In New York, the managing member of a limited liability company (an “LLC”) owes a fiduciary duty to the LLC’s other members. This means that the LLC’s managing member and the entity’s other members are in a relationship of trust and confidence under which the managing member is bound to exercise the utmost good faith and undivided loyalty toward the other members throughout the relationship. If the managing member of the LLC violates his fiduciary duty to the entity’s other members, those members may bring a derivative lawsuit against the managing member for breach of fiduciary duty.
By contrast, as a general rule, an accountant retained by a limited liability company is not a fiduciary as to the LLC or its members, except where the accountant is directly involved in managing the LLC’s investments. As a result, the members of an LLC cannot successfully sue the LLC’s accountant or accountants for breach of fiduciary duty.
However, where it is demonstrated that the accountants retained by the mamaging member of a limited liability company had complete knowledge of the managing member’s misuse of that LLC’s funds, and were indispensable to the managing member in his efforts to conceal the use of those funds, the accountants may be held liable for aiding and abetting the breach of fiduciary duty by the managing member. That is, under these circumstances, the members of the LLC may bring a derivative lawsuit against the LLC’s accountants for aiding and abetting the managing member’s breach of fiduciary duty.
New York City attorney David S. Rich has experience suing limited liability companies’ accountants for aiding and abetting the LLC’s fiduciaries’ breaches of fiduciary duty. If you believe that your LLC’s accountants may have helped your business partner or partners rip off the LLC, call David S. Rich at (212) 209-3972.