It is somewhat rare for a business dispute to be litigated all the way through trial. Protracted litigation is costly, time-consuming, and unpredictable. When that does happen, however, the results can be illuminating—especially when the trial court’s decision is upheld on appeal.
That is what happened in the recent decision of the Appellate Division, First Department, in Mohinani v. Charney, 208 A.D.3d 404 (1st Dep’t 2022). After a decade of litigation and a trial, the appellate court upheld the trial court’s dismissal of the plaintiffs’ breach of fiduciary duty claim. The appellate court also addressed aspects of fiduciary-duty claims that have particular importance for businesspeople, especially real-estate investors: (1) the duties that promoters of real-estate ventures owe their passive investors; (2) the necessary elements of a successful breach of fiduciary duty claim, including pleading damages properly; and (3) when a derivative claim on behalf of an entity, rather than an individual claim on behalf of one of the entity’s shareholders or members, is the appropriate vehicle to seek redress.