Argued: January 25, 2018
Appeals from the United States District Court for the Western
District of Virginia, at Harrisonburg. Michael F. Urbanski,
Chief District Judge. (5:11-cv-00048-MFU)
J. O'Keeffe, IV, JOHNSON, ROSEN & O'KEEFFE, LLC,
Roanoke, Virginia, for Appellants.
Ward Shaw, GORDON & REES, LLP, Raleigh, North Carolina,
for Appellant Randy Coley.
Hugo Jamnback, YARMUTH WILDSON, PLLC, Seattle, Washington,
W. Bryant, BRYANT & IVIE, PLLC, Raleigh, North Carolina,
for Appellant Its Thundertime, LLC.
Patrick T. Jordan, GORDON & REES, LLP, Seattle,
Washington, for Appellant Randy Coley.
KEENAN, WYNN, and HARRIS, Circuit Judges.
BARBARA MILANO KEENAN, Circuit Judge
2013, the district court held Randy Coley (Mr. Coley) liable
for conducting a fraudulent scheme involving the unauthorized
transmission of television programming provided by DIRECTV,
LLC (DIRECTV). The court entered judgment against Mr. Coley
in the amount of over $2.3 million. After an unsuccessful
attempt to satisfy its judgment against Mr. Coley personally,
DIRECTV filed a motion in the district court to "reverse
pierce" the "corporate veil" of three of Mr.
Coley's limited liability companies (LLCs), contending
that the three entities were "alter egos" of Mr.
Coley. The district court granted DIRECTV's motion,
finding that the LLCs were alter egos of Mr. Coley and, thus,
were subject to execution of DIRECTV's judgment against
appeal raises the question whether application of Delaware
law in this case permits the remedy of reverse piercing a
corporate veil of an LLC, when the LLC has been determined to
be the alter ego of its sole member. Upon our review, we
affirm the district court's decision to allow this
remedy, based on our consideration of existing Delaware law
and of the overwhelming evidence that the LLCs at issue were
alter egos of Mr. Coley. We also affirm the balance of the
district court's judgment.
Coley has operated various businesses that provide consumers
access to cable television services. DIRECTV widely
distributes cable television services to many entities and
individuals, including services to facilities that have
multiple residential rooms, such as hotels and hospitals. In
2000, Mr. Coley, through his now-defunct company East Coast
Cablevision, LLC (ECC), contracted with DIRECTV to provide
its programming to 168 rooms at the Massanutten Resort in
Virginia. By May 2011, Mr. Coley was receiving payment for
cable services provided to over 2, 500 units at Massanutten
by DIRECTV. During this time, however, Mr. Coley continued to
pay DIRECTV only for services provided to the original 168
units, and fraudulently retained the excess revenue received
for services provided to more than 2, 300 units. Mr. Coley
and ECC continued to provide unauthorized DIRECTV programming
to those additional units at the Massanutten Resort until
DIRECTV initiated an investigation and discovered the
2011, Sky Cable, LLC (Sky Cable), a dealer of DIRECTV's
services, sued Mr. Coley, his wife, Kimberli Coley (Mrs.
Coley), and DIRECTV, among others, in the district court,
alleging that Sky Cable had been deprived of certain revenue
as a result of Mr. Coley's unlawful distribution scheme
at the Massanutten Resort. The court ultimately dismissed Sky
Cable's claims against DIRECTV, but DIRECTV filed
cross-claims in the case under 47 U.S.C. § 605(a)
against Mr. Coley, Mrs. Coley, and ECC for unauthorized
receipt and distribution of DIRECTV's programming.
evidence before the district court showed that in addition to
ECC, Mr. Coley also managed three other LLCs, namely, Its
Thundertime, LLC (ITT), East Coast Sales, LLC (East Coast),
and South Raleigh Air, LLC (South Raleigh). At issue in this
case is appellant ITT, an LLC in which Mr. Coley is the sole
member, which was incorporated in 2008 under Delaware law.
Mr. Coley stated that he created ITT to hold title to real
property for various rental properties purchased by him and
his wife. According to Mr. Coley, ITT collected only the
profit, as opposed to the entire revenue, obtained from
rentals of these properties. DIRECTV has not alleged that ITT
was a part of the illegal cable television transmission
scheme conducted by Mr. Coley and ECC.
evidence further showed that Mr. Coley is also the sole
member of East Coast and South Raleigh, each of which manages
and collects income on the properties owned by ITT. Mr. Coley
and these three LLCs have engaged in a continuous commingling
of funds. For example, on various occasions, Mr. Coley
directed that one LLC transfer funds to another LLC to pay
certain expenses, including mortgage payments on properties
for which Mr. Coley and his wife were the mortgagors. Mr.
Coley at times also admitted that he did not keep complete
records of how and why funds were transferred between him and
the proceedings in the district court and before entry of
judgment, Mrs. Coley represented that she had not been
involved in her husband's businesses and had no
membership interest in ITT. Likewise, Mr. Coley testified
prior to entry of judgment that Mrs. Coley had never worked
outside the family home, and that Mr. Coley was the sole
member of ITT.
years of litigation, the district court entered judgment in
favor of DIRECTV against Mr. Coley and ECC for certain
violations of federal communications law under 47 U.S.C.
§ 605(a). The court awarded damages to DIRECTV in the
amount of $2, 393, 000. DIRECTV and Mrs. Coley stipulated to
her dismissal from the case with prejudice, based on
representations by her and Mr. Coley that she had no
ownership interest in any of Mr. Coley's companies.
was unable to collect any payment on the judgment from Mr.
Coley, who allegedly has few personal assets. Mr. Coley
apparently dissolved ECC after the district court entered its
judgment. However, discovery in the case revealed that
several of Mr. Coley's LLCs, including ITT, held title to
or managed Mr. Coley's assets. Therefore, to enforce its
judgment against Mr. Coley, DIRECTV filed a motion in the
district court to reverse pierce the corporate veil of ITT,
East Coast, and South Raleigh to obtain access to the
LLCs' assets. These three LLCs were not parties to the
case and had not been served with process.
response to DIRECTV's motion, Mr. Coley asserted,
contrary to his earlier representations made under oath in
the district court, that Mrs. Coley had a 50 percent
membership interest in ITT and had been a member of ITT since
"day one." At the time of DIRECTV's motion,
Mrs. Coley was not a party to the lawsuit, and she had not
directly asserted her alleged interest in ITT in the district
court. However, Mrs. Coley filed an action in North Carolina
state court, which later was dismissed, seeking a declaration
that she held a 50 percent interest in ITT. See Coley v.
Its Thundertime LLC, No. 16-CVS-3019, 2016 WL 3944082,
at *1, *5 ( N.C. Super. Ct. July 15, 2016).
Delaware has not expressly adopted the remedy of reverse
piercing of a corporate veil, neither party asked the
district court to certify that issue of law to the Delaware
Supreme Court under that court's Rule 41. In July 2016,
over two years after its initial judgment issued, the
district court entered an amended judgment rendering the
three LLCs co-judgment debtors with Mr. Coley. The district
court held that: (1) under Delaware law, the three LLCs were
alter egos of Mr. Coley, and (2) that Delaware would
recognize reverse veil piercing under such
circumstances. The court also held that the Coleys were
equitably estopped from asserting that Mrs. Coley had any
membership interest in the LLCs. Finally, the court held that
DIRECTV's failure to serve process on the LLCs did not
prevent the court from exercising jurisdiction over them. Mr.
Coley, Mrs. Coley, and ITT timely appealed.
initial matter, DIRECTV has asked us to dismiss Mrs.
Coley's appeal on the grounds that she did not
participate in the post-judgment proceedings in the district
court and does not qualify as a nonparty entitled to appeal.
Mrs. Coley contends in response that she has established a
sufficient legal interest in the judgment to file an appeal.
We disagree with Mrs. Coley's position.
review de novo Mrs. Coley's asserted right to appeal as a
nonparty. See Microsystems Software, Inc. v. Scandinavia
Online AB, 226 F.3d 35, 39 (1st Cir. 2000); see also
David v. Alphin, 704 F.3d 327, 333 (4th Cir. 2013).
Generally, nonparties to proceedings in the district court
may not appeal from a district court's judgment.
Kenny v. Quigg, 820 F.2d 665, 667 (4th Cir. 1987);
see also Marino v. Ortiz, 484 U.S. 301, 304 (1988)
(noting that the "better practice" is for nonparty
to seek intervention). A limited exception arises if a
nonparty has an interest in the litigation and actively
participated in the particular stage of district court
proceedings that is challenged on appeal. See Doe v. Pub.
Citizen, 749 F.3d 246, 259-61 (4th Cir. 2014)
(explaining that nonparty that did not participate generally
nevertheless could appeal because it participated in matters
relevant on appeal); Microsystems, 226 F.3d at 41
(noting that litigants cannot "evade" party status
and later expect to be treated as parties); Dopp v. HTP
Corp., 947 F.2d 506, 512 (1st Cir. 1991) (holding that
party who secured dismissal prior to judgment could not
appeal). This limited exception is particularly applicable
when the nonparty is the only person or entity in a position
to appeal a given aspect of the district court's
judgment. See Kenny, 820 F.2d at 668.
Coley testified prior to being dismissed from the case in the
pre-judgment proceedings that she had no membership interest
in ITT. She now advances the contrary argument that she holds
a 50 percent interest in ITT, but she did not participate in
any manner in the post-judgment proceedings at issue in this
appeal. Additionally, we observe that Mr. Coley is
in a position to represent on appeal any interest that Mrs.
Coley otherwise could assert. Under these circumstances and
in view of the equities of this case, we grant DIRECTV's
motion to dismiss Mrs. Coley's appeal. See Hilao ...