Meinhard v. Salmon
249 N.Y. 458 (1928).
Salmon signed a 20-year lease on hotel property that he wanted to convert to shops and offices. He did so with the help of his “joint adventurer” Meinhard. Near the end of the lease, Salmon agreed to a massive redevelopment project with the lessor, who didn’t know of Meinhard. When Meinhard found out about the agreement, he sued.
- A referee awarded Meinhard a 25% interest (based on his half interest in half the property).
- The Appellate Division increased it to 50%.
When a business partner fails to inform his co-partner of a business opportunity that arises as a result of the partnership, does he breach his fiduciary duty?
Yes. While it lowered the plaintiff’s award to 49%, the court affirmed the decision.
“Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty.”
- Here, “the trouble about his conduct is that he excluded his coadventurer from any chance to compete, from any chance to enjoy the opportunity for benefit that had come to him alone by virtue of his agency. This chance, if nothing more, he was under a duty to concede.”
Basically, this case said that partners in a business owe fiduciary duties to one another when a business opportunity arises during the course of the partnership.