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Partnerships: Fiduciary Duties (LOYALTY (BREACH (Can't engage in "…
Partnerships: Fiduciary Duties
LOYALTY
BREACH
Can't misappropriate a "partnership opportunity."
UPA § 404(b)(1)
.
Was there a sufficient nexus between the partnership and the new opportunity?
Meinhard v. Salmon
.
Can't engage in "self-dealing"
Did the partner serve as seller and buyer in a partnership transaction?
Vigneau v. Storch Engineers
.
Plaintiff's Burden
= Partner was conflicted.
Rebuttal
= Transaction was "fair" and "fully disclosed."
Remedy
Legal
Conflicted partner must return all profits that were wrongfully earned.
Illegal
The partnership cannot withhold the conflicted partner's interest in the business.
WORKAROUND
Ex-Ante
Partners may agree beforehand to describe a category of loyalty violations, if the category is not "manifestly unreasonable."
UPA § 103(b)(3)(i)
.
Ex-Post
Partners may authorize or ratify a specific act, if the partner fully disclosed all material facts.
UPA § 103(b)(3)(ii)
.
The act can be "manifestly unreasonable" (like a conflict of interest).
Covalt v. High.