Monday, December 12, 2011
Francis v. United Jersey Bank case brief
Francis v. United Jersey Bank
87 N.J. 15 (1981)
NJ Supreme Court held that corporate directors owe a duty of care to their corporation and its shareholders. The court outlined the responsibilities that arise from the duty of care.
Pritchard & Baird Intermediaries Corporation was a reinsurance broker. The company acted as a “middle man” between insurance companies seeking to indemnify each other for insurance claims. The company had begun as a partnership co-founded by Charles Prichard, Sr. (“Charles Sr.”) but eventually became a corporation whose whose board included Lillian Pritchard (“Lillian”), William Pritchard (“William”), and Charles Pritchard, Jr. (“Charles Jr.”). Following the death of Charles Sr., Charles Jr. and William began to abuse the company’s ﬁnances by withdrawing increasing sums of money from its accounts under the guise of “shareholder loans.” Although the withdrawals created enormous capital deficits that eventually forced the company into bankruptcy, Lillian did nothing to rein in the abuse.
(1) Did Lillian Pritchard breach a duty of care to the corporation and its
(2) If so, was the breach a proximate cause of the bankruptcy?
(1) Lillian Pritchard breached a duty of care to the corporation and its share-
(2) The breach was a proximate cause of the bankruptcy.
Corporate directors owe a duty of care to the corporation andits shareholders. While the speciﬁc responsibilities vary according to the nature of the corporation, the duty of care requires directors to have at least a rudimentary understanding of the corporation’s business as well as up-to- date knowledge of the corporation’s activities. Although a director need not personally audit the corporation’s accounts, directors should review ﬁnancial statements to keep abreast of its ﬁnancial situation. Therefore, a director may not excuse his failure to discharge this duty by claiming ignorance of the corporation’s state.
Despite being a director of Pritchard & Baird, Lillian was entirely detached from the company’s aﬀairs. Had she reviewed its ﬁnancial statements, she would immediately have realized that Charles Jr. and William were making improper withdrawals from the company’s accounts. The obviousness of the withdrawals means that Lillian also had an obligation to attempt reining in the abuse. Her failure to intervene was therefore a proximate cause of the bankruptcy.
According to a Forbes article, personal injury lawsuits are civil actions brought by an injured person against the party responsible for the...
Class 1: Elements of Fundamental Value: Present Value, Future Value, Net Present Value: Elements of Fundamental Value (38) One year : ...
Corthell v. Summit Thread Company (1933) · Facts: Corthell is a salesman for Summit. He invents contraption that is bought b...
I can help you land in the top 10% of your law school class. Imagine, how your life would be different if you were in the top 10% o...