GSB Vol. 13, NO. 7, Pg. 34. 2007 Annual Review of Case Law Developments: Georgia Corporate and Business Organization Law.

Author:Thomas S. Richey

Georgia Bar Journal

Volume 13.

GSB Vol. 13, NO. 7, Pg. 34.

2007 Annual Review of Case Law Developments: Georgia Corporate and Business Organization Law

GSB JournalVol. 13, NO. 7June 20072007 Annual Review of Case Law Developments: Georgia Corporate and Business Organization LawThomas S. RicheyThe purpose of this article is to track case law developments in Georgia's state and federal courts dealing with corporate and business organization law issues. Some of the cases reviewed address important, previously unresolved questions. These include the Court of Appeals of Georgia's conflicting decisions on the standard of care for directors and officers of Georgia corporations. Other decisions involve elusive issues, such as the validity of an election of directors of a Georgia membership nonprofit corporation that lacks the officers or the bylaws to authorize a meeting of members. We have included still other decisions, such as those concerning piercing the corporate veil, because they illustrate and confirm settled points of law.

In general, the article is organized by type of entity -corporations, partnerships and limited liability companies, with decisions organized by subject matter within those categories. In several areas-statutes of categorized those decisions by issue. Following is a brief summary of these developments.

Business and Nonprofit Corporations

In Flexible Products Co. v. Ervast, 284 Ga. App. 178, 643 S.E.2d 560 (2007) and Rosenfeld v. Rosenfeld, 286 Ga. App. 61, 648 S.E.2d 399 (2007), different divisions of the Court of Appeals of Georgia addressed whether corporate officers and directors are subject to an ordinary negligence standard of care, reaching opposite results. The Flexible Products Co. case, holding that ordinary negligence is not actionable, was decided unanimously and, under the Court of Appeals' Rule 33, is binding precedent, whereas the Rosenfeld decision, holding the standard to care is ordinary negligence, was not unanimously decided and is only physical precedent.

The 11th Circuit Court of Appeals in TSG Water Resources, Inc. v. D'Alba & Donovan, Certified Pub. Accountants, P.C., 260 Fed. Appx. 191 (not published in the Federal Reporter) addressed the business judgment rule as to claims against a Georgia corporate officer, along with the test for corporate citizenship for diversity jurisdiction and issues of reasonable reliance and scienter for common law fraud and fraud under the Georgia securities laws.

In three instructive decisions, Impreglon, Inc. v. Newco Enterprises, Inc., and W. Curt Jarrell, 508 F. Supp. 2d 1222 (N.D. Ga. 2007), Lou Robustelli Mktg. Servs., Inc. v. Robustelli, 286 Ga. App. 816, 650 S.E.2d 326 (2007), and Hilb, Rogal & Hamilton Co. of Atlanta, Inc. v. Holley, 284 Ga. App. 591, 644 S.E.2d 862 (2007), the courts ruled on claims for breach of fiduciary duty by departing personnel, among other things, examining in Impreglon whether advance planning is a breach of fiduciary duty and in Hilb, Rogal and Lou Robustelli Marketing whether particular corporate personnel had fiduciary duties, focusing on whether an officer or employee had authority to bind the corporation.

Several decisions concerned the capacity, authority, rights and liabilities of corporate officers, directors and shareholders in other contexts. The Court of Appeals of Georgia's decision in Keane v. Annice Heygood Trevitt Support Trust, 285 Ga. App. 155, 645 S.E.2d 641 (2007) dealt with the capacity in which a guarantee of a corporate indebtedness was executed, rejecting arguments that the defendant could not be personally liable because he executed the guarantee in his capacity as a shareholder or as a director. In Clay v. Oxendine, 285 Ga. App. 50, 645 S.E.2d 553 (2007), the Court of Appeals held that corporate officers could not escape personal liability under Georgia's anti-payday lending statute and the Georgia Industrial Loan Act by arguing that their acts were those of the corporation. The case of Hinely v. Alliance Metals, Inc. of Atlanta, 285 Ga. App. 230, 645 S.E.2d 584 (2007) involves claims by a corporate executive that his employer breached his employment contract by, among other things, engaging in...

To continue reading