Corporate Officers Acting in Bad Faith and Outside Scope of Duties Can Be Held Liable for Actions Taken in Corporation’s Name

On May 30, 2024, the First Department issued a decision in Manhattan Chrystie St. Dev. Fund, LLC v. 215 Chrystie Invs. LLC, 2024 NY Slip Op. 02989, holding that corporate officers acting in bad faith and outside the scope of their duties could be held liable for actions taken in corporation’s name, explaining:

Defendants have failed to demonstrate that Witkoff and Schrager cannot be liable as corporate officers because, according plaintiff the benefit of every possible favorable inference, the complaint adequately alleges that they took acts outside the scope of their employment for personal profit. This is based on their allegedly causing the Joint Venture to incur commercially unreasonable loans so they could siphon money for their enrichment, while leaving the Joint Venture unable to pay amounts owed to plaintiff.

(Internal citations omitted).

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