Products Liability Law Daily Wrap Up, DESIGN AND MANUFACTURING DEFECTS—DRUGS—E.D. Mich.: No piercing of corporate veil to reach CEO, sole shareholder in absence of fraud, (Jul 30, 2026)

By Jeffrey H. Brochin, J.D.

Patient failed to establish grounds for piercing Edge Pharma’s corporate veil to hold CEO personally liable, where Complaint offered no allegations that he was a ‘manufacturer or seller’ subject to product liability under Michigan law.

A federal District Court in Michigan has granted the Motion to Dismiss filed by the William Chatoff (Chatoff) CEO and founder of Edge Pharma, LLC (Edge Pharma or Manufacturer), in a products liability lawsuit brought by a patient who was injected with allergy drugs manufactured by the company. Under Michigan law, there is a presumption that the corporate form will be respected, and the presumption (corporate veil) may be pierced only where an otherwise separate corporate existence has been used to ‘subvert justice or cause a result that is contrary to some overriding public policy’, which was found not to be the case here (Elias v. Edge Pharma, LLC, No. 2:24-cv-12251-LVP-CI (E.D. Mich. July 20, 2026)).

Injected with recalled allergy serum. On July 27, 2021, the Patient’s physician prescribed her allergy injections, and she received her first dosage of the injection in mid-September 2021. The doses contained serum synthesized by Edge Pharma. On September 30, 2021, she reported feeling nausea to her doctor, but continued receiving injections through January 20, 2022. She returned to her doctor on February 10, 2022, complaining of discoloration and worsening pain in her left shoulder, upper arm, and forearm. She informed her doctor at that point that her allergist had phoned her to report that the allergy serum she was using had been recalled.

Her doctor ordered an MRI which indicated that the Patient sustained a proximal humerus fracture and several other injuries in the affected area. During a follow-up visit, he noted that her range of motion was severely limited due to pain in her upper extremity joints and left shoulder. In the interim, on December 4, 2021, Edge Pharma had announced a nationwide recall of “all lots of all drugs” due to a “lack of sterility assurance for products intended to be sterile.” Three days later, on December 7, 2021, the FDA published an announcement of Edge Pharma’s voluntary recall of its drug products.

A wholly unsterile environment. FDA inspectors had found mold, insufficient ventilation, “blackish grime” on the floors, “white crusty residue” on an air duct, “black mold like substances” on walls, and a “greenish fuzzy material” on the side of a refrigerator in areas intended to be sterile. Between April 2021 and September 2021, approximately 17.5% of drug lots failed sterility testing based on the presence of particles that could indicate microbial contamination. Edge Pharma’s Quality Unit had nevertheless approved the drugs for distribution. Furthermore, the Quality Unit invalidated endotoxin data and distributed twelve lots of drugs intended to be sterile, and used those lots to fill approximately 333 orders from healthcare professionals for patient treatment. Edge Pharma did not provide assurance that those drug product lots met specifications regarding endotoxins.

The Patient filed suit against Edge Pharma and Chatoff in his individual capacity as owner, manager, CEO and remaining representative of Edge Pharma. In her First Amended Complaint, the Patient alleged claims for: (I) negligent manufacture; (II) breach of implied and express warranties; and (III) negligent manufacture for a failure to warn. In her proposed Second Amended Complaint, she added two counts against Chatoff in his individual capacity for general negligence and negligent misrepresentation relating to the production of the serum she was injected with. Presently before the court were Chatoff’s Motion to Dismiss and the Patient’s Motion for Leave to file her Second Amended Complaint.

Piercing the corporate veil. Chatoff argued that the Patient had failed to establish grounds for piercing Edge Pharma’s corporate veil to hold him personally liable, and that she offered no allegations that Chatoff was a manufacturer or seller subject to product liability under Michigan law. The court noted that Chatoff correctly identified that a party seeking to pierce the corporate veil must satisfy a three-part test, because under Michigan law, there is a presumption that ‘the corporate form will be respected’; in other words, the presumption, (often called the ‘corporate veil’) may be pierced only where an otherwise separate corporate existence has been used to ‘subvert justice or cause a result that is contrary to some overriding public policy.’

Accordingly, Michigan courts will not pierce the corporate veil unless (1) the corporate entity was a mere instrumentality of another entity or individual; (2) the corporate entity was used to commit a fraud or wrong; and (3) the patient suffered an unjust loss. However, in evaluating whether to pierce the corporate veil, courts frequently consider more specific factors such as the undercapitalization of the corporation, the maintenance of separate books, the separation of corporate and individual finances, the use of the corporation to support fraud or illegality, the honoring of corporate formalities, and whether the corporation is merely a sham.

Instrumentality element. Although the Complaint alleged that Chatoff was the founder of Edge Pharma, the signer on business registration and other filings, and the point of contact with the FDA regarding its investigations into Edge Pharma (and also alleged that Chatoff ‘potentially’ commingled personal and corporate funds), the court found such allegations to be insufficient to establish even the first element of the three-part test. Her allegations spoke only to Chatoff’s role within Edge Pharma rather than actions or statements that suggest the company was an instrumentality of Chatoff’s will or that it was a sham. As Chatoff noted in his Motion to Dismiss, “it is unsurprising that the FDA would be in close contact with the majority shareholder and CEO of a pharmaceutical company or that such a person would be the FDA’s primary contact with the company.”

The court found that he correctly asserted that ‘it is well-settled that Michigan courts will respect the separate existence of business entities from their owners,’ and that ‘this is true even when a single shareholder or member owns the entity.’ Beyond her allegations that Chatoff was the founder, CEO, and signer on business documents, the Patient’s First Amended Complaint and proposed Second Amended Complaint did not give the court a reason to find that Edge Pharma was a mere instrumentality of Chatoff.

Commingling of funds. In deciding whether to pierce the corporate veil, Michigan courts have also considered the commingling of funds and the extent to which the shareholder controlled the decisions of the entity. Here, in both her current and proposed pleadings, the Patient contended that Chatoff ‘potentially co-mingled personal funds with corporate funds.’ However, the court found that without any additional facts to support that statement, the Patient’s allegation regarding the possibility of commingled personal and corporate funds did not provide a basis to pierce the corporate veil. Speculating that something is “potentially” true does not make it plausibly true pursuant to the requirements of Federal Rule of Civil Procedure 8; rather, factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint’s allegations are true.

The court concluded that the allegations were insufficient to establish that Edge Pharma was a mere instrumentality of Chatoff or that he commingled personal and corporate funds in such a way that would justify recognizing Chatoff and Edge Pharma as distinct parties for the purposes of the Patient’s claims.

Misuse of corporate form. The court observed that piercing the corporate veil is appropriate where an individual or entity misuses the corporate form to commit a fraud or wrong. Here again, the court found that the Patient failed to allege sufficient facts to establish that Chatoff used Edge Pharma’s corporate form to commit a fraud or wrong. Instead, her own filings alleged that Edge Pharma’s Quality Unit--not Chatoff--invalidated endotoxin data and that Edge Pharma made no assurances that its products met endotoxin specifications.

In sum, the Patient failed to plead sufficient factual allegations to establish the elements required to pierce Edge Pharma’s corporate veil to hold Chatoff personally liable for the claims alleged in her current and proposed pleadings. Although she pleaded facts alleging an unjust loss, she was required to satisfy all three elements in order to pierce Edge Pharma’s corporate veil and to sue Chatoff in his individual capacity. The court therefore granted Chatoff’s Motion to Dismiss.

The case is No. 2:24-cv-12251-LVP-CI.

Judges: Parker, L.

Attorneys: Alyson L. Oliver (Oliver Bell Group) for Patricia Elias. Debra A. Geroux (Butzel Long) for Edge Pharma, LLC.

Companies: Edge Pharma, LLC

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