A business partnership is built on trust. When you enter into a partnership, a joint venture, or a closely held corporation with another person, you are placing significant confidence in their judgment, honesty, and loyalty. New York law recognizes this relationship by imposing fiduciary duties on business partners — legal obligations that require each partner to act in the best interests of the partnership and its members.
When a partner breaches those duties, the consequences can be devastating. Misappropriated funds, unauthorized self-dealing, diversion of business opportunities, and concealment of material information can destroy a business and cause significant financial harm to the innocent partners. If you suspect your business partner has breached their fiduciary duty, understanding your legal rights and options is the essential first step toward protecting your interests.
What Are Fiduciary Duties Under New York Law?
Under New York law, fiduciary duties arise in relationships where one party places special trust and confidence in another. Business partnerships — including general partnerships, limited partnerships, LLCs, and closely held corporations — give rise to fiduciary obligations among the partners, members, or shareholders. New York courts have consistently held that these duties include the duty of loyalty, which requires a partner to put the interests of the partnership ahead of their own personal interests; the duty of care, which requires a partner to exercise reasonable diligence and prudence in managing partnership affairs; and the duty of good faith and fair dealing, which requires honest and fair conduct in all partnership-related matters.
New York’s Partnership Law and Limited Liability Company Law codify certain aspects of these duties, while case law has developed additional principles that apply in specific factual contexts. The scope and application of fiduciary duties can also be modified by a partnership agreement or operating agreement, though New York law limits the extent to which these duties can be waived.
Common Forms of Fiduciary Duty Breach
Fiduciary duty breaches take many forms, but certain patterns recur in New York business disputes. Self-dealing occurs when a partner enters into transactions that benefit themselves at the expense of the partnership, such as paying themselves excessive compensation, entering into contracts with entities they own, or purchasing partnership assets at below-market prices. Diversion of business opportunities happens when a partner takes a business opportunity that rightfully belongs to the partnership and pursues it for their own benefit, depriving the other partners of the revenue and value that opportunity would have generated.
Misappropriation of partnership funds involves a partner using partnership money for personal purposes or unauthorized expenditures. Concealment and misrepresentation occur when a partner hides material information from other partners or makes false statements about the partnership’s finances, operations, or prospects. Competing with the partnership takes place when a partner starts or invests in a competing business without the knowledge and consent of the other partners.
Each of these breaches can give rise to legal claims with significant remedies available to the injured party.
Legal Remedies for Fiduciary Duty Breach in New York
New York law provides several remedies for breach of fiduciary duty, depending on the nature and extent of the breach. Compensatory damages may be awarded to make the injured partner whole for the financial losses caused by the breach. An accounting may be ordered, requiring the breaching partner to provide a full and complete disclosure of all partnership finances and transactions. Disgorgement of profits requires the breaching partner to surrender any profits they obtained through the breach. Constructive trust is an equitable remedy where the court treats assets improperly obtained by the breaching partner as being held in trust for the benefit of the partnership. Injunctive relief may be available to prevent ongoing or threatened breaches, such as an order prohibiting a partner from competing with the partnership or dissipating partnership assets.
In cases involving particularly egregious conduct, New York courts may also award punitive damages, though these are the exception rather than the rule in commercial disputes.
Practical Steps When You Suspect a Breach
If you believe your business partner has breached their fiduciary duty, time is of the essence. Taking prompt and strategic action can significantly improve your legal position and help preserve evidence that may be critical to your case.
First, document everything you can. Gather financial records, communications, contracts, and any other documents that may be relevant to the suspected breach. Do not confront the suspected partner before consulting with legal counsel, as premature confrontation can result in the destruction of evidence or other actions that make recovery more difficult.
Second, review your partnership agreement or operating agreement. These documents often contain provisions that affect the scope of fiduciary duties, the procedures for resolving disputes, and the remedies available. Understanding what your agreement says is essential to formulating your legal strategy.
Third, consult with experienced litigation counsel as soon as possible. Fiduciary duty claims involve complex legal standards, evidentiary challenges, and strategic considerations that require sophisticated legal guidance. An attorney experienced in New York business litigation can assess the strength of your claims, advise on the best course of action, and take immediate steps to protect your interests, such as seeking emergency injunctive relief if assets are at risk.
Why Travis & De Blase LLP
At Travis & De Blase LLP, we represent business owners and partners in complex fiduciary duty disputes throughout New York. Our litigation team has extensive experience handling breach of fiduciary duty claims in partnerships, LLCs, and closely held corporations. We understand the financial and emotional toll these disputes take, and we are committed to pursuing aggressive, results-oriented representation on behalf of our clients.
Whether your case requires negotiation, mediation, or trial, we bring the litigation strength and business insight necessary to protect your interests and hold breaching partners accountable.
If you suspect your business partner has breached their fiduciary duty, contact us today for a confidential consultation. Call (212) 248-2120 or email info@travisdeblase.com. Our offices are at 40 Wall Street, Suite 2508, New York, NY 10005.
Related Practice Areas and Resources
If you suspect a breach of fiduciary duty, our Business Litigation and Business Disputes attorneys can help. Review our Business Litigation FAQ and Business Disputes FAQ for answers to common questions.