Violation of Corporate Opportunity Doctrine Held Actionable

The fiduciary duty owed by corporate officers and directors includes an obligation not to usurp a corporate business opportunity for personal gain but to allow that opportunity to be enjoyed by the corporation, to which it is said to belong. (See Feddeman & Co. v. Langan Assocs., P.C., 260 Va. 35, 46 n.1 (2000)). As fiduciaries, officers and directors have a duty of loyalty that requires them to act in the best interests of the corporation at all times. A breach of fiduciary duty may arise if a corporate officer becomes personally interested in an opportunity of legitimate interest to his employer. Conflicts of interest must be avoided and all corporate opportunities must be presented to the corporation before the officer takes it for himself or offers it to others. If a corporate officer violates this so-called “corporate opportunity doctrine,” the corporation may sue for damages.

Technically, a violation of the corporate opportunity doctrine is a breach of fiduciary duty, but according to a recent opinion from the Western District of Virginia, it doesn’t really matter what you call it; it’s a tort, for which monetary damages can be recovered.

The case of Jarel Cole Gordon v. Blue Mountain Therapy, LLC, involved a classic breach-of-fiduciary-duty scenario. The facts, according to the opinion, go something like this. Blue Mountain Therapy hired Jarel Gordon in 2017 to develop therapy programs for children with special needs, and eventually promoted him to Director of ABA Services. At some point during Gordon’s employment, he apparently entered into a contract with a school system or other third party to provide therapy to students in his individual capacity, outside of his role with Blue Mountain Therapy. The therapy services he was to provide were exactly the same sort of services he would ordinarily provide as a Blue Mountain Therapy provider. Blue Mountain Therapy alleged that Gordon never informed it of the business opportunity and never informed it that he had usurped it for himself. Gordon pot-of-gold-300x279provided the services, got paid, and didn’t share any of the money with his employer.

Gordon was fired shortly after Blue Mountain learned of what had been happening. He sued for wrongful termination but was hit with a counterclaim that included claims for breach of fiduciary duty, breach of contract, breach of the common law duty of loyalty, breach of the corporate opportunity doctrine, and fraud. Gordon moved to dismiss all counts of the counterclaim but the court rejected all of his arguments and let all counts proceed, including the count for violation of the corporate opportunity doctrine, which the court acknowledged “is generally considered a breach of fiduciary duty rather than conduct constituting a direct cause of action.” (See Feddeman case cited above).

The fact that Blue Mountain styled a separate claim for violation of the corporate opportunity doctrine, without labeling it as a breach of fiduciary duty, was really just a matter of semantics, the court held. The counterclaim alleged that Gordon entered into contracts with a school system or other third party to provide therapy services for his own benefit, which was contrary to the best interest of his employer. That alleged conduct plausibly alleged a breach of the corporate opportunity doctrine, the court held, and whether the count would have been “more aptly labeled a breach of fiduciary duties is beside the point.”


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