Restaurant of Hattiesburg, LLC v. Hotel & Restaurant Supply, Inc.
2012 Miss. App. LEXIS 127
Miss. Ct. App.2012Background
- Restaurant of Jackson LLC’s debt to HRS led to HRS’s first suit seeking payment from the two Jackson/SouthEastern entities; SouthEastern managed the accounting and payroll for both restaurants and deposited proceeds from both into a shared account.
- After Jackson Copeland’s closed, Restaurant of Hattiesburg continued to operate and later opened a separate bank account, while HRS sought to pierce the LLC veil to recover from Restaurant of Hattiesburg, Schafer, Brick.
- The circuit court granted summary judgment to HRS in the veil-piercing suit against the LLCs, finding all Gray prongs met, and held Schafer, Brick, and Restaurant of Hattiesburg jointly and severally liable for the first-venue debt.
- HRS then filed a second suit in 2008 alleging veil piercing and seeking to hold Hattiesburg, Schafer, and Brick liable for the debt of Restaurant Jackson and SouthEastern.
- The circuit court denied summary judgment to Restaurant of Hattiesburg, Schafer, and Brick but granted summary judgment to HRS on the veil-piercing claim, leading to an appeal on multiple procedural and substantive issues.
- The Mississippi Court of Appeals reversed on several Gray-prong findings, held that a second veil-piercing suit is permissible, and remanded for further proceedings to resolve disputed factual issues about LLC formalities, identity of performance, and fraud/misfeasance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gray’s three-prong test applies to piercing an LLC veil | HRS argues Gray governs LLC piercing | Restaurant of Hattiesburg et al. contend Gray applies as to corporations, not LLCs | Gray applies to LLCs; three prongs required |
| Whether HRS proved all Gray prongs, especially first prong Frustration of contractual expectations | HRS showed Hattiesburg/Schafer/Brick failed to meet contract expectations | Defendants argue there was no undisputed frustration because HRS knew it dealt with an LLC | Not undisputed; first prong not proven conclusively; reversal warranted |
| Whether a second veil-piercing suit is procedurally permissible and timely | Second suit appropriate to collect the judgment via veil piercing | Second suit barred by res judicata/collateral estoppel or timeliness | Second suit permissible; statute of limitations tied to judgment; res judicata/collateral estoppel not bar in this context |
| Whether res judicata or collateral estoppel barred the second suit | Second suit presents a new theory; not barred by prior judgment | Identities/claims could bar successive actions | Res judicata not bar; collateral estoppel limited in scope; underlying issue not identical |
| Whether seven-year statute for actions founded on judgments applies | Veil-piercing claim derives from judgment debt, not direct contract | Open-account statute of three years applies | Seven-year period applies; second suit timely |
Key Cases Cited
- Gray v. Edgewater Landing, Inc., 541 So. 2d 1044 (Miss. 1989) (three Gray prongs for piercing corporate veil; apply to LLCs as appropriate)
- Buchanan v. Ameristar Casino Vicksburg, Inc., 957 So. 2d 969 (Miss. 2007) (reaffirms Gray framework and limits piercing to extraordinary circumstances)
- Rosson v. McFarland, 962 So.2d 1279 (Miss. 2007) (first prong analysis; intent to contract with entity not individual)
- Thames & Co. v. Eicher, 373 So.2d 1033 (Miss. 1979) (discusses agency/undisclosed principal; distinguishes veil piercing contexts)
- Richardson v. Jenkins Builders, Inc., 737 So.2d 1030 (Miss. Ct. App. 1999) (third Gray prong; lack of fraud evidence; corporate form not miscused)
- Gen. Motors Acceptance Corp. v. Bates, 954 F.2d 1081 (5th Cir. 1992) (illustrates limitations on piercing based on formalities)