CONCEPT REVIEW:

Because almost all individuals within a corporation have legal fiduciary duties to it, they can be held liable for harming the business by violating these duties. There are, however, certain instances in which directors, officers, and shareholders cannot be held liable for harming the business.

Case:

Larry is the sole corporate officer of the hypothetical corporation RXV, Inc., the owner-operator of the Fruitful Valley Landfill. One of his top managers at the company, Karl, illegally set up a contract with an industrial manufacturer to dump toxic waste into the ground of the landfill. The Department of Environmental Management filed suit against RXV seeking injunctive relief and penalties for violations of state environmental laws. Karl is also being investigated criminally for his illegal actions with the toxic chemicals. Larry did not know about Karl's actions, but if he had been paying closer attention to the day-to-day affairs at the corporation, he could have discovered and prevented Karl's illegal actions.

Suppose that Larry does indeed have to go through some lawsuits based on the dumping of the chemicals. Can Larry be compensated for his legal fees through the corporation's funding?