September 2012


I read a great piece last week by Mark Rogers arguing that corporate directors can unwittingly breach their fiduciary duty by spending too much time on mobile devices during board meetings.  Not only did I agree wholeheartedly with Mark’s analysis, but it also reminded me of another fiduciary duty that company insiders, and even some in-house counsel, often wittingly ignore: the duty to preserve “corporate opportunities” for the company.

In general, an officer, director, partner, LLC member or shareholder in a closely held corporation owes a fiduciary duty not to usurp for his personal benefit, a business opportunity that could and should belong to the corporation.  A classic example of a breach of this duty, which can lead to a claim for what is called the “diversion of a corporate opportunity,” occurs when the president and CEO of a company learns that a competing business is for sale, and, instead of bringing the matter to the company’s board of directors, he helps his son buy the business for himself.… Keep reading

Employees not at work


Although there are many occasions when an employer may lawfully terminate a non-performing or absent employee, if the reason for the non-performance or absence is based on a physical or mental condition – or a perceived physical or mental condition – employers are well-served to carefully scrutinize the facts before deciding to terminate an employee.  Here are a few examples of where further scrutiny is well worth the effort:

 Employees not at work1.  Where the basis for termination comes only from a single source.

Assume, for example, that a line manager recommends the termination of an employee because she is “unreliable.” In reality, and unbeknownst to the employer, the line manager actually wants the employee fired because he feels inconvenienced by having to cover her authorized, intermittent leave hours.  If the employer takes the line manager’s word that the employee is simply “unreliable” and terminates the employee taking intermittent leave, the employer will potentially be liable for disability discrimination or a violation of the Family and Medical Leave Act.  Thus, when the basis for making an employment termination decision comes only from one person, in-house counsel should advise the company to do whatever it can to verify the facts through one … Keep reading

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Sometimes, when business people can’t directly negotiate (or re-negotiate) favorable deal terms, they are tempted to withhold a payment or some other obligation in an effort to leverage the other party into an agreement it otherwise would not make.  In-house counsel should be wary of endorsing such conduct, as this could result in exposing their companies to liability going far beyond simply having to lose face and/or doing what they should have done in the first place.  Take, for example, the following scenario:

Acme engaged Alpha as its exclusive manufacturer for widgets and gidgets for two years.  Four months later, Acme tries to negotiate a similar deal with Beta to manufacture didgets, and, if consummated, such a deal would provide Acme with ten times the revenue that the Alpha contract was expected to provide.  While Beta expresses interest, it eventually makes clear that unless it also can manufacture gidgets, there will be no deal.  While Acme tries to buy out of the gidget portion of the Alpha contract so that Acme can give Beta what it wants, Alpha refuses.  Acme’s CEO realizes that the Beta deal is going to fall apart if something does not change quickly, so she … Keep reading

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