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Can a Fiduciary Breach His Duty if It Will Cause Personal Harm in NY?


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1/1/2016
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Proving a breach of fiduciary duty claim in New York is a challenge. Plaintiffs must demonstrate all of the elements of the claim, and must do so with sufficient detail. The facts and circumstances of each particular case may further complicate the filing. For example, what happens when the defendant in question may have owed a duty to the plaintiff, but the action that was taken would cause self-harm? A recent New York state trial court recently answered this type of question.

In the case in question, the facts were as follows:

  • The director of a corporation also served as a personal guarantor on a company loan.
  • Under the terms of the guaranty, the director could be held personally liable if the company voluntarily filed for bankruptcy with his consent. 
  • The company did file for bankruptcy, and the lender sued the director under the guaranty.
  • The director, however, sued the attorney, who advised him to file for bankruptcy, since it caused him personal financial harm. 

The New York court held that the director owed the corporation a duty of loyalty. A fiduciary who owes a duty of loyalty to a company cannot, in this case, point to his personal liability as reason for breaching the duty to the company. Since the company was in dire financial straits and would have been harmed had it not filed for bankruptcy, the director would have breached his duty to the company if he did not consent to the bankruptcy filing.

To learn more about the complex issues surrounding fiduciary duty in New York, contact an experienced New York breach of fiduciary duty attorney today. Call our office at (888) 497-3410 for a free consultation.



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