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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 8, 2020

Fiduciary Duty Claims Based on Joint Venture Fail Without Provision Providing for Sharing Losses as Well as Profits

On October 1, 2020, the First Department issued a decision in Shionogi Inc. v. Andrx Labs, LLC, 2020 NY Slip Op. 05308, holding that breach of fiduciary duty claims based on an alleged joint venture fail without allegations of an agreement to share losses as well as profits, explaining:

Plaintiff failed to point to cognizable evidence supporting the existence of a joint venture with defendants, which it posits as the basis of its claim for breach of fiduciary duty. While the record shows the existence of some elements of a joint venture, including profit-sharing, there is no evidence of any provision for loss-sharing. Plaintiff contends that there was no need to provide for loss-sharing, because there was no reasonable expectation of losses. The parties clearly foresaw the possibility of loss, however, making provision for its allocation in the case of brand Fortamet sales, but made no such provision for generic Fortamet sales. Where, as here, losses are reasonably foreseeable, loss-sharing is an indispensable element of a joint venture. Hence, plaintiff’s joint-venture arguments fail.

(Internal quotations and citations omitted).

Fiduciaries have special duties and complex commercial litigation often involves allegations of a breach of those duties. 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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