Corporate Officer Liable for Business Tort Only to Extent of Personal Participation in and Knowledge of It

On September 9, 2019, Justice Borrok of the New York County Commercial Division issued a decision in Itria Ventures LLC v. Provident Bank, 2019 NY Slip Op. 32695(U), holding that a corporate officer could be held liable for a business tort only to the extent of the officer's personal participation in, and knowledge of, the tort, explaining:

The Itria Defendants argue that Provident fails to state a counterclaim for conversion against Biz2Credit and Mr. Arora because there are no allegations that either party was specifically involved, in their individual capacity, with the inventory financing or accepted payments from Lotus Exim. The Itria Defendants assert that in New York, an officer or director is only liable when acting for personal, rather than corporate interests. In opposition, Provident argues that the position taken by the Itria Defendants contradicts established law, citing to the proposition that a corporate officer who commits a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced. In Rajeev, the Second Department upheld a jury's verdict imposing personal liability against a corporate officer because, there, the evidence indicated that she was responsible for the determination to withhold the subject records from the plaintiff. The cases cited by the parties are not actually contradictory because both Hoag and Rajeev recognize that that there must be some element of personal responsibility by a corporate officer before liability may be imposed. This is consistent with the New York Court of Appeals' decision in Hinkle Iron Co. v Kohn, where the Court held that a corporate officer must personally participate in the act of conversion and have knowledge of such an act before any liability may attach. Thus, as an initial matter, Mr. Arora and Biz2Credit may be liable for conversion if Provident can establish that they personally participated in the conversion. However, this issue is academic because Provident fails to allege the requisite elements of conversion.

(Internal quotations and citations omitted) (emphasis added).

As this decision shows, only if a corporate officer participates in the conversion may the officer be held liable for conversion. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding one person depriving another of her property, whether that property is tangible or intangible, or even involves a discrete fund of money.