977 F.3d 216
2d Cir.2020Background
- Daniel Feldman, former corporate secretary/director/trustee for several Yukos-related entities, was sued for multiple breaches of fiduciary duty based on several schemes (notably the Trust Scheme and the Julius Baer Scheme); a jury found him liable on two schemes and awarded nominal damages to several plaintiffs.
- Plaintiffs sought disgorgement of Feldman’s compensation under New York’s faithless servant doctrine; the district court instructed the jury that disgorgement required disloyalty “in substantial respects.”
- Feldman moved under Rule 50 for judgment as a matter of law arguing that several plaintiffs had failed to prove the required “damage” element of breach of fiduciary duty because they sought no compensatory damages; the district court denied the Rule 50 motion.
- Feldman brought a third-party SCA claim against David Godfrey, alleging Godfrey directed a forensic firm (Crowe Horwath) to access Feldman’s Gmail beyond the authorized date range; the district court granted summary judgment for Godfrey.
- Plaintiffs sought discovery sanctions against Feldman for alleged perjury and withheld documents; the district court denied sanctions.
- The Second Circuit affirmed the district court on summary judgment (SCA), sanctions denial, and the jury instruction issue, but reversed insofar as the Foundations’ breach claims (Stichting entities) were permitted to go to the jury because there was no evidence those Foundations paid Feldman compensation (so the damage element was not met).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Godfrey (via Crowe Horwath) violated the Stored Communications Act by accessing Feldman’s Gmail beyond authorized scope | Godfrey overseen review exceeded authorization; access after date limit was unauthorized | Feldman expressly (and contemporaneously) authorized downloading all emails; any later review was not SCA-protected "electronic storage" trespass | Affirmed for Godfrey: no SCA violation because (1) downloaded emails were not in SCA "electronic storage" at time of review and (2) Feldman authorized the download |
| Whether district court abused discretion by denying discovery sanctions for alleged perjury and withholding documents | Plaintiffs: clear-and-convincing evidence of perjury and bad-faith withholding warranted sanctions | Feldman: testimony was plausible/subject to credibility determinations; no prior court order violated; searches run; no bad faith shown | Affirmed: district court did not abuse discretion; credibility and factual disputes are for jury; Rule 37 requires prior order; inherent-power sanctions require clear-and-convincing proof |
| Proper legal standard for forfeiture of compensation under New York’s faithless servant doctrine (Turner substantial-violation standard v. Murray any disloyal act) | Plaintiffs: Murray (any disloyal act sufficient) is correct; substantiality instruction was erroneous | Feldman: Turner substantial-violation standard is an accepted branch of NY law; instruction was permissible | Affirmed: not plain error to instruct on Turner standard because NY law is unsettled and both standards are recognized by courts |
| Whether compensatory damages (or payment of compensation by plaintiff) is required to prove breach of fiduciary duty (Rule 50 challenge re: Foundations) | Plaintiffs: nominal damages or faithless-servant disgorgement suffices even if plaintiff did not pay defendant compensation; nominal damages can satisfy damage element | Feldman: breach-of-fiduciary-duty requires proof of actual "damage"; Foundations never paid him and offered no damage evidence | Reversed in part: courts may treat a principal’s claim to disgorge servant’s compensation as satisfying the damage element when the plaintiff paid the servant; but where a plaintiff (here the Foundations) never paid compensation and no other injury is shown, nominal damages cannot satisfy the damage element — judgment for Feldman on Foundations’ claims |
Key Cases Cited
- Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184 (2d Cir. 2003) (discusses the two competing New York faithless-servant standards and analysis of substantiality)
- Feiger v. Iral Jewelry, Ltd., 41 N.Y.2d 928 (N.Y. 1977) (faithless servant doctrine: disloyal employees disentitled to compensation)
- Turner v. Kouwenhoven, 100 N.Y. 115 (N.Y. 1885) (articulated substantial-violation standard)
- Murray v. Beard, 102 N.Y. 505 (N.Y. 1886) (articulated broader rule that any disloyal act may forfeit compensation)
- Theofel v. Farey-Jones, 359 F.3d 1066 (9th Cir. 2004) (consent vitiated where obtained by exploiting an invited mistake; relevant to SCA consent/deceit argument)
- Anzaldua v. Northeast Ambulance & Fire Prot. Dist., 793 F.3d 822 (8th Cir. 2015) (discusses unauthorized reuse of Gmail access in SCA context)
- Morgan Stanley v. Skowron, 989 F. Supp. 2d 356 (S.D.N.Y. 2013) (faithless-servant disgorgement granted as a matter of law in extreme repeated misconduct)
- Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137 (N.Y. 2017) (nominal damages are not available where actual harm is an element of the tort)
- Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90 (N.Y. 1993) (damage as essential element of tort; nominal damages cannot substitute for actual injury in those torts)