Thursday, March 15, 2018

corporations - corp. officer liability - participation theory

B & R Resources  v. Dept. of Envir. Protection – Cmwlth. Court – 3-15-18

Under Pennsylvania law, a corporate officer can be liable in tort for his own wrongful conduct on behalf of the corporation, even though the corporation is not a sham and there is no basis for piercing the corporate veil. Wicks v. Milzoco Builders, Inc., 470 A.2d 86, 89-90 (Pa. 1983); Francis J. Bernhardt, III, P.C. v. Needleman, 705 A.2d 875, 878 (Pa. Super. 1997); Bank of Landisburg v. Burruss, 524 A.2d 896, 901 (Pa. Super. 1987).

This basis of individual liability, known as the participation theory, is predicated on the corporate officer’s own actions and participation in the corporation’s wrongful conduct, rather than the corporation’s status and his relationship to the corporation. Wicks, 470 A.2d at 89-90. In Wicks, our Supreme Court explained: “The general, if not universal, rule is that an officer of a corporation who takes part in the commission of a tort by the corporation is personally liable therefor; but that an officer of a corporation who takes no part in the commission of the tort committed by the corporation is not personally liable to third persons for such a tort, nor for the acts of other agents, officers or employees of the corporation in committing it, unless he specifically directed the particular act to be done or participated, or cooperated therein.” …

Liability under this theory attaches only where the corporate officer is an actor who participates in the wrongful acts. Therefore, corporate officers may be held liable for misfeasance. Nevertheless, corporate officers and directors may not be held liable for mere nonfeasance. Thus, the mere averment that a corporate officer should have known the consequences of the liability-creating corporate act is subject to a motion to strike for impertinence and proof of that averment alone is insufficient to impose liability.