Theft of a Corporate Opportunity

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We have represented clients alleged to have been involved in a “theft of a corporate opportunity.” As most people know, “a corporate officer or director is under a fiduciary duty of individual loyalty, good faith and fair dealing in conducting corporate business.” Racine v Weisflog, 477 N.W.2d 326, 329 (Wis App., 1991). One of the primary duties is that a corporate officer cannot divert assets of the corporation and use them for the officer’s personal advantage.

In Hawaii, the “corporate opportunity” doctrine has been explained as follows:

If there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from it nature, in the line of the corporation’s business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself.

Lussier v Mau-Van Development, Inc., 4 Haw.App. 359, 368 (Hawaii App., 1983)(Citing Guth v Loft, Inc., 5 A.2d 503, 511 (Del.Ch., 1939).

If an officer or director diverts a “corporate opportunity” for his or her own personal gain, then such action may constitute a breach of the officer or director’s fiduciary duty to the corporation (ie. the duty of loyalty). The damages for such breach may include, (i) recovery of any profits earned (usually with the imposition of a constructive trust on the property taken), (ii) compensatory damages, and/or (iii) injunctive relief.