Amalgamation Does Not Include Individuals

The Court formally adopted amalgamation (or single business enterprise theory) in Pertuis v. Front Roe Restaurants, Inc., 423 S.C. 640, 817 S.E.2d 273 (2018). There, the Court stated:

We formally recognize today this single business enterprise theory, and in doing so, we acknowledge that corporations are often formed for the purpose of shielding shareholders from individual liability; there is nothing remotely nefarious in doing that. For this reason, the single business enterprise theory requires a showing of more than the various entities' operations are intertwined. Combining multiple corporate entities into a single business enterprise requires further evidence of bad faith, abuse, fraud, wrongdoing, or injustice resulting from the blurring of the entities' legal distinctions.

In Pertuis, the Court found that the party seeking to amalgamate corporate interests had not met his burden because there was not evidence of “bad faith, abuse, fraud, wrongdoing, or injustice resulting from the blurring of the entities' legal distinctions.”

Stoneledge frames the test from Pertius as follows:

a party seeking to impose the existence of a single business enterprise must show both (1) the intertwining of the operations of the entities and (2) evidence of bad faith, abuse, fraud, wrongdoing, or injustice resulting from the blurring of the entities' legal distinctions.

(emphasis added and quotation omitted). The word “entities” in that test is important. Among other things, the Stoneledge plaintiffs sought to apply the doctrine to an individual and an LLC and have them treated as a single business enterprise. In considering that claim, the Court held that “the single business enterprise theory is not to be used to amalgamate an individual with a company. The single business enterprise theory exists as an equitable remedy for plaintiffs whenever they have been wronged by business entities with blurred identities.” This is not to say that there are not ways to pierce the corporate veil to reach individuals, but it does clarify that the doctrine of amalgamation can only be applied to businesses, not people.

If you have questions about this topic or other business matters, please contact Sarah.