Individuals conducting business in the construction industry typically will do so through a corporation or some other business entity to obtain the legal advantages available to such entities. As a general matter, “[t]he rule of law that has evolved in New Jersey is that the corporate form as a wholly distinct and separate entity will be upheld.” Coppa v. Taxation Div. Director, 8 N.J. Tax 236, 246 (Tax Ct. 1986). As such, “a primary reason for incorporation is the insulation of shareholders from the liabilities of the corporate enterprise.” State Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983).
Both decisional and statutory law, however, have chipped away at the protection provided by the corporate form to the point where individuals can be exposed to significant personal liability in construction disputes even though the work on a construction project was performed by a business entity. These exceptions include: (1) traditional piercing the corporate veil liability; (2) where the law imposes an independent duty on the individual; (3) statutory claims pursuant to the Consumer Fraud Act (CFA), N.J.S.A. § 56:2-1, et seq. and/or the Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. § 45:22A-37; and (4) the tort participation theory. When applied, these exceptions can effectively undermine the assertion of the corporate form as a defense and expose individuals to potentially significant personal liability in construction disputes.
