The Colorado Court of Appeals announced its opinion in Paradine v. Goei, 2018 COA 88, on Thursday, April 19. The court held that the Colorado Wage Claims Act (CWCA) does not prevent plaintiffs from holding corporate officers liable for the corporation’s wrongdoing.
The plaintiff, Robert Paradine, was the CFO of Aspect Technologies, Inc. He sued Aspect and its CEO, Esmond Goei, alleging that Goei had violated the CWCA. Goei asked the trial court to dismiss the personal claims against him, arguing that Paradine could not sue him as an individual. As an officer of a corporate entity, Goei argued that he was shielded from responsibility for the corporation’s liabilities. The trial court granted Goei’s motion and dismissed Paradine’s claims against him.
Paradine went on to appeal the decision, arguing that the trial court erred in dismissing his personal claim against Goei. He claimed that, under CWCA, the common law doctrine of piercing the corporate veil still holds. ‘Piercing the corporate veil’ refers to the action of holding officers of corporate entities personally liable – which, under limited circumstances, plaintiffs can do.
In a unanimous decision, the Court of Appeals agreed with Paradine. The Court asserted that a plaintiff can pierce the corporate veil and hold a CWCA claim against a corporate officer in his or her individual capacity.
However, the Court also noted that in order for a CWCA plaintiff to successfully use this doctrine, he or she must still produce substantial evidence that the individual should be held responsible for the actions of their corporation. This includes: “(1) evidence that the corporate was a mere alter ego of the officer; (2) evidence that the officer used the corporation to perpetrate a fraud or to defeat a rightful claim; and (3) the trial court’s evaluation of whether an equitable result will be achieved by disregarding the corporate form and holding the shareholder personally liable for the acts of the business entity.”