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07 | 21 | 2006 Posted By James Streett

Applicability of Officer/Director Immunity Statutes is a Question of Fact

Tennessee, like most states, provides individual immunity for officers and directors  of corporations for certain acts done on behalf of the corporation.  However, the individual immunity conferred by the Tennessee statutes in not without qualification.  Tenn. Code Ann. § 48-18-301(a)(1),(d) (directors) and Tenn. Code Ann. § 48-18-403(a)(1),(d) (officers) make individual immunity contigent on three elements:

 

(1) the exercise of reasonable care;

(2) the presence of good faith;

(3) the legitimate interests of the corporation.

 

The Court of Appeals recently addressed the application of these statutes in  Dolan v. Poston, 2005 WL 2402919 (Tenn. Ct. App. 2005).  The Court noted: 

When a corporate officer relies on Tenn. Code Ann. § 48-18-403 for immunity in his or her individual capacity, the question becomes whether that officer was performing duties of a corporate officer in good faith and in furtherance of the perceived best interest of the corporation.  The critical factors in considering this question are intent, motive or purpose, and means.”  These are, of course questions of fact.  Id. at *6.

Accordingly, for purposes of both pleading and proof, these elements should be kept in mind when officer/director immunity is a relevant issue.