District Court of New Jersey Dismisses Individual Owners of Company Who Were Not Personally Involved in Alleged Wrongdoing
What conduct by corporate owners and officers will subject them to individual liability? A recent decision from the federal district court in the District of New Jersey shows it must be something more than actions that are consistent with normal, routine business operations. In Circuit Lighting, Inc. v. Progressive Products, Inc., Civil Action No. 12-5612 (D.N.J. Aug. 23, 2013), the court ruled that two individual corporate owners and officers could not be held liable for acts of the corporation without some evidence that they personally participated in the alleged wrongful conduct. The court denied a motion to amend Circuit Lighting’s complaint to add as defendants Robert and Todd Allison, two owners and officers of the defendant corporations. The plaintiffs alleged that the two men had participated in the acts of fraud, conspiracy and conversion alleged in the complaint. The court ruled that the proposed amended complaint contained no valid basis for imposing individual liability on the two men. The only basis for their involvement was an ambiguous email that had been sent by a third party to the two men, and Todd Allison’s later invoice indicating that certain repairs to Circuit Lighting were not covered under warranty. The court found these allegations were not enough to establish that they affirmatively engaged in any of the wrongful conduct alleged in the complaint. Without any personal involvement or any basis for "piercing the corporate veil" to impose the corporation’s liability on the individuals, the court held that the proposed amended complaint against the two corporate officers was futile.