In Pappas v. Tzolis, an action between former members and managers of an LLC, the Court of Appeals addressed the question of whether one member breached a fiduciary duty by failing to disclose negotiations for the sale of the company in connection with a buyout of another member’s interest.

The Court noted that “[t]he relationship between plaintiffs and [the purchaser] had become antagonistic to the extent that plaintiffs could no longer reasonably regard the purchaser as trustworthy.” Thus, the Court found that no breach existed because “plaintiffs were sophisticated businessmen represented by counsel [and] plaintiffs’ own allegations make it clear that at the time of the buyout, the relationship between the parties was not one of trust, and reliance on [the purchaser’s] representations as a fiduciary would not have been reasonable.”

Pappas v. Tzolis, 2012 NY Slip Op 08053 [20 NY3d 228] November 27, 2012.