Management agreements are a keystone of a successful business structure. It should seem self-evident that a partner's effort to forge his partner's signature on a management agreement to give him powers that the other partner didn't agree to is a serious breach of fiduciary duty and is a surefire way to start a  serious business dispute. The Florida Fourth District Court of Appeal recently ruled that forgery of a limited liability company management agreement can constitute more than just a breach of fiduciary duty but can result in damages being owed to the company See Shah LLC v Patel, 50 Fla. L. Weekly D1869 (Fla. 4^th DCA Aug. 20, 2025).

In Shah, the plaintiffs, Hiren and Piyush Shah, formed two limited liability companies with Umesh Patel and Sanjay Patel to manage two hotels. Umesh was the initial manager of the companies, and during his tenure, Sanjay loaned monies from the LLCs to Sanjay's wife and entities in which Sanjay held a financial interest. Sanjay then became sole manager. When he did, he created a backdated management agreement, forged Umesh's signature, and then used the management agreement to convert the loans into past management compensation to him and obligated the LLCs to pay him an ongoing management fee at a rate the Shahs had not approved. 

The Shahs sued for breach of fiduciary duty on behalf of the LLCs. After dismissing Umesh from the case, the trial court ruled that  Sanjay had breached his fiduciary duty in forging the agreement, but that the Shahs had failed to prove that the forgery caused any damages to the LLC. Specifically, the trial court found that the only evidence of damages were loans about which the Shahs had known and which two financial witnesses testified had been “zeroed out.” 

The appellate court overturned this decision, ruling that the trial court focused too much on the forgery and not enough on its financial impact on the companies. The forged agreement allowed Sanjay to direct the companies' bookkeeper to zero out the loans, turning an LLC asset – roughly $2 million in loans owed to the companies -- into a liability, along with an accrual of excessive unapproved management fees.

In reaching its conclusion, the court examined the timing of the zeroing out of loan as well as to whom the loan reductions were applied. The court also examined the amounts of the loans taken off the books and the management fees paid to the defendant through the forged management agreement. If there is a lesson to learn here, it's that forging a management agreement can lead to more than just a partnership dispute or breakdown, and courts will look carefully for any negative impacts on the business and  award serious damages.

This post was co-authored by Bennett Hammond