Commercial Division Blog

Posted: November 21, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Category Commercial Division Justices

Business Judgment Rules Shields Managing Member From Liability for Breach of Fiduciary Duty

On October 4, 2022, Justice Cohen of the New York County Commercial Division issued a decision in Greenman v. Miller, et al., 2022 NY Slip Op 33355(U) holding that summary judgment was appropriate on a breach of fiduciary duty claim where the defendant was the company’s managing member and was therefore protected under the business judgment rule, stating:

As an initial matter, Miller is the Entities' managing member and he has the exclusive authority to manage the Entities. "As a result, his decisions are subject to significant deference under the business judgment rule" (Barry v Clermont York Assoc. LLC, 50 Misc 3d 1203(A) [Sup Ct, NY County 2015], affd as mod, 144 AD3d 607 [1st Dept 2016]; Matter of Levandusky v One Fifth Ave. Apt. Corp., 75 NY2d 530, 537-38 [1990]), unless he engages in fraud or self-dealing (Wolf v Rand, 258 AD2d 401, 404 [1st Dept 1999]; see also Birnbaum v Birnbaum, 73 NY2d 461, 466 [ 1989]). Here, the business judgment rule precludes Jane's allegations relating to Miller's decision to cancel swap agreements to which the entity had been a party. Miller submits that this was justified because of future cost savings which exceeded the up-front penalty. While this may or may not have been a good decision, Jane does not allege Miller engaged in fraud or self-dealing as related to this claim. Thus, summary judgment in favor of Miller is granted on this claim.

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