In Episode 158, "The Voice" Kramer creates a corporation called Kramerica Industries (facebook fan page here, https://www.facebook.com/pages/Kramerica-Industries/120549141899) in order to develop some of his ideas. Kramer hires an intern to help him work on ideas such as an oil tanker bladder. The episode raises issues of piercing the corporate veil as Kramer's business according to the university is "a solitary man with a messy apartment which may or may not contain a chicken".
In a nut shell, corporations exist in order to create an economic unit that diffuses liability from shareholders to the corporation. For instance, a company like Exxon can raise billions of dollars from shareholders, but if they have a massive oil spill, the only entity on the hook is Exxon itself, not mom and pop investor. However, if a corporation is just owned by one person using the corporation as a sham, then individuals can "pierce" the corporate veil in order to find the individual liable.
The general test for liability of individuals has two prongs, unity of interest and ownership and refusing to allow piercing of the veil would either sanction a fraud or promote injustice. Clearly Kramerica is "a plaything of" Kramer, as this was actually the intent of Kramer to create a company that he used as a plaything. Typical evidentiary considerations also include lack of corporate formalities, commingling of funds and assets, severe under capitalization and treating corporate assets as ones own. Because Kramer operated the company from his own apartment, with or without a chicken, and merely had one unpaid employee, it appears a summary judgment motion could suffice. However, the question remains, would an injustice be caused if the veil is not pierced.
In Sea-Land Services, Inc. v. Pepper Source, the court had a difficult time proving that refusing to allow PCV(piercing of the corporate veil) would sanction fraud or promote an injustice. Even if Kramer caused a tort, and people would not recover as a result of the corporation, that is not enough to pierce the veil. It is not enough to simply say that you would not be able to collect a judgment. The second prong needs to be met. In order to qualify for a promotion of injustice a party would need to prove that there is some unjust enrichment done, or other intent to defraud going on.
The fact that Kramer is able to create this corporation and avoid liability is a truly unique aspect of American corporate law. This protection for incorporators honest intent is what allows innovative people to create companies with little worry as long as they have a sincere business aspiration. Even with Kramer's cockamamie idea, courts would likely protect him from liability, unless he had an intentional scheme to squirrel out of liability.
In fact, the legal theory is tested in the episode, when Kramer tries out his oil tank bladder in Georges "Play Now" office. The test goes awry and Claire, Jerry's girlfriend, gets hit by the oil. Kramer blames his intern (which in agency law would not suffice), however George's company is tagged with liability because the accident occurred on their property. Kramerica survives.
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