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Nevada Law Library

Usurpation Of Corporate Opportunity

In Nevada, the elements for a claim usurpation of corporate opportunity are:

1.         Defendant is a fiduciary to a company;

2.         Defendant appropriates for her own use, an opportunity that should belong to the company;

3.         The competing business is operated to the detriment of the Plaintiff company;

4.         Defendant has an interest or expectancy in the competing business’s opportunity; and

5.         Causation and damages.

Simply stated, a company’s fiduciary is forbidden from appropriating a business opportunity belonging to the company for her own personal gain.  19 Am. Jur. 2d, Corporations, § 1311.  The Doctrine is recognized in Nevada.  Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 87-88, 734 P.2d 1221 (1987) (“it is generally recognized that a corporate fiduciary cannot exploit an opportunity that belongs to the corporation.”).  The central questions presented to courts in most Corporate Opportunity Doctrine situations are whether the company has an expectancy interest in the opportunity and whether the opportunity, in all fairness, belongs to the Company.  Id. Under this view, the existence of a protectable opportunity is tested by determining whether the company has an “expectancy or interest” therein.  If the company has a legal or even equitable interest or expectancy growing out of a pre-existing right or relationship, the fiduciary may not keep the opportunity for herself.  Am. Jur. Proof of Facts 2d 291 Corporate Opportunity Doctrine – Fairness of Corporate Official’s Acquisition of Business Opportunity § 2 (2003).  Stated another way, any proposed activity developed through the company’s assets that is reasonably incident to the business is a protected opportunity.  See Anest v. Audino, 773 N.E.2d 202, 210-11 (Ill. App.  2d  2002).   In such a situation, if a fiduciary takes the opportunity for herself, the Company may elect to claim all benefits therefrom for itself, and the law will impress a trust in favor of the company on the opportunity and its profits.  McLinden v. Coco, 764 N.E.2d 606, 616 (Ind. App. 2002); I.P. Homeowners, Inc. v. Radtke, 558 N.W.2d 582, 288 (Neb. Ct. App. 1997); Bank of Amer. v. Ryan, 207 Cal. App. 2d 698, 24 Cal. Rptr. 739 (1962) (recognizing that the implied trust is imposed not only on the property and its profits, but also imposes liability for interest at the legal rate from the receipt of profits, rents, etc.).