Usurpation of corporate opportunities

New York Law Journal

United States Publication October 2022

The corporate opportunity doctrine precludes fiduciaries from “divert[ing] and exploit[ing] for their own benefit any opportunity that should be deemed an asset of the corporation.” O’Mahony v. Whiston, No. 652621/2014, 2019 WL 4899030, at *6 (N.Y. Co. Oct. 4, 2019) (citing Alexander & Alexander of N.Y., Inc. v. Fritzen, 147 A.D.2d 241, 246 (1st Dep’t 1989)).

The doctrine is premised on the notion that a corporate officer or director may not personally profit at the expense of the corporation. See Troffa v. Troffa, No. 6095102016, 2022 WL 3140457, at *6 (Suffolk Co. Aug. 2, 2022). When a fiduciary usurps or diverts a corporate opportunity, “he may be held accountable for the fruits of his wrongdoing.” Sheiffer v. Petry Holding, No. 601792/2004, 2005 WL 6578258 (N.Y. Co. 2005).

New York courts generally use two non-exclusive tests to determine whether the opportunity at issue was a corporate opportunity: (1) the tangible expectancy test and (2) the line of business test. While these tests help assess what constitutes a “corporate opportunity,” some courts take a more general approach assessing all relevant factors.

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