Owners and Employees of NJ Corporations Can Be Held Personally Liable For Business’s Fraud

By Fredrick P. Niemann, a NJ Consumer Fraud Attorney

The “corporate veil” has traditionally been a highly controversial concept among corporations and consumers. The corporate veil is essentially a shield that protects owners and employees of corporations from personal liability stemming from the business’s fraudulent actions. This means that if an individual is the victim of a fraudulent action committed by a New Jersey corporation, the victim may only sue the corporation itself, not the individuals who run the corporation. Consumers have long complained about the rule, as wealthy owners of corporations have been able to hide behind this corporate veil by creating companies that have little value, thereby protecting their personal wealth from lawsuits. Fortunately for NJ consumers, the state legislatures created the New Jersey Consumer Fraud Act, which strikes a balance between protecting owners of corporations from personal liability and assuring consumers that they will be able to recover if they are victims of fraudulent actions.

The NJ Consumer Fraud Act states that all those who take part in the fraudulent schemes of corporations can be held personally liable, from owners all the way down to employees. The New Jersey Supreme Court recently enforced the Act in a construction fraud case, finding all individuals that were involved in defrauding an individual to be personally liable. This even included certain employees that were only involved in minor parts of the fraud. The Court stated that personal liability would apply to all those involved with the violations of the Consumer Fraud Act, whether their actions were misrepresentations, omissions, or even smaller violations of the Act. The Court, however, also reinforced the notion that all owners, managers, employees, and others that did not take part in the fraud and had no knowledge of it were still protected by the corporate veil and thus could not be held personally liable.

The Consumer Fraud Act strikes a nice balance between protecting consumers from fraudulent actions of corporations while also protecting innocent owners and employees of corporations from personal liability for fraudulent actions that they did not know take part in. If you have any questions regarding the NJ Consumer Fraud Act or other New Jersey laws on fraud, please contact Fredrick P. Niemann, Esq. at 855-376-5291 or email him at fniemann@hnlawfirm.com/. He would be happy to answer any questions you may have

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