The Minnesota Supreme Court extended personal liability for a company's defamatory statement in the matter of DeRosa v. McKenzie. This is a very important change for the owners and members of the board of directors to be aware of in Minnesota.
The facts are quite straightforward. DeRosa was formerly on the Board of Directors for a Minnesota limited liability company. The company and DeRosa had a falling out. Subsequently, the LLC released a statement asserting DeRosa had committed criminal acts and violated securities law.
The Court of Appeals ruled that DeRosa's Complaint was deficient as personal liability does not attach to a company's statement. The Minnesota Supreme Court reached a different result, however. The Supreme Court refined the analysis compared to the Court of Appeals. While the Court of Appeals was correct in its statement of law that persons are not subject to personal liability for company actions based upon the person's title within the company, the Supreme Court looked at the individual's involvement with the perpetration of the allegedly defamatory statement and the statement's publication.
In so doing, the Supreme Court concluded that when a person actively participates in the perpetration of the defamation, they can be held personally liable for the actions. This too is consistent with the history of Minnesota law. “It is the universal rule that an officer of a corporation who takes part in the commission of a tort by the corporation is personally liable therefor . . . .” Ellingson v. World Amusement Serv. Ass’n, 222N.W. 335, 339 (Minn.1928).
The extension in DeRosa is to defamation. It serves as a very poignant reminder of a gap in the corporate protections to individuals in a limited liability company or corporation. You can't hide behind the corporate shield if you actively participate in the commission of a tort, so be mindful of your actions and call me if you have any questions on what your corporate risk includes.
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