Opinion ID: 678811
Heading Depth: 2
Heading Rank: 3

Heading: Restitution of Goldman's Fee

Text: 37 Finally, FMC claims that it is entitled to restitution of Goldman's fee because Goldman breached its fiduciary duties to FMC. Judge Pollack ruled that FMC could not recover under this theory as a matter of law. We agree. 38 In deciding this claim, Judge Pollack did not indicate which state's law governed. The only two candidates are Illinois and New York. FMC's principal place of business is in Illinois, while Goldman has its principal place of business in New York and maintains an office in Illinois; it also appears from the record that the contract from which Goldman's fiduciary duty to FMC arose was formed in either Illinois or New York. We do not remand for resolution of the choice-of-law issue, however, because FMC has no claim against Goldman under the law of either state. 39 A principal is entitled to restitution of compensation paid if an agent breaches its duties of loyalty or obedience. Restatement (Second) of Agency Sec. 469 cmt. a (1958) [hereinafter Restatement ]; see Vendo Co. v. Stoner, 58 Ill.2d 289, 314, 321 N.E.2d 1, 14 (1974), cert. denied, 420 U.S. 975, 95 S.Ct. 1398, 43 L.Ed.2d 655 (1975); Monotronics Corp. v. Baylor, 107 Ill.App.3d 14, 18, 62 Ill.Dec. 760, 764, 436 N.E.2d 1062, 1066 (App.Ct.1982); Soam Corp. v. Trane Co, 608 N.Y.S.2d 177, 178 (App.Div.1994). If an employee of the agent commits the act constituting a breach of the agent's fiduciary duty to the principal, under the doctrine of respondeat superior the agent is liable to the principal only if the agent's employee was acting within the scope of his employment. Cf. Randi F. v. High Ridge YMCA, 170 Ill.App.3d 962, 964, 120 Ill.Dec. 784, 786, 524 N.E.2d 966, 968 (App.Ct.1988) (discussing respondeat superior standard generally); Sims v. Bergamo, 3 N.Y.2d 531, 534-36, 169 N.Y.S.2d 449, 451-53, 147 N.E.2d 1, 3-4 (1957) (same). For FMC's claim to survive summary judgment, then, there must be a genuine issue of material fact as to whether a Goldman employee (1) acted in the scope of his employment and (2) committed an act constituting a breach of Goldman's duty of loyalty to FMC. 40 FMC predicates its claim of breach of fiduciary duty on the allegations that two Goldman employees, Brown and Brosens, communicated its confidential information to Boesky and his cronies. Turning first to Brown, we conclude that Goldman is not liable for Brown's acts because Brown did not act in the scope of his employment. While an employer may be liable for even intentional and criminal acts committed by its employee, those acts must in some way further the interests of the employer, and not solely benefit the employee. Randi H., 170 Ill.App.3d at 964-65, 120 Ill.Dec. at 788, 524 N.E.2d at 968; Sims, 3 N.Y.2d at 533-36, 169 N.Y.S.2d at 450-51, 147 N.E.2d at 2-4 (requiring evidence to show that employee's tortious act was in furtherance of his employer's interests); Restatement Sec. 235. The record reveals that Brown divined FMC's identity through surreptitious activities unknown to others at Goldman. As is evident even from FMC's complaint, Brown sold nonpublic information to line his own pockets in violation of every fiduciary duty he owed to Goldman as its employee. None of his actions furthered Goldman's interests. Whether Goldman was negligent in maintaining lax internal controls which Brown easily sidestepped is irrelevant in a claim for restitution. Since Brown did not act within the scope of his employment, as FMC conceded below, see FMC, 825 F.Supp. at 626, Goldman cannot be held liable under a theory of respondeat superior for breach of the duty of loyalty on the basis of Brown's acts. 41 Goldman also cannot be held liable for Brosens's acts, but for different reasons. Brosens clearly acted within the scope of his employment. Indeed, Brosens engaged in discussions with Lessman on express direction from his superiors at Goldman. After construing the evidence in the light most favorable to FMC, however, there is no genuine issue of material fact as to whether these discussions constituted a breach of the duty of loyalty. An agent breaches its duty of loyalty if it does not act solely for the benefit of the [principal] in all matters connected with [the] agency. Mullaney, Wells & Co. v. Savage, 78 Ill.2d 534, 546, 37 Ill.Dec. 572, 578, 402 N.E.2d 574, 580 (1980); Restatement Sec. 387; see Landau v. Percacciolo, 50 N.Y.2d 430, 436-37, 429 N.Y.S.2d 566, 568-69, 407 N.E.2d 412, 415-16 (1980). No inference of breach can reasonably be drawn from the record. First, despite extensive discovery by FMC, there is no proof that Brosens in fact disclosed confidential business information to Boesky. Second, even if such disclosures were made, his conversations were intended to further FMC's interests in the reorganization. Not a shred of evidence shows that Goldman, through Brosens's efforts, sought to advance any interests of its own separate and apart from the success of FMC's recapitalization. 42 FMC's allegation that Goldman consistently placed its interests in maintaining its relationship with the Boesky organization above FMC's interest in the confidentiality of its information is not enough to save this claim from summary judgment. When a motion for summary judgment is made, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but ... must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e). The specific facts marshaled in rebuttal must be such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). FMC proffers as evidence of Goldman's faithless cozying up to Boesky the facts that Brosens and Lessman regularly exchanged information for years, that their bosses had regular contact over the years, and that Goldman did not disclose the Brosens-Lessman conversations to either FMC or the SEC. No reasonable jury could find a breach of the duty of loyalty based on such evidence. [T]o defeat a motion for summary judgment a plaintiff cannot rely on conjecture or surmise and must do more than simply show that there is some metaphysical doubt as to the material facts. Heilweil v. Mount Sinai Hosp., 32 F.3d 718, 723 (2d Cir.1994) (citations and quotations omitted).