South-Western Legal Studies in Business

Executives Do Not Have a Duty to Represent Company Financial Status to Employees
Description Appeals court held that an executive of a company, who told employees that their jobs were secure six months before the plant was closed, could not be sued for negligent misrepresentation to the employees because he had no duty of care to them about the financial status of the company.
Topic Business Organization
Key Words Duty of Care; Negligent Misrepresentation
C A S E   S U M M A R Y
Facts Beracha, CEO of Campbell, which operated an Earthgrains bread plant in Charlotte, North Carolina, told the employees in a meeting in August that the plant was profitable and their jobs were secure. In December, the employees were told that the plant would be closed in February and their jobs lost. The employees sued Beracha and the company for negligent misrepresentation. The trial court dismissed the suit; the employees appealed.
Decision

Affirmed. Beracha did not owe a duty to report accurate information about the plant's financial status to the employees. He owed a duty of care to the corporation. The employees "fail to show that (1) Beracha was offering them guidance in a business transaction; (2) that the alleged information was false; (3) that defendants had a pecuniary interest in inducing plaintiffs to continue employment; or (4) that plaintiffs were justified in relying on the alleged information." Hence, there was no negligent misrepresentation.

Citation Jordan v. Earthgrains Cos., --- S.E.2d --- (2003 WL 138243, Ct. App., N.C., 2003)

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