486 F. App'x 153
2d Cir.2012Background
- Plaintiffs allege Butt, as an officer of Refco Alternative Investments, owed fiduciary duties to SPhinX funds.
- District court dismissed Butt for lack of a personal fiduciary-duty relationship; reliance on RAI rather than Butt personally.
- Plaintiffs asserted Butt oversaw RAI’s commodity pools and related services, implying a high-trust relationship.
- Court analyzed direct fiduciary-duty claim under New York law, finding no individual duty by Butt distinct from RAI.
- Plaintiffs pursued aiding-and-abetting breach of fiduciary duty, claiming Butt knowingly participated in breaches.
- Court concluded plaintiffs failed to allege Butt’s actual knowledge of any breach by others; aiding claim dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Butt owe a direct fiduciary duty to SMFF and PlusFunds? | Butt’s role as RAI officer created personal fiduciary duties. | No personal fiduciary duty; duties run from RAI, not Butt individually. | No direct fiduciary duty by Butt. |
| Can Butt be liable for aiding and abetting a fiduciary breach? | Butt knowingly participated in breaches and aided them. | Plaintiffs failed to allege Butt’s actual knowledge of any breach. | Aiding-and-abetting claim fails for lack of actual knowledge. |
| Are the alleged allegations about Butt sufficiently independent of RAI to plead personal liability? | Paragraph 233 shows Butt’s separate fiduciary role. | Allegations are derivative of RAI’s duties and insufficient for Butt’s personal liability. | Allegations do not establish Butt’s personal fiduciary duty. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleadings must show plausibility, not mere possibility)
- Gonzalez v. Hasty, 651 F.3d 318 (2d Cir. 2011) (de novo review of Rule 12(b)(6) dismissals; plausibility standard)
- United States v. Chestman, 947 F.2d 551 (2d Cir. 1991) (fiduciary relationship entails reliance and control)
- Rajeev Sindhwani, M.D., PLLC v. Coe Business Service, Inc., 861 N.Y.S.2d 705 (N.Y. App. Div. 2008) (corporate officer may be liable, but not automatically for fiduciary duties)
- Kaufman v. Cohen, 760 N.Y.S.2d 157 (N.Y. App. Div. 2003) (aiding and abetting requires actual knowledge of breach)
- Richardson Greenshields Sec., Inc. v. Mui-Hin Lau, 693 F. Supp. 1445 (S.D.N.Y. 1988) (broker with discretionary powers owes client fiduciary duties; not dispositive here)