Can Officers of an S Corporation Be Sued for Product Liability?
- If you can show that the S corporation was not formed propertly, you can sue officers for product liability. Essentially, if the officers did not follow correct procedure for filing and maintaining corporation status, the liability protection does not exist because the corporation does not exist.
- If an officer signs a contract without indicating the signature is on behalf of the S corporation, you can make the case that the officer was acting on his own. You can then sue the officer for product liability. You may also sue if the officers routinely sign letters, memorandums and other official documents without indicating that the signatures are on behalf of the corporation.
- If officers do not keep company funds separate from personal funds, you can claim that the S corporation is merely an alter ego and not a separate entity. The courts may allow you to sue the officers if you can show co-mingling of money.
- Often, the reason for suing officers in addition to the corporation is that the corporation may not have enough money to pay damages. If you can show that the S corporation has been deliberately underfunded to prevent having to pay damages, the court may allow you to pursue the assets of officers in a product liability case.
- An S Corporation cannot shield its officers from sexual harrassment lawsuits. If you want to sue an officer for sexual harrassment, the corporation may ask the officer to resign, but that won't limit your ability to sue the individual for wrongdoing. This would arise in a product liability case where your interactions with an officer regarding your complaint became tainted with sexual innuendo or sexual stereotyping. If the S Corporation successfully shielded the officer from the product liability complaint, you would still have grounds to sue the officer on the sexual harrassment complaint.