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S.C. Supreme Court Sets Criteria to Pierce Corporate Veil of Sibling Businesses

On July 10, the South Carolina Supreme Court handed down an important decision in Pertuis v. Front Roe Restaurants, establishing the criteria to determine when the corporate veil can be pierced horizontally – in other words, when a court can disregard the corporate form of sibling companies having common ownership, control, officers, or members.

The practice of corporations joining forces with others that share business goals, leadership and even finances to mitigate personal liability for those in charge is not a new one. The merging of business interests has long-been debated, going back to a 1986 Court of Appeals decision in Kincaid v. Landing Development Corp. The theory generally states that, “where multiple corporations have unified their business operations and resources to achieve a common business purpose and where adherence to the fiction of separate corporate identities would defeat justice, courts have refused to recognize the corporations’ separateness, instead regarding them as a single enterprise-in-fact.” Corporate entities could be combined into a single entity if their interests, entities and activities are so interconnected, “as to blur the legal distinction between the corporations and their activities.” Kincaid v. Landing Dev. Corp., 289 S.C. 89, 96, 344 S.E.2d 869, 874 (Ct. App. 1986).

The South Carolina Supreme Court’s latest decision in Pertuis v.  Front Roe ruled in a minority shareholder oppression dispute between the owners of three restaurants and their general business manager, who claimed part ownership in the entire enterprise. The restaurants were incorporated separately in North and South Carolina but had the same shareholders and general manager. The general manager sued the majority shareholders claiming part-ownership in the entire operation and asserted that he was entitled to a percentage of the entire business as a buyout. 

The trial court found that the S-corporations owning each of the three restaurants were a “partnership.” It disregarded the corporate entities and awarded the general manager a cut of the whole. The Court of Appeals affirmed.

Ultimately, the Supreme Court rejected the lower courts’ refusal to respect the individual corporate forms of the three S-corporations.

In so doing, the South Carolina Supreme Court, for the first time, adopted the single business enterprise theory and established the criteria for disregarding the corporate existence of commonly owned sibling entities. 

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SCRIPTS System Must be Reviewed to Prescribe Schedule II Mediation

On May 19, 2017, Governor Henry McMaster signed into law the mandate that all licensed professionals with prescriptive authority, including physicians, physician assistants, dentists, optometrists, advanced practice nurses and podiatrists, implement and review a patient's history in the South Carolina Reporting and Identification Prescription Tracking System  ("SCRIPTS") before prescribing Schedule II pain medication.

The SCRIPTS system review requirement allows a designated staff member to review the SCRIPTS system on behalf of the licensed practitioner. If a designated staff member reviews patient information in the SCRIPTS system on behalf of the licensed professional, the licensed professional must discuss the patient's prescription history in the SCRIPTS system with the delegate before prescribing a Schedule II controlled substance. The communication must be reflected in writing in the patient’s chart.  When prescribing a Schedule II medication, licensed professionals should document the medication and the quality of pills prescribed in the patient's chart to ensure compliance with the relevant LLR practice act.

Failure to use the SCRIPTS system as required can result in consequences, including referral to the appropriate South Carolina Department of Labor, Licensing, and Regulation Board for  investigation and potential disciplinary action.  Our professional licensing attorneys routinely defend LLR investigations including South Carolina Board of Nursing complaints, Medical Board complaints, and Dental Board complaints.  

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South Carolina Auto Liability Case May Set New Bar For Awarding Damages

Questions before the South Carolina Supreme Court could change whether negligence in causing a car accident now may be considered in awarding damages for injuries allegedly caused by a vehicle’s design flaw.

The answers to questions of state law certified in the federal products liability case Donze v. General Motors hinge on the South Carolina Supreme Court’s decision on whether comparative negligence, which apportions damages based on fault, applies in crashworthiness cases.

For years, South Carolina plaintiffs have been able to successfully argue that the circumstances of what caused an accident are irrelevant when considering liability based on crashworthiness, which is the degree to which a vehicle will protect its occupants from the effects of an accident – often referred to as the second collision.

Under the crashworthiness theory in South Carolina, a manufacturer can be held responsible for a design flaw of the vehicle that enhances or aggravates the injuries above and beyond those from the initial collision.

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Prevent Workers’ Comp Claims By Understanding How To Manage Risks

Accidents will happen – about 23,000 times a day in U.S. workplaces, on average, according to one study.

Workers’ compensation insurance pays for occupational injury and illness claims, and that typically protects businesses from defending against personal injury claims brought by employees. In South Carolina, which has a “no-fault” system, it doesn’t matter who is to blame for the workplace injury for a valid claim to be paid.

Although workers’ comp insurance covers an injured employee’s medical expenses and disability pay, the hidden costs for businesses are significant. The Occupational Safety & Health Administration calculates that lost productivity, higher insurance premiums and other indirect costs can total up to four times the cost of the workers’ comp claim itself.

With costs related to occupational injuries and deaths adding up to $192 billion annually, a plan to manage those risks is essential for every business.

First and foremost, employers must develop a culture of safety. OSHA says workplaces that establish safety and health management systems can reduce their injury and illness costs by 20 to 40 percent.

Changing an organization’s culture is not often easy, so leadership is critical to achieve buy-in from employees throughout the organization. Whether it’s a small business or large corporation, the message that safety is a primary concern must come from the top down.

A risk management plan can minimize workers’ comp costs in three ways: limiting opportunities for risk by controlling who comes through your door, identifying and fixing problems before something happens and managing additional risks once an accident occurs.

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It’s Time To Get Your Cybersecurity Plan In Place

Cybersecurity threats pose risks to every type of business. As our dependence on technology has increased, the opportunities for data to fall into the wrong hands are all around.

Every business has some understanding of the dangers of dealing with sensitive data. We’ve heard the horror stories. Hospitals have been held hostage by hackers demanding ransom in exchange for restoring access to electronic files. Data files stolen from retailers have resulted in millions of compromised credit card accounts. Threats include any way fraudsters can use your information to make a buck.

Think of a cybersecurity plan in the same way as a plan you would prepare for any other emergency. Businesses take preventative steps to avoid fires, accidents and other catastrophic events and have plans for how to respond when an emergency comes up. Fire drills, safety procedures and incident response teams can help protect businesses from physical threats. Data breaches may be more difficult to detect initially, but they can have a similar disruptive effect on your business – and on the bottom line.

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Business Visas Help Companies Fill Critical Positions

Immigration is much in the news these days as the presidential candidates discuss border security, terrorism and preserving jobs for U.S. citizens. These public policy issues deserve a thorough vetting of candidates, but they shouldn’t be confused with the legal business visa process that thousands of American businesses depend upon.

Unfortunately, our schools are not producing a sufficient number of graduates in some professional fields, and American businesses have to bring in foreign nationals to fill critical positions. There is a common misconception that these businesses are hiring cheap labor that displaces U.S. citizens, but that’s wildly inaccurate. American businesses are incurring substantial expense to bring in foreign workers with specialized skills, and they would gladly hire U.S. citizens but for the dearth of domestic talent in some professional areas. 

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Precise Communication is the Antidote to Accounting Malpractice Claims

In my experience as both an attorney and a formerly licensed CPA, true accounting malpractice is rare. But, when there are claims, they can be expensive. It’s incumbent on accountants, as well as clients, to take steps to minimize the misunderstandings that can lead to litigation. 

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Turner Padget Lawyer Helps Obtain Favorable Opinion for Defense Bar

South Carolina recently became the latest jurisdiction to prohibit the assignment of legal malpractice claims between adversaries in litigation, joining the majority of jurisdictions that have considered the issue. 

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Considerations for Whether, When and How Much to Pay to Settle Litigation

Most lawsuits never go to trial, but it is still difficult for a business that is the target of litigation to know whether and when to settle, and for how much. 

It may be especially challenging for a defendant to take the initiative to settle when it feels it occupies the moral or legal high ground. However, while it may not seem fair, every defendant starts losing money the day the complaint is filed. Unless a defendant has a viable counter claim or a contractual agreement that the loser pays the winner’s fees and costs, the best a defendant can hope for is to lose only the cost of defense. For this and other reasons, it is often the best business decision to settle, even when in the right. But how much should a defendant pay to settle and at what point in the litigation, and at what number is it better to try the case? 

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