In Buchner v. Pines Hotel, Inc. (87 AD2d 691, 448 N.Y.S.2d 870 [3d Dept. 1982], affd 58 NY2d 1019, 448 N.E.2d 1347, 462 N.Y.S.2d 436 ), the trial court directed a trial on the issue of whether two related entities were in fact engaged in a joint venture and found, after the trial, that they were not (id. at 691).
On appeal, the Third Department upheld the trial court's decision.
In Buchner the entities were a parent company and its subsidiary, and had a lessor-lessee relationship.
The appellate court reasoned that although the entities had significant overlap, the trial court was correct to respect the entities' decisions about how to organize themselves, as it was only fair that they receive the consequences, as well as the benefits, of formal separation:
a business enterprise has a range of choice in controlling its own corporate structure But reciprocal obligations arise as a result of the choice it makes. The owners may take advantage of the benefits of dividing the business into separate corporate parts, but principles of reciprocity require that courts also recognize the separate identities of the enterprises when sued by an injured employee (id. at 692.)