Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-02025/USCOURTS-casd-3_15-cv-02025-4/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332fr Diversity-Fraud

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Case No. 15-cv-2025-WQH-JLB

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DIRECT LIST, LLC, 

Plaintiff,

v.

PHIL KESSLER, LAUREN 

KESSLER, and DIANA 

OWENS,

Defendants.

CASE NO.: 15-cv-2025-WQH-JLB

ORDER 

HAYES, Judge:

The matter before the Court is the Motion for Judgment as a Matter of Law 

filed by Defendants Phil Kessler, Lauren Kessler, and Diana Owens (ECF No. 238).

Defendants contend that Phil Kessler (“Kessler”) is entitled to judgment as a 

matter of law on the claim for breach of fiduciary duty brought by Plaintiff Direct 

List, LLC (“Direct List”) because, inter alia, “there is no fiduciary relationship 

between Phil Kessler and the Plaintiff.” (ECF No. 238 at 4). Direct List contends 

that “Kessler knowingly assumed a fiduciary relationship with . . . Direct List by 

acting as Mr. Salu’s mentor and business coach and encouraging Mr. Salu to disclose 

intimate details of Direct List’s business model, financials, customer and vendor lists, 

and personnel issues.” (ECF No. 161 at 5). 

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Case No. 15-cv-2025-WQH-JLB

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“To establish a cause of action for breach of fiduciary duty, a plaintiff must 

demonstrate the existence of a fiduciary relationship, breach of that duty and 

damages.” Charnay v. Cobert, 51 Cal. Rptr. 3d 471, 480 (Cal. Ct. App. 2006) (citing 

Benasra v. Mitchell Silberberg & Knupp LLP, 20 Cal. Rptr. 3d 621, 632 (Cal. Ct. 

App. 2004); Pierce v. Lyman, 3 Cal. Rptr. 2d 236, 240 (Cal. Ct. App. 1991)). To 

incur a fiduciary duty, one must “knowingly undertake to act on behalf and for the 

benefit of another, or must enter into a relationship which imposes that undertaking 

as a matter of law.” Comm. On Children’s Television, Inc. v. Gen. Foods Corp., 673 

P.2d 660, 675–76 (Cal. 1983) (citing Scott, The Fiduciary Principle, 37 Cal. L. Rev. 

539, 540 (1949); Rest. 2d Trusts (1959) § 2.). 

The Court finds that Direct List has not established by a preponderance of the 

evidence that Kessler “knowingly undert[ook] to act on behalf” of Direct List. 

Comm. On Children’s Television, 673 P.2d 660, 675–76 (Cal. 1983) (citing Scott, 37 

Cal. L. Rev. at 540; Rest. 2d Trusts § 2).

Direct List relies on a footnote in Dirks v. S.E.C., 463 U.S. 646 (1983) for the 

proposition that business consultants like Kessler can have fiduciary duties. (ECF 

No. 161 at 11–12). That footnote states “[u]nder certain circumstances, such as 

where corporate information is revealed legitimately to [a] . . . consultant working 

for the corporation, these outsiders may become fiduciaries of the shareholders.” 

Dirks, 463 U.S. at 655 n. 14 (emphasis added). In this case, however, Direct List has 

not established by a preponderance of the evidence that Kessler ever worked for 

Direct List. 

Direct List cites two out-of-circuit cases for the proposition that “[b]usiness 

consultants entrusted with confidential information have been held to be fiduciaries 

in a number of situations similar to the present case.” (ECF No. 161 at 12). However, 

in the first case, the district court rejected the defendants’ argument that the Illinois 

Trade Secret Act precluded the plaintiff’s breach of fiduciary duty claim; it did not 

rule on whether the defendant owed the plaintiff a fiduciary duty. See EarthDweller, 

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Case No. 15-cv-2025-WQH-JLB

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Ltd. v. Rothnagel, No. 93 C 3790, 1993 WL 487546, at *7 (N.D. Ill. Nov. 22, 1993). 

In the second case, the Fourth Circuit held in an unpublished opinion that a defendant 

who initiated negotiations to purchase a company on behalf of the plaintiff then broke 

off those negotiations and purchased the company itself owed the plaintiff a fiduciary 

duty. See Bocek v. JGA Assocs., LLC, 537 F. App’x 169, 176 (4th Cir. 2013) (relying 

on the rule that “[a]gents are fiduciaries and owe their principals a strict duty of 

loyalty”). In that case, the defendant acted on behalf of and as an agent of the plaintiff 

when it initiated the negotiations. See id. Here, however, Direct List has not

established by a preponderance of the evidence that Kessler ever acted on behalf of 

Direct List or as an agent of Direct List.

Accordingly, the Court GRANTS Defendants’ Motion for Judgment as a 

Matter of Law (ECF No. 238) on Direct List’s claim for breach of fiduciary duty. 

The Court DENIES Defendants’ Motion for Judgment as a Matter of Law (ECF No. 

238) on Plaintiffs’ claims for fraud, misappropriation of trade secrets, violation of 

California Penal Code § 502, intentional interference with prospective economic 

advantage, and negligent interference with prospective economic advantage.

Dated: August 6, 2018

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