Business partnership disputes often arise when one partner withholds information about potential business opportunities from the company. In New York business litigation, these cases typically involve allegations that a partner failed to disclose a material opportunity that the company should have had the chance to evaluate or pursue, resulting in loss of potential revenue opportunities or strategic disadvantage.
Unlike claims involving the outright diversion or “usurpation” of a business opportunity, withholding focuses on concealment, delay, or failure to communicate the opportunity, thereby preventing the business from having a chance to act. Such conduct can lead to a lawsuit when it implicates fiduciary duties, violates governing agreements, or otherwise reflects a breakdown in the duties of loyalty and good faith owed between business partners.
What Does It Mean to Withhold a Business Opportunity?
Withholding a business opportunity refers to failing to disclose an opportunity that could benefit the business. A partner may simply keep the opportunity hidden, delay informing the company about it, or prevent the business from pursuing it. Some common examples of a partner withholding a business opportunity can include the following:
- Receiving a request for a proposal from a potential major client but failing to inform the other partners, resulting in the company missing the deadline to bid.
- Learning about an upcoming acquisition opportunity through industry contacts, but not sharing the information with the other partners or allowing the business a chance to evaluate it.
- Receiving notice of a strategic partnership or joint venture opportunity but intentionally keeping it off the agenda and not circulating it to other decision-makers.
- Becoming aware that an existing customer seeks expanded services but not informing the company or routing the inquiry internally, resulting in lost business.
- Learning of a valuable supplier, distribution, or financing opportunity relevant to the company, but keeping the information to themselves and not bringing it up for discussion.
In these situations, the company or other partners may have grounds to pursue legal action if the opportunity rightfully belonged to the business and the company suffered harm as a result.
When Can You Sue a Business Partner for Withholding Business Opportunities?
Withholding a business opportunity is not an independent cause of action in New York, but it may give rise to certain claims based upon the circumstances and the legal duties involved. For instance, withholding a business opportunity may be a legal violation if the partner breached a fiduciary duty by failing to disclose it, or the conduct involved fraud, self-dealing, or another business tort. Similarly, a claim may also be brought if a partner violates the partnership agreement or another governing document by failing to disclose the opportunity or engaging in prohibited competitive conduct.
In addition, the affected partners or owners may have an actionable claim under New York’s corporate opportunity doctrine if the partner exploits a business opportunity that rightfully belonged to the business for personal benefit — or diverts the opportunity to another business without first presenting it to the company. Depending on the facts of the case, other claims may also be available, such as breach of contract, unjust enrichment, or an action for an accounting.
Available remedies for claims involving withheld business opportunities may include compensatory damages, disgorgement, an injunction to prevent ongoing misconduct, an accounting, or, in extreme cases, dissolution. It’s essential to have a skilled business attorney by your side who can best advise you regarding your rights and the remedies that may be applicable in your specific case.
Contact an Experienced Long Island Business Litigation Attorney
If you suspect a business partner is withholding business opportunities from the company, a knowledgeable business litigation attorney can help protect your interests. At Barnes & Barnes, P.C., we offer skillful representation and aggressive advocacy for a wide range of business lawsuits across Long Island, including those involving the withholding of business opportunities. Contact us at (516) 673-0674 to schedule a consultation and learn how we can assist you.
