A CORPORATION (HERE A COOPERATIVE) DOES NOT OWE A FIDUCIARY DUTY TO THE SHAREHOLDERS; THE INDIVIDUAL BOARD MEMBERS MAY OWE A FIDUCIARY DUTY TO THE SHAREHOLDERS FOR INDIVIDUAL ACTIONS BUT NO ALLEGATIONS OF WRONGDOING BY BOARD MEMBERS WERE MADE (FIRST DEPT).
The First Department, reversing (modifying) Supreme Court, noted that a corporation (or, in this case a cooperative) does not owe a fiduciary duty to its shareholders:
… [T]he second cause of action for breach of fiduciary duty as against the cooperative and the board member defendants also does not state a claim upon which relief may be granted. The cause of action cannot be sustained as against the cooperative “because a corporation owes no fiduciary duty to its shareholders” … . Furthermore, even assuming that the cause of action was addressed to the actions taken by the individual board member defendants, it “does not allege any individual wrongdoing by the members of the board separate and apart from their collective actions” taken in their capacity as board members … . Tahari v 860 Fifth Ave. Corp, 2023 NY Slip Op 01269, First Dept 3-14-23
Practice Point: A corporation does not owe a fiduciary duty to shareholders. Individual board members may owe a duty which would be breached by wrongdoing, not alleged here.
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