September 24, 2021

Volume XI, Number 267

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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.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 210
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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