We wanted to follow up on an earlier blog post about a case, U.S. v. Trek Leather (United States Court of Appeal Case No. 11-1527).  Although the case deals with 19 U.S.C. Section 1592 (misrepresentation and fraud of merchandise introduced into the United States), the question posed to the en banc Court had broader implications for veil piercing for liability of executives. Namely, whether there must first be a showing of fraud or piercing the veil before imposition of personal liability of an executive.

Briefly, the Defendants’ president and majority shareholder undervalued garments being brought into the United States, which led to an under-collection of the appropriate duties (the duties were later repaid). The district court granted summary judgment against the president holding him personally liable under Section 1592 as “a person.” However, the Federal Circuit panel reversed.  That decision was later vacated and the district court’s decision was reviewed en banc.  

The precedential opinion by the en banc Court was issued on September 16, 2014. United States v. Trek Leather,2014 U.S. App. LEXIS 17746(Fed. Cir.Sept. 16, 2014).   On the question of whether a corporate officer is a person, the Court unequivocally said yes.  “There is simply no basis for giving an artificially limited meaning to this most encompassing of terms, which plainly covers a human being.”  Trek Leather, 2014 U.S. App. Lexis 17746, * 13.  However, the Court did not reach the critical question of whether the corporate veil needed to be pierced, but held the Defendant liable on traditional agency grounds:

Applying the statute to Mr. Shadadpuri does not re¬quire any piercing of the corporate veil. Rather, we hold that Mr. Shadadpuri’s own acts come within the language of subparagraph (A). It is longstanding agency law that an agent who actually commits a tort is generally liable for the tort along with the principal, even though the agent was acting for the principal. Restatement (Second) of Agency § 343 (1958); Restatement (Third) of Agency § 7.01 (2006). That rule applies, in particular, when a corporate officer is acting for the corporation. 3A Fletcher Cyc. Corp. § 1135 (2014). We see no basis for reading section 1592(a)(1)(A) to depart from the core principle, reflected in that background law, that a person who personally commits a wrongful act is not relieved of liability because the person was acting for another. See United States v. Matthews, 533 F. Supp. 2d 1307, 1314 (Ct. Int’l Trade 2007), aff’d, 329 F. App’x 282 (Fed. Cir. 2009); United States v. Appendagez, Inc., 560 F. Supp. 50, 54–55 (Ct. Int’l Trade 1983).  That is as far as we go or need to go in this case. We do not hold Mr. Shadadpuri liable because of his prominent officer or owner status in a corporation that committed a subparagraph (A) viola¬tion. We hold him liable because he personally committed a violation of subparagraph (A).

Id. at 20-21.  For now, the law is clear that if corporate executives own actions violate statutes they may very well be held liable for those actions.  Whether the veil will be pierced in other instances of either negligence or gross negligence remains unresolved.