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Posted: October 26, 2019

Singling Out Employee to Receive a Share of Profits Created a Fiduciary Relationship

On March 13, 2019, Judge Costello of the Hudson County Superior Court (Law Division) issued a decision in RCS Logistics, Inc. v. Expolanka USA LLC, Docket NO.: HUD-L-2668-17, holding that singling out one employee to receive a share of profits created a special relationship creating a fiduciary duty, explaining:

Shareholders cannot sue for injuries arising from the diminution in value of their shareholdings resulting from wrongs allegedly done to their corporations. Nor can stockholders assert individual claims for wages or other income lost because of injuries assertedly done to their corporations. Under Pepe, Rosen would not have standing. However, Rosen states he is not suing as a shareholder, nor does he claim to be a shareholder. Instead, Rosen claims Heaney owed him a fiduciary duty due to Heaney’s position as CEO while Rosen was the Chief Commercial Officer, the third highest position in RCS, and due to Heaney’s promise that Rosen would receive 5% of profits. Rosen offers no case law to support this position. The fact that the percentage share in the sale proceeds was offered to no one other than Rosen distinguishes him for all others who were shareholders and who stood to gain from their status as shareholders. Rosen was singled out by Heaney and offered this unique opportunity. For this reason, the Court finds that this put Heaney and Rosen in a special relationship so as to create a special injury under Weil v. Express Container Corp., 360 N.J. Super. 599, 611 (App. Div. 2003), certif. denied 177 N.J. 574 (2003) As stated in F.G. v. MacDonell, 150 N.J. 550,563 (1997), a fiduciary relationship arises between two persons when one person is under a duty to act for or give advice for the benefit of another on matters within the scope of their relationship. Heaney is alleged to have singled out Rosen for this special treatment (i.e., 5% share of the sale while not being a shareholder) and by doing so, he created a special relationship.

(Internal quotations and citations omitted).

Fiduciaries have special duties, but the questions of whether a defendant is a fiduciary and what acts breach a fiduciary duty are sometimes complicated ones. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of relating to a fiduciary.

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