By: Oderah C. Nwaeze & Mackenzie M. Wrobel
Although Delaware has not expressly adopted the remedy of reverse piercing of a corporate veil, the United States Court of Appeals for the Fourth Circuit believes that Delaware LLCs may be deemed the alter ego of their sole or controlling equity-holder and held jointly liable for that individual’s (or entity’s) liabilities. Indeed, in Sky Cable, LLC v. DIRECTV, Inc., 886 F.3d 375 (4th Cir. 2018), the Court of Appeals applied reverse veil-piercing to conclude that the LLCs at issue were properly co-debtors to a $2.3 million judgment against the LLCs’ sole member, Randy Coley.
At the trial level, the Western District of Virginia entered a $2.3 million judgment for DirecTV, after finding that Mr. Coley was liable for a fraud scheme involving the unauthorized transmission of DIRECTV’s programming. See Sky Cable, LLC, 886 F.3d at 377. When DIRECTV could not enforce the judgment against Mr. Coley, DIRECTV moved the district court to pierce the corporate veil of three of Mr. Coley’s LLCs, arguing that the LLCs were Mr. Coley’s alter egos. Id. The district court agreed and granted DIRECTV’s motion. Id. Among the reasons for that holding was that: (1) the LLCs were controlled solely by Mr. Coley; (2) Mr. Coley failed to observe corporate formalities and maintain proper accounting records; and (3) Mr. Coley engaged in significant commingling of assets between the LLCs and his personal finances. Id. at 390. Continue reading Does Delaware law support reverse veil-piercing? The Fourth Circuit says: YES!
Proposed changes to Delaware’s alternative entity statutes, including amendments providing greater flexibility in finance and other transactions, were passed unanimously by the state House of Representatives on June 10, 2014.
The proposed amendments to the Limited Liability Company Act, 6 Del. C. §§ 18-101, et seq. (LLC Act), the Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101, et seq. (LP Act) and the Revised Uniform Partnership Act, 6 Del. C. §§ 15-101, et seq. (GP Act), if approved by the Senate and Governor Markell, by their own terms will become effective on August 1, 2014.
Continue reading Amendments to Delaware LLC and Partnership Acts Pass House
A proposed amendment to the Delaware statute of limitations for contract claims should go a long way toward eliminating uncertainty in parties’ attempts to extend limitations periods by written agreement or by entering into contracts under seal. Parties generally cannot extend (or waive) a statutory limitations periods by agreement, and the requisite formalities required to enter into contracts under seal can be easily botched due to a lack of guidance and inconsistent caselaw. The amendment would allow parties to extend the limitations period in writing to up to 20 years and would only apply to contracts involving at least $100,000.
Continue reading Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)Proposed Amendment to Delaware Statute of Limitations Would Extend Time for Contract Claims to 20 Years (Without Seal)