Company Directors Liability of Approval of Unlawful Acts In California
A corporate director or officer's participation in tortious conduct may be shown not solely by direct action but also by knowing consent to or approval of unlawful acts. (Frances T. v. Village Green Owners Assn. (1986), 42 Cal. 3d at pp. 503-504; Spahn v. Guild Industries Corp. (1979) 94 Cal. App. 3d 143, 157, fn. 9 [156 Cal. Rptr. 375]; Murphy Tugboat v. Shipowners & Merchants Towboat (N.D.Cal. 1979) 467 F. Supp. 841, 852, affd. (9th Cir. 1981) 658 F.2d 1256; 18B Am.Jur.2d, supra, Corporations, 1877; 3A Fletcher Cyclopedia of the Law of Private Corporations (perm. rev. ed. 1994) 1135.)
As the Supreme Court held in Frances T., supra, 42 Cal. 3d at pages 508-509, "To maintain a tort claim against a director in his or her personal capacity, a plaintiff must first show that the director specifically authorized, directed or participated in the allegedly tortious conduct; or that although they specifically knew or reasonably should have known that some hazardous condition or activity under their control could injure plaintiff, they negligently failed to take or order appropriate action to avoid the harm.
The plaintiff must also allege and prove that an ordinary prudent person, knowing what the director knew at that time, would not have acted similarly under the circumstances."
In Spahn v. Guild Industries Corp., supra, 94 Cal. App. 3d at page 157 and footnote 9, the Court of Appeal held officers and directors of a corporation were personally liable for fraud committed by a managerial employee because they knew about and allowed the tortious conduct to occur.
In addition, corporate directors and officers may be held personally liable, as conspirators, for violating their own duties towards persons injured by the corporation's tort. (Doctors' Co. v. Superior Court, supra, 49 Cal. 3d at p. 48; Wyatt v. Union Mortgage Co., supra, 24 Cal. 3d at p. 785.)