As there was no showing that the misconduct benefited the defendants personally, District Court was correct in not piercing the corporate veil on a theory of sham, as corporate formalities should be considered differently with respect to closely held or family corporations.
As the discovery sanction against one spouse, holding that a corporation held by a tenancy by the entirety was in fact an alter ego, created a split between federal substantive law for the discovery sanction and state substantive law for the co-tenant by the entirety, it was an abuse of discretion. Under state law, both who hold by a tenancy of the entirety are presumed to act for the benefit of the marriage.
http://www2.ca3.uscourts.gov/opinarch/163432p.pdf
Since 2011. An occasional commonplacing of the U.S. Circuit Courts of Appeal.
Neither an authoritative statement of the law nor legal advice. Quick work.