Dr. Russell Acree formed Memorial Health Services, Inc. MHS to manage various small hospitals. MHS entered into a management agreement with Irwin County Hospital Hospital. Acree, Dr. Howard McMahan, and Dr. Gene Jackson formed AJM, Inc. in furtherance of their agreement for McMahan and Jackson to relocate and eventually become part of the management team at the Hospital. Due to subsequent disagreements, Acree, acting in his individual capacity, agreed to purchase McMahan’s and Jackson’s interest in AJM for $750,000 each. For over a year, Acree caused MHS and the Hospital to make the payments for which he was obligated under the buyout agreement. After further conflict, however, Jackson discontinued his practice in the area, and Acree later terminated the payments to McMahan. Although the agreement was with Acree, McMahan brought suit against both Acree and MHS Appellants to recover damages for breach of contract. The jury returned a verdict against both Appellants, on which the trial court entered judgment in favor of McMahan. The Court of Appeals affirmed, concluding, as to the judgment against MHS, that the concept of reverse piercing of the corporate veil is applicable in Georgia and that the trial court did not err in its charge thereon. Acree v. McMahan , 258 Ga. App. 433 574 SE2d 567 2002. This Court granted certiorari to consider whether the doctrine of reverse piercing of the corporate veil can be applied in this state. We reject reverse piercing, at least to the extent that it would allow an “outsider,” such as a third-party creditor, to pierce the veil in order to reach a corporation’s assets to satisfy claims against an individual corporate insider. An increasing number of courts have recognized the distinction between “insider” and “outsider” reverse piercing claims, first articulated in Crespi, “The Reverse Pierce Doctrine: Applying Appropriate Standards,” 16 J. Corp. L. 33, 37 II A 1990. Outsider reverse veil-piercing extends the “traditional veil-piercing doctrine to permit a third-party creditor to ‘pierce the veil’ to satisfy the debts of an individual out of the corporation’s assets. Cit.” Emphasis in original. C.F. Trust v. First Flight , 306 F3d 126, 134 III A 4th Cir. 2002 certifying the question to the Supreme Court of Virginia. Only a few jurisdictions have addressed this version of disregarding the corporate entity. Crespi, supra at 56 II C 1. Some jurisdictions permit such claims, but place strict limitations on its application, such as requiring the plaintiff to prove that no innocent third-party creditor or shareholder would suffer harm or prejudice as a consequence of reverse veil-piercing and that there is no other available remedy, such as the usual judgment collection procedures. C.F. Trust v. First Flight , supra at 138 III A; C.F. Trust v. First Flight , __SE2d__ IV Va. 2003 answering the certified question from the Fourth Circuit.
The issue is one of first impression in this state. Certain opinions of our Court of Appeals have held that the evidence in the particular case would not support reverse piercing assuming that the doctrine were viable. Plaza Properties v. Prime Business Investments. , 240 Ga. App. 639, 643 2 d 524 SE2d 306 1999; Gwinnett Property, N.V. v. GH Montage GmbH , 215 Ga. App. 889, 893 2 453 SE2d 52 1994; Hogan v. Mayor & Aldermen of Savannah , 171 Ga. App. 671, 673 3 320 SE2d 555 1984 “insider” reverse piercing claim. However, we “find no authority under Georgia law and plaintiff has cited none for the ‘reverse pierce.’ ” Hogan v. Mayor & Aldermen of Savannah , supra at 673 3. Furthermore, the Court of Appeals has ruled that reverse piercing of the corporate veil is improper where a plaintiff simply recasts a fraudulent conveyances theory. Gwinnett Property, N.V. v. GH Montage GmbH , supra at 893 2.
