2009 Annual Review of Case Law Development: Georgia Corporation and Business Organization
| Jurisdiction | Georgia,United States,Federal |
| Citation | Vol. 15 No. 7 Pg. 0020 |
| Pages | 0020 |
| Publication year | 2010 |
GBJ Feature
by Thomas S. Richey
This article surveys the decisions addressing corporate and business organization law issues handed down by the Georgia state and federal courts during 2009. Although few of the cases decide matters of first impression, several discuss important points of law on which there is little Georgia authority. The article includes many other decisions because they confirm the continued validity of established principles governing Georgia business organizations and reflect the way in which the courts view and apply those principles.
This article is organized, first, by entity type—corporations, partnerships, limited liability companies and other forms of business ventures. The rest of the article is grouped by subject matter with cases divided into (a) decisions primarily concerning transactional issues that should apply to all forms of business organizations and (b) decisions dealing with litigation issues characteristic of business organization disputes. Following is a brief summary of these developments.
Duties and Liabilities of Corporate Directors, Officers and Employees
One of the potentially most important decisions of the year, Brock Built, LLC v. Blake, 300 Ga. App. 816,
686 S.E.2d 425 (2009) confirms that officers and directors of Georgia corporations cannot be held liable for ordinary negligence in the performance of their corporate duties under O.C.G.A. § 14-2-830 and appears to be the Georgia appellate courts' first recognition of a business judgment rule presumption. The Court of Appeals of Georgia applies these principles to a limited liability company without explanation and without mention of the corresponding provisions of the Georgia Limited Liability Company Act. In an order following trial, the court in In re: Maxxis Group, Inc.: Hays v. Curry, Adv. Case No. 06-06554-MGD, (N.D. Ga., Bankr. September 29, 2009) (unpublished), rejected a bankruptcy trustee's claims against directors of a corporate debtor under § 14-2-830, upholding the directors' rights to rely on management statements regarding corporate performance and finding insufficient evidence of their knowledge of the corporation's insolvency.
Two decisions dealt with claims for misappropriation of corporate opportunities — Professional Energy Management, Inc. v. Necaise, 300 Ga. App. 223, 684 S.E.2d 374 (2009), in which the court held that employees with authority to bind corporations have fiduciary duties, but not as to corporate opportunities, and Brewer v. Insight Technology, Inc., 301 Ga. App. 694, 689 S.E.2d 330, (2009), holding that a "beachhead" by the corporation is not required for misappropriation of opportunities during a corporate officer's tenure and finding that punitive damages were not capped because of the officer's specific intent to harm the corporation.
Wachovia Insurance Services, Inc. v. Fallon, 299 Ga. App. 440, 682 S.E.2d 657 (2009) confirms that a former officer of a Georgia corporation does not owe fiduciary duties not to compete after his departure and after a close review of the evidence holds that the former officer had not violated any of his duties to the corporation before or after he left. The court in Eayrs v. Absolute Roofing, Inc.,
300 Ga. App. 825, 686 S.E.2d 432, (2009) ruled that a defendant, who was clearly acting as an agent of a disclosed principal, could not be held personally liable on a contract merely because the contract did not disclose the corporate status of the business. HRH Architects, Inc. v. Lansing, 2009 WL 1421217 (N.D. Ga. Apr. 2, 2009) discusses and applies the tests to determine when corporate officers can be held directly or vicariously personally liable for copyright infringement.
Corporate Stock Ownership and Rights
In 2009 there were several decisions addressing contractual issues involving purchases or option rights to receive stock or other equity-based investments. Two decisions involved applications of Georgia's blue sky law. Fernandez v. WebSingularity, Inc., 299 Ga. App. 11, 681 S.E.2d 717 (2009) dealt with a subscription agreement for an amount of shares inconsistent with oral representations. The court held that there were issues of fact regarding whether the corporation had accepted the subscription before the purchaser rescinded it, but found his Georgia Securities Act of 1973 claims were barred because he was held to know of the alleged misrepresentations when he executed the subscription agreement. In Golden Atlanta Site...
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