685 F. App'x 59
2d Cir.2017Background
- In March 2013 Feiliks Global Logistics Corp. (Feiliks US) was formed in New York: Feiliks Singapore owned 80%; Ami Wey owned 20% and served as controller.
- Feiliks HK loaned Feiliks US $300,000 in April 2013; Feiliks Singapore and Wey also contributed startup capital.
- After a breakdown in relations in 2014, Feiliks HK and Feiliks Singapore sued Feiliks US and Wey for breach of contract (failure to repay the $300,000 loan) and breach of fiduciary duty by Wey.
- The district court held for defendants: dismissed the contract claim (Wey not personally liable; Feiliks US excused by plaintiffs’ conduct) and dismissed plaintiffs’ direct fiduciary-duty claim as it should have been brought derivatively.
- Plaintiffs appealed; the Second Circuit affirmed the district court’s judgment in all respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction (diversity) | Wey is not a U.S. citizen; diversity lacking | Wey sworn affidavit that she is a naturalized U.S. citizen establishes diversity | Diversity jurisdiction exists; plaintiffs offered no contrary evidence |
| Wey's individual liability on $300,000 loan | Wey should be personally liable for loan repayment | Wey did not sign the loan in her individual capacity | Held for Wey — no personal signature/liability |
| Feiliks US obligation to repay loan | Feiliks US must repay loan despite plaintiffs’ conduct | Plaintiffs undermined the company and frustrated performance | Held for Feiliks US — plaintiffs’ diversion of business excused repayment (implied duty of good faith) |
| Breach of fiduciary duty claim against Wey | Wey breached fiduciary duties and plaintiffs suffered direct harm | Harm was to the corporation; any shareholder injury was derivative | Held for Wey — claim was derivative and improperly pleaded as direct, so dismissed |
Key Cases Cited
- Diesel Props S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d 42 (2d Cir.) (standard of review on appeal from bench trial)
- Action S.A. v. Marc Rich & Co., 951 F.2d 504 (2d Cir.) (dual citizen treated as U.S. citizen for diversity)
- Tandon v. Captain’s Cove Marina of Bridgeport, Inc., 752 F.3d 239 (2d Cir.) (burden to prove subject-matter jurisdiction is by preponderance)
- Lowell v. Twin Disc, Inc., 527 F.2d 767 (2d Cir.) (implied condition that promisee will cooperate in performance)
- Grad v. Roberts, 14 N.Y.2d 70 (N.Y.) (implied obligation of good faith not to frustrate contracts)
- Excimer Assocs. v. LCA Vision, Inc., 292 F.3d 134 (2d Cir.) (direct vs. derivative injury test)
- Abrams v. Donati, 66 N.Y.2d 951 (N.Y.) (mismanagement claims are corporate, not individual, causes of action)
- Bobal v. Rensselaer Polytechnic Inst., 916 F.2d 759 (2d Cir.) (review standard for denial of counsel disqualification)
- JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418 (2d Cir.) (arguments not raised in opening brief are waived)