## Facts

- Mark and Larkin Hammond owned three separate S-corporations operating restaurants: two in North Carolina and one in South Carolina (Front Roe Restaurants, Inc.).
- Kyle Pertuis was hired to manage the restaurants and was promised minority equity as part of his compensation.
- Under two employment agreements, Pertuis was to receive a 10% ownership interest in each of the two North Carolina corporations after five years.
- For Front Roe, the agreement provided 1% ownership when the restaurant became profitable and an additional 9% upon achieving $500,000 in profits.
- By 2007, Pertuis held 10% interests in the two North Carolina corporations but only 1% in Front Roe because the profit benchmark had not been met.
- After unsuccessful efforts to renegotiate a larger Front Roe interest, Pertuis ended the relationship and sued, asserting entitlement to a 10% Front Roe stake, treatment of the corporations as a single enterprise or de facto partnership, minority-shareholder oppression, forced buyout, and unpaid distributions.
- Following a bench trial, the circuit court found the corporations were effectively “amalgamated” into a de facto partnership due to common ownership, intermingling of funds, and disregard of corporate formalities, and it awarded Pertuis 7.2% ownership in Front Roe and $99,117 in distributions, and ordered a buyout after valuing the corporations.
- The court of appeals affirmed, concluding the amalgamation issue was not preserved and accepting the single-enterprise approach.

## Issues

1. Whether South Carolina law permits treating sibling corporations as a single business enterprise based on operational integration and blurred corporate identities.
2. What legal standard governs “single business enterprise” (horizontal veil-piercing) in South Carolina.
3. Whether the facts justified disregarding corporate separateness and altering contractual ownership rights, including awarding Pertuis 7.2% of Front Roe and granting oppression-based remedies.
4. Whether, and to what extent, South Carolina courts could issue determinations affecting the two North Carolina corporations.

## Decision

- The South Carolina Supreme Court granted certiorari and reversed in part, vacated in part, and affirmed as modified in part.
- The court formally recognized the single business enterprise theory but held that integration and blurred identities, without more, do not justify disregarding corporate separateness.
- The court adopted a two-part requirement for single-enterprise treatment: (1) a high degree of operational and resource integration and (2) proof of abuse, injustice, or fundamental unfairness arising from that integration.
- Applying that standard, the court rejected the trial court’s “amalgamation” and “de facto partnership” findings and reversed the award granting Pertuis a 7.2% ownership interest in Front Roe.
- The court affirmed as modified Pertuis’s entitlement to unpaid shareholder distributions to the extent supported and within the court’s authority.
- The court vacated portions of the court of appeals’ opinion to the extent it made findings concerning the two North Carolina corporations.

## Legal Principles

- South Carolina recognizes single business enterprise (horizontal veil-piercing) only upon proof of both substantial intercorporate integration and abuse, injustice, or fundamental unfairness (such as fraud or evasion of obligations) connected to that integration.
- Common ownership, intercompany commingling, and lax observance of formalities are insufficient, standing alone, to disregard corporate separateness.
- Equity does not permit courts to restructure contractual ownership arrangements merely because the overall relationship appears unfair in hindsight.
- A shareholder may recover unpaid distributions owed in the shareholder’s corporate capacity when supported by the evidence and within the court’s jurisdictional and choice-of-law limits.
- Appellate and trial relief must respect limits on adjudicating rights and obligations of foreign (out-of-state) corporations.

## Conclusion

The court narrowed horizontal veil-piercing in South Carolina by requiring proof of concrete abuse in addition to operational integration, rejected the de facto partnership and altered-ownership remedy imposed on Front Roe, preserved limited relief for unpaid distributions, and restricted any rulings affecting the North Carolina corporations.


Pertuis v. Front Roe Rests., Inc., 423 S.C. 640, 817 S.E.2d 273 (S.C. 2018)