Pertuis v. Front Roe Restaurants, Inc., 423 S.C. 640

Summary

The South Carolina Supreme Court reviewed a dispute involving minority ownership interests in three restaurant corporations and the alleged amalgamation of those corporations into a single business enterprise. The court formally recognized South Carolina's single-business-enterprise theory, requiring evidence beyond intertwined operations, including bad faith, abuse, fraud, wrongdoing, or resulting injustice. It reversed in part, vacated in part, and affirmed as modified in part the lower courts' rulings concerning amalgamation, ownership interests, distributions, valuation, and shareholder oppression.

Holdings

1. South Carolina law governs the evaluation of whether the three corporations operated as a single business enterprise; the internal-affairs doctrine does not bar review of that threshold issue.
2. South Carolina formally recognizes a single-business-enterprise theory, but treating multiple corporations as one enterprise requires more than intertwined operations; the party seeking the remedy must prove bad faith, abuse, fraud, wrongdoing, or injustice resulting from the blurring of the entities' legal distinctions.
3. The trial court erred by treating Lake Point, Beachfront, and Front Roe as a single business enterprise.
4. Pertuis proved only a 1% ownership interest in Front Roe and was not entitled to the trial court's equitable award of a 7.2% interest.
5. Pertuis was entitled to unpaid distributions from Front Roe, but the award had to be reduced from $99,117 to $14,142 to exclude amounts attributable to the North Carolina corporations.
6. The internal-affairs doctrine precluded consideration of the remaining issues concerning Lake Point and Beachfront, and the court vacated the judgment to the extent it made findings concerning those corporations.

Questions Presented

1. Whether South Carolina law governed the alleged amalgamation or single-business-enterprise theory despite two corporations being incorporated in North Carolina.
2. Whether the evidence supported treating the three corporations as a single business enterprise or amalgamated entity.
3. Whether Pertuis proved entitlement to a 7.2% ownership interest in Front Roe.
4. Whether Pertuis was entitled to shareholder distributions attributable to the North Carolina corporations and Front Roe.
5. Whether the court could consider the remaining issues concerning the North Carolina corporations under the internal-affairs doctrine.

Disposition

reversed_and_remanded