As part of a comprehensive risk assessment, corporate counsel must be in a position to advise on a corporation's (or officer's or director's) potential litigation exposure resulting from the actions of other members of the corporate family. This theory of liability goes by a variety of names, including "vicarious liability," "successor liability" and "corporate veil piercing."

As explained below, a corporation's liability for the acts of another typically turns on whether the actual wrongdoer is the alter-ego or agent of the corporation against which suit is now brought.

An alter-ego or agency finding is not just relevant to one's potential liability for damages. It also may play a role in determining whether a corporation is subject to suit in the forum state and impact the corporation's discovery obligations.

Generally, a corporation may be liable for the actions of an affiliate (or subsidiary or other related corporation) if the affiliate is deemed to be the corporation's alter-ego. Courts apply a variety of factors to determine whether one corporation can be fairly categorized as the alter-ego of another corporation. These factors often vary by state. However, they typically focus on:

(See Practice Note, Piercing the Corporate Veil: Alter Ego Theory.)

A corporation may also be held vicariously liable for the actions of its agents. Agency liability generally depends on:

(See Practice Note, Piercing the Corporate Veil: Agency Theory.)

Under certain statutes, a corporate officer may also be criminally liable for her subordinate's conduct, even if the officer had no knowledge or involvement in the wrongdoing. In this situation, the officer's liability turns on whether she:

(See Practice Notes, Criminal and Civil Liability for Corporations, Officers and Directors: Responsible Corporate Officer Doctrine; see also Trends in Federal White Collar Prosecutions: Company and Managerial Liability for the Unlawful Acts of Corporate Employees.)

Further, in the merger context (and in certain asset purchase deals) the successor corporation often may be liable for the predecessor's alleged wrongdoing (see Practice Note, Product Liability Claims, Defenses and Remedies: Successor Liability in Product-related Litigation).

Corporate veil piercing also plays a role in the personal jurisdiction analysis. A foreign corporation may potentially be subject to suit in any US state in which its claimed alter-ego (or agent) has sufficient jurisdictional contacts. Courts weigh most of the same factors to determine whether a domestic alter-ego's (or agent's) contacts may be imputed to a foreign corporation as they do when determining a corporation's substantive liability for its alter-ego's (or agent's) actions (see Practice Note, Piercing the Corporate Veil: Jurisdiction Versus Liability and Article, Protecting Foreign Parent Corporations from Personal Jurisdiction in the US).

In federal court, a corporation must produce all responsive documents, electronically stored information (ESI) and other materials within its possession, custody or control (FRCP 34(a)(1) and 45(a)(1)(A)(iii)). Whether one corporation is the alter-ego or agent of another certainly impacts the "possession, custody or control" analysis. A corporation may need to preserve and produce documents and ESI in the physical possession of a corporate affiliate (even documents or ESI held outside the US) if the court rules that the affiliate is the corporation's alter-ego or agent (see Article, Protecting Foreign Corporations from US Discovery; see also Practice Notes, Requesting Parties: Initial Considerations (Federal): Documents in the Possession of an Agent or Affiliate and Subpoenas: Drafting, Issuing, and Serving Subpoenas (Federal): Indirect Non-party Discovery).