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Like Marley, Court Forges Chain Of Liability Link By Link To Hold Nevada Director Liable For California Corporation's Debt

The Nevada legislature has gone a long way to insulate directors of Nevada corporations from liability.  Directors, however, are not entirely immune as was recently illustrated in Judge Barry Ted Moskowitz' recent ruling in Odyssey Reinsurance Co. v. Nagby, 2019 U.S. Dist. LEXIS 111794.  

The case involved an involved the following series of transfers allegedly to avoid payment of return commissions originally owed by Cal-Regent, a California corporation, to the plaintiff:

Judge Moskowitz found that the plaintiff was a creditor of PBIS, a Nevada corporation, both under California's Uniform Fraudulent Transfer Act (now known as the Uniform Voidable Transactions Act) and California's successor liability rule at the time PBIS distributed the proceeds of its sale of assets to Amtrust.  Judge Moskowitz then ruled that the distribution was unlawful under NRS § 78.288(2)(a) because it left PBIS unable "to pay its debts as they became due in the usual course of business," and under NRS § 78.288(2)(b) because it left PBIS with assets "less than the sum of its total liabilities."  Accordingly, PBIS' director was liable pursuant to NRS § 78.300.  

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About this Author

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

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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