{"id":1395,"date":"2020-04-16T12:21:42","date_gmt":"2020-04-16T12:21:42","guid":{"rendered":"https:\/\/www.bfvlaw.com\/the-right-to-compete-is-not-a-right-to-cheat\/"},"modified":"2020-04-16T12:21:42","modified_gmt":"2020-04-16T12:21:42","slug":"the-right-to-compete-is-not-a-right-to-cheat","status":"publish","type":"post","link":"https:\/\/www.bfvlaw.com\/the-right-to-compete-is-not-a-right-to-cheat\/","title":{"rendered":"The Right to Compete is Not a Right to Cheat"},"content":{"rendered":"\n<p>Our <a href=\"https:\/\/www.bfvlaw.com\/can-you-start-a-competing-business\/\">recent Right to Compete blog post<\/a> confirms that a company\u2019s manager may compete if the company\u2019s operating agreement gives the manager the right to do so, notwithstanding the manager\u2019s fiduciary duty to act in the best interests of the company he manages. But, even in this nod to free enterprise, there are limits.<\/p>\n\n\n\n<p><strong>A Right to Compete Superior Court Decision<\/strong><br>A <a href=\"https:\/\/readingroom.law.gsu.edu\/cgi\/viewcontent.cgi?article=1405&amp;context=businesscourt\">recent decision<\/a> by the Superior Court of Fulton County \u2013 Business Court Division, squarely addresses this issue.&nbsp; The case involved a dispute between co-owners of a successful senior living industry empire.&nbsp; The minority owner, holding roughly a 30% interest in the business, sued the majority owner \u2013 who was also the company\u2019s manager &#8211; for breach of fiduciary duty, alleging that the manager engaged in a series of conflicting interest transactions that benefited the manager to the detriment of the company he managed.&nbsp; More specifically, the minority owner alleged that the manager was using the money, resources, staff, infrastructure and knowhow of the company to support other businesses the manager owned, but in which the minority member had no interest.<\/p>\n\n\n\n<p><strong>The Operating Agreement&nbsp;<\/strong><br>The company\u2019s operating agreement provided:<br>Manager may become involved in other businesses, endeavors, and partnerships, some of which may be in competition with the Company.<\/p>\n\n\n\n<p>The operating agreement also expressly exempted the manager from complying with <a href=\"https:\/\/law.justia.com\/codes\/georgia\/2017\/title-14\/chapter-3\/article-8\/part-6\/\">Georgia\u2019s Conflicting Interest Transactions\u2019 statute<\/a>. In light of this language, the manager argued that his competitive conduct was permissible.&nbsp; The trial court disagreed, finding that while the operating agreement may give the manager the ability to both compete and to engage in conflicting interest transactions, the manager still had an obligation to \u201cact in a manner he [&nbsp; ] believes in good faith to be in the best interests of the [&nbsp; ] company and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.\u201d&nbsp; In effect, the court decision held that the manager could compete with the company he managed, but that using that company\u2019s own resources to compete against it crossed the line from competing to cheating.&nbsp;<\/p>\n\n\n\n<p>Finding the line and determining when its been crossed in these situations can be difficult.&nbsp; Experienced counsel can help. &nbsp;<a href=\"https:\/\/www.bfvlaw.com\/attorney\/william-j-piercy\/\">Let us know<\/a> if we can help.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our recent Right to Compete blog post confirms that a company\u2019s manager may compete if the company\u2019s operating agreement gives the manager the right to do so, notwithstanding the manager\u2019s fiduciary duty to act in the best interests of the company he manages. But, even in this nod to free enterprise, there are limits. A [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":1396,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4,8],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Right to Compete is Not a Right to Cheat | Berman Fink Van Horn P.C.<\/title>\n<meta name=\"description\" content=\"Our recent Right to Compete blog post confirms that a company\u2019s manager may compete if the company\u2019s operating agreement gives the manager the right to do so, notwithstanding the manager\u2019s fiduciary duty to act in the best interests of the company he manages.\" \/>\n<meta name=\"robots\" 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