1924
Ponente: Learned Hand, J.
Topic: Duties of Directors and Controlling Stockholders
SUMMARY:
Barnes, as receiver of Liberty Starters Corp., filed an action
against Andrews, a director of the corporation, for misprision of office. The
complaint alleged that Andrews failed to give adequate attention to the affairs
of the corporation, resulting in losses and depletion of funds.
The Court found
Andrews guilty of misprision of office for relying solely on the President's
updates on the status of the corporation. Despite this, Andrews could not be
held liable for the losses suffered by the corporation because Barnes failed to
adequately show that the performance of Andrew's duties would have completely
avoided said losses.
When a business fails from general mismanagement, business
incapacity, or bad judgment, it is difficult to conjecture that a single
director could turn the company around, or how much dollar he could have saved
had he acted properly.
DOCTRINE:
A business can fail for many reasons. Thus, imposition of a
liability depends on proof of causation.
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