Opinion ID: 752950
Heading Depth: 2
Heading Rank: 2

Heading: First Cause of Action: Tortious Interference with Salvo's Fiduciary Duties

Text: 46 Under New York law, 7 a tortious interference with fiduciary duty claim consists of three elements: (1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that the plaintiff suffered damages as a result of the breach. S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-48 (2d Cir.1987)(applying New York law) (citations omitted). With regard to the first element of this claim, the parties agree that an agent of a corporation owes fiduciary duties to his principal, the corporation, and he breaches those duties when he fails to act in the best interest of the corporation. The second element of this claim does not require proof of wrongful intent; knowing participation in such a breach is sufficient. See S & K Sales, 816 F.2d at 848-49. The third element of the claim is clear on its face, and is satisfied upon a showing of pecuniary harm. See Whitney v. Citibank, N.A., 782 F.2d 1106, 1117 (2d Cir.1986). Applying these principles to Defendants GMI, Gallen and Brockway, we find that the evidence before the district court was sufficient to support a finding in favor of Hannex. 47 First, there is sufficient evidence to support Hannex's allegation that Salvo breached his fiduciary duty to Hannex, his employer. Salvo met repeatedly with GMI without informing the Hanneses, even after being told by Jack Hannes not to meet with GMI. Salvo participated in meetings between GMI and Yamaguchi, meetings that Jack Hannes specifically instructed Salvo not to arrange or participate in. Salvo repeatedly told falsehoods to Jack and Martin Hannes to conceal his frequent contacts with GMI. Salvo arranged to attend a meeting with GMI and Yamaguchi in Japan, without the consent of the Hanneses and contrary to Martin Hannes's express instructions. Moreover, Salvo failed to carry out Jack Hannes's instruction to urge Yamaguchi to sign a proposed distribution agreement. When Jack Hannes reprimanded Salvo for these actions, Salvo forwarded the letter to GMI and its attorneys and asked them how to proceed. Furthermore, the evidence suggested, and the jury could find, that all of these things were done to assist GMI in entering into an arrangement which would be devastating to Hannex, Salvo's employer, to which he owed a fiduciary duty. A reasonable jury could conclude, based on this evidence, that Salvo breached his fiduciary duty by refusing to use his best efforts to obtain a new distribution agreement that would have benefitted Hannex and by purposefully trying to strike a deal with GMI and S & S Japan that was contrary to Hannex's financial interest. 48 There is also sufficient evidence to support Hannex's allegation that GMI, Gallen and Brockway knowingly participated in this breach. After being put on notice that Jack Hannes disapproved of any meetings between them and Yamaguchi, and that he disapproved of Salvo contacting GMI, they continued to meet with Salvo in the effort to acquire either the Hannex business or a distribution agreement with S & S Japan. While Salvo was still employed by Hannex, GMI paid Salvo's expenses in attending meetings and making calls on behalf of GMI, and booked Salvo's plane tickets through GMI's travel agent. Salvo provided sensitive Hannex information to GMI. Salvo informed GMI that Hannex did not have an existing contractual relationship with S & S Japan at the very time Salvo was supposed to be trying to finalize the contract. He also consulted GMI and its attorneys about his non-compete agreement while still employed by Hannex. This unusual course of dealings is circumstantial evidence sufficient to support the inference that GMI, Brockway and Gallen knowingly participated in Salvo's breach. 49 Finally, a jury could conclude that Hannex suffered damages as a result. Yamaguchi initially indicated that he would sign the distribution agreement, and that he was satisfied with Hannex's distribution effort. However, after Salvo began his string of contacts with GMI, Yamaguchi changed his mind. There is evidence suggesting that Yamaguchi insisted on including Salvo in any future distribution arrangement, thus making Salvo's loyalty to Hannex critical to maintaining the relationship between Hannex and S & S Japan. A jury could conclude, therefore, that had Salvo not worked secretly with GMI, S & S Japan would have continued to do business with the Hanneses' companies in the United States. In any event, Hannex was precluded from presenting evidence of damages because of the bifurcated nature of the trial and the lower court's ruling. Such proof may be presented upon re-trial of the case. 8 50 With respect to Defendant S & S Japan, however, we agree with the district court that the evidence was insufficient to support a judgment in Hannex's favor. Although there is some evidence to suggest that Yamaguchi was aware that Salvo had a relationship with Hannex, there is not sufficient evidence from which a reasonable trier of fact could infer that Yamaguchi knew this relationship was of a fiduciary nature. 51 The JCAA found, and these findings are binding on the parties for purposes of this appeal, see supra n. 5, that Yamaguchi believed New S & S USA was in fact S & S USA, that S & S USA was still a party to the distribution agreement, that it was acting as a co-distributor with Hannex, and that it would be a party to the new distribution agreement. While as a result of this understanding Yamaguchi would clearly expect there to be some contractual relationship between Salvo and Hannex, he understood Salvo to represent a distinct corporate entity (S & S USA, not Hannex-owned New S & S USA). To assume that Yamaguchi understood there to be a fiduciary, rather that contractual, relationship between Salvo and Hannex would be entirely speculative. Accordingly, this portion of the claim was properly dismissed. 52