Also known as: loyalties · duty of loyalty
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary duty requiring a partner, member, or agent to place the interests of the partnership, company, or principal above personal gain. The duty encompasses accounting for profits derived from entity opportunities, avoiding self-dealing, and refraining from competition during the relationship.
Lila Lin serves as a managing member of Lunar Dynamics, an LLC developing drone software. She learns of a government contract during an LLC meeting and signs it through her separate corporation using company engineers. The LLC sues Lin for breach of the duty of loyalty.
Luis Lopez and Leah Lamb form a limited partnership to operate a marina. Their agreement states that no partner owes a duty of loyalty. Lopez later opens a competing dock using partnership assets. Lamb challenges the agreement clause.
Select any source to read its text and confirm it supports the definition.
Lamar Lewis and Levi Lowe operate a consulting firm as general partners. Their agreement purports to eliminate the duty of loyalty. Lewis accepts paid work for a direct competitor without disclosure. Lowe seeks damages for the breach.
Defense counsel learns that the client intends to commit perjury at trial. Counsel refuses to present the false testimony and informs the court after attempting to dissuade the client. The client claims violation of the duty of loyalty.
Landon Long, a member of Lakeshore Industries, an LLC, causes the company to lease equipment from his wholly owned corporation at above-market rates without disclosure. The other members sue Long for violating the duty of loyalty.
Lumen Capital, a limited partnership, has a general partner who forms a rival fund and solicits limited partners using information gained from the original partnership. The limited partners sue for breach of the duty of loyalty.
A managing partner breaches the duty by appropriating partnership opportunities, serving an adverse interest, or competing with the partnership before dissolution. Full disclosure and ratification by all partners can validate an otherwise prohibited transaction.
Supporting sources
A partnership agreement cannot alter or eliminate the duty of loyalty except in limited circumstances permitted by statute. Attempts to waive the duty entirely are unenforceable.
Supporting sources
An agent breaches the duty of loyalty by steering clients to a competing business in which the agent holds an interest without disclosure. The breach occurs even if the principal suffers no actual loss.
Supporting sources
Counsel must first attempt to dissuade the client from perjury. If unsuccessful, counsel may withdraw and, if necessary, disclose the perjury to the court as a remedial measure.
Supporting sources
A principal may recover any benefit the agent received from the breach, the value of that benefit, or damages caused by the breach. The agent forfeits compensation for the disloyal conduct.
Supporting sources
…sacred. It is an association that promotes a way of life, not causes; a harmony in living, not political faiths; a bilateral loyalty, not commercial or social projects. Yet it is an association for as noble a purpose as any involved in our prior decisions. Reversed. Concurring opinions Concurring — Mr. Justice…