Lothrop v. Chirob, Inc., No. S1051-03 CnC (Norton, J., Mar. 4, 2005) 

[The text of this Vermont trial court opinion is unofficial. It has been 

reformatted from the original. The accuracy of the text and the 

accompanying data included in the Vermont trial court opinion database is 

not guaranteed.] 

STATE OF VERMONT SUPERIOR COURT 

Chittenden County, ss.: Docket No. S1051-03 CnC 

LOTHROP 

v. 

CHIROB, INC. 

ENTRY 

 This is a motion for summary judgment that raises the question of 

how liability attaches to a corporate officer. 

 

 Defendants David Roby and Darren Chiott formed Bullet Boy, Inc., 

a message and delivery service in northern Vermont. The two incorporated 

their business as a Vermont corporation and became the company’s sole 

shareholders, directors, and officers. Ten years later, they decided to sell 
their business and listed it with the Vermont Business Brokers. The 

Brokers generated a packet of information about Bullet Boy. This included 

an overview of the operations, owner’s information, number of employees, 

list of equipment, purchase price, and financial statements of operating 

income for the past two years. It is unclear who from Bullet Boy helped the 

Vermont Business Brokers prepared this list. It may have been Chiott; it 

may have been Roby; or it may have been both. 

 At this point, plaintiff Gregory Lothrop entered the picture. He 

received the packet of information on Bullet Boy and began making 

inquires. He dealt exclusively with Chiott who talked with him on the 

phone and met with him at two meetings in August 2001. At those 

meetings, Lothrop, Chiott, and an agent of the Vermont Business Brokers 

discussed the details of the business and negotiated the sale. At one 

meeting, Chiott gave Lothrop a list of Bullet Boy’s top ten customers by 

total annual billing amounts. These dealings led to a letter of intent signed 

by Chiott and Lothrop. The two physically inspected the business’s 

equipment and assets and signed an asset purchase agreement. Chiott then 

executed a Bill of Sale, conveying all of Bullet Boy’s equipment and assets 

to Lothrop, including its customer lists. Bullet Boy, Inc. then changed its 

name to Chirob, Inc., which freed Lothrop to create a corporation with that 

name, essentially taking possession of the company’s goodwill asset. 

 Lothrop now claims that Roby and Chiott greatly overstated the 

value of their business. In particular, he points to the customer lists that the 

parties provided at the time of the Bill of Sale. Lothrop claims that many of 

the “active customers” were in fact former or dissatisfied customers. 

According to Lothrop, these lists were the most important asset of the 

company and its inaccuracies greatly altered the value of the business. 

Lothrop, however, also claims that he was misled by the information given 
to him before and during the sale by Chiott and the Vermont Business 

Brokers, which also exaggerated the business’s haleness. 

 In his defense, Roby does not dispute any of these facts or Lothrop’s 

dissatisfaction. Instead, Roby points to the fact that the entire sale and 

several of the lists generated during negotiations were produced by Chiott. 

Roby argues that Chiott, and Chiott alone, bears all personal liability for 

them, and that he should not be held liable because he did not participate in 

their manufacture or distribution. 

 To understand the implications of Roby’s defense and its relative 

merit, it is necessary to isolate Roby in each of his many roles at Bullet 

Boy, Inc. See generally C. Fain, Corporate Director and Officer Liability, 

18 U. Ark. Little Rock L.J. 417 (1996) (discussing the limits of corporate 

duties and liabilities for individuals). As a shareholder Roby enjoys 

immunity for the tortious actions of officers, other shareholders, and 

directors. 11A V.S.A. § 6.22(b) (noting that personal actions are the sole 

source of liability). In this case, Roby appears to have acted as a 

shareholder only to extent that he voted to approve the asset sale. This 

decision is not at issue in the present litigation. As a director, Roby had 

similar immunity, so long as he relied in good faith on information and 

acted as an ordinary, prudent director. 11A V.S.A. § 8.30. In this case, 

Roby may have acted as a director when he and Chiott came up with the 

idea to sell the assets of the corporation, and it may have been as a director 

that he and Chiott agreed to have Chiott handle any prospective buyers. He 

may even have acted as a director in approving the sale to Lothrop. But 

these activities put Roby too far away from the details of the sale that 

Lothrop cites in his complaint. Roby as director may be authorizing the 

sale and empowering Chiott to provide details, but there is no evidence that 

Roby as director was ordering Chiott to mislead customers or generate 
misleading documents and customer lists. Lothrop’s basis for his claims is 

much smaller. He is claiming that Roby and Chiott produced misleading 

documents that led him to overvalue the corporation. In this respect, he is 

talking about Roby and Chiott in their role as officers of the corporation. 

 An officer of a corporation is charged with performing duties listed 

in the corporate bylaws and any duties prescribed or directed by the board 

of directors. 11A V.S.A. § 8.41. When dealing with external parties, an 

officer is often an agent of the corporation, but he is not an agent of other 

officers. It is generally held that an officer, even one acting in an official 

capacity, is liable only for torts that she commits. 3A W. Fletcher, Fletcher 

Cyclopedia of the Law of Corporations § 1135 (2002). Conversely, an 

officer is not personally liable for the torts of a corporation merely by virtue 

of her office. Id. at § 1137; see also Bowling v. Ansted Chrysler-PlymouthDodge, Inc., 425 S.E.2d 144, 148–49 (W.Va. 1992) (collecting cases). 

Roby’s argument for summary judgment focuses on his non-participation in 

any direct dealings with Lothrop. In respect to the general rule, this 

position has some merit. Since there is no evidence that Roby and Chiott 

conspired from the beginning to mislead any buyers, Chiott’s 

misrepresentations made during the negotiations and through documents 

that he generated are not attributable to other officers, directors, or 

shareholders. To the extent that they are misrepresentations, they are 

attributable to Chiott and the corporation. 

 The problem with granting summary judgment in this case, however, 

is that despite his evidence, Roby does not discuss the manufacture of the 

initial information provided to the Vermont Business Brokers or the final 

customer list provided at the sale. More importantly, these two exceptions 

are indicative of the lack of evidence showing that Chiott, and not Roby, 

was the sole officer responsible for generating and handling all of the 
material for the sale. This is important because there is an exception the 

rule against officer liability. 

 The responsible corporate officer doctrine states that “if a corporate 

officer participates in the wrongful conduct, or knowingly approves the 

conduct, the officer, as well as the corporation is liable for the penalties.” 

3A Fletcher, at § 1135, at 202. As one court phrased the duty: 

An individual director [or officer] cannot escape liability for 

fraudulent corporate action taken under authorization affirmatively 

approved by him merely by asserting his ignorance of facts he had 

a duty to know and should have known. Where the duty of 

knowing facts exists, ignorance due to neglect of duty on the part 

of a director creates the same liability as actual knowledge and a 

failure to act thereon.

Fowler v. Elm Creek State Bank, Inc., 254 N.W.2d 415, 419 (Neb. 1977). 

 This exception to officer liability is not a piercing of the “corporate 

veil.” Cf. Agway, Inc. v. Brooks, 173 Vt. 259, 262–63 (2001). When a 

court pierces the “corporate veil,” the court is essentially ignoring the 

corporate structure with its inherent liability because the owners and 

officers of the corporation through underfinancing or fraudulent behavior 

have abused the corporate form and behaved outside the corporate 

structure. In this case there is no evidence by plaintiff to suggest that 

Chiott or Roby abused the corporate structure itself or that there is any 

reason to treat them outside their roles as officers, directors, and 

shareholders. 

 Instead, what Lothrop is arguing is that it is unclear who in the 

corporation was responsible for generating the misrepresenting documents 

and who approved them before they were sent out. While Roby disclaims 
several of them, he does not disclaim them all, and he does not delineate his 

responsibilities in the corporation from Chiott. To the extent that Roby 

seeks to assert the defense of non-responsibility, the burden falls on him to 

make this clear and demonstrate that he was not responsible in any official 

capacity for generating, approving, sanctioning, or ratifying the alleged 

misrepresentations. There is also caselaw to support the idea that this 

determination is ultimately be a factual one and the province of the fact 

finder. Bowling, 425 S.E.2d at 149 (“In sanctioning a fraudulent act, the 

officer need not have actual knowledge because constructive knowledge 

may suffice.”); 3A Fletcher, at § 1137, at 218–19. Still, it is important to 

note that this constructive knowledge is limited and liability will only 

attach where there is evidence of affirmative participation and not simply 

an isolated failure. See, e.g., Shay v. Flight C Helicopter Services, Inc., 

822 A.2d 1, 17–19 (Pa. 2003) (noting that liability through the participation 

theory attaches for misfeasance but not for mere nonfeasance). 

 Because Roby’s evidence fails to fully isolate him from the 

corporate process that created the alleged misrepresentations, summary 

judgment at this juncture would be improper. Therefore, based on the 

foregoing, Roby’s motion for summary judgment is denied. 

 Dated at Burlington, Vermont________________, 2005. 

 ________________________ 

 Judge