2010-04-15_County_of_Hawaii_Motion_to_Dismiss_Counter_Claim_to_Expunge_Lis_Pendens

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separate existence and "pierce the corporate veil". See Kahili, Inc. v. Yamamoto, 54 Haw. 267, 271, 506 P.2d 9, 12 (1973)(disregarding corporate entity since stockholders used corporation as "alter ego"and as"agency or instrumentality"); U.S. v. Jon-T Chemicals, Inc., 768 F.2d 686, 691 (1985); 18 C.J.S. Corporations § 14 (2009)(noting alter ego and instrumenm1iiv are theories tc) disregard corporate form). Therefore, Defendants acknowledge that the County is not a party to the contracts, however, they seek to have the County liable for WWH obligations by piercing the corporate veil of WH.6 W The doctrine of piercing the corporate veil is the rare exception, applied in the case of exceptional circumstances, and the act of disregarding a corporate entity is to be exercised with reluctance and caution. Thus, the decision to ignore the separate existence of a corporate entity is an extraordinary act to be taken only when necessary to promote justice(emphasis added). 18 C.J.S. Corporations § 15 (2009). Therefore,piercing the corporate veil is an exceptional remedy which is rarely permitted. The Hawaii Supreme Court have stated the following regarding piercing the corporate veil: The general rule is that a corporation and its shareholders are to be treated as distinct legal entities. The corporate`veil" will be pierced and the legal entity of the corporation will be disregarded only where recognition of the corporate fiction would bring about injustice and inequity or when there is evidence that the corporate fiction has been used to perpetrate a fraud or defeat a rightful claim (emphasis added). Chung v. Animal Clinic, Inc., 63 Haw. 642, 645, 636 P.2d 721, 723 (1981). Therefore, it is clear that when the corporate veil is pierced, the corporation existence is ignored and the shareholders may be directly liable. Piercing the corporate veil is a means to impose liability upon shareholders and officers of a corporation.' It is not a means to impose liability upon non-shareholders of the corporation. 6 As noted,WWH is a limited liability company. Pursuant to HRS§428-201 a limited liability company is"a legal entity distinct from its members". Rather than"shareholders',limited liability companies have"members'. See HRS Chapter 428. 7 It is even more difficult to pierce the corporate veil of a limited liability company since HRS§428-303(b)provides that managers and members are not liable even if they fail to"observe the usual company formalities or requirements relating to the exercise of its company powers or management of its business..." 5