## Facts

- A Texas court entered a default judgment for Litchfield Asset Management Corporation against Mary Ann Howell and her former corporation for $657,207 plus interest; the judgment was later enforced in Connecticut.
- During the period of litigation and enforcement, Mary Ann Howell and family members formed two Connecticut LLCs, Architectural Design, LLC and Antiquities Associates, LLC, through which Howell continued her interior design business.
- Howell contributed substantial funds to one LLC in exchange for a dominant ownership interest and operated the business from her home.
- The trial court found extensive commingling of personal and LLC finances, including payment of company expenses from personal accounts and payment of personal/family expenses from LLC funds, as well as commingling between the two LLCs.
- Litchfield brought a post-judgment action alleging that Howell (with her son Jon Howell) shifted Howell’s assets into and among the LLCs to place them beyond Litchfield’s reach, asserting fraudulent conveyance, civil conspiracy, and reverse veil piercing to reach LLC assets.

## Issues

1. Whether the fraudulent conveyance predicate to the civil conspiracy claim was proven under the required heightened standard (clear, precise, and unequivocal evidence), and whether the conspiracy judgment and damages could stand.
2. Whether reverse veil piercing was properly applied to disregard the LLCs’ separate existence and make their assets available to satisfy Howell’s personal judgment debt under Connecticut’s instrumentality and identity rules, consistent with equitable limits.

## Decision

- Affirmed the judgment reverse piercing the LLCs and holding Architectural Design, LLC and Antiquities Associates, LLC liable for Howell’s personal judgment debt.
- Reversed the civil conspiracy judgment and related damages and remanded for a new trial because the trial court did not clearly apply the heightened proof standard required for fraudulent conveyance/fraud.
- Directed that any retrial account for remedial limits in fraudulent transfer matters, including that a transferee’s liability generally should not exceed the value wrongfully received; damages against Jon Howell were problematic where the LLCs, not Jon, were the transferees.

## Legal Principles

- Fraudulent conveyance (and fraud-based claims) must be proven by clear, precise, and unequivocal evidence (functionally, clear and convincing evidence); failure to apply that standard is reversible error.
- Civil conspiracy is derivative; liability depends on proof of an underlying tort, not the agreement alone.
- Reverse veil piercing may be permitted to satisfy an owner’s personal debts from entity assets when the instrumentality rule or identity rule is met, its use is necessary for an equitable result, and it does not unfairly prejudice innocent members or other creditors.
- Instrumentality rule: (1) domination and control of the entity, (2) use of that control to commit a wrong or violate a duty, and (3) proximate causation of the plaintiff’s injury.
- Identity rule: such unity of interest and ownership that separateness has ceased, and respecting the entity form would work an injustice.
- Commingling of assets, lack of meaningful separation in operations, and use of the entity to frustrate payment of an established debt support alter-ego findings and veil piercing.

## Conclusion

The appellate court upheld equitable reverse veil piercing of closely held, family-controlled LLCs used as the judgment debtor’s alter egos to obstruct collection, but it set aside the fraud-based conspiracy judgment because the trial court did not expressly apply the heightened evidentiary standard required to prove fraudulent conveyance and related fraud.


Litchfield Asset Mgmt. Corp. v. Howell, 799 A.2d 298 (Conn. App. Ct. 2002)