Ferguson v. Ferrante
664 F. App'x 58
| 2d Cir. | 2016Background
- Douglas Ferguson left Barclays to join Aurora Information Security & Risk, LLC after Ferrante (Aurora principal) allegedly promised Ferguson a 40% equity interest and other partnership benefits.
- Ferguson and Aurora later executed a January 12, 2012 Settlement Agreement resolving disputes between "Aurora and Doug," which released certain claims between those parties but expressly preserved claims arising from gross negligence, fraudulent conduct, or willful misconduct of a party (including principals, employees, agents).
- Ferrante signed the Settlement Agreement only with respect to a paragraph limiting personal liability and was not a named party to the agreement.
- Ferguson sued Ferrante and Aurora claiming fraudulent inducement (against Ferrante), breach of duty of loyalty (against Ferguson by Aurora counterclaim), and other contract-based claims; bench trial followed.
- The district court credited Ferguson’s testimony and corroborating evidence (mock business cards, emails, Skype messages) and found Ferrante not credible, concluding Ferrante fraudulently induced Ferguson and never intended to grant the promised equity.
- The district court denied Aurora recovery of $736,000 spent on network security as consequential damages from the Settlement Agreement breach; court held those costs were not the natural and probable consequence nor within parties’ contemplation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Settlement Agreement barred Ferguson's fraudulent-inducement claim against Ferrante | Ferguson: Agreement released only claims between Aurora and Ferguson; fraud claims against Aurora principals were preserved and Ferrante is not a party | Ferrante: Settlement released and resolved all claims and precludes personal liability; thus fraudulent-inducement claim is barred/duplicative | Held: Agreement applied only to "the parties" (Aurora and Ferguson); Ferrante was not a party; fraud claim against Ferrante not barred; summary judgment denial correct |
| Sufficiency of evidence for fraudulent inducement | Ferguson: Credible testimony and corroborating documents show promise of 40% equity, reliance, intent to deceive, and damages | Ferrante: Denies promise/intent; argues insufficient evidence | Held: District court credibility findings supported fraud elements; appellate court affirmed judgment for Ferguson |
| Breach of duty of loyalty / solicitation of clients | Ferguson: Not liable; notifications to clients were permissible and not solicitation | Aurora: Ferguson solicited clients by notifying them of departure and thus breached loyalty | Held: Court found no solicitation or duty-of-loyalty breach; affirmed |
| Recoverability of $736,000 network-security expense as expectation/consequential damages | Aurora: Security expense was consequence of Ferguson's breach and should be recoverable | Ferguson: Costs were not natural/probable or within contemplation at contracting | Held: Expense not recoverable — not natural and probable nor within parties' contemplation; affirmed |
Key Cases Cited
- Schaefer v. State Ins. Fund, 207 F.3d 139 (2d Cir.) (standard for de novo review of denial of summary judgment where pure legal error alleged)
- Krist v. Kolombos Rest. Inc., 688 F.3d 89 (2d Cir.) (standard of review for bench-trial findings: law de novo, facts for clear error)
- Vangas v. Montefiore Med. Ctr., 823 F.3d 174 (2d Cir.) (evidentiary sufficiency standard; reasonable factfinder review)
- Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58 (2d Cir.) (elements of fraudulent-inducement claim under New York law)
- Bank of Am. Nat’l Tr. & Sav. Ass’n v. Gillaizeau, 766 F.2d 709 (2d Cir.) (requirement that release contain explicit, unequivocal statement to release defendant)
- Kenford Co. v. County of Erie, 73 N.Y.2d 312 (N.Y.) (recoverable damages: natural and probable consequences vs. extraordinary damages within contemplation)
- Richbell Info. Servs. v. Jupiter Partners, 309 A.D.2d 288 (N.Y. App. Div.) (fraud claim duplicative only where related contract claim is viable against same defendant)
- Muhlstock v. Cole, 245 A.D.2d 55 (N.Y. App. Div.) (permitting departing professionals to inform prior clients of new practice without automatic finding of solicitation)