’s contract and warranty obligations.

## Decision

- The Seventh Circuit affirmed the district court’s grant of JNOV for Oberer Development.
- The evidence did not permit a reasonable jury to find that Gold Key (or its predecessors) was a mere instrumentality of Oberer Development used in a way that would justify disregarding corporate separateness.
- Proof of common family ownership, overlapping directors or stockholders, and informal references to “Oberer Enterprises” did not, without more, establish alter-ego liability.
- Isolated third-party confusion between affiliated corporations did not show domination, a collapse of corporate separateness, or misuse of the corporate form.
- Gold Key’s inability to pay (insolvency) did not, by itself, justify imposing its liabilities on Oberer Development.

## Legal Principles

- A parent corporation is not liable for a subsidiary’s debts merely because of stock ownership, shared officers/directors, or use of a common business label.
- Veil-piercing (the “mere instrumentality” doctrine) requires strong proof that the subsidiary was so controlled that it lacked a separate corporate existence and that the corporate form was used to commit a fraud or wrong causing an unjust loss if separateness is respected.
- Relevant indicators may include gross undercapitalization, commingling of funds, failure to maintain separate books and accounts, failure to observe corporate formalities, or using the subsidiary as a sham to evade obligations.
- References to an informal “group” name, where no separate legal entity exists, do not create affiliate liability absent evidence that the corporations actually operated as one.
- On review of JNOV, the question is whether the evidence, even when viewed favorably to the verdict winner, provides a legally sufficient basis for the jury’s finding.

## Conclusion

Because CM proved at most common ownership, some overlap among related corporations, and a few incidents of third-party confusion—without evidence of domination, disregard of corporate separateness, or misuse of the corporate form—the Seventh Circuit held veil-piercing was not legally supportable and affirmed JNOV for Oberer Development.


C M Corp. v. Oberer Development Co., 631 F.2d 536 (1980)