When Are Directors of Minnesota Corporations Liable to Commercial Creditors For Torts Committed By Corporate Employees?
Recently, a commercial creditor attempted to rely upon dictum from a 1976 Minnesota Supreme Court decision to claim that directors should be liable to the creditor based on negligence principles for failing to detect or prevent torts committed by corporate employees. But to hold directors liable in such circumstances would dangerously expand the traditional rule that directors are not liable to third party commercial creditors in negligence for torts they did not commit. * * * * Several years ago the president of a company forged the signatures of our director clients on personal guarantees as part of a scheme to defraud a bank into making a loan to the president’s company. Our clients were also defrauded into investing in the president’s corporation, and became shareholders and directors just three weeks before the bank made its loan. After the bank had issued the loan, our clients discovered the fraud and promptly notified the bank. Unfortunately, by this time, the loan proceeds had
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