Resolution Trust Corp. v. Block
924 S.W.2d 354, 1996 Tenn. LEXIS 416 (1996)
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Rule of Law:
When corporate directors and officers act in concert to breach their fiduciary duties, their liability to the corporation is joint and several, meaning each individual can be held responsible for the entire harm. This principle is not abrogated by the adoption of comparative fault.
Facts:
- The defendants were former officers and directors of the Lincoln Federal Savings and Loan Association.
- As a board, the defendants collectively approved certain loans made by the corporation.
- These loans resulted in significant financial losses to Lincoln Federal Savings and Loan Association.
- The corporation became insolvent, and the Resolution Trust Corporation (RTC) was appointed as its receiver.
Procedural Posture:
- The Resolution Trust Corporation (RTC) sued the former officers and directors in the U.S. District Court for the Eastern District of Tennessee.
- RTC's complaint requested a judgment holding the defendants jointly and severally liable for $4.2 million.
- The defendants filed a motion to strike the request for joint and several liability, arguing that liability must be apportioned based on comparative fault.
- The district court initially denied the motion but later reconsidered and granted the defendants' petition to certify the question of law to the Tennessee Supreme Court.
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Issue:
Does Tennessee's adoption of the doctrine of comparative fault require liability to be apportioned among corporate directors and officers for their collective breaches of duty, or does the doctrine of joint and several liability still apply?
Opinions:
Majority - White, Justice
No, Tennessee's adoption of comparative fault does not require apportionment of liability among directors for their collective actions; joint and several liability still applies. The court reasoned that the principles of comparative fault, established in cases like McIntyre v. Balentine, apply to tortfeasors who act independently to cause a single, indivisible injury. However, the doctrine of joint and several liability historically and logically applies to tortfeasors who act in concert. The court emphasized that when directors engage in a 'collective breach,' they are participating in a joint enterprise where the act of one is the act of all. This concerted action is distinct from separate, independent acts of negligence. Citing numerous authorities and the unanimous view of other jurisdictions, the court concluded that even commentators who advocate for abolishing joint and several liability in other contexts agree it should be retained for defendants who act in concert.
Analysis:
This decision clarifies a significant exception to Tennessee's modern comparative fault regime. It establishes that the nature of the defendants' conduct—specifically, whether they acted independently or in concert—is the key determinant for applying either comparative fault or joint and several liability. By preserving joint and several liability for the collective actions of corporate boards, the court reinforces the principle of collective board responsibility and accountability. This holding provides a strong tool for plaintiffs, such as corporate receivers, to recover full damages from any single culpable director, rather than being forced to pursue proportional shares from each individual.
