Also known as: standard of liability · standards of liabilities · liability standards
Written by attorneys · grounded in primary & secondary sources — see below
Criteria that specify the degree of fault or conduct required to impose legal responsibility for harm or breach.
Serena Soto, a local teacher, sued a newspaper after it published an inaccurate story accusing her of misconduct at school. The newspaper had published the story after a single unverified tip and without contacting Soto. Because Soto is a private figure, the court applied a negligence standard rather than actual malice, allowing her to proceed to trial on whether the paper failed to exercise reasonable care in checking the facts.
Sofia Stern, a director of Skyline Construction, approved a major subcontract without reviewing the contractor's safety record despite internal warnings of prior violations. After a worksite fatality led to large fines, shareholders sued. The court held Stern to the informed-decision standard of liability and found she could be personally liable because she had not become informed to the extent she reasonably believed appropriate.
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Scott Summers, an at-will employee at Synergy Systems, was fired after reporting suspected accounting irregularities to his supervisor. He sued for wrongful termination in violation of public policy. The court applied the standard of liability for at-will employment claims and dismissed the suit because Summers had not identified a fundamental public policy that the termination violated.
Sebastian Santos, an investment adviser, recommended a high-risk stock to clients without disclosing that the issuer had paid him a commission. The SEC brought an enforcement action alleging violations of Rule 10b-5. The court required the SEC to prove scienter and granted summary judgment for Santos because the evidence showed only negligence, not knowing or reckless misconduct.
Seth Shapiro, an accountant at Spectrum Financial, failed to detect a client's fraudulent financial statements because he performed only routine checks. Investors who lost money sued the firm under Rule 10b-5. The court held that liability required scienter and dismissed the claims because the accountant's conduct amounted to negligence rather than intentional or reckless disregard.
Sierra Santos, a supervisor at Sterling Dynamics, repeatedly made unwelcome sexual advances toward a subordinate. The subordinate sued the company under Title VII. The court applied the Ellerth standard of liability and held the employer vicariously liable because it had no effective anti-harassment policy and failed to take prompt corrective action.
The plaintiff must show that the director's conduct fell into one of the five categories listed in the statute, such as a decision the director was not informed to an extent reasonably believed appropriate, action not in good faith, or a sustained failure of oversight. The plaintiff must also prove that harm occurred and that the harm was proximately caused by the director's conduct.
No. A private figure need only prove fault as defined by state law, provided the state does not impose liability without fault. Presumed or punitive damages, however, still require a showing of actual malice.
Liability requires scienter, meaning knowing or reckless misconduct. Negligence alone is insufficient to establish a violation.
…at 195. They argue that the "remedial purposes" of the Acts demand a construction of § 10 (b) that embraces negligence as a standard of liability. But in seeking to accomplish its broad remedial goals, Congress did not adopt uniformly a negligence standard even as to express civil remedies. In some circumstances and with respect to…