Reverse Piercing in Direct TV v. 'It's Thundertime'
The Fourth Circuit Court of Appeals has an easy lesson for those individuals looking to set up fantastically named shell companies to funnel their money and lives through: You can still get reverse pierced just like It's Thundertime LLC.
Reverse piercing of the veil applies to situations where a third party is seeking to hold the corporation liable for the member's action. As the owner of It's Thundertime LLC learned the hard way, if you commingle, then the courts will pierce it, in forward or reverse. Direct TV's case against Randy Coley, aka, the owner of It's Thundertime, had a $2.3 million judgment that reverse pierced the veil upheld on appeal.
What Caused the Storm?
It was discovered that Randy Coley basically got 168 Direct TV subscriptions for a multi-unit living complex, then split it up among 2,500 units. He collected a fee from each of the 2,500 units, while only paying Direct TV for 168. Coley was found liable of conducting a fraudulent scheme, and damages were assessed.
When it came time to pay, Coley explained that he was unable to do so. That's when a motion was brought to reverse pierce the corporate veil in order to reach the assets of Coley's other companies, including, you guessed it, It's Thundertime. The court agreed to reverse pierce as it found that Coley was the sole member and used the corporations to pay for personal expenses, like his mortgage, as well as commingled funds between companies he solely owned. It further explained that the standards for reverse piercing, while not explicitly stated, are nearly the same as for regular piercing.
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