>> Management Theories
Green & Freedman Baking Company (Green & Freedman) was a family-owned Massachusetts corporation that produced and sold baked goods. The terms of a collective bargaining agreement required Green & Freedman Baking Company to make periodic payments on behalf of its unionized drivers to the New England Teamsters and Baking Industry Health Benefits and Insurance Fund (Health Fund). After sixty years of operation Green & Freedman experienced financial difficulties and ceased to make the agreed-upon contributions. They mixed their own finances with those of Green & Freedman's.
The Elmans, through their domination of Green & Freedman, caused the corporation to make payments to themselves and their relatives at a time when the corporation was known to be failing and could be expected to default, or was already in default, on its obligations to the Health Fund. It then transferred all remaining assets to a successor entity named Boston Bakers, Inc. (Boston Bakers). Boston Bakers operated essentially the same business as Green & Freedman until its demise two years later. The Health Fund sued Green & Freedman, Boston Bakers, and the two corporations' principals, Richard Elman and Stanley Elman, to recover the payments owed by Green & Freedman with interest, costs, and penalties. There was no evidence of financial self-dealing in the case of Boston Bakers. Both corporate defendants conceded liability for the delinquent contributions owed by Green & Freedman to the Health Fund. The suit against the Elmans was based on piercing the corporate veil with respect to Green & Freedman and Boston Bakers. The Elmans, however, denied they were personally liable for these corporate debts. Are the Elmans liable? Explain.