Can a fiduciary be released from his or her duty under New York contract law? According to two recent court decisions, the answer may be yes. Under this theory, two knowledgeable parties can validly enter into a contract that contains a provision where one party waives his or her right to bring claims based on breach of fiduciary duty. The alleged breaches are often a result of misrepresentations or omissions by the other party during the course of negotiating the agreement. These waiver and release provisions are known as “big boy” provisions. If you are the party to a contract that contains such language, it is vital that you contact an experienced New York business litigation attorney for guidance.
The first case involving the upholding of a big boy provision involved real estate investors with interests in an LLC. One of the three partners offered to buy out the others for approximately 1.5 million. Later, the defendant was able to sell certain assets of the LLC for substantially more—approximately $17.5 million. A New York judge ruled in November 2012 that the plaintiffs had ample opportunity to conduct their own due diligence when selling their shares in the LLC, and therefore the big boy provision was upheld.
In a second case upholding a big boy provision, the New York Supreme Court, New York County, dismissed a lawsuit brought by a real estate developer who alleged that his two co-developers induced him to sell his investment in a hotel based upon an erroneous appraisal. The judge held in January 2013 that the language releasing liability was valid because the parties were sophisticated and represented by counsel.
To learn more about breach of fiduciary duty claims, contact an experienced New York business litigation lawyer today. Call our office at (888) 497-3410 for a free consultation.