Legal Question in Business Law in California

Re: Personal liability versus corporation liability

"Just to scare them" is never a good enough reason to name someone as a defendant. Depending upon the circumstances, though, there can be a variety of reasons why a lawyer would name individual officers, directors, etc. along with the corporation.

I want to note first that the corporate veil protects shareholders, not officers or directors (except to the extent that they also own stock). You may have misunderstood this doctrine; if so, that misunderstanding may have caused you some confusion.

In tort actions, a corporation can be held liable for acts taken by its personnel when acting within the course and scope of their duties. This does not alter the fact that the individuals are also liable. In such cases the individuals are sued because they are the wrongdoers.

In other types of cases there may be various reasons to sue individual employees, officers, directors and owners along with (or instead of) the corporation. In shareholder derivative suits, for example, the directors have to be named as defendants.

Because there are so many different types of lawsuits and so many conceivable fact patterns, this is the best answer I can give you in the abstract. You may want to re-submit your question with more details about the case.

Re: Personal liability versus corporation liability

Mr. Hoffman has given you an accurate and pretty thorough answer already, and I fully agree. Never name anyone a party unless (a) you have a legally and factually tenable theory upon which the party might be found liable, or (b) the law makes the proposed party a "necessary" party in order to insure that it is informed and participates. In some cases, defendants are named who really ought to be co-plaintiffs, but didn't want to be; naming them as defendants gives the court jurisdiction and the court can grant complete relief, possibly including awarding damages, property, etc. to the reluctant party.

I can think of cases where an officer or director has been named personally because (for example), in signing a document, he or she failed to sign in his or her capacity as an officer, but carelessly just signed as an individual. Also, stockholders in a closely-held business can sue officers and directors in their individual capacities, as well as derivatively, for a number of types of misfeasance or malfeasance in office, including making unauthorized loans of company money or property to themselves(Corporations Code section 315) or breach of the fiduciary duties of care and loyalty.

So, there are perhaps a half dozen types of suits or types of plaintiff where suit against a director, officer, or less likely a mere shareholder, is not only possible, but necessary and proper.