Reverse Veil Piercing: A Judgment Against You Can Become A Judgment Against Your Company

by Weintraub Tobin

It happens all the time.  A hard fought lawsuit results in a satisfying judgment.  Then it comes time to collect and it turns out the judgment is worth no more than the paper it’s written on.  For example, sometimes a party obtains a judgment against a company with little to no assets to satisfy the judgment.  And since, legally speaking, companies exist separate and apart from the individuals who run them, the individual owners are usually shielded from liability when the company ends up on the wrong end of a judgment.

Except for when they won’t be.  Sometimes, courts decide that the idea of a separate corporate entity is baloney.  When that happens, they utilize one of the more dramatic sounding legal terms and “pierce the corporate veil,” adding the individuals as defendants on the judgment.  But can the reverse ever occur?  Let’s say a plaintiff obtains a judgment against an individual and wants to collect against that person’s company.  Can courts engage in “reverse veil piercing”?  Until last month, the answer under California law had been no.  But the times they are a changing.  In Curci Investments, LLC v. James Baldwin, a California Court of Appeal held that a judgment against an individual defendant could in fact become a judgment against his company under the right circumstances.

The Case

The plaintiff was James Baldwin, a prominent real estate developer.  Back in 2004, he formed JPBI, LLC for the exclusive purpose of holding and investing Baldwin and his wife’s cash balances.  The only two members were Baldwin, with a 99% interest, and his wife, who had the remaining 1%.  Baldwin was both the manager and CEO of the company and determined when, if at all, the company made distributions to him and his wife.

A couple years later, Baldwin borrowed $5.5 million in his individual capacity.  Baldwin failed to pay back the money when the note came due.  The plaintiff, Curci Investments LLC, sued and ultimately recovered a $7.2 million judgment against Baldwin.  That judgment proved incredibly difficult to collect because Baldwin held almost no assets individually.  In 2014, Curci obtained a charging order against JPBI requiring JPBI to pay Curci any distributions that it was otherwise going to make to Baldwin.  There was just one problem with that.  Baldwin controlled when, if at all, JPBI made any distributions to him.  Shockingly, JPBI ceased making distributions to Baldwin, notwithstanding that it had made $178 million in distributions during the prior 8 years.  Yeah, this guy clearly had the resources to satisfy the “meager” $5.5 million judgment.

Curci then asked the trial court to add JPBI to the judgment directly (the aforementioned reverse veil piercing).  Baldwin and JPBI argued that such brazen tactics were not allowed in California.  The trial court agreed and denied the motion, relying on past California precedent disallowing reverse veil piercing.  Curci asked the Court of Appeal to reverse that decision and, surprisingly, the court obliged.

In disallowing reverse veil piercing in prior cases, California courts have expressed concern that it would allow judgment creditors to bypass normal collection procedures while also harming innocent shareholders and corporate creditors.  In disregarding those concerns, the Curci court held that there were no innocent shareholders here because JPBI’s only two members were Baldwin and his wife (who was also individually liable for the judgment under California’s Family Code).  The court also held that this case had already proven that “normal judgment collection procedures” were ineffective. Normally, the way to go after an individual’s interest in an LLC is to obtain a charging order against his or her distributions.  Curci had already done that and Baldwin, as JPBI’s manager, simply stopped making any distributions.  Given that, the court held that reverse veil piercing may be allowed on these facts and remanded the case back to the trial court to determine whether it should do so.


The facts in this case are pretty extreme.  When structured correctly, corporate entities will continue to exist separately from the individuals who form them.  That said, litigants on both sides of a lawsuit should take note of this case, as should individuals when setting up corporate entities that are controlled largely by a single individual.  Where, as here, it is pretty evident that an individual has near absolute ownership of and control over a company, courts may utilize reverse veil piercing to prevent that individual from controlling the company in a manner that prevents creditors from collecting judgments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Weintraub Tobin | Attorney Advertising

Written by:

Weintraub Tobin

Weintraub Tobin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.