Federal Circuit Holds Board Of Directors As A Separate Entity
We often hear about a board of directors being sued, but can a plaintiff really sue a corporation's board? According to a recent decision by the Federal Circuit, a plaintiff can't sue a board, at least not as a separate entity in federal court:
Under the Federal Rules of Civil Procedure, for parties other than an individual or corporation, their capacity to be sued is determined "by the law of the state where the court is located," here, California. Fed. R. Civ. P. 17(b). The Supreme Court of California has not addressed whether a corporation's board of directors may be sued as a legal entity separate from the corporation itself. But California's Corporation Code only identifies a corporation or association as entities that may be sued. Cal. Corp. Code § 105; seeTheta Chi Fraternity, Inc. v. Leland Stanford Junior Univ.,212 F. Supp. 3d 816, 821 (N.D. Cal. 2016). We are persuaded that, under California law, a plaintiff may not sue a corporation's board of directors as an entity separate from the corporation.
Siegler v. Sorrento Therapeutics, Inc., U.S. Ct. of Appeals Case No. 2020-1435 (Fed. Cir. July 20, 2021). The plaintiff argued, albeit unsuccessfully, that Section 14 of the Clayton Act provided the requisite authority. The Federal Circuit pointed out that the statute imposed liability on individual directors and was criminal, not civil.