The Minnesota Supreme Court has held that a corporate officer may be personally liable for a defamatory statement made by the corporation where he allegedly “participated” in the publication of the statement. DeRosa v. McKenzie, 936 N.W.2d 342 (Minn. 2019). The plaintiff, William DeRosa, was appointed to the board of directors of Dakota Plains Holdings, Inc. (“Dakota”) by a major shareholder, Lone Star Value Management (“Lone Star”). Dakota’s CEO, Craig McKenzie, did not get along with DeRosa and claimed that DeRosa was improperly sharing information about Dakota with Lone Star. DeRosa resigned from the Board and Dakota started a lawsuit against him in Nevada alleging breach of fiduciary duty.
The Defamatory Statement
While the Nevada action was pending, Dakota issued a press release stating in part:
“DeRosa . . . violated his fiduciary duties to all
stockholders and committed unlawful acts by sharing material non-public information.
Mr. DeRosa resigned from the Board because of this breach of fiduciary duty and
will stand trial in court for his actions later this year.”
Dakota issued the press release at McKenzie’s direction and with his approval. It was subsequently included in the company’s 8-K filing with the SEC as well. DeRosa sued for defamation in Minnesota. Because he alleged that McKenzie “authorized” the publication not that McKenzie “made or authored” the statement, the district court dismissed the complaint and the Minnesota Court of Appeals affirmed.
Personal Liability for Corporate Acts under Minnesota Law
The Minnesota Supreme Court reversed, noting the “universal rule that an officer of a corporation who takes part in the commission of a tort by the corporation is personally liable therefor.” The Court acknowledged that a corporate officer cannot be held personally liable for company’s defamatory acts by virtue of job title alone (which it characterized as “reverse-vicarious liability”) but held that if the allegation is that the corporate officer “personally took part . . . by directing, authorizing, and approving” the allegedly defamatory statement, the officer may have personal liability. The claim was remanded to the trial court so McKenzie may have other defenses to assert, such as privilege, but the holding is still a wake-up call to corporate officers to be mindful of the corporate communications they authorize or endorse.
Potential Consequences
The precedent from this decision might be exploited by former employees in leverage against their former employers in future legal actions by asserting a defamation claim against an officer personally instead of the corporation. Business and their officers should always be cautious when making official statements about any individual.
If you have questions about a potential defamation claim,
contact the Minnesota defamation law attorneys at Trepanier MacGillis Battina
P.A.
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About the Author:
MacGillis Battina P.A. is a Minnesota business, litigation and employment law firm located in Minneapolis, Minnesota. Their attorneys can be reached at 612.455.0500.