Piercing Corporate Veil in Magistrate's Court

[GeorgiaPatty]

What is the name of your state? Georgia

Background: My husband is a small businessman and his business is conducted through subcontractors. We have 11 of them. They perform services for our endusers, collect the $$$ at point of sale and submit all the money to us by the end of the month. Then we make an accounting of the services they provide and send them a check. We had a sub that stopped submitting the $$$. He owes us $5200 (i know it doesn't sound like much, but it is a small business and it hurts). My husband didn't know he was dealing with an LLC, he thought the sub was a sole proprietor. The checks we received didn't even say "O'Malleys LLC". We went to a lawyer for advice. He wrote a demand letter and Mr. O'Malley called and said he would pay, but his business was bad, blah blah blah. He said he was going to sell some property to pay us. He never paid us. Our lawyer advised us to sue the LLC in Maistrate's court. We did, Mr. O'malley immediately consented to the judgment. My husband called him and asked when we could expect a check for the judgment. He said that we will never get a penny from him, the LLC had no assets and to drop dead. OUr lawyer advised us to seek criminal charges from the DA (because Mr. O'Malley didn't just owe us money, he actually Had our money and refused to give it to us.) The DA has refused to indict or send it to a grand jury because of the civil judgment, even though they admit that there was a criminal aspect to Mr. O'Malley's actions! (I really don't understand that.) I believe that we can sue Mr. O'Malley in Magistrate's court personally because he never represented himself as an LLC, he was the sole member/manager of the LLC and because the LLC was indistinguishable from his personal affairs.

Any thoughts or ideas?

 

[dcatz]

Q. Any thoughts or ideas?

A. Do it. I've yet to encounter a state that won't hold the "general manager" of an LLC personally liable, when the LLC is a "one-man band". The tendency is to treat it as a sole proprietorship or subchapter-S corporation, existing as an LLC for the tax benefits and any other protections of the corporate form but not to evade creditors.

That doesn't entail piercing the veil, which can be more complicated and expensive, not to mention more likely to fail. If all indicia of corporate status is in place, piercing the veil may not work.

Another approach that gets you to the same place is to move to amend the judgment to add the the individual defendant post hoc. If it is a one-man band, he had notice of the pending claim, which was the reason for the quick consent to judgment against the LLC. Consult with the attorney on that as well.

Finally, you might try suing O'Malley personally for conversion or a cause of action that you didn't assert against the LLC. If the LLC was never previously disclosed and you couldn't have discovered it by reasonable due diligence, if the defendant relied on res judicata and collateral estopple because of the prior action agaisnt the LLC, it would seem to me that would necessarily require admissions against interest, and you should have him where you want him.

Talk to your attorney about legal precedents for all of these in your state.

 

[GeorgiaPatty]

Q. Any thoughts or ideas?

Finally, you might try suing O'Malley personally for conversion or a cause of action that you didn't assert against the LLC. If the LLC was never previously disclosed and you couldn't have discovered it by reasonable due diligence, if the defendant relied on res judicata and collateral estopple because of the prior action agaisnt the LLC, it would seem to me that would necessarily require admissions against interest, and you should have him where you want him.

Talk to your attorney about legal precedents for all of these in your state.

What exactly is "conversion"?

 

[seniorjudge]

Q: What exactly is "conversion"?

A: Stealing.