Liz Kramer – January 19, 2012<\/p>\n
The highest court in the District of Columbia has held that piercing the corporate veil is outside the scope of the arbitration clause in Giron v. Dodds, 2012 WL 18574 (D.C. Ct. App. 2012).\u00a0 But the case\u2019s reasoning may extend to all cases in which a party must bring a court case in order to collect on an arbitration award.<\/p>\n
In Giron, property owners sued a construction company after the company abandoned a renovation project.\u00a0 In response to the construction company\u2019s motion to compel, the trial court ordered arbitration.\u00a0 After the arbitrator awarded the owners almost $121,000 from the construction company, however, the company refused to pay.<\/p>\n
The owners then brought a new complaint in the trial court, seeking to pierce the company\u2019s corporate veil and hold the two shareholders individually responsible for the arbitration award.\u00a0 The shareholders moved to compel arbitration of the veil-piercing claim, but the trial court denied the motion.\u00a0 (Why would the shareholders of the construction company, who had just been roundly defeated in arbitration, would want the veil-piercing claims sent back to arbitration anyway?!\u00a0 Must be gluttons for punishment.)\u00a0 The D.C. Court of Appeals affirmed that decision.<\/p>\n
The court found that the veil-piercing claim did not fall within the scope of the parties\u2019 arbitration agreement.\u00a0 The court held the claim did not \u201cari[se] out of or relat[e] to [the] contract, or the breach thereof,\u201d but arose \u201cout of the [owners\u2019] efforts to collect the arbitration award.\u201d\u00a0 The court analyzed the issue under D.C.\u2019s Uniform Arbitration Act, but cited supportive cases decided under the FAA.<\/p>\n
This is a useful case for any party\u00a0who must institute follow-up litigation to collect on an arbitration award.\u00a0 An important practice pointer here\u00a0is that the lawyer for the owners wisely asked\u00a0the arbitrator to clarify that she did not consider the veil-piercing claim.<\/p>\n
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