An alter ego challenge has proven fatal to a Colorado asset protection attorney’s single-member LLC in the case of Boxer F2, L.P. v. Bronchick. In this case, the creditor, Boxer F2, L.P., sought relief against attorney William Bronchick, his ex-wife, and three Bronchick entities after obtaining judgments totaling $891,970. The court conducted a bench trial and issued an opinion on the matter.
The court found that Bronchick had interests in three entities, including a professional corporation, a single-member LLC, and a Delaware Series LLC. Boxer garnished Bronchick’s wages and obtained charging orders against his interests in the LLCs to enforce its judgment. The court detailed various transactions and transfers made by Bronchick between the entities, some of which were poorly documented and raised questions about their legitimacy.
In its legal analysis, the court examined whether the entities were alter egos of Bronchick and whether they were used to perpetrate a wrong against the creditor. The court found evidence of commingling of assets, inadequate record-keeping, and misuse of the entities for the purpose of defeating Boxer’s claim. Each entity was evaluated individually, with different outcomes for each.
The court declined to pierce the veil of Hasaki, in which Bronchick’s ex-wife had an ownership interest, as she was found to be an innocent party with no knowledge of the debt. Similarly, the veil of Bronchick’s professional corporation, B&A, was not pierced due to the potential impact on clients. However, the court allowed Boxer to pierce the veil of BCG and impose an equitable lien on its assets to satisfy the judgment.
The case highlights the importance of proper entity operation in asset protection planning. Failure to maintain clear boundaries between entities and engage in transparent, well-documented transactions can result in alter ego challenges and the piercing of the corporate veil. The opinion also underscores the vulnerability of single-member LLCs and the potential ramifications for innocent parties, even in divorce proceedings.
It is cautioned against relying solely on single-member LLCs for asset protection, as they may be susceptible to veil piercing in certain circumstances. Professional entities are not immune from creditor attacks, and creditors may find alternative ways to access their income or assets. Innocent spouses, even ex-spouses, face challenges in proving their lack of involvement in disputes involving their partners’ debts.
The outcome of this case may have significant implications for asset protection planning and the treatment of single-member LLCs in legal proceedings. It remains to be seen whether there will be an appeal and what the Tenth Circuit Court of Appeals will ultimately decide on the matter.
