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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 28, 2018

Breach of Fiduciary Claim Reinstated; it Was Not Duplicative of Contract Claim Because it Sought Separate and Distinct Relief

On June 20, 2018, the Second Department issued a decision in Slocum Realty Corp. v. Schlesinger, 2018 NY Slip Op. 04587, holding that a breach of fiduciary claim was not duplicative of a breach of contract claim because it sought separate and distinct relief, explaining:

The Supreme Court also erred in granting those branches of the defendants’ motion which were for summary judgment dismissing the cause of action alleging breach of fiduciary duty insofar as asserted against Richard Schlesinger and Prince Realty Trust, and the cause of action alleging aiding and abetting breach of fiduciary duty insofar as asserted against Richard Schlesinger. The plaintiffs correctly contend that Prince Realty Trust, as a managing general partner of Forest & Garden, owed a fiduciary duty to Forest & Garden and to its partners. Richard Schlesinger, as the manager of Forest & Garden, as per the Forest & Garden Agreement, also owed a fiduciary duty to Forest & Garden and its partners. His position as a partnership manager is analogous to that of a corporate officer or director, who owes a fiduciary duty to the corporation and its shareholders. The plaintiffs submitted evidence that Richard Schlesinger and Prince Realty Trust improperly authorized transfers in excess of $2 million to their affiliates. In addition, the plaintiffs submitted evidence that Richard Schlesinger aided and abetted a breach of fiduciary duty owed to Forest & Garden by Prince Realty Trust. Contrary to the defendants’ contention, the breach of fiduciary duty cause of action is not duplicative of the breach of contract cause of action, as it seeks relief separate and distinct from damages recoverable under a breach of contract cause of action. Thus, the court should not have granted summary judgment dismissing the breach of fiduciary duty cause of action insofar as asserted against Richard Schlesinger and Prince Realty Trust, and the aiding and abetting breach of fiduciary duty cause of action insofar as asserted against Richard Schlesinger, and the plaintiffs are entitled to a new trial on these causes of action.

(Internal citations omitted).

Fiduciaries have special duties, but the question of whether a defendant is a fiduciary, and thus can be liable for a breach of fiduciary duty, is sometimes a complicated one. Further, it a claim against a fiduciary is based on a breach of contract, a plaintiff cannot bring both a breach of contract and breach of fiduciary claim. We both bring and defend breach of fiduciary duty and professional malpractice claims and other claims relating to the duties of trustees and professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of such claims.

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