553 F. App'x 33
2d Cir.2014Background
- Williams sued Wells Fargo for breach of fiduciary duty, breach of contract, and related state-law claims arising from a referral-fee agreement for a Wells Fargo U.S. listed options desk.
- Williams would refer clients to the desk and receive a percentage of the desk’s net revenues as a referral fee.
- Williams alleged Wells Fargo used money from the venture for proprietary trading, i.e., trading for Wells Fargo’s own account.
- The district court dismissed Williams’s claims for failure to state a claim under Rule 12(b)(6).
- The Second Circuit affirmed, holding the agreement did not create a joint venture or fiduciary duties and that contract terms were unambiguous.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did a fiduciary duty arise from a joint venture? | Williams argues the agreement created a joint venture and fiduciary duties. | Wells Fargo contends no joint venture or fiduciary duties were formed; status as independent contractor suffices. | No fiduciary duty; no joint venture. |
| Did the agreement’s structure thus create fiduciary-like control over funds? | Wells Fargo’s control over desk profits and Williams’s fee implied a fiduciary relationship. | The desk’s profits were Wells Fargo’s alone; Williams had no security interest in profits. | No fiduciary duty from Wells Fargo’s control of its own funds. |
| Does Paragraph 14 incorporate an internal policy prohibiting proprietary trading? | Paragraph 14, coupled with an internal policy manual, prohibits proprietary trading by client-facing desks. | Paragraph 14 is a non-disparagement clause and does not incorporate the manual wholesale. | Paragraph 14 does not incorporate the policy manual. |
| Does Net Revenues language govern proprietary trading activities at the new desk? | Excluding profits from proprietary desks suggests Williams was owed profits or protections. | Net Revenues excludes only profits generated by a separate proprietary trading desk, not govern the new desk’s activities. | Net Revenues exclusion does not govern the new desk’s trading activities. |
Key Cases Cited
- Johnson v. Nextel Commc’ns, Inc., 660 F.3d 131 (2d Cir. 2011) (elements of fiduciary claim; standard of review)
- Flickinger v. Harold C. Brown & Co., Inc., 947 F.2d 599 (2d Cir. 1991) (fiduciary relationship definition under NY law)
- Dinaco, Inc. v. Time Warner, Inc., 346 F.3d 64 (2d Cir. 2003) (elements of joint venture test in NY law)
- Itel Containers Int’l Corp. v. Atlanttrafik Express Serv. Ltd., 909 F.2d 698 (2d Cir. 1990) (joint venture partnership analysis)
- Vermont Teddy Bear Co. v. 538 Madison Realty Co., 807 N.E.2d 876 (N.Y. 2004) (court may not rewrite unambiguous contract terms)
- De Vito v. Pokoik, 540 N.Y.S.2d 858 (App. Div. 2d Dep’t 1989) (non-proprietary interest in business affects JV analysis)
- Reiss v. Fin. Performance Corp., 764 N.E.2d 958 (N.Y. 2001) (fiduciary duties in investment-type arrangements)
- Krumme v. WestPoint Stevens Inc., 238 F.3d 133 (2d Cir. 2000) (enforce contract terms’ plain meaning)
- American Express Bank Ltd. v. Uniroyal, 562 N.Y.S.2d 613 (App. Div. 1st Dep’t 1990) (interpretation of contractual terms)