In a New York case, majority owners of an Irish soccer bar used the proceeds of a lease buyout to relocate the bar—and cut out the minority owners at the same time. The majority owners started a new corporation to operate the new bar. The minority owners said they knew nothing about all this and sued, claiming the majority owners misappropriated a “corporate opportunity.” Under the corporate opportunity doctrine, a fiduciary cannot “divert or exploit for his own benefit an opportunity that is an asset of his principal.” But, if the minority owners had known of the new venture and did not object, they would not be entitled to reap any benefits from the new bar. However, the court found that the majority owners deceived the minority owners, keeping them in the dark about the new bar, so they are indeed liable for the lost value of the opportunity, plus punitive damages. (By the way, the bar at issue is Smithfield Hall, located at 138 W. 25th St. in New York City.)

Our thanks to attorney Peter Mahler (Farrell Fritz) who alerted us to this case—check out his firm’s blog, “ New York Business Divorce,” which offers valuable insights on cases of owner disputes at closely held businesses.

The case is O’Mahony v. Whiston, 2023 NY Slip Op 30482(U), Feb. 15, 2023, Supreme Court, New York County, and a case analysis and full court opinion will appear soon on the BVLaw platform.