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Labor Team USA, Inc. v. Reed

A-5443-99T5, 2001 WL 1149641 (N.J. Super. App. Div. 2001)

CORPORATIONS; OFFICERS; LIABILITY—Where a party historically contracts in his or her individual capacity and changes the signature line on a contract to read in the name of a corporation that might not have any assets, the party may be found personally liable for a contract claim.

A temporary labor firm and an individual had an ongoing relationship whereby the labor firm supplied workers for the individual’s various business enterprises. There was testimony that all dealings with made with the customer as an individual and not with any corporate entity. One of the agreements prepared by the supplier initially had a signature line for its customer as an entity followed by the individual customer’s name as the signatory. Nothing described the entity as a corporation nor indicated that the individual was signing on behalf of a corporation. The individual changed the signature line to show the customer as a corporation with a different name, but signed without any designation that his signature was in a corporate capacity. At trial, the individual customer “claimed that he used the corporation to limit his liability in case anyone ‘choked’ on a piece of food.” However, he did not dispute that he historically dealt with the labor supplier as an individual, rather than as a corporate entity. He presented no proof that the entity whose name was inserted above the signature line on the contract in question, was, in fact, a corporation. The lower court focused on the fact that “there was nothing to indicate that the preceding course of negotiation and handling between [the labor supplier] and [the individual] was to be put aside.” Further, the lower court thought that it would be inappropriate for the individual “to stand behind a corporate label of a corporation which may or may not have assets in it.” Consequently, the lower court chose to pierce the corporate veil. The Appellate Division upheld because the lower court “found that [the individual] had contracted with [the labor supplier] individually, and had done so historically. Most telling is the judge’s finding that there were no proofs to establish that these corporations had any assets in the first instance, which is well supported by the record.”

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