In a recent court battle between a popular resort and casino, Wynn Resorts, and one of its board members, the company alleges that by working to develop competing businesses, the board member is breaching its fiduciary duty to the company. Whether or not a New York breach of fiduciary duty occurs between a board member and a company in this type of situation depends on the facts and circumstances surrounding the particular case. First, it must be established whether a fiduciary duty exists between a company and a board member. A New York court will analyze whether the relationship between the parties inherently or automatically entails a higher level of trust that which would exist between two typical parties to an agreement. In past holdings, New York courts have in fact held that corporate officers and directors fall into this category.
Having established that a fiduciary duty may exist between a company and a board member, Wynn Resorts would also have to demonstrate one or more of the following in order to successfully prevail against its board member under New York business litigation law:
- The board member owed the company a duty of good faith, which it breached when investing in the competing businesses.
- The board member owed the company a duty of loyalty, which it breached when investing in the competing businesses.
- The board member engaged in self-dealing when investing in the competing businesses.
- The board member failed to place the best interest of the company above his own self-interest when investing in the competing businesses.
- The company may have to demonstrate that the board member’s actions arose to more than just mere fiduciary misconduct.
To learn more about breach of fiduciary duty by board members, contact a New York breach of fiduciary duty attorney today at 888-497-3410 for a free consultation.