Legal Eye: Whom to sue?

Not often do I have an opportunity to get into the legal trenches and ask those stereotypical questions: "Whom can we sue?" and, more importantly, "Who's got the deeper pockets?" When big scandals and rogue employees dominate the headlines, it's time to get tough. Polish law offers several potential angles to consider when pursuing perpetrators of white-collar crime, including corporate fraud by a rogue employee.

Employee

A rogue employee is an easy target for civil suits, but usually doesn't have deep pockets. Polish law further restricts a company's ability to collect on the losses caused by a troublesome employee.

In particular, the damages that the company may claim are limited to three times the employee's monthly salary. In the case of billion-dollar losses, it probably wouldn't be worth the attorneys' fees to bother with a claim against the employee.

Even if the company chooses not to sue, the employee is not off the hook. The shareholders could decide to sue on behalf of the company. Again, a caveat exists: the shareholders may not sue earlier than a year after the loss was discovered. And there's still that cap on the damages awarded.

Of course, if the employee acted illegally, he or she could be prosecuted for committing a crime.

Management board

The idea of personal liability can cause management board members to lose sleep at night. Unfortunately, when ignoring rumors of a rogue employee, management board members may be risking personal liability. Management board members may be held criminally liable for action or failure to take action if it causes damage to the company. Imprisonment for up to five years and/or a fine are the potential punishments.

In addition to penal fines, civil penalties may also threaten the pocketbook. The company could sue management board members, individually or collectively, for losses resulting from an act or failure to act that violated law or the company's articles of association. The management board members would have to defend themselves by showing that they were not at fault. Additionally, the company could potentially sue the management board members in the labor court as employees, but the damages cap still applies.

Finally, if the losses are enough to bankrupt the company, the management board members could become personally liable to the company's creditors, if they do not declare insolvency quickly enough. Although the grounds for creditors to bring suit against management board members are narrow, it's important for management board members to keep this in mind when the company is in crisis.

Supervisory board

Both criminal and civil liability can be traced further in a company. Members of a company's supervisory board or audit committee could also be held civilly or criminally liable for damages caused to the company by their acts or failure to act.

Company

Ultimately, though, it's the company that will bear the brunt of the suits. As the employee presumably acted in the company's name, the company will likely be responsible for paying off all those debts. This may cause the company to consider insolvency or re-organization of its debts.

Shareholders

This is the one group that can rest easy. Shareholders in a limited liability company (Sp. z o. o.) or joint stock company (SA) only risk having worthless shares. It is not possible to sue these shareholders personally for company losses.

Judith Gliniecki is Of Counsel to Wierzbowski Eversheds
judith.gliniecki@wierzbowski.pl