Keith Bishop reports:
Reverse veil piercing involves subjecting an entity to the liabilities of its owner. See Inside and Outside Veil Piercing. As Professor Bainbridge has noted, there are two types of reverse veil piercing:
One type might be called insider reverse veil piercing, in which a shareholder seeks to disregard the corporate entity.
The other is so-called outsider reverse piercing, in which a personal creditor of the shareholder seeks to disregard the corporation’s separate legal existence to reach assets of the corporation to satisfy its claim.
In a decision issued yesterday, the California Court of Appeal considered the second type of reverse veil piercing - outside reverse veil piercing. Blizzard Energy, Inc. v. Bernd Schaefers, 2021 Cal. App LEXIS 968. The plaintiff had obtained a judgment for nearly $4 million against an individual in Kansas. When the plaintiff had the Kansas judgment entered in California, it asked the court to add two limited liability companies to the judgment based on the reverse alter ego doctrine. The defendant's spouse, who had filed for a divorce, has a 50% interest in these LLCs. She was not a defendant in the Kansas action. The court added the LLCs as judgment debtors and the defendant appealed.
To learn how the case came out, go here.
