Lack Of Knowledge Defeats Breach Of Fiduciary Duty Claim

Allen Matkins
Contact

Allen Matkins

Yesterday's post discussed Judge Mary Kay Vyskocil's ruling in Barenbaum v. Palleschi, 2020 U.S. Dist. LEXIS 180624 that the plaintiff's derivative claims were not "validly in litigation".  The case involved allegations that several executives and directors of FTE Networks, Inc. purported to issue convertible notes "without proper authorization from the FTE Board of Directors, by using forged signatures on the issuing documents".  

Under the laws of a different jurisdiction, the plaintiff's breach of fiduciary claim may have withstood a motion to dismiss.  The corporation, however, was incorporated in Nevada.  Under Nevada law, a director will not be liable to the corporation for a breach of fiduciary duty unless, among other things, the breach involved intentional misconduct, fraud or a knowing violation of law.  NRS 78.138(7)(b)(2).  The plaintiff's problem in Barenbaum was that he admitted that the notes had been issued without board approval.  This defeated any inference of intentional misconduct by the board members sufficient to sustain a claim under Nevada law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

Allen Matkins on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.