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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 14, 2019

Faithless Servant Claim Requires Defendant to Have Acted Directly Against Employer’s Interests as in Embezzlement, Improperly Competing or Usurping Business Opportunities

On October 1, 2019, the First Department issued a decision in Bluebanana Group v. Sargent, 2019 NY Slip Op. 07014, holding that a faithless servant claim requires that the employee-defendant acted directly against the employer’s interests, explaining:

Plaintiffs have failed to state a cognizable claim for breach of the duty of loyalty, which requires the employee to have acted directly against the employer’s interests – as in embezzlement, improperly competing with the current employer, or usurping business opportunities. Plaintiffs have not alleged that they were in any of the same businesses as Sargent. Plaintiffs do not claim any tangible expectancy in Sargent’s alleged side business activity, nor are there any well-pled allegations that Sargent stole or embezzled funds. The claim for breach of duty of loyalty/faithless servant was properly dismissed.

(Internal quotations and citations omitted).

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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