Controlling Shareholders Did Not Have Fiduciary Duty to Minority Shareholder

On January 12, 2016, the First Department issued a decision in Arnett v. Charles Morgan Securities Inc., 2016 NY Slip Op. 00130, holding that controlling shareholders did not have a fiduciary duty to a minority shareholder, explaining:

Plaintiff does not dispute defendants' contention that Nevada, where EGI was incorporated, does not recognize a fiduciary duty owed to a corporation's creditors by majority or controlling shareholders. To the extent he relies on RSI Communications PLC v Bildirici (649 F Supp 2d 184 [SD NY 2009], affd 412 Fed Appx 337 [2d Cir 2011], cert denied — US &mdash, 132 S Ct 97 [2011]) in support of his argument that defendants owe him a fiduciary duty under New York law, RSI and the cases cited therein state only that "officers and directors" of insolvent corporations owe creditors a fiduciary duty, and plaintiff has not alleged facts showing that defendants were officers or directors of EGI. Further, his allegations that defendants controlled EGI are conclusory.

(Internal quotations and citations omitted).