Also known as:intentional mis-conduct · willful misconduct · wilful misconduct
Written by attorneys · grounded in primary & secondary sources — see below
Conduct undertaken deliberately with knowledge that it violates a duty or legal obligation.
Sources & Authorities
How it applies
Common Examples
6
LLC Member Overrides Safety Rules
Ivan Ivanov, a member managing Ironclad Industries, repeatedly disabled mandatory safety interlocks on production equipment to meet output targets even though state regulations required the devices to remain active. When the equipment failed and injured a worker, the other members sued Ivan for the resulting losses. Because Ivan knowingly disabled required safeguards, a court found his conduct constituted intentional misconduct that breached the statutory duty of care.
General Partner Diverts Funds
Ike Ingram, the general partner of a limited partnership that owned a chain of restaurants, used partnership accounts to pay personal gambling debts. The limited partners sued to recover the diverted sums. Because Ike knowingly took partnership money for his own benefit, the court held that his actions amounted to intentional misconduct that violated the duty of care.
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Model Codes
Hornbooks
Partner Falsifies Records
Imran Iyer, a partner in a consulting firm, altered client billing records to inflate hours after learning the client would be audited. The other partners sued for the resulting penalties and lost fees. The court concluded that Imran's deliberate falsification met the definition of intentional misconduct under the duty of care statute.
Exculpation Clause Invalidated
Infinity Bank and its limited partners agreed in the partnership agreement that no partner would be liable for any breach of duty. When a general partner knowingly backdated loan documents to conceal regulatory violations, the limited partners sued. The court held that the exculpation clause could not shield the partner from liability for intentional misconduct.
Partner Aids Securities Violation
A general partner in a real-estate limited partnership approved bond issues while knowing the developer had falsified appraisal reports. Limited partners sued the partner for aiding misconduct. The court held the partner could not escape liability absent proof that the conduct did not constitute intentional misconduct under the partnership statute.
Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.511 U.S. 164 (1994)
Partner Negligence Versus Intent
A partner performed audits for a brokerage firm whose president was running a Ponzi scheme. Other partners sued claiming the partner should have discovered the fraud. The court ruled that the partnership statute requires proof of intentional misconduct and does not reach ordinary negligence.
Ernst & Ernst v. Hochfelder425 U.S. 185, 197 (1976)
Common questions
Frequently Asked
3
How does intentional misconduct differ from gross negligence under partnership duty-of-care statutes?+
Intentional misconduct requires a deliberate act done with knowledge that it violates a duty or law. Gross negligence involves a conscious disregard of a substantial risk without that same level of purposeful violation. Both categories independently breach the duty of care.
Supporting sources
Can a partnership agreement eliminate liability for intentional misconduct?+
No. Uniform acts prohibit partnership agreements from relieving or exonerating a person from liability for conduct involving intentional misconduct. Any clause attempting to do so is unenforceable.
Supporting sources
Does a partner who acts to further personal interests automatically commit intentional misconduct?+
No. A partner may pursue personal interests without breaching duties provided the conduct does not rise to gross negligence, intentional misconduct, or knowing violations of law. The statutes expressly state that furthering one's own interest alone does not constitute a violation.
Supporting sources
425 U.S. 185 (1976)Business Associations
…of Nay that would have revealed the fraudulent scheme. Respondents specifically disclaimed the existence of fraud or intentional misconduct on the part of Ernst & Ernst.[^maj-5] After extensive discovery the District Court granted Ernst & Ernst's motion for summary judgment and dismissed the action. The court rejected Ernst &…