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  • WisBar News
    August 12, 2011

    Corporate agents can’t use corporate veil to escape false representation claim 

    The argument that agents must act outside the scope of authority to be personally liable fails.

    Corporate agents can't use corporate veil to   escape   false representation   claim Aug. 12, 2011 – Even if acting on behalf of the corporation, agents who engage in tortious conduct can be personally liable, the District II Wisconsin Court of Appeals recently clarified.

    Jason and Tara Ferris (Ferris) alleged that three of Location 3 Corporation’s agents conspired to make false representations in a real estate condition report by omitting information that land adjacent to the property was a designated Superfund site, a toxic waste zone. This intentional conduct violated Wis. Stat. section 895.446 (action for property damage), Ferris argued.

    The Waukesha County Circuit Court dismissed the agents from the lawsuit, finding insufficient facts to pierce the corporate veil of limited liability. However, the District II Wisconsin Court of appeals reversed in Ferris v. Location 3 Corp., 2010AP2203 (Aug. 10, 2011).

    The agents of Location 3 Corp. argued that corporate agents cannot be personally liable in addition to the corporation’s liability if not acting outside the scope of authority, and in any event, Ferris did not plead sufficient grounds to support a veil piercing argument.

    The appeals court, in an opinion written by Chief Judge Richard Brown, clarified that an agent can be personally liable regardless of whether or not they acted outside the scope of their authority, if a fact finder finds the agent engaged in tortious conduct.

    “Wisconsin case law has firmly established that individuals are liable for their own tortious conduct,” Judge Brown wrote. “Thus, the defendants in the case cannot hide behind the corporate veil.”

    The appeals court also rejected the argument that the economic loss doctrine, which bars contract parties from pursuing tort remedies, barred Ferris’ misrepresentation claim. Under Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 22, 308 Wis. 2d 103, 746 N.W.2d 762, the economic loss doctrine does not bar statutory claims, the appeals court explained.

    By Joe Forward, Legal Writer, State Bar of Wisconsin

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