Corporate Board Members' Personal Liability

Corporate suits against current or former corporate board members are not only reserved for the likes of Enron, failed hedge funds, and the Sun-Times, but are also available to aggrieved shareholders of smaller, local businesses and non-profits.

A lot of regular, working people volunteer for Board positions at smaller corporations, including homeowners’ associations. It may be frightening for some of them to learn that they face personal liability for injuries to the corporation if those injuries are caused by the board’s neglect or mismanagement.

That is why I found the case Davis v. Dyson, decided by the 2nd Dist. on December 19, 2008, particularly interesting. The case involved the embezzlement of more than $550,000.00 from a Condo Association by a former property management company.

Several homeowners filed suit against the individuals who sat on the Association’s Board of Directors during the time that the fraud was occurring. The homeowners brought suit on individual and derivative bases. A derivative action is one that a corporate shareholder brings on behalf of a corporation, when the corporate management declines to act due to fraud or incompetence. The defendants were former members of the Association’s Board of Directors.

Plaintiffs alleged breaches of fiduciary duty. Corporate board members owe fiduciary duties to shareholders. In the case of a condo association, this includes complying with Illinois Condominium Property Act and the Association’s bylaws. Plaintiffs specifically allege that the board members violated the Condo Act by failing to purchase insurance to protect the Association against the fraud that occurred.

The defendants asserted the business judgment rule. They argued that the fraud was not foreseeable and that it did not make sound business sense to carry that much insurance. Under the business judgment rule, absent evidence of bad faith, fraud, illegality, courts are not at liberty to interfere with the exercise of business judgment by corporate directors. In other words, it isn’t a breach of fiduciary duty to simply make a bad business decision.

The Court affirmed the trial court’s dismissal of the homeowners’ individual counts. The Court held that the plaintiff homeowners did not allege any separate and distinct injury from that suffered by all of the other homeowners.

The injury was to the Association, so the Court reversed the trial court’s dismissal of the homeowners’ derivative count. In doing so, the Court found that plaintiffs’ allegations, when viewed in the light most favorable to plaintiffs, could potentially support a finding that the director defendants breached their fiduciary duty of due care.

Therefore, the case was remanded to the trial court for further proceedings, where the defendants will face personal liability for the decisions they made while on the board.

NIU-COL Student Appointed to Illinois Senate

Toi Hutchinson, a student at the Northern Illinois University College of Law, was unanimously appointed by Illinois Democratic Party officials to serve as the Illinois State Senator of the 40th Congressional District. The Illinois State Senate seat was vacated by Debbie Halvorson after she successfully ran for the United States Congress.

Hutchinson, of Olympia Fields, Ill., was previously Halvorson’s chief of staff and the Olympia Fields village clerk. Hutchinson also worked for United Way as its executive director in South Cook County and was soon promoted to chief professional officer in its Southwest Suburban office. At that time, she was the youngest chief professional officer and the only African-American director in the State of Illinois. Most recently, Hutchinson was a lobbyist in Springfield for the Chicago law firm of Vincent R. Williams & Associates, P.C.

Hutchinson received her B.A. from the University of Illinois at Urbana Champaign. She also is a graduate of the Harvard University Kennedy School of Government’s Executive Management Program. Hutchinson will be sworn into the Illinois State Senate on January 14, 2009 in Springfield.

Another topic on the Multistate Bar Exam?

The National Conference of Bar Examiners is considering including questions about civil procedure to the 200-multiple choice test, in addition to questions from the existing topics of torts, criminal law, contracts, real property, evidence and constitutional law.

Full details here.

Return Your New Car?

We all have seen it; recent data has shown the auto industry is in much turmoil. The headlines report General Motors down as much as 22.7%, Chrysler down 30%, and Toyota down 15%. That being said… it is by far the best time to purchase a car, IF YOU TRULY NEED ONE. Automakers have thrown out incentive after incentive in attempts to entice new car buyers but few have been as radical as the one Hyundai has recently announced.

With roughly a 3% market share Hyundai has recently announced the, “Hyundai Assurance Program”. The program is one which allows a new car buyer to return a vehicle within the first 12 months of ownership. The program also covers the cost of depreciation on the vehicle within the first 12 months of ownership up to $7,500 in negative equity. The company states that the program is intended to protect the consumer, in case of involuntary unemployment, physical disability, loss of driver’s license due to medical impairment, international employment transfer, self-employed personal bankruptcy, and accidental death.

The program is subject to approval by Hyundai, stipulates that the assurance program coverage is limited to the above situations, and a consumer must have made at least two scheduled payments prior to filing a “benefit request” with Hyundai Assurance. Furthermore upon filing a request the value of the vehicle is assessed by the dealer.

It’s an interesting plan, which targets those who are currently on the fence about buying a new vehicle but hesitate due to the current economic situations. In 2008 Hyundai was down 14% in overall sales compared to 2007; let’s see where this new program takes them... who knows maybe others will follow?

Keep up the good work Officer!

Adam C. Weinstein has sued the Belleville, IL police department alleging a violation of his constitutional rights. Media reports do not indicate whether the police officer in question is being sued personally. (Editor's Note: I really hope that he is.)

Weinstein was arrested in 2006 outside a bar in Belleville, IL for "impersonating a police officer."

According to the lawsuit, a waitress told Weinstein that some police officers wanted to speak with him outside the bar. At the time, Weinstein was wearing a black t-shirt with the word "POLICE" typed across the front.

Weinstein went outside and was greeted by Belleville Police Officer Jeff Vernatti. Vernatti, Weinstein alleges, asked him for his police credentials. Weinstein says he told the officer he didn’t have any credentials because he wasn’t a police officer.

That’s when, according to Weinstein, the police officer started screaming curse words and became physically and verbally abusive. Weinstein says he was cuffed, but later released by the officer. He also says that he was made to take the t-shirt off while standing in the cold.

Weinstein was ticketed for impersonating a police officer. The ticket ONLY ALLEGED THAT WEINSTEIN WORE THE SHIRT. Nothing else! The ticket was eventually dismissed. Now Weinstein is suing.

Holy cow! What an idiot. I'll bet this officer also wants to arrest all 40 million people who bought NYPD hats after 9-11 for "impersonating fire fighters." Seems to me that one should be free from arrest for the words printed on his clothing under the 1st Amendment to the Constitution, but maybe I am wrong. We'll wait to see how this one plays out.

Have a safe and happy new year.

Is Cheerleading a Sport?

I don't know. At least not officially.

The Wisconsin Appellate Court recently refused to decide whether cheerleading is in fact a sport. That court assumed that cheerleading is a sport, for purposes of a recent opinion, but failed to actually hold that cheerleading was a sport.

The Court did, however, hold that cheerleading is not a "contact sport," as that was the true issue before the court.

The case involved a ninth-grade cheerleader's suit against another cheerleader for negligence in failing to properly spot her during a stunt and causing her to fall from a pyramid and suffer a severe head injury.

The defense claimed immunity from negligence liability under a Wisconsin statute that provides that a participant “in a recreational activity that includes physical contact between persons in a sport involving amateur teams” is liable only for causing injury to another participant by acting “recklessly or with intent to cause injury.”

In Noffke v. Bakke, 748 N.W.2d 195 (Wis. App. 2008), the Court held that cheerleading is not a “contact sport” for purposes of this statute. It concluded that, although “the risks and the athleticism involved in cheerleading are comparable to those in contact sports,” cheerleading is not a “contact sport” because “it does not involve physical contact between opponents.”

Therefore, the Wisconsin statute at issue did not bar plaintiff's negligence claim against the defendant.

The Wisconsin Supreme Court granted the defendant's petition to appeal this ruling, and the case is awaiting decision after oral argument last fall.

Maybe then we will get an official ruling as to whether cheerleading is actually a sport.

(Article courtesy of the Marquette University Law School Faculty Blog.)

Proper Service

Thank you very much for the warm welcome Michael! It's amazing how just a semester of law school can change how you look at the world, it's a whole new perspective with out a doubt! Below is a link for an article that I came across...I am a big fan of technology and innovation...so I figured this might be some food for thought?

In brief, the article is about an Australian lawyer who convinced the courts to allow him to service a couple via facebook! After many unsuccessful attempts at serving the couple properly, the lawyer came across the woman's facebook page. The Judge granted permission, stipulating that the service was only to be given via their private emails such that the private matter would only be seen by the intended parties. It's not the first time the Australian courts gave permission for service in these ways (emails, text, etc.) The idea reminds me of what i learned in Civil Procedures in terms of proper service. Yet another way technology has opened a new chapter in the legal realm. I wouldn't be surprised if this method is attempted by attorneys in the U.S. in the near future?!

http://news.bbc.co.uk/1/hi/world/asia-pacific/7785004.stm

Guest Contributors

I am pleased to announce that the Northern Law Blog has added a Guest Contributors section. The Law Blog is now accepting posts from non-NIU lawyers and law students.

The first guest contributor is Waseem A. Mateen. Waseem is a first year law student at the Valparaiso University School of Law. He just recently finished his first semester final exams, so we'll give him some time to unwind before we look for his first post.

Glad to have you Waseem!

iPhone application helps DUI offenders find lawyers

I have blogged about Avvo before. They are the lawyer rating service that previously petitioned the Illinois Supreme Court for the master roll of all licensed attorneys in this state, and lost.

Well, they are back in the news. They have developed an application for the iphone which allows you to log each drink that you consume over a given time period. It then calculates your approximate BAC based on gender, weight, etc. Then, if you exceed the legal limit, it will suggest cab companies or other alternative means of transportation. Then, if you get pulled over for DUI, it will suggest a DUI lawyer in your area.

Check out the full article here.