When a corporation is formed – meaning that a business is structured and will operate according to the rules for corporations rather than for partnership or sole proprietorships – certain advantages apply. When your business is a corporation, it becomes an entity of its own. It is an entity that is responsible to its shareholders and while it, as a corporate entity can be sued, generally speaking, the individual shareholders or officers cannot be held personally liable for damages done by the “other guy,” the corporation. We refer to this shield as the corporate veil.
There are, however, provisions within the law which can ‘pierce the corporate veil’ when it becomes necessary, making officers of the corporation responsible for the torts of the corporation. For example, when one or more of the officers of the corporation directly causes the operation of the corporation to be negligent, the corporate veil and their protections under those laws may be stripped away, leaving the officer or owners personally vulnerable to lawsuit.
This is what happened in the case of Barnes v. Smith, 339 Ga. App. 607 (2016) where a woman was seriously injured in an accident caused by an intoxicated driver. The man had been drinking at a tavern – a corporation owned by a single stockholder. The injured woman sued the bar and its owner – the only shareholder and officer for the corporation – for negligence in training and supervising the tavern’s staff asking that the corporate shield be lifted so that he could be held personally accountable for the woman’s injuries.
Evidence proved that the bartender on duty at the time was the shift supervisor and had been trained by the owner/stockholder. She knew the customer and recognized that he was intoxicated. She unsuccessfully tried to take his keys, offered to call him a cab, and even offered to drive him home. He refused her intervention. When the intoxicated man told the bartender that he was going to nap in his car, she believed him. She later heard his car drive away.
The trial judge granted the defendant’s motion for summary judgment to the bar’s owner and sole shareholder on the negligent training claim brought against him because there is nothing to show that he directly participated in a wrongful act. The case against him was dismissed because he was protecte`d by the corporate veil and could not be held personally liable.
The plaintiff appealed the trial court’s judgment. Upon review, the Georgia Appeals Court simply applied the general rule that a corporate officer “who takes no part in the commission of a tort committed by the corporation is not personally liable unless he specifically directed the particular act to be done or participated or cooperated therein.”
Taking on a corporation in court can be challenging. It can also be frustrating on a personal level. As in this case, we might think it obvious that the bartender was improperly trained by the owner – she didn’t call the police to pick up the drunk driver as she should have. But because the defendant had thought to structure his business as a corporation, he left the courtroom personally unscathed, although the corporation itself (because it employed the bartender) may ultimately still be responsible to the injury victim.
Personal injury law and its successful practice turn on the legal team’s ability to anticipate and plan for all the curve-balls that will inevitably be thrown by the opposition. When a team does this kind of work all day, every day they become very good at it. That’s why we specialize.
If you’ve been injured by somebody else’s negligence – whether or not they are protected by the corporate veil – allow us to review your case. We provide a free case evaluation so that we can analyze the facts and help you determine what your best course of action is. There is no charge, just good advice. Call our offices today.