Twin Cities Business Litigation Blog : Minneapolis Business Litigation Lawyer & Attorney : Gavin P. Craig Law Firm : St. Paul, Twin Cities, Minnesota MN

Business Owners who incorporate their business, or create a Limited Liability Company, usually have a misconception that they have immunity to liability. Company officers, agents for the company, are responsible for their own misdeeds.In a recent case the appellate court in New York State found the sole owner of the plaintiff corporation personally responsible for the failure of the company to comply with certain court orders, even though he was not a party to the action.

The court held: Although appellant Qasemi is not a party to the action, he is the sole owner and principal of plaintiff, and can be punished for plaintiff's disobedience of the order and judgment. While Qasemi was not personally served with these dispositions, it is undisputed that plaintiff was served and was aware of the mandates contained therein. It defies credulity that Qasemi himself was unaware of the orders ... Furthermore, since there were no issues of fact to be resolved at a hearing, it was proper for the court to make a finding of contempt without a hearing...

So much for limited liability. That concept of limited liability only goes so far. An officer is an agent of their company, and as such is not liable for contracts entered into on behalf of the company so long as the agent informs the other party of the agency and the identity of the principal. Failure to do so leaves the agent liable for the debt. In this case the court didn't hesitate to nail the agent because the agent caused the principal to violate the court's order.

This case is a good lesson for all.

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State and US District Courts use a legal analysis to determine whether the state or District Court has jurisdiction over a defendant located in another state. In a real stretch of logic, Delaware Court held that a law firm, by sending a document to CT Corporation (CSC in Delaware) in Delaware for filing with the Delaware Secretary of State for a Delaware Corporation conducted business in the state of Delaware. The court concluded that the courts in Delaware had jurisdiction over the law firm. Did the out of state law firm intend to conduct business in Delaware? No!

Would the result be the same if the law firm had served CT Corporation in Ohio, for delivery to CSC in Delaware? Would that action constitute transacting business in Delaware?

The law firm's client was already subject to jurisdiction in the courts in Delaware by virtue of their status as a Delaware Corporation. Thanks to Ward of Ward on Iowa Limited Liability Companies for the Reference.

Compare this result to the courts findings in the Pope and Bellisio cases discussed below on November 11th. Once again the courts find a single transaction sufficient to establish jurisdiction. One interesting question is whether the law firm, acting as agent for the Delaware principal, was really doing business in Delaware. The court decided, "yes."

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For those of us that like to give advice - here is a great question from Emeritus Professor David Slawson of USC's Gould School of Law. This one is worth pondering. I will watch for your answers.
 

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