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Volume X, Number 221

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Director Found To Have Breached His Fiduciary Duty By Sharing Corporation's Privileged Information With His Personal Attorney

A homeowner in a common interest development sued the homeowner association and two of its directors and the directors employers.  The directors' were employed by two related companies engaged in the development and support of common interest developments.  The homeowner association's attorneys advised the association during the course of the litigation.  One of the directors shared this information with his counsel and his employer's counsel.  The plaintiff then amended his complaint to add a cause of action for breach of fiduciary duty to the association.

The trial court awarded the plaintiff his share of the attorney fees paid by the association for the entire trial.  The Court of Appeal found that this was an unreasonable basis for computation of damages. Coley v. Eskaton, 2020 Cal. App. LEXIS 629.  Although the director prevailed on this point, his victory was not complete because the Court of Appeal did not disagree on the finding of liability, only on the calculation of damages.  In this respect, the Court of Appeal appears to assume that the association was damaged by the disclosure, but it does not explicate how.  One wonders, however, if the "damage" caused by the director's disclosure (and, presumably, the resulting waiver) in fact redounded to the benefit the plaintiff and other homeowners.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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