![]() ![]() 11, 1992) (policy of failing to declare dividends and using company profits to enrich the majority owner at the expense of the minority owner states a claim for breach of fiduciary duty.) 3d at 71 (owners of closely held companies owe each other the fiduciary duties of utmost good faith and loyalty) Litle v. 2d 208, 219 (1960) (“A director or officer of a corporation is forbidden to administer the affairs of the corporation for his private emolument.”) Hagshenas, 199 Ill. Barron, 2014 IL App (2d) 121100, ¶ 65 (“Barron breached his fiduciary duty because he acted in his own interest and not in the interests of the Operating Companies and Kovac when he caused the Operating Companies to pay him and Sandra millions in excessive compensation over the years.”) Gidwitz v. Dana Hotel, LLC, 2017 IL App (1st) 161048, ¶ 73 (managing member of LLC owes duties of loyalty and due care) Kovac v. If a lawyer assists an owner of a closely held company in “looting” it through phony de facto distributions then the lawyer has arguably aided a fiduciary breach and his or her communications in furtherance of the breach may not be protected by the attorney-client privilege due to the crime-fraud exception. See C.O.A.L., Inc. “Majority fault” de facto dividends in this context are defined as the receipt of excessive compensation by the majority owner in a closely held company, initiated by the majority owner in order to deny the minority owner its legal entitlement to a proportionate share of the profits based on its ownership percentage. Such an arrangement would give the majority the unfettered right to freeze a minority investor out of the company’s business returns for so long as the majority desires.” Moll, Shareholder Oppression and Dividend Policy in the Close Corporation, 60 Wash. … he investors surely would not have agreed to an arrangement where the majority, solely at its whim and without any valid reason, could exclude a minority shareholder from distributions of profit that other shareholders (including the majority) are continuing to receive. “Perhaps the clearest case for judicial intervention into a close corporation’s dividend policy involves the majority shareholder’s receipt of ‘de facto’ dividends to the exclusion of the minority shareholder. ![]() Owners in closely held companies have a common law fiduciary duty to act with the utmost good faith and loyalty and this duty includes “prohibiting enhancement of personal interests at the expense of the interests of the enterprise.” Hagshenas v. 10, 2003) recognized, a lawyer may not “escap liability for knowingly and substantially assisting a client in the commission of a tort.” 2003), as modified on denial of reh’g (Nov. … The Kentucky Supreme Court held that the breach of fiduciary duty was ‘on an equal par with fraud and deceit.”’) Lawyers who aid and abet fiduciary breaches and other torts are subject to suit. ![]() Radojcic, 2013 IL 114197 on other grounds (“In concluding that an intentional breach of fiduciary duty may serve as the fraud necessary to establish the crime-fraud exception, we take note of Steelvest, Inc. Intentional fiduciary breaches are regularly called constructive fraud however and give rise to the crime fraud exception. Radojcic, 2013 IL 114197, ¶ 49.Ī lawyer’s participation in intentional breaches of fiduciary duty triggers the crime-fraud exception even though a fiduciary breach is no necessarily a crime or act of common law fraud. An attorney may be completely innocent of wrongdoing, yet the privilege will give way if the client sought the attorney’s assistance for illegal ends.” People v. “The focus of the crime fraud exception is on the intent of the client (citation omitted), not the legitimacy of the services provided by the attorney. ![]()
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