Opinion ID: 2492601
Heading Depth: 3
Heading Rank: 3

Heading: The Fiduciary Shield Doctrine.

Text: Individual defendants Raether, Kravis, Greene, Brous, Roberts, and Tobin also argue that even if we determine that personal jurisdiction over KKR and its affiliates is appropriate, the court cannot exercise personal jurisdiction over them because such jurisdiction is based solely upon their actions as directors of those corporations. In so arguing, the individual defendants claim to be protected by the so-called fiduciary-shield doctrine. That doctrine provides that an officer's or employee's mere association with a corporation is an insufficient basis for the Court to assert jurisdiction over them, even though the Court can assert jurisdiction over the corporation. See 4 C. Wright & A. Miller, Federal Practice and Procedure § 1069 at 370 (2nd ed.1987). Restated, jurisdiction over individual officers and employees of a corporation may not be predicated on the court's jurisdiction over the corporation itself. Id. at 371. Brink v. First Credit Res., 57 F.Supp.2d 848, 858-59 (D.Ariz.1999). As the defendants observe, this Court first applied the fiduciary-shield doctrine in Thames v. Gunter-Dunn, Inc., 373 So.2d 640, 641-42 (Ala.1979), wherein this Court stated: [I]t is clear that jurisdiction over individual officers or employees of a corporation may not be predicated merely upon jurisdiction over the corporation itself. Weller v. Cromwell Oil Co., 504 F.2d 927 (6th Cir.1974); Professional Investors Life Ins. Co. v. Roussel, 445 F.Supp. 687 (D.Kan.1978); Path Instruments v. Asahi Optical Co., 312 F.Supp. 805 (S.D.N.Y.1970). The relationship of bank officers to their bank is analogous to the relationship of corporate officers to their corporation. Therefore we will consider the question of personal jurisdiction here in the same way we would consider it in a corporate frame of reference. It is established that there must be a showing that the individual officers engaged in some activity that would subject them to the state's long-arm statute before in personam jurisdiction can attach. In Idaho Potato Com'n v. Washington Potato Com'n, 410 F.Supp. 171, 181 (D.Idaho 1975) the court said: `(U)nless there is evidence that the act by the corporate officer was other than as an agent for the corporation, then personal jurisdiction over the corporate officer will not lie. Fashion Two Twenty, Inc. v. Steinberg, 339 F.Supp. 836, 842 (E.D.N.Y.1971).' In this case there was no allegation that the corporate entity was a sham or facade intended only to protect the individual appellees. Nor was there a showing that the appellees engaged in any business for personal gain or profit or any transaction which was outside the scope of their employment with the bank. Thus the corporation could not be said to have acted as an agent of the individual appellees so as to become their alter egos and to warrant personal jurisdiction over them. .... While it is sometimes proper to hold that a foreign corporation or bank whose agents acted in Alabama, and caused ramifications in this state, has sufficient contacts with the state to warrant jurisdiction, it is a totally different matter to hold that individual officers have such... contacts. In this case the officers had never been present in Alabama, and there was no proof that the appellees were conducting any personal business either through the use of the corporation as an alter ego, or through personal agents in this state. Thus this Court finds that the ... contacts necessary to extend personal jurisdiction are lacking. 373 So.2d at 641-42. Since the publication of that decision, however, this Court has distinguished Thames on several bases so as to avoid applying the fiduciary-shield doctrine. For example, in Ex parte Sekeres, 646 So.2d 640, 641-42 (Ala.1994), this Court explained: After Thames ... this Court addressed the question of in personam jurisdiction over seven corporate officer/employee defendants in Brooks v. Inlow, 453 So.2d 349 (Ala.1984). The Court affirmed the circuit court's holding that it had no jurisdiction over the two defendants who had never been present in Alabama, but reversed the judgment in favor of the five defendants who had come to Alabama on corporate business. The Court in Brooks distinguished Thames by emphasizing the statement in Thames that the bank officers had never been present in Alabama. The Court has similarly found personal jurisdiction over directors or officers of corporations in Keelean v. Central Bank of the South, 544 So.2d 153 (Ala.1989); Duke v. Young, 496 So.2d 37 (Ala.1986); Alabama Waterproofing Co. v. Hanby, 431 So.2d 141 (Ala.1983); and View-All, Inc. v. United Parcel Service, 435 So.2d 1198 (Ala.1983). 646 So.2d at 641-42. Moreover, in Sudduth v. Howard, 646 So.2d 664, 668-69 (Ala.1994), the Court explained a distinctly different analytical approach than was articulated in Thames: We note Larry Howard's contention that, under the `fiduciary shield doctrine,' he lacks sufficient contact with this state for purposes of personal jurisdiction. We find that argument to be without merit. Larry Howard's status as an employee or agent of CMS is not relevant in this case. This Court held in Duke v. Young, 496 So.2d 37, 40 (Ala. 1986): ` [A]s demonstrated by the facts and holding in Calder [ v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984)], an individual is not shielded from liability simply because his acts were done in furtherance of his employer's interest. In fact, the Court stated there that the defendants' status as employees does not somehow insulate them from jurisdiction. Calder, supra, 465 U.S. at 790, 104 S.Ct. at 1487.' See, also, Ex parte Sekeres, 646 So.2d 640 (Ala.1994). Larry Howard specifically cites us to Thames v. Gunter-Dunn, Inc., 373 So.2d 640 (Ala.1979), and Pierce v. Heyman, 480 So.2d 1185 (Ala.1985). However, the Court in Duke, supra, at 40, distinguished Thames and Pierce on their facts, holding that `[i]n each instance the tortious act complained of was exactly what Calder referred to as mere untargeted negligence.' See Lowry v. Owens, 621 So.2d 1262 (Ala. 1993). The thrust of the Sudduths' allegation is that Larry Howard participated in, if he did not mastermind, a scheme to defraud and deceive potential investors in Alabama. This is not an allegation of `mere untargeted negligence.' Rather, this is an allegation of intentional and tortious action expressly aimed at Alabama residents. See, Lowry v. Owens, supra, at 1266; Calder, supra, 465 U.S. at 789, 104 S.Ct. at 1487; Duke, supra, at 40. 646 So.2d at 668-69 (emphasis added). [9] By their own admissions, all the individual defendants except Roberts had been to Alabama in connection with the acquisition of Bruno's. More importantly, the allegations against these defendants do not consist of mere untargeted negligence. Instead, the plaintiffs allege that the defendants were complicit in committing fraudulent suppression, fraudulent misrepresentation, and deceit, all of which, as noted, was allegedly committed to the end of acquiring an Alabama corporation with a significant physical presence in Alabama. `A corporate agent who personally participates, albeit in his or her capacity as such agent, in a tort is personally liable for the tort.' Sieber v. Campbell, 810 So.2d 641, 645 (Ala.2001). See also Bethel v. Thorn, 757 So.2d 1154, 1158 (Ala.1999), and Ex parte Charles Bell Pontiac-Buick-Cadillac-GMC, 496 So.2d 774, 775 (Ala.1986). Likewise, corporate agent status does not insulate the agent personally from his or her jurisdictional contacts with a state or from personal jurisdiction in the state. Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984); Sieber, supra; Sudduth v. Howard, 646 So.2d 664, 668 (Ala.1994); and Duke[ v. Young ], 496 So.2d [37] at 40[ (Ala.1986)]. Ex parte McInnis, 820 So.2d at 798-99; see also Licciardello v. Lovelady, 544 F.3d 1280, 1285 (11th Cir.2008) (citing Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984), for the proposition that [i]ntentional torts ... may support the exercise of personal jurisdiction over the nonresident defendant who has no other contacts with the forum). The individual defendants allegedly engaged in tortious activity directed toward the State of Alabama in connection with the leveraged recapitalization and resulting acquisition of Bruno's. In addition, the plaintiffs allege that the fraud continued after the leveraged recapitalization through the submission of misleading Bruno's public filings, filings the individual defendants approved as members of the board of directors of Bruno's. Based on the torts allegedly committed by the individual defendants, we conclude that the fiduciary-shield doctrine does not insulate those defendants from personal jurisdiction in this State.