This case represents the only case in the last 20 years where the "corporate veil" was "pierced." Here, Polaris advanced goods to a corporation National Marketing Services, in excess of $50,000. National Marketing issued a promissory note to Polaris for this amount. The note was assumed by Commercial Resources, Inc., the successor of National Marketing. Both National Marketing and Commercial Resources were formed and owned by Bob Davis and Michael Kaplan. They were the sole shareholders and officers of corporations. Both corporations did business at the same location and used the same bank. Evidence at trial indicated that Kaplan and Davis did not always follow corporate procedures, and that they often used corporate money for personal expenses. After Commercial Resources defaulted on the note, Polaris brought suit, alleging that Davis, Michael Kaplan, and Jerome Kaplan, Michael's brother and a salesman for Commercial Resources, were the alter ego of the corporation and were personally responsible for the debt.

The trial court entered judgment for Polaris against the corporation for the amount of the note, but declined to hold either Michael Kaplan or Jerome Kaplan personally liable. (Bob Davis had defaulted prior to trial, and was not a party to the appeal.)

The supreme court affirmed as to Jerome Kaplan and reversed as to Michael Kaplan.

As regards Michael Kaplan, the court explicitly stated, for the first time, that there is no litmus test for determining when the corporate fiction should be disregarded. Rather, the result depends on the circumstances of each case. The various factors were listed, as usual, but none is conclusive. The court then pointed to the facts which indicated a lack of formal corporate formalities and the use by Michael Kaplan of corporate funds for his personal use. While these facts pointed to a unity of interest between Michael Kaplan and the corporation, this itself was not enough to "pierce the corporate veil." Such actions must also be the cause of the plaintiff's injury, and must sanction a fraud or promote an injustice before the "corporate veil" can be "pierced." The court held that the failure to observe proper corporate formalities and the corporation's payment of Michael Kaplan's personal debts did not sanction a fraud or promote an injustice to Polaris.

However the court found that the corporation could have paid its debt to Polaris if Kaplan's numerous withdrawals of corporate funds for his personal benefit had not been made Thus, Michael Kaplan's actions were the direct cause of Polaris' injury and it would have been unjust to allow Kaplan's actions to go unpunished.