Creditor May Add LLC As Additional Judgment Debtor

In the case of Curci Investments, LLC vs. James P. Baldwin (two well known Orange County real estate builders and investors). Curci loaned Baldwin, individually, $5.5M. Baldwin failed to make any payments on the Note and Curci sued. After a half a decade of chasing Baldwin to collect on the debt and judgment Curci filed a motion to add Baldwin’s investment entity, JPB Investments, LLC (JPBI) as an additional Judgment Debtor pursuant to CCP 187. Curci based its motion on the outside reverse veil piercing doctrine. It argued that JPBI was Baldwin’s alter ego, that Baldwin was using JPBI to avoid paying the Judgment and that an unjust result would occur unless JPBI’s assets could be used to satisfy Baldwin’s personal debt.

Baldwin had caused JPBI to distribute approximately $178M to him and his wife, as members, between 2006 and 2012. After October 2012 the date of the entry of judgment in favor of Curci on its note, Baldwin did not have any distributions made to he or his wife or other members. The court held that reverse veil piercing is a means of reaching the LLC’s assets not the debtor’s transferrable interest in the LLC. Corporations Code Section 17705.03 does not preclude reverse piercing. Curci had been attempting to collect on a judgment for nearly half a decade frustrated by Baldwin’s non-responsiveness and claimed lack of knowledge concerning his own personal assets and the web of business entities in which he has an interest.

For all of the aforementioned reasons the appellate court concluded reverse veil piercing may be available in this case. However, the court did not express an opinion as to whether JPBI’s veil should actually be pierced. Instead the appellate court remanded the matter to the trial court to engage in the required fact driven analysis in the first instance.