OTR Associates v. IBC Services, Inc.
Superior Court of New Jersey
801 A.2d 407 (App. Div. 2002)
OTR Associates (plaintiff) leased mall space to IBC Services, a shell subsidiary wholly owned by International Blimpie Corporation (defendant) and created solely to hold the lease for a Blimpie franchisee's sublease, having no independent assets beyond the lease, no independent income beyond the franchisee's sublease rent, no separate business premises or employees, and remaining under Blimpie's retained authority to approve and manage the lease. OTR's partners believed throughout the transaction that they were dealing directly with Blimpie rather than a separate subsidiary — the people who approached OTR wore Blimpie uniforms, correspondence bore the Blimpie logo, and the corporate separation was not discovered until after the franchisee's eventual eviction for late rent — and when OTR sued for $150,000 in unpaid rent, the trial court found for OTR and pierced the corporate veil to reach Blimpie; Blimpie appealed.
Whether a parent corporation's corporate veil may be pierced to hold it liable for a wholly owned, asset-less subsidiary's lease obligations, where the parent used the subsidiary in a manner that misled the landlord about which entity it was actually contracting with.