A director or officer who is charged with a breach of the duty of due care, the duty of loyalty, or some other wrongdoing, can face substantial damages. For example, the defendant directors in Smith v. Van Gorkom (488 A 2d 858, Dec. 1985) ended up settling for $ 23 million even though they were not guilty of intentional wrongdoing (Emmanuel Law Outlines, Corporations, p. 382).

Common-Law Fraud and Deceit

Directors and officers are also subject to lawsuits based on common-law fraud and deceit. The plaintiff must show the director or officer made false representations under circumstances that entitled him to rely on them, and that as a results of the reliance he suffered damages (Dorsey v. Mancuso 23 Conn. App. 629 (1990)). The plaintiff must also show the representations were fraudulently made. It appears the courts may find fraud when statements are made recklessly (Warren v. Delaney 148 Conn. 469).

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