QUESTION
Do I have a case for breaCH OF FUDUCIARY DUTY?
Asked on Feb 17th, 2017 on Business Law - New Jersey
More details to this question:
I have entered into a partnership with someone to run a urgent care. He is to run the business while I run the medical side. Recently I have discovered that he has set up a management LLC where he is the sole member and has been paying himself. Meanwhile I have not seen any profits from my 18% ownership of the business. The operational contracts say nothing about his management LLc and he has stated to me that he has not taken any payment in 4 years. Do I have a case?
1 ANSWER
That depends on what the agreement provides. If the management company is performing and being paid for services which your partner was supposed to provide without compensation (other than profit participation) then he had no right to cause the urgent care to engage and pay it. Assuming that the operating agreement gave him the right, as the business manager, to hire a management company on behelf of the urgent care company, and allowed him to do so unilaterally despite the conflict of interest, the question would be whether the management company was being paid a fair rate (generally based on what the market rate is for the services provided) or was being paid more than a disinterested management company would have been paid, in which case yoiur partner has breached his fiduciary duty by putting his own interest above that of the partnership.
Answered on Feb 17th, 2017 at 2:24 PM