Corporate Officer Liability for Failure to Supervise

General Supervisory Statute Grants No Private Remedy For Third Parties

Although California law creates a duty to supervise employees by the designated officer of a corporate real estate broker (California Business and Professions Code section 10159.2), the Court of Appeal ruled that this duty is owed only to the corporation, not to third parties harmed by the failure to supervise. (Sandler v. Sanchez (Jun. 18, 2012) 2012 DJDAR 8129.)

However, this does not mean that third parties cannot sue under traditional agency and vicarious liability principles.  Generally speaking, the corporation may be held liable for the acts and/or omissions of employees.  Sometimes, corporate officers may be held liable.  Generally, however, more than only a general statutory supervisory duty is necessary, according to the court.

Whenever one has a claim against a corporation, in any context, one needs to review the facts and the law to determine if there may be individual liability on the part of one or more officers, directors or employees – there may be.  But, there may not be.  When defending, one needs to investigate fully, as there may be a conflict in representing both the corporation and any individuals therein.  While a conflict waiver may be appropriate is some situations, in others – not so much.

In this economy, with corporations going out of business, plaintiffs are looking for other pockets and insurance policies from which to be compensated. Consult a business litigation attorney to determine the potential liability of a particular corporation and its officers in this always evolving area of law.