Henkel of Am., Inc. v. Craig M. Bell & Knight Capital Partners Corp.

HENKEL OF AMERICA, INC., Plaintiff, v. CRAIG M. BELL and KNIGHT CAPITAL PARTNERS CORP., Defendants.

Case Number 17-13909

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

February 28, 2019

Honorable David M. Lawson

ORDER DISMISSING COUNT V OF THE COMPLAINT AND DISMISSING THE CASE WITH PREJUDICE

On December 17, 2018, the Court issued an opinion granting the defendants' motion for summary judgment and dismissing all of the plaintiff's claims except Count V of the complaint, which pleaded a claim for breach of fiduciary duty. The Court also ordered the parties to file supplemental briefs under Federal Rule of Civil Procedure 56(f) addressing "(1) which jurisdiction's substantive law governs Count V of the complaint; (2) what evidence in the record establishes that Craig Bell owed any fiduciary duty recognized under the applicable law; and (3) what evidence in the record establishes that the alleged damages comprising Bell's salary and benefits paid during 2014 were proximately caused by the alleged breach of duty." The Court has reviewed the parties' submissions and now concludes, for the same reasons stated in its prior opinion, that the breach of duty claim must be dismissed for want of any proofs in the record sufficient to establish the element of causation.

"Summary judgment is proper 'if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Pittman v. Experian Information Solutions, Inc., 901 F.3d 619, 627 (6th Cir. 2018) (quoting Fed. R. Civ. P. 56(a)). "The moving party bears the burden of showing that no genuine issues of material fact exist," and it "must demonstrate the 'basis for its motion, and identify[] those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.'" Id. at 627-28 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)). To oppose that showing, "[t]he nonmoving party 'must set forth specific facts showing that there is a genuine issue for trial.'" Id. at 628 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)). "The reviewing court must then determine 'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Ibid. (quoting Anderson, 477 U.S. at 251-52). In doing so, the Court must "view the facts and draw all reasonable inferences in favor of the non-moving party." Ibid. (quoting Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

Federal Rule of Civil Procedure 56(f) provides that "[a]fter giving notice and a reasonable time to respond, the court may: (1) grant summary judgment for a nonmovant; (2) grant the motion on grounds not raised by a party; or (3) consider summary judgment on its own after identifying for the parties material facts that may not be genuinely in dispute." The Court gave the parties notice of the pertinent issues in its opinion, and the order for supplemental briefing, and it allowed them to be heard on the questions now decided in their supplemental filings.

As an initial matter, the parties disagree on which state's substantive law should control the breach of fiduciary duty claim. The plaintiff contends that Delaware law should govern, because that is the state where the plaintiff is incorporated, and it is to the plaintiff that the alleged duty was owed. The defendants argue that the claim is governed by either Michigan or Connecticut substantive law. The result is the same under either regime, however, because, as with its otherclaims, the plaintiff has failed to establish that any of the defendants' conduct proximately caused the losses that it alleges.

"In diversity cases [a federal court applies] the choice-of-law rules . . . of the forum state, which is Michigan in this case." CenTra, Inc. v. Estrin, 538 F.3d 402, 409 (6th Cir. 2008). However, where there is no conflict in the governing principles from the several potential sources of law, the Court need not proceed further in the choice of law analysis, and simply may apply the uniform rule. Ibid. ("[W]e need not resolve the exact question of what Michigan's choice-of-law principles would indicate as the applicable standards of professional conduct because, for the issues we must address today, Michigan's standards of professional conduct are consistent with the other possible sources of law, making any asserted conflict of laws a false conflict."). In this case, there is no actual conflict of law, because under the law of every forum favored by the parties, causation is a required element of a cause of action for breach of fiduciary duty. E.g., In re Katy Indus., Inc., 590 B.R. 628, 639 (Bankr. D. Del. 2018) ("Generally, to survive a motion to dismiss [challenging a claim for breach of fiduciary duty], a plaintiff must sufficiently allege duty, breach, causation, and damages."); In re Great Lakes Comnet, Inc., 588 B.R. 1, 15 (Bankr. W.D. Mich. 2018) ("Causation is a prima facie element for . . . claims of . . . breach of fiduciary duty . . . under Michigan law.") (citing Cousineau v. Ford Motor Co., 140 Mich. App. 19, 363 N.W.2d 721 (1985)) (collecting cases); Chioffi v. Martin, 181 Conn. App. 111, 138, 186 A.3d 15, 32 (2018) ("The elements which must be proved to support a conclusion of breach of fiduciary duty are: (1) that a fiduciary relationship existed which gave rise to a duty of loyalty[,] an obligation to act in the best interests of the plaintiff, and an obligation to act in good faith in any matter relating to the plaintiff; (2) that the defendant advanced his or her own interests to the detriment of the plaintiff;(3) that the plaintiff sustained damages; and (4) that the damages were proximately caused by the fiduciary's breach of his or her fiduciary duty.").

In its supplemental brief addressing the issue of causation, the plaintiff continues to advance the position that causation is established between the breach of a duty to disclose outside employment and resulting damages comprising defendant Bell's salary, bonuses, and benefits, because "[h]ad HOA known of Bell's breach of his fiduciary duties, HOA would never have paid any discretionary bonus covering the time of his misconduct, because Bell would have been terminated had HOA known of his deceptive conduct." However, the Court rejected that argument with respect to all of the other claims, because the cases on point uniformly have concluded that causation cannot be established for damages which merely comprise "ordinary...