Misappropriation of a business opportunity is a specific type of unfair competition, which requires an intentional act of bad faith.
What is Misappropriation of Business Opportunity?
Misappropriation of a business opportunity occurs when one person has a legitimate business opportunity, the other party knew about this opportunity, and the other party obtained this business opportunity to the detriment of the person who had the legitimate business opportunity.
Normally, this type of unfair competition occurs between:
- A corporation and his directors or officers;
- A party who owns an intellectual property such as a trade secret or idea as against another person who wrongfully exploits such intellectual property without ownership or license; and
- Parties in violation of a non-disclosure or non-solicitation agreement.
Misappropriation of business opportunity is an intentional tort, usually used when there is no remedy of a breach of contract claim. Possible remedies for a claim of misappropriation of business opportunity are the imposition of a constructive trust to prevent undue enrichment, actual damages, and punitive damages.
Types of Misappropriation of Business Opportunity
Misappropriation of business opportunities can occur in the context of a corporation and its fiduciaries. For example, a real estate corporation has a legitimate business opportunity to purchase a building at a low price. One of the corporation’s directors was informed about this opportunity because his vote was needed in a board meeting to purchase the property. Unbeknownst to the corporation, its director, using another company he had majority ownership over, purchased the building at a low price. This director misappropriated the business opportunity that belonged to the real estate corporation. For this intentional act of bad faith, the director can be held liable for damages incurred by the corporation.
Another example of misappropriation of a business opportunity can occur when someone exploits or steals another person’s intellectual property without the consent of the intellectual property owner. Usually, the intellectual property takes the form of a trade secret. In a claim for misappropriation of trade secret, the trade secret must be sufficiently described in particularity so that its protectability can be assessed.
New York law also recognizes a cause of action for the misappropriation of ideas. The idea, however, must be novel and concrete and must not be a variation of an idea that is already in the public domain. To prove this claim, the plaintiff must establish: (1) a legal relationship between the parties in the form of a fiduciary relationship, an express contract, implied contract, or quasi contract; and (2) that it possessed an idea that was novel and concrete. Schroeder v. Pinterest Inc., 133 A.D.3d 12, 23 (1st Dept. 2015).
Misappropriation of a business opportunity can also occur in violations of non-disclosure agreements and non-solicitation agreements. In this case, the misappropriation is an additional cause of action from the breach of contract. This happens when a party to the agreement is obligated to not solicit the customers of another or not use the information acquired under the contract for the individual’s business or employer.
Misappropriation of a business opportunity usually involves fraud, deceit, or a breach of fiduciary duty. Filing a claim with the courts requires the experience of an experienced unfair competition lawyer who can adequately draft your complaint and present the supporting evidence for your claim. Should you need assistance, we at the Law Offices of Albert Goodwin can help. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].
