Director and Officer Liability for Torts: The Hoang Doctrine Exception
In general, directors and officers are not personally liable for the wrongful conduct of an entity. For example, if Acme Corp. defrauds you during your purchase of widgets, you likely cannot hold the President of Acme Corp. personally liable.
In Colorado, the Hoang doctrine provides a major exception to this general rule. In the case of Hoang v. Arbess, the Colorado Court of Appeals held that an officer can be held personally liable for the wrongful conduct of the entity if he was personally involved in the wrongful conduct. Hoang v. Arbess, 80 P.3d 863 (Colo. App. 2003). What constitutes the “personal involvement” required to create personal liability may vary. The Hoang court found “At a minimum, personal liability attaches to a defendant who was directly involved in the conduct through conception or authorization.” Hoang at 864. The officers approval, direction, active participation or cooperation in the wrongful conduct may also be sufficient to create personal liability. Hoang at 868. However, the question of what actions the officer took remains a question of fact for the jury. Id.
As a result of the Hoang doctrine it is possible to hold a director or officer of an entity personally liable—but that determination is fact-specific. A good rule of thumb is, the more direct involvement an individual had in either deciding to take the wrongful action, or actually completing the wrongful action, the more likely it is that he can be held personally liable.
- Evidence the Manager of the construction company who was involved in each step of the construction, chose the individual home sites, oversaw the subcontractors, set policies and procedures for the subcontractors to follow, failed to follow the soil engineer’s advice and visited the construction sites at least once a week was sufficient to impose personal liability. Hoang v. Arbess, 80 P.3d 863, 868-869 (Colo. App. 2003).
- The Colorado Court of Appeals found that individual liability could attach to a construction manager who directed construction contrary to the recommendations in a engineer’s report. Hildebrand v. New Vista Homes II, LLC, 252 P.3d 1159, 1163 (Colo. App. 2010).