Reverse Veil Piercing Is Alive and Well in California

Philip J. Bonoli, Esq.

Philip Bonoli, Partner at Brutzkus Gubner, counsels his employer clients on all types of employment matters, including severance and employment agreements, government investigations and workplace policies. Additionally, Philip has significant experience with complex litigation and commercial disputes, and has represented businesses in corporate ownership disputes and litigation.

Of all the decisions rendered by courts throughout California and of all the major legislation passed in the state of California over the past year, one case that received little attention but packed a punch in terms of precedential value was Curci Investments, LLC v. Baldwin, 14 Cal. App. 5th 214 (2017). This decision, which resurrected the reverse veil piercing doctrine in California, is a game-changer in the corporate world by allowing third-party creditors to pierce the corporate veil to reach a limited liability company’s assets to satisfy the debts, obligations, and liabilities of the limited liability company’s members/managers. Reverse veil piercing, which may not be as sexy or mainstream as several other headline-grabbing cases and issues, was left for dead in 2008, but has gained new life following the Curci decision.

Reverse veil piercing was, for all intents and purposes, on life support in California following a California Court of Appeal’s decision in Postal Instant Press, Inc. v. Kaswa Corporation, 162 Cal. App. 4th 1510 (2008) which found that, in California, a third-party creditor may not pierce the corporate veil to reach corporate assets to satisfy a shareholder’s personal liability. Traditionally, a corporation or limited liability company has been organized to shield and protect the personal assets of its owners, shareholders, or members/ managers from the company’s debts and liabilities. A primary purpose of a corporation or a limited liability company is to protect the personal assets of its owners.