Legal News

Corporate Violation, Officer Liability

Friday, January 16, 2009

A new decision of a California Court of Appeal applies the "Responsible Corporate Officer Doctrine", as developed by the U.S. Supreme Court, "to hold corporate officers in responsible positions of authority personally liable for violating strict liability statutes protecting the public welfare".  This doctrine is described as a common law theory of liability separate from piercing the corporate veil or imposing personal liability for direct participation in tortious conduct.  In this case, it was applied to affirm personal liability of senior corporate officers who were also directors and shareholders, for corporate violations of state environmental laws from a leaking underground gasoline tank, after a series of governmental notice and cure letters were passed off to lower level staff as ignorable "paperwork" while a leak continued.  Officer personal liability has been imposed in other extreme, unusual cases for corporate violations of public welfare laws, such as environmental, safety, and other compliance type statutes.

The Court of Appeal held that personal liability may be imposed on a corporate officer if (1) the individual is "in a position of responsibility which allows the person to influence corporate policies or activities"; (2) "the individual could have influenced the corporate actions which constituted the violations"; and (3) "the individual's actions or inactions facilitated the violations."  In many cases, an employer corporation may be obliged to indemnify an exposed employee under Labor Code Section 2802 or otherwise, although such protection may not be effective in some cases of intentional misconduct or corporate insolvency.  People v. Roscoe, California Court of Appeal No. CO55801, December 26, 2008.

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