## Facts

- Randy Coley, through a company, contracted with DIRECTV to provide satellite programming to 168 resort units at Massanutten Resort in Virginia.
- Coley expanded service to more than 2,500 units while continuing to pay DIRECTV only for 168 units and retained the additional revenue.
- In 2013, a federal district court entered a judgment of more than $2.3 million against Coley for unlawful transmission of DIRECTV programming.
- After difficulty collecting from Coley personally, DIRECTV sought post-judgment relief to reach assets held by three Delaware LLCs controlled by Coley, asserting the LLCs were Coley’s alter egos.
- The district court, applying Delaware law, granted “reverse veil-piercing,” permitting execution on the LLCs’ assets to satisfy the judgment against Coley.
- Coley, one LLC (Its Thundertime, LLC), and Kimberli Coley appealed, challenging the availability of reverse veil-piercing, the alter-ego findings, and the reach of enforcement to particular assets.

## Issues

1. Whether Delaware law permits reverse veil-piercing of a Delaware LLC that is the alter ego of its sole member so a judgment creditor of the member may reach LLC assets.
2. Whether the district court clearly erred in finding Coley’s LLCs were his alter egos under Delaware law.
3. Whether applying reverse veil-piercing in this case improperly conflicted with Delaware’s limited-liability policy or unfairly prejudiced third parties.
4. Whether the district court properly included certain assets, including assets associated with Kimberli Coley, within judgment enforcement.

## Decision

- The Fourth Circuit affirmed the district court’s post-judgment orders.
- The court held Delaware law allows reverse veil-piercing in the LLC context when the LLC is the alter ego of its sole member and equity warrants the remedy.
- The court upheld the alter-ego findings, citing strong proof of commingling and disregard of separateness among Coley and the LLCs.
- The court rejected arguments that reverse piercing was categorically barred by limited-liability principles or that the remedy unfairly harmed innocent parties.
- The court affirmed the district court’s treatment of challenged assets in enforcing the judgment.

## Legal Principles

- Delaware veil-piercing is an equitable doctrine; courts may extend it to reverse veil-piercing when consistent with equitable considerations and existing Delaware law.
- Reverse veil-piercing may be used to reach an entity’s assets to satisfy an owner’s debt when the entity is the owner’s alter ego and the remedy does not unjustly harm innocent third parties.
- Alter-ego determinations may rest on factors such as commingling of funds, failure to respect entity separateness, and use of the entity form to facilitate wrongdoing; appellate review is highly deferential to factual findings (clear-error standard).
- Limited-liability protections do not shield misuse of the LLC form where the entity and member are functionally indistinguishable and the entity is used to thwart lawful collection.

## Conclusion

The Fourth Circuit affirmed judgment enforcement against Coley’s Delaware LLCs, holding that Delaware law permits reverse veil-piercing of an LLC that is the alter ego of its sole member, particularly where the record shows commingling and lack of separateness and where third-party prejudice is not shown.


Sky Cable, LLC v. DIRECTV, Inc., 886 F.3d 375 (4th Cir. 2018)