Creditors Can’t Directly Sue Officers and Directors of an Insolvent Corporation in Tennessee
On December 17, 2010, the Tennessee Supreme Court held “that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of fiduciary duties they owe to the corporation.” Sanford v. Waugh, 2010 WL 5139496 (Tenn. 2010). With this holding, the Supreme Court reversed the Court of Appeals and instead adopted the reasoning of the Delaware Supreme Court.
By Cautionary Tale About Guaranties
In Crossville, Inc. v. Kemper Design Center, Inc., et al., 2010 WL 5158641, the U.S. District Court for the Middle District of Tennessee addressed two matters related to interpreting and applying personal guaranties of corporate debt. Each of the issues arose from the fact that personal guaranties were executed at the same time as a first set of loan documents, and none were executed with a second set of loan documents. The parties did not agree about whether the second set was a “modification” of the first set, or a new transaction altogether.
Is $#*! Hitting The Fan?
In 20 years of practicing law, I have never seen a year end this busy. We’ll have to wait to see how 2011 unfolds, but it looks like the much-talked about melt down of commercial lending might be kicking off.
Update…
Good article in the Nashville Post about the health of local banks:
http://www.nashvillepost.com/news/2010/11/30/waters_still_choppy_for_local_banks (subscription required)
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