V. Reverse Piercing
A number of cases have considered the concept of reverse piercing wherein the interests of the LLC are attributed to a member, often a sole member. This argument was recently raised in a South Carolina bankruptcy case in which the debtor, sole member of his LLC, argued that the assets that he had contributed to his LLC (and which were subject to a mortgage) should be deemed his, and thus any mortgage foreclosure by the LLC lender would be stayed because the individual sole member was in bankruptcy.67 "Essentially, Debtor argues that because of his lack of control over ETAR [the LLC] and its corporate activities, the Court should view him as its alter ego and deem ETAR's interest in the Property as property of Debtor's individual bankruptcy estate." Judge Waites concluded that reverse piercing was not appropriate in this case. "In the absence of a 'showing of total domination and control of one entry [or individual] by another and inequitable consequences caused thereby, the Court cannot extend the protections of the stay to ETAR's property interests and deem the Property as property of Debtor's individual bankruptcy estate."68
A recent Fourth Circuit opinion, applying Delaware law did recognize "reverse outsider veil piercing" concluding that the assets of a solely owned LLC should be liable for the member's wrongs and that this would be particularly appropriate in a single-member LLC as there would be no other members injured by imposing liability on the LLC's assets.69 The court also noted that generally the law of where the LLC is formed determines whether piercing is permissible,70 and that in Delaware, the remedy is only appropriate in...
