PA Enterprise Liability & Veil Piercing

Business owners form LLCs and corporations for one primary reason: liability protection. The corporate form creates a legal wall between the business’s debts and the owner’s personal assets. But in Mortimer v. McCool, 255 A.3d 261 (Pa. 2021), the Pennsylvania Supreme Court left open a theory that may allow creditors to reach through that wall in ways that many business owners do not expect.

What Happened

Ryan Fell Mortimer was seriously injured by an intoxicated driver who had been over-served at a restaurant in Coatesville, Pennsylvania. She obtained a $6.8 million dram-shop judgment against the entity that held the liquor license, 340 Associates, LLC. But 340 Associates had limited assets. The restaurant’s real property was held in a separate entity, McCool Properties, LLC. The two entities had overlapping but not identical ownership: the two McCool brothers owned 340 Associates, while McCool Properties was owned by the two brothers together with their father.

Mortimer argued that the court should disregard the separate corporate forms and allow her to satisfy the judgment from McCool Properties’ assets. Under the traditional veil-piercing doctrine, this would have been difficult because she was not trying to reach through to an owner. She was trying to reach sideways, from one commonly owned entity to another.

The Ruling

The Supreme Court affirmatively recognized the “enterprise liability” theory of veil piercing as valid under Pennsylvania law, in the narrow, two-part form it described. The Court adopted no predefined factor test, and it left further application of the doctrine to the lower courts in future cases, but it did not merely decline to rule the theory out. It adopted it.

In the form the Court described, the claim is triangular. Liability must run up from the debtor corporation to the common owner, and from there back down to the targeted sister corporation. A creditor must first establish grounds to pierce up to the common owner, then reverse-pierce down to the sister entity. Common ownership and shared operations are not enough on their own. The traditional requirement of fraud, wrong, or injustice still governs, and the Court said a party seeking enterprise liability must prove at least twice over what an ordinary alter ego plaintiff proves once. What distinguishes the theory is its target: it would let a creditor reach a sister entity rather than an owner, but only by passing liability through the common owner first.

The Court declined to formalize the inquiry with a list of predefined factors, saying that simplicity is to be preferred. It kept the traditional two-part test: there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and adherence to the corporate fiction must be such that it would sanction fraud or promote injustice. For enterprise liability the Court added that the affiliated entities must have common owners or an administrative nexus above the sister corporations. The Court discussed the five-factor enterprise test the Superior Court had used in Miners, Inc. v. Alpine Equipment Corp., but said it was not bound to that test.

The Court did not apply the theory on the facts of this case, and it affirmed the denial of relief to Mortimer. It gave two reasons and treated them as equally important. First, the entities did not share substantially common ownership. The father was a full one-third owner of McCool Properties and held no interest in 340 Associates, so reaching McCool Properties’ assets would have prejudiced a blameless owner. Second, the trial court found no basis to pierce the veil between 340 Associates and the brothers individually. Because the only path to McCool Properties ran through the brothers, the first leg of the triangle failed and McCool Properties was insulated by the gap.

What This Means for Business Owners

If you own multiple entities and they share bank accounts, employees, office space, or management, a creditor of one entity may try to reach the assets of the others. Sharing alone is not enough to get there. The creditor must also show that honoring the separate forms would sanction fraud or promote injustice. The separate corporate forms provide protection only to the extent that they are respected in practice.

This has direct implications for common business structures in Bucks County. A real estate investor who holds properties in separate LLCs but manages them all from the same office, with the same bank account, using the same employees, is the kind of structure a creditor will attack under Mortimer. A family business that operates a restaurant through one entity and holds the real estate in another, without maintaining genuine operational separation, faces the same risk.

The fix is straightforward but requires discipline. Each entity needs its own bank account, its own books, its own contracts, and its own decision-making process. If you treat your entities as interchangeable, a court may do the same.

If you have questions about whether your business structure provides the liability protection you expect, contact our office for a review.

Legal and factual content on this page was last verified: Aug. 2026. If you are reading this significantly after that date, confirm key provisions with current statute text or contact our office.