2010 Georgia Corporation and Business Organization Case Law Developments
| Publication year | 2011 |
| Pages | 0020 |
Thomas S. Richey
This is an overview of the 2010 survey of Georgia corporate and business organization decisions. For the full survey, including an extended discussion of each of these cases, you may download or print the document at the following link: http://www.bryancave. com/2010-ga-survey/. This article is not intended as legal advice for any specific person or circumstance, but rather a general treatment of the topics discussed. The views and opinions expressed in this article are those of the author only and not Bryan Cave LLP. The author would like to acknowledge and thank Ann Ferebee and Vjollca Prroni for their assistance with the article.
This article surveys case law developments involving corporate and business organization law issues that have been handed down by the Georgia state and federal courts during 2010. A few of the decisions decide matters of first impression or appear to have significant precedential value. Others illustrate and confirm settled points of law, are instructive for the types of legal issues that arise in a corporate law practice, or are typical of claims and defenses that are asserted in business organization disputes.
The article is divided into two parts-first, this Introduction and Overview, which catalogs the 2010 Georgia business organization decisions covered in the article with a brief description of its principal rulings and, second, a Discussion of Case Law Developments, which discusses the decisions in more detail, with some analysis where warranted.
In both parts, the decisions are organized in sections, first, by entity type—decisions that focus on corporations, limited liability companies and partnerships—and, second, by business transactions and litigation issues that are generally common to all forms of business organization. A final section covers selected decisions handed down in 2010 by the Georgia Business Court. Following is a brief summary of these developments.
Duties and Liabilities of Corporate Directors, Officers and Employees
Holmes v. Grubman, 286 Ga. 636, 691 S.E.2d 196 (2010), was probably the year's most far-reaching decision. In that case, the Supreme Court of Georgia, responding to a certified question from the U.S. Court of Appeals for the 2nd Circuit, held that Georgia common law recognizes "holding claims," claims for fraud and negligent misrepresentation by shareholders who forbear selling stock in public companies in reliance on misrepresentations. The Court also established the parameters and requirements for public company holding claims, namely that the misrepresentation must be "directed at" the plaintiff through a "direct communication," and the plaintiff must plead and prove "specific reliance" consisting of actions indicating that the plaintiff actually
and justifiably relied on the misrepresentation. In response to other certified questions, the Court also addressed the issue of proximate cause in the public company holding claim context and the limited fiduciary duties that a stockbroker owes its customer.
Several decisions in 2010 addressed various aspects of standing with regard to claims against corporate officers and directors. In Barnett v. Fullard, 306 Ga. App. 148, 701 S.E.2d 608 (2010), the Court of Appeals of Georgia reaffirmed that claims for misappropriation of corporate assets are derivative, not direct claims. The Court also ruled in that case that claims to enforce shareholder inspection rights must be asserted against the corporation, not against directors and officers. In In re Integrity Bancshares, Inc.: Lubin v. Skow, 382 Fed. App'x. 866 (11th Cir. 2010), the U.S. Court of Appeals for the 11th Circuit, also addressing the distinction between direct and derivative claims, ruled that the Federal Deposit Insurance Corporation as receiver is the exclusive owner of claims against officers of a failed bank. The trustee in bankruptcy of the bank's holding company can assert claims against the holding company's officers only for distinct holding company level conduct. In Heard v. Perkins, 441 B.R. 701 (N.D. Ala. 2010), the U.S. District Court for the Northern District of Alabama held that deepening insolvency claims are not cognizable under current Georgia law, because duties to creditors in Georgia are limited to a prohibition against self-preferential conduct. The court also held that under current federal pleading standards, the business judgment rule may be considered on a motion to dismiss breach of fiduciary duty claims.
Decisions on Personal Liability of Corporate Officers for Corporate Conduct
The courts in 2010 addressed officer liability issues under Georgia common law and federal and state statutes in a variety of contexts. In Barrs v. Acree, 302 Ga. App. 521, 691 S.E.2d 575 (2010), the founder and registered agent of a company was held not liable for an employee's conduct through agency by implication or ratification. In Alexander v. Hulsey Environmental Services, Inc.; LHR Farms, Inc. v. Alexander, 306 Ga. App. 459, 702 S.E.2d 435 (2010), the Court of Appeals of Georgia confirmed that corporate officers may be held personally liable for the corporation's conduct constituting a nuisance when they direct or participate in that activity. The 11th Circuit reaffirmed in Goolsby v. Gain Technologies, Inc., 362 Fed. App'x. 123 (11th Cir. 2010), that officers cannot be held personally liable for a corporate tort without directing or...
To continue reading
Request your trial