North Carolina Business Litigation Report

Sex and Fiduciary Duty

The case of  Land v. Land is a minority shareholder dispute among shareholders of a family business. 

The Business Court sees these kinds of disputes regularly, and there's not much novel in the Court's Order today denying summary judgment in a fight over a masonry business involving two brothers and their father.

The part of the Order that warrants a mention, however, has to do with the Plaintiff's claim of a breach of fiduciary duty by his brother Eddie, the majority shareholder of the business.  Eddie had an unusual defense to this claim by his brother, Alan.

The defense was that Eddie had an affair with Alan's wife, that Alan had discovered the affair, and that Alan therefore could not have had any expectation of a fiduciary duty being owed to him by Eddie.  According to Eddie, Alan therefore could not have relied on the allegedly false statements made to him by Eddie regarding the affairs of the Company.

The Court rejected the argument, holding:

Eddie claims that Alan could not have reasonably relied upon any actions of Eddie’s because Alan caught Eddie in a compromising position with Alan’s then wife in the mid-1980s. (Def. Br. Summ. J. Alan 11.) Eddie asks the Court to hold that that circumstance alone defeats any claim to reasonable reliance or a fiduciary relationship between the two. Alan claims that his knowledge of the situation (which he kept secret until discovery in this case) gave him more leverage and reason to trust Eddie in business. (Alan Br. Opp’n 19; Def. Mot. Summ. J. Alan 4.) While the Court may have its own personal view of the wisdom of one brother trusting another under these circumstances, the Court believes that the overall question of whether there was a fiduciary relationship between Eddie and Alan is one for the jury after it sorts out all the sordid facts.

 

 

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Mack Sperling
Brooks Pierce, LLP
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