The US Supreme Court unanimously declined to reshape the corporate veil-piercing doctrine when presented with the opportunity to do so in Dewberry Group, Inc. v. Dewberry Engineers, Inc. On February 26, 2025, the Supreme Court issued an opinion vacating and remanding the US Court of Appeals Fourth Circuit’s decision affirming an award in a trademark infringement dispute under the Lanham Act that included disgorgement of profits from the named defendant’s non-party corporate affiliates. (Bracewell previously reported on this case in a client alert on November 20, 2024.) The Supreme Court held that because the affiliates were not joined as parties, and because they were separate corporate entities, they could not be made responsible for the defendant’s damages in the absence of a finding that the traditional standards for corporate veil-piercing had been met.

In vacating and remanding the decision, the Supreme Court rejected the US District Court for the Eastern District of Virginia’s treatment of the defendant and its non-party affiliates as a single corporate entity and instead interpreted the Lanham Act’s use of the term “defendant’s profits” to refer only to corporate defendants that were actually included as parties in the suit. Thus, the Court ruled that the District Court should not have included the profits of a non-party defendant in its damages award. Additionally, the Court ruled that the Fourth Circuit and the District Court had not undertaken an adequate analysis under the statute’s relevant provisions before considering the profits of the defendant’s non-party affiliates.

Notably, however, the Supreme Court declined to address several issues: whether proper use of the Lanham Act’s “just-sum” provision could result in a profit disgorgement award that includes profits of non-party entities; whether courts should look beyond the “just-sum” provision and into the “economic realities” of a defendant’s affiliates, an approach suggested in an amicus curiae brief submitted by the United States; and whether corporate veil-piercing is “an available option on remand.”

Justice Sotomayor, joining the majority opinion in full, authored a concurrence to encourage lower courts to consider the “economic reality” argument put forth by the United States in its amicus curiae brief. Under this approach, a court could look to non-arm’s-length relationships between defendant corporations and affiliates, or below-market rates charged by defendant corporations to affiliates for trademark-infringing services. Justice Sotomayor emphasized, “courts must be attentive to practical business realities for a Nation’s trademark laws to function, and the Lanham Act gives courts the power and the duty to do so.”

In response to the Supreme Court’s remand, the District Court could more fully engage in a “just-sum” analysis under the Lanham Act. Alternatively, the District Court could consider a veil-piercing approach or another equitable strategy to uncover the “economic reality” of the infringing party. For now, however, the traditional standards for corporate veil-piercing remain intact.