Commercial Litigation and Arbitration

Family Members in Family-Owned Business Owe Fiduciary Duties to Each Other

From Braddock v. Braddock, 60 A.D.3d 84871 N.Y.S.2d 68 (1st Dept. 2009):

[S]ince David and John are cousins, John's reliance on David's good faith may be found to be reasonable even where it might not be reasonable in the context of an arm's length transaction with a stranger. Family members stand in a fiduciary relationship toward one another in a co-owned business venture (see Venizelos v Oceania Mar. Agency, 268 A.D. 2d 291 (1st Dep’t 2000); see also Birnbaum v Birnbaum, 73 N.Y. 2d 461 (1989)).

The reference to "co-owned" is potentially misleading. The claim was that David promised his cousin John an ownership interest in his start-up; reneged; made a new offer on less desirable terms; and reneged again. John never was an "owner" in any legal sense of the term.

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