Case Comments

Lowell Anderson

Stetina Brunda Garred & Brucker

ALTER EGO

After selling a company to Plaintiff, Panchumarthi formed Truinfo, Inc. and was its CEO and sole owner. Plaintiff hired Panchumarthi as a consultant and later accused him of misappropriating customer information by unauthorized computer access occurring after his consulting was terminated. Truinfo was also hired, as a subcontractor, but that terminated before Panchumarthi’s consulting agreement ended. Asserting alter ego, Plaintiff sought to hold Truinfo, Inc. liable for Panchumarthi’s personal actions. But alter ego involves holding the corporation liable for an individual’s actions to avoid misuse of the corporate shield. Plaintiff’s theory is called "reverse piercing," and with one exception has been rejected by California courts. Reverse piercing requires "that (1) ‘there is such a unity of interest and ownership that the individuality, or separateness, of the said person and corporation has ceased;’ and (2) ‘adherence to the fiction of the separate existence of the corporation would… sanction a fraud or promote injustice. [citation omitted]’" The alter ego liability assertion was dismissed without leave to amend. Calsoft Labs, Inc. v. Panchumarthi, 2020 U.S.P.Q.2d 36439 (N.D. Cal. 2020) (Magistrate Judge Cousins).