Judge Pierces Corporate Veil To Award $2.2 Million in Court Battle Over Defaulted Notes

February 9, 2016 – Press Releases

A team of Fox Rothschild attorneys won a $2.2 million judgment against a Georgia couple when a judge in Atlanta ruled that a corporation the couple controlled was “operated as a sham” to avoid repaying a $550,000 loan.

Fox Rothschild attorneys Bret A. Puls, Aaron Mills Scott and Meghan M.A. Hansen successfully argued that the court should pierce the corporate veil and enter summary judgment for the plaintiff, a foreign lender. The evidence, they argued, proved that the husband and wife “used company assets to pay their personal expenses and lavish money on their children.”

The Fox team argued that the couple had “so thoroughly and deliberately comingled and confused the assets of SDK Investments LLC (SDK) with their own personal assets and those of other companies that summary judgment is absolutely warranted.”

Judge Tom Campbell of Fulton County Superior Court agreed and ruled in favor of the plaintiff on both counts — piercing the corporate veil and fraudulent transfer. In his 50-page order, Judge Campbell concluded that there was a “mountain of evidence that they routinely disregarded the separateness of SDK from themselves and their other companies.”

In a prior lawsuit, the lender had secured a $1.2 million judgment in April 2012 against SDK for its defaulting on repayment of promissory notes totaling $550,000, but the lender was unable to collect due to the corporation’s insolvency.

In the second lawsuit, the Fox team argued that the Georgia couple had systematically drained SDK of all its assets and used them for their own benefit. As a result, they argued, the couple should no longer enjoy the protection of limited corporate liability.

Judge Campbell agreed, writing that “overwhelming evidence demonstrates that piercing the veil of SDK is appropriate.” The judge also concluded that the original debt has grown with interest and penalties to $2.2 million, and that the lender is also entitled to an award of attorney’s fees or punitive damages to be determined later.

Puls is a litigation partner whose practice centers on securities litigation, derivative lawsuits, shareholder and partnership disputes, merger and acquisition litigation, corporate control challenges, and government and internal investigations on behalf of public and private corporations, corporate executives, boards of directors and special litigation committees.

Scott is a partner whose practice focuses on disputes arising from loans, leasing agreements and other commercial transactions. He also regularly represents clients involved in employment litigation, trademark and brand protection matters and defamation claims.

Hansen is a partner who represents private and public companies in complex business and commercial disputes and arbitrations, particularly those involving product liability and consumer fraud claims and class actions. She also devotes a considerable portion of her practice to litigating and resolving contract disputes for clients in the health care industry.