Litigation Blog

Imagine this scenario. Your client is a successful small-business owner who has built several companies over the years. One owns commercial real estate, another operates a construction business, and a third manages investments. Each company was formed for a different purpose, and each conducts its own business.

One day, a dispute arises involving a construction project. The plaintiff sues the construction company, but also names the real estate company, the investment company, and the owner individually.

Why?

The plaintiff argues that the companies share common ownership, perhaps some management personnel, and possibly even an office address. The plaintiff suggests that they are all effectively one business and should all be held responsible for the alleged wrongdoing.

But two of the companies never signed the contract. One had no employees working on the project. And the owner never personally promised to perform the work.

The plaintiff has placed them all in the same lawsuit.

Now the defense has a problem that may be more dangerous than the plaintiff's evidence. You have 12 jurors who may assume that every company owned by the same person should be held responsible for another company’s alleged misconduct.

That is where voir dire becomes critical.

Why Voir Dire Matters in Business Litigation

After 25 years of trying cases, I have become convinced that some of the most important work a trial lawyer does occurs before opening statements. It happens during jury selection.

Voir dire is the process of questioning prospective jurors to identify potential bias or prejudice and determine whether they can evaluate the case fairly. It also serves a more sophisticated purpose to uncover the assumptions, experiences, and deeply held beliefs that jurors will inevitably bring into the jury box.

Jurors do not arrive at the courthouse as blank slates. They may have worked for companies, have owned businesses, dealt with contractors, or followed news stories about corporate misconduct. Those experiences can influence how they view business owners, limited liability companies (LLCs), and the legal protections that allow individuals to conduct business through separate entities.

The challenge is discovering those attitudes before the evidence begins.

How Corporate Separateness Can Become a Jury Issue

When a lawsuit names multiple affiliated companies, there is a natural temptation to view them collectively. A plaintiff's lawyer may repeatedly refer to the defendants as "they” when describing who entered into an agreement, failed to perform, knew about a problem, or refused to correct it.

But who, exactly, is "they?" Which defendant actually took the action in question?

Was it the company that signed the contract? The company that employed the workers? An affiliated company that owned unrelated property? Or the individual who happened to own all three?

Those distinctions matter.

Under Texas law, corporations and LLCs generally possess a legal identity separate from its owners and affiliated entities. Common ownership alone does not automatically make one company liable for another company’s obligations. However, corporate separateness may be disregarded in certain circumstances, depending on the applicable law and facts.

The legal distinction may seem straightforward to business owners and their attorneys. Prospective jurors, however, may not intuitively appreciate the distinction.

To some, multiple LLCs sound like a sophisticated business strategy. To others, they sound like an elaborate scheme to avoid responsibility. And therein lies the danger. The defense lawyer who waits until closing argument to address that perception may have waited too long.

How to Identify Juror Bias During Voir Dire

Effective voir dire starts with open-ended questions that encourage prospective jurors to discuss their experiences and beliefs. Simply asking whether everyone agrees that separate companies should be judged separately is unlikely to reveal much. Most jurors recognize the answer they are expected to give.

Instead, I prefer to begin with questions about business experience:

• Do you currently own a business, or have you owned one in the past?
• Does anyone own more than one business?
• Do you work for a company that has multiple subsidiaries or affiliated businesses?
• Have you worked for two or more companies owned by the same person?

These questions help reveal how prospective jurors understand business structures without suggesting that any particular answer is right or wrong.

A juror who has managed several businesses may understand why separate entities exist. Another juror may have experienced a situation in which a company changed its name or ownership structure to avoid paying employees or vendors.

Neither automatically makes a juror favorable or unfavorable. The point is to get the jurors talking.

Explore Beliefs About Multiple LLCs and Business Ownership

Once the conversation begins, counsel can ask more targeted questions:

• Why do you think someone might own more than one company?
• What do you think about a business owner who forms a separate LLC for each project?
• Does anyone believe that operating through multiple companies is inherently unfair?
• Has anyone had an experience where they believed a company used its corporate structure to avoid responsibility?

Consider two hypothetical responses.

One juror explains separate companies makes sense because different businesses have different risks, employees, and operations. Another believes business owners create multiple LLCs to hide money and avoid paying when something goes wrong.

Both potential jurors have given you extremely valuable information. The second juror has revealed a potential predisposition that could become particularly important if the plaintiff's case depends upon treating affiliated companies as one.

The appropriate response is not to immediately challenge or correct that juror. Instead, ask follow-up questions:

• Can you tell me more about that?
• Have you had a personal experience that led you to feel that way?
• Is that something you feel strongly about?

The goal is not to win an argument with a prospective juror. The goal is to learn what the prospective juror believes before that belief becomes a verdict.

Why Common Ownership Does Not Automatically Mean Common Liability

Eventually, the conversation should move from general attitudes about business ownership to the particular concern presented by the case.

When a plaintiff sues several companies because they share an owner, counsel should consider whether prospective jurors distinguish ownership from legal responsibility.

For example, I might ask:

"How many of you believe that if one person owns two companies, both companies should be responsible if one of them does something wrong?"

The follow-up questions are often more revealing than the initial responses:

• Would it matter whether the second company had anything to do with the transaction?
• Would it matter whether that company signed the contract?
• Would it matter whether the company employed anyone involved in the project?
• Or is your feeling that common ownership, by itself, should be enough to impose responsibility?

That final distinction is the heart of the inquiry. A juror may reasonably believe that related companies should share responsibility when the evidence establishes a legitimate legal basis for doing so.

That is not necessarily bias. The concern is the juror who believes they should share responsibility regardless of the evidence or the law.

Voir Dire is About Discovering Bias, Not Teaching the Law

Trial lawyers may be tempted to use voir dire to explain the law of corporate separateness, limited liability, alter ego, and the circumstances under which one entity may be held liable for another's obligations. However, voir dire is not opening statement or a law-school lecture.

In Texas, voir dire is generally intended to uncover bias and prejudice and to facilitate the intelligent exercise of challenges, not to secure commitments about how jurors will decide disputed issues. Questions that improperly attempt to commit jurors to a particular verdict or preview the effect of specific evidence may draw legitimate objections.

A more effective approach is to explore attitudes without asking jurors to prejudge the case.

For example:

• Does anyone have strong feelings about whether business owners should be allowed to operate through multiple LLCs?
• Does anyone believe that the legal protections afforded to LLCs are fundamentally unfair?
• Would anyone have difficulty considering each defendant’s conduct separately, if the Court's instructions required you to do so?

These questions are designed to reveal predispositions. They do not require the juror to decide whether any particular defendant is liable.

That distinction is essential.

How to Address Potential Bias Against Individual Business Owners

When the business owner is also sued personally, the problem becomes even more pronounced.

Some prospective jurors may not distinguish between a business and its owner. They may believe that if the company breached a contract, its owner should be responsible, or that an owner should personally pay for damages caused by the company.

Under Texas law, ownership of an LLC or corporation does not generally impose personal liability merely because of the entity’s obligations. Personal liability may arise from an individual's own actionable conduct, a personal guaranty, applicable statutes, or other recognized legal grounds.

Voir dire should explore whether prospective jurors can distinguish between the owner and the business.

Potential questions include:

• Have you owned or managed a company where you were responsible for decisions made by employees?
• How do you feel about holding a business owner personally responsible for something the company did?
• Does anyone believe the owner of a company should always be personally responsible for its debts?
• Is that a belief you hold strongly?

Notice that the purpose is not to obtain agreement that the owner cannot be liable. The purpose is to identify jurors who may be unwilling to distinguish between the owner and the business even when the evidence and the Court's instructions require it.

What Changes When a Plaintiff Asserts Alter Ego?

When a plaintiff asserts an alter-ego or veil-piercing theory, voir dire requires additional care. The defense cannot simply tell the jury that separate companies must always be treated separately, because Texas law recognizes circumstances in which corporate separateness may be disregarded, subject to important statutory and common-law limitations.

The applicable rules may differ depending upon the nature of the claim, the type of entity, and the particular basis for imposing liability.

Nor should counsel assume that the phrase "single business enterprise" supplies an independent basis for imposing liability merely because affiliated entities operate together. The Texas Supreme Court has rejected single-business-enterprise liability as a free-standing theory in the corporate context. See SSP Partners v. Gladstrong Investments (USA) Corp., 275 S.W.3d 444 (Tex. 2008).

The objective during voir dire is therefore not to persuade jurors that affiliated entities can never share liability. It is to determine whether jurors can distinguish between liability established through evidence and applicable law, and liability presumed merely from common ownership.

The Bottom Line: Voir Dire Can Shape the Outcome of Business Litigation

When a business owner and several affiliated companies are sued together, the defense faces two separate challenges.

The first is the legal challenge: determining which defendants actually owed duties, undertook obligations, committed actionable conduct, or may properly be held responsible under applicable law.

The second is the human challenge: determining whether jurors can recognize and evaluate those distinctions fairly.

The first challenge is addressed through pleadings, evidence, legal instructions, and argument. The second begins during voir dire.

Through my experience, I have learned that jurors generally want to do the right thing. But they also bring their life experiences, instincts, and assumptions into the courtroom. A good trial lawyer understands that those assumptions can influence how the jurors interpret the evidence.

When a case involves multiple affiliated businesses, the most important question may not be whether the plaintiff can prove that one company did something wrong. It may be whether the jury can resist assuming that every company with the same owner must have done something wrong, too.

One owner does not necessarily mean one business. One lawsuit does not necessarily mean one collective responsibility. And one juror's unexamined assumption can sometimes matter more than a hundred pages of corporate records.

That is why effective voir dire is not about finding 12 people who agree with the defense. It is about finding jurors who are willing and able to let the evidence and the law decide the case. Because when your client owns three companies, and the plaintiff has sued all three, the last thing you want is a jury that decided they were all the same before you ever called your first witness.

Mr. Kraus is a shareholder at Chamberlain Hrdlicka. He is a Texas real estate litigator, triple board certified by the Texas Board of Legal Specialization, with more than 25 years of experience. This article provides general information and is not legal advice.