Defendant created two corporations: first was an industrial company and second held
a lease to a building, which it then subleased to the first. Second had no other assets
except the sublease. Plaintiff was the landlord who had leased the building to the
second company. When second corporation did not pay its lease, the plaintiff wanted
to go after the first corporation and its owner.
Court added an option third prong to the two-prong test in Pepper Source: if the
plaintiff should have known that the corporation was grossly undercapitalized, it
should not be able to pierce the corporate veil.
On basis of third prong, plaintiff could not reach defendant in this case.