Under general principles of corporate law, a real estate corporation is generally liable for acts of its salespersons but a supervisor generally is not personally liable for the acts of a salesperson. However, in a case that is out of step with general corporate law, the Ninth Circuit held that the designated broker for a real estate corporation could have personal liability for the negligent supervision of his agent, and under agency laws, the court held that a broker could have personal liability as principal for the actions of his agent, a salesperson. The court based this holding on California real estate licensing law which places the responsibility for supervision of salespersons on a specific real estate broker who is the officer for the real estate corporation.
The Ninth Circuit also found sufficient justification to apply the "alter ego" theory and pierce the corporate shield to impose liability on the individual owner/broker. In the case of Holley v. Crank, the court considered several facts to be relevant: the broker was the sole shareholder of the corporation, he was the company's president and designated officer/broker, it was very thinly capitalized, and he failed to treat the corporation as a distinct entity in his tax return.
C.A.R. strongly disagrees with the holding that disregards the corporate structure and traditional application of corporate and agency principles and is concerned about the long-term ramifications of personal liability on brokers that have in good faith tried to comply with the fair housing laws and have trained their agents to do so.