Reference no: EM131466947

Jonathan Devereaux owned and operated a very successful eating establishment in New Orleans. He incorporated his business under the name Café de Devereaux. Jonathan was the sole shareholder, officer and director of Café de Devereaux, a Delaware corporation. Devereaux handled all of the financial matters for Café de Devereaux. He ordered all of the supplies and paid all the vendors. French Fromage supplied Café de Devereaux with imported cheeses, truffles and dairy products for the restaurant on a daily basis. Devereaux became substantially behind in paying French Fromage for cheese delivered to Café de Devereaux, French Fromage threatened to cut off Café's credit and sue for payment. Devereaux promised French Fromage that Café would pay the outstanding debt of $125,000. French Fromage and Café de Devereaux entered into a settlement agreement requiring Café de Devereaux to pay the outstanding debt within 30 days. It turned out that Devereaux was using Café's corporate funds to pay for various personal expenditures including renovations to his home, hair implants, a skiing vacation and gambling expenses. At the time Café was not paying its debt to French Fromage, Devereaux withdrew at least $170,000 from Café's bank accounts. French Fromage went to court and obtained a judgment in the amount of $125,000 against Bistro. However, before the court entered the judgment, Devereaux formed a new corporation called Devereaux Bistro, and now operates his restaurant business at a new location directly across the street from the now shuttered Café de Devereaux. Café de Devereaux no longer has any assets. Devereaux owns 51% of the stock in Devereaux Bistro, and is a director and its President. Devereaux's wife owns the remaining 49 % of the stock. Devereaux conducts the business of Devereaux Bistro with furnishings, kitchen equipment and inventory from Café de Devereaux. French Fromage sues Devereaux and Devereaux Bistro for the $125,000 judgment that it obtained against Café de Devereaux. French Fromage asks the court to treat Devereaux and Devereaux Bistro as if they were the same as Café de Devereaux , and to hold Devereaux and Devereaux Bistro liable for Café de Devereaux's debt.

Discuss the legal theories under which French Fromage may claim Devereaux is personally liable for the corporate debt of Cafe de Devereaux . Can Devereaux Bistro be held liable for the debts of Café de Devereaux? Fully explain your answers and the legal theories applied. Discuss the legal theories under which French Fromage may claim Devereaux is personally liable for the corporate debt of Café de Devereaux . Can Devereaux Bistro be held liable for the debts of Café de Devereaux? Fully explain your answers and the legal theories applied.