• January 31, 2018

The jurist Benjamin Cardozo (1870-1938) used the most florid speech of any famous American judge and his description of “fiduciary duties” has been quoted thousands of times because it is quirky and therefore memorable:

When it comes to people who owe other people a fiduciary duty (such as business partners), “not honesty alone but, the punctilio of an honor the most sensitive, is…the standard of behavior.”

To use more common speech, in affairs of business, in the market-place, courts generally try not to interfere with hard-nosed and sharp-elbowed business practices. The market-place can be rough and, to a large extent, our legal system is fine with that. However, if you enter into a partnership, if you go into business together, or if you owe someone else a fiduciary duty for any variety of reasons (as attorneys generally owe to clients, etc.), courts will step in if you dupe someone to whom you owe the duty. The duty involves loyalty, “utmost good faith,” “the obligation to disclose material facts, and the duty to act in an honest, fair and reasonable manner in the operation of the business.”

Plaintiff Kevin McGregor formed an LLC with Jessica Medlin to develop a building in the Linden Hills neighborhood in Minneapolis. She allegedly mispresented her finances to McGregor, she allegedly unilaterally passed information about the opportunity to third parties, and, Plaintiff alleges, Ms. Medlin scuppered the deal Plaintiff had so she and others (and not the Plaintiff) could capitalize on the opportunity. Ms. Medlin and her alleged fellow co-conspirators tried to get out of the case on summary judgment; that effort went badly for the defendants who lost on every claim. Trial is scheduled to begin in less than two weeks before Hennepin County District Court Judge Mary Vasaly.

The order denying defendants’ motions for summary judgment is 35-pages but it is worth reading in its entirety. The court’s analysis is detailed, thorough, and insightful. And the case highlights the importance of deep fact discovery. “be careful what u say and how u say it. I can’t get this linked back to me,” is a text message from Defendant Medlin to an alleged co-conspirator. (See here at p. 10.) At around this time, someone allegedly tipped off Plaintiff’s business partner that, “the competing group knew what we were up to before we did…” (see here, again at p. 10). We’re sure that it was no simple (or cheap) task getting this information but it might show itself to be extremely valuable information in the resolution, one way or the other, of this lawsuit.

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