Monday, April 23, 2012

Forleo v. American Products Overruled

Forleo v. American Products of Kentucky, Inc. Has Been Legislatively
Overruled – The Reinstatement of an Administratively Dissolved
Organization is Effective as to the Organization’s Agent

      In Forleo v. American Products of Kentucky, Inc., 2006 WL 2788429 (Ky. App. 2006), notwithstanding the reinstatement of the corporation, the Court of Appeals held that the shareholders/officers/directors who, in the period of dissolution prior to reinstatement, entered into a contract with a third-party would be held personally liable thereon.  In 2007, the statutes were amended to overrule Forleo as to corporate shareholders and LLC members, it being stated that the administrative dissolution does not deprive them of the otherwise applicable rule of limited liability.  See Thomas E. Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Kentucky Law Journal 229, 239-243 (2008-09).
      Now addressing the broader issue, namely the liability of an agent for actions undertaken during the period of administrative dissolution but prior to the reinstatement, various of the acts have been amended to expressly provide that upon reinstatement, the liability of any agent acting on behalf of the administratively organization shall be determined as if the administratively dissolution “had never occurred.”  See 2012 H.B. 341, amending KRS § 14A.7-030.
      This amendment has the effect of affirming the holdings of Judge Coffman rendered in eServices, LLC v. Energy Producing, Inc., reviewed here on February 22, 2012, and that of the Court of Appeals in Pannell v. Shannon, 2011 WL 3793415 (Ky. App. Aug. 26, 2011).

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