Case ID: f-appx_598/html/0794-01.html
Source: Caselaw Access Project
Author: {"author": "", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SAWABEH INFORMATION SERVICES COMPANY, EDCOMM, INC., Plaintiffs-Appellees-Cross-Appellants, v. LINDA EAGLE, DAVID SHAPP, CLIFFORD BRODY, Defendants-Appellants-Cross-Appellees.
      
    
    Nos. 14-403-cv(L), 14-610-cv(XAP).
    United States Court of Appeals, Second Circuit.
    March 25, 2015.
    Philip R. Berwish, Berwish Law, New York, NY, for Plaintiffs.
    David Shapp, pro se (Linda Eagle, pro se, New York, New York, Clifford Brody, pro se, Ambler, PA, on the brief), Buckingham, PA, for Defendants.
    PRESENT: DENNIS JACOBS, RAYMOND J. LOHIER, JR., Circuit Judges, FRANK P. GERACI, JR., District Judge.
    
      
       The Clerk of Court is respectfully directed to amend the official caption in this case to conform with the caption above.
    
    
      
       Chief Judge Frank P. Geraci, Jr., of the United States District Court for the Western District of New York, sitting by designation.
    
   SUMMARY ORDER

The parties cross-appeal from the judgment of the United States District Court for the Southern District of New York (Scheindlin, J.), which: requires defendants to indemnify Sawabeh Information Services Company (“SISCOM”) for any judgment entered in a related state court action; declares that Edcomm, Inc. (“Ed-comm”) owns certain intellectual property; and dismisses with prejudice the parties’ remaining claims and counterclaims. We assume the parties’ familiarity with the underlying facts, the procedural history, and the issues presented for review.

“In reviewing a district court’s decision in a bench trial, we review the district court’s findings of fact for clear error and its conclusions of law de novo. White v. White Rose Food, a Div. of DiGiorgio Corp., 237 F.3d 174, 178 (2d Cir.2001).

In all respects but one, we affirm the judgment for the reasons set forth by the district court.

The district court erroneously concluded that defendants breached their fiduciary duty to SISCOM by failing'to disclose a series of loans from Debra Slater (the “Slater Loans”). The court’s factual findings are not clearly erroneous; the error is in the legal analysis. Under New York law, “[t]he elements of a claim for breach of a fiduciary obligation are: (i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and (iii) damages resulting therefrom.” Johnson v. Nextel Commc’ns, Inc., 660 F.3d 131, 138 (2d Cir.2011).

The district court found that defendants (former directors and shareholders of Ed-comm) entered into a fiduciary relationship with SISCOM when SISCOM acquired Edcomm. But by that point, it was already too late for SISCOM to avoid any loss or potential liability arising out of the Slater Loans; SISCOM became liable for those loans, if at all, upon its acquisition of Edcomm. To the extent that defendants breached a fiduciary duty by failing to disclose the loans after the acquisition, there were no “damages resulting therefrom” because any injury to SISCOM resulted from defendants’ failure to disclose the Slater Loans before the acquisition, when defendants did not yet owe SISCOM a fiduciary duty. On the facts found by the district court, SISCOM’s claim fails as a matter of law.

For the foregoing reasons, and finding no merit in the parties’ other arguments, we hereby AFFIRM the judgment of the district court, except as to SISCOM’s breach of fiduciary duty claim. We REVERSE the portion of the judgment requiring defendants to indemnify plaintiffs for any judgment entered in the state court litigation concerning the Slater Loans. 
      
      . The district court correctly dismissed Ed-comm’s breach of fiduciary duty claim.