Warning to Executives: You Can Lose Personal Immunity from Business Liabilities

Response Magazine

It is common knowledge among participants in the direct marketing industry that, in addition to the state attorney general and district attorney watchdogs governing violations of consumer marketing rules, the big dog in the hunt is the Federal Trade Commission (FTC), which implements Section 5 of the FTC Act. Section 5 is the primary tool used by the FTC for regulating and stopping unfair and deceptive marketing practices.

Most FTC actions are against the business entity that is deemed to be deceiving the consumer and receiving the ill-gotten gains, and such actions seek, together with damages, to enjoin further similar conduct. However, sometimes, the relief sought by the FTC includes claims against the principals or executives of the business entity, which claims can far exceed the financial gain paid to the individual agent. If the FTC can sustain the necessary legal elements of individual responsibility in such cases, the responsible principals cannot hide behind the normal immunity given to principals or managers when acting through a corporation or limited liability company.

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“Warning to Executives: You Can Lose Personal Immunity from Business Liabilities,” by Arthur P. Yoon and Jeffrey R. Richter was published in the DRMA Voice, a property of Response Magazine, on September 13, 2016. Reprinted in part with permission.