Curci Investments v. Baldwin, G052764

Background

Baldwin formed JPB Investments LLC (JPBI) in 2004 as an LLC to hold and invest his and his wife’s cash; he owns 99% and is manager/CEO; his wife owns 1%.
Baldwin personally borrowed $5.5 million from Curci’s predecessor; Curci later obtained a judgment against Baldwin for ~ $7.2 million after payment defaults.
JPBI made large loans (≈$42.6 million) to family partnerships controlled by Baldwin’s family; JPBI distributions to Baldwin and his wife totaled ≈$178 million from 2006–2012, but none after the judgment.
Curci obtained charging orders against multiple entities (including JPBI) but received no distributions; JPBI’s manager (Baldwin) extended family note maturities and no payments were made on those notes.
Curci moved to add JPBI as a judgment debtor via outside reverse veil piercing (Code Civ. Proc. § 187); trial court denied the motion relying on Postal Instant Press and concluded reverse piercing unavailable in California.
The Court of Appeal reversed and remanded, holding reverse veil piercing may be available against an LLC under these facts and directing the trial court to decide the fact-driven veil-piercing inquiry.

Issues

Issue	Curci's Argument	Baldwin's Argument	Held
Whether outside reverse veil piercing is available in California to reach an LLC's assets to satisfy a member’s personal judgment	Reverse piercing is available; Postal Instant Press is distinguishable and does not control LLCs; equity may require disregarding JPBI’s separateness	Postal Instant Press bars outside reverse piercing; Corporations Code §17705.03 (charging order) is the creditor’s exclusive remedy	Reversed trial court; held reverse piercing may be available against an LLC in these circumstances and remanded for fact-specific inquiry
Whether Corp. Code §17705.03 precludes reverse piercing and provides the exclusive remedy	Charging order statute does not bar reverse piercing because it addresses the debtor’s transferable interest, not reaching the LLC’s assets; drafters’ comments preserve reverse piercing	The statute provides the sole remedy to satisfy a judgment from a member’s interest	Court held §17705.03 does not categorically preclude reverse piercing and noted the statute’s scope is narrower
Whether Postal Instant Press controls this case	Postal Instant Press limited to corporations and its concerns (innocent shareholders, bypassing collection) are not implicated with JPBI’s ownership/control facts	Postal Instant Press establishes a broad bar on third-party reverse piercing that should apply here	Court distinguished Postal Instant Press as limited to corporations and not dispositive here
Whether factual findings are required before piercing JPBI	Curci urged remand for fact-finding on alter ego factors and lack of adequate legal remedies	Baldwin did not oppose initially but urged legal limitations; trial court made no factual findings	Court directed remand for trial court to undertake traditional veil-piercing, plus whether plain, speedy, adequate legal remedies exist

Key Cases Cited

Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523 (discusses alter-ego/veil-piercing elements)
Mesler v. Bragg Management Co., 39 Cal.3d 290 (equitable nature of veil piercing; justice-focused inquiry)
Postal Instant Press, Inc. v. Kaswa Corp., 162 Cal.App.4th 1510 (held third-party reverse piercing unavailable as to corporations; distinguished here)
McClellan v. Northridge Park Townhome Owners Assn., 89 Cal.App.4th 746 (trial court may amend judgments to add judgment debtors)
In re Martinez, 210 Cal.App.4th 800 (de novo review for legal issues)
Wisan v. M.J., 371 P.3d 21 (Utah case adopting reverse-piercing framework and requiring lack of adequate legal remedy)
In re Phillips, 139 P.3d 639 (Colorado case addressing outside reverse piercing and necessary safeguards)
C.F. Trust, Inc. v. First Flight Ltd. P’ship, 580 S.E.2d 806 (discusses factors and limitations for reverse piercing)