June 16, 2015 Articles

Alter Ego Liability in a Post-Tort World

What is an "inequitable result"?

By Wendi J. Berkowitz and Patrick Lai

Imagine this not-so-farfetched scenario: A conglomerate—let’s call it Company Zeus—determines, after careful study and investigation, that it must diversify its holdings to survive. Rather than starting afresh on unfamiliar terrain, Zeus’s chief executive officer and board conclude they should locate and purchase a profitable business in the identified industry. Zeus ultimately winnows the field of potential acquisition targets to a specific enterprise, Company Athena. Unfortunately, though, Athena is a subsidiary of Poseidon Corporation, and it is most definitely not for sale. The only way for Zeus to have Athena is to buy Poseidon. Poseidon, meanwhile, a conglomerate itself, has dozens of other subsidiaries operating in a variety of industries and businesses, none of which Zeus is interested in maintaining for the long term. Instead, Zeus will sell all of Poseidon’s businesses other than Athena in order to finance the Poseidon acquisition. The proceeds from the sale of Athena’s affiliates will pay for Athena’s purchase.

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