CATSKILL DEVELOPMENT, L.L.C., MOHAWK MANAGEMENT, L.L.C., MONTICELLO RACEWAY DEVELOPMENT COMPANY, L.L.C., CATSKILL LITIGATION TRUST, Plaintiffs-Appellants, PAUL DEBARY, JOSEPH BERNSTEIN, Consolidated-Plaintiffs-Appellants, – v. – PARK PLACE ENTERTAINMENT CORPORATION, Defendant-Appellee, HARRAH’S OPERATING COMPANY, INC., Consolidated-Defendant-Appellee.
Docket No. 06-5860-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term, 2007 (Argued: May 12, 2008 Decided: October 21, 2008)
Before NEWMAN, WALKER, and SOTOMAYOR, Circuit Judges.
SANFORD I. WEISBURST, Quinn Emanuel Urquhart Oliver & Hedges, LLP (Andrew L. Frey, Mayer, Brown, Rowe, & Maw LLP, John P. Gallagher, Troutman Sanders LLP, on the brief) for Plaintiffs-Appellants.
GEORGE F. CARPINELLO, Boies, Schiller, & Flexner LLP (Martin Deptula, Teresa Monroe, Paul R. Verkuil, on the brief) for Defendants-Appellees.
SOTOMAYOR, Circuit Judge
These consolidated cases involve a dispute between a group of entities vying for the right to develop a casino in the Catskills with the non-party Mohawk Indian Tribe (“the Tribe“). As explained further below, plaintiffs-appellants Catskill Development, L.L.C. (“Catskill“), Mohawk Management, L.L.C. (“Mohawk“), and Monticello Raceway Development Company, L.L.C. (“Monticello“), and consolidated-plaintiffs-appellants Paul DeBary and Joseph Bernstein (collectively, the “Catskill Group“),1 claim that defendant-appellee Park Place Entertainment
BACKGROUND
A. Regulatory Framework
In 1988, Congress enacted the Indian Gaming Regulatory Act (“IGRA“),
To conduct gaming, an Indian tribe must satisfy numerous prerequisites. As relevant to this case, the gaming must take place “on Indian lands . . . located within a State that permits such gaming.”
Moreover, IGRA provides for federal oversight of contracts between tribes and non-tribal entities regarding the management of tribal gaming operations.
B. Factual Background
In 1996, the Catskill Group entered into a series of contracts with the Tribe6 for the purpose of building and operating a casino at a site adjacent to the Monticello Raceway. Three of those contracts are at issue here:
- A Land Purchase Agreement (“LPA“) between the Tribe and Catskill, which, inter alia, provided for Catskill’s transfer of 29 acres of land to the United States to be held in trust for the Tribe;
- A Management Agreement (“MA“) between the Tribe and Mohawk, which, inter alia, detailed the duties and responsibilities of Mohawk, and the fees for its management services; and
- A Development and Construction Agreement (“DCA“) between the Tribe and Monticello, which, inter alia, provided for the construction and development of the casino and surrounding lands.
The Catskill Group alleges that during the ensuing negotiations between Park Place and the Tribe, Park Place misrepresented to the Tribe, inter alia, that the federal approval granted to Catskill to take land into trust for purposes of gaming was “portable,” and that a casino project on another site would be approved within four months. Finally, and as described further below, Park Place also allegedly concocted, participated in, and acquiesced in a scheme with Kaufman to place a financial “squeeze” on the Tribe by slowing the Akwasasne casino’s payroll, with the hope and intent that the Tribe would turn to Park Place for a financial bailout.
Shortly after Park Place and the Tribe entered into this agreement, the Tribe and the Catskill Group ceased discussions with respect to the Monticello Raceway project.
C. Procedural History
Catskill, Mohawk, and Monticello (i.e., the Catskill Group) commenced suit in November 2000 alleging, inter alia, that Park Place tortiously interfered with the Catskill Group’s contractual relations with the Tribe (“Count I,” or the “interference with contract claim“). In the alternative, the Catskill Group alleged that Park Place had tortiously interfered with its business relationships with the Tribe (“Count II,” or the “interference with business relations claim“).9
The Catskill Group moved for reconsideration, arguing, inter alia, that one of the contracts at issue—the LPA in particular—was enforceable without NIGC approval. The district court agreed and reinstated the interference with contract claim with respect to the LPA only. Catskill Dev., LLC v. Park Place Entm’t Corp., 154 F. Supp. 2d 696, 703–05 (S.D.N.Y. 2001) (“Catskill II“).
Park Place then moved the district court for reconsideration of that decision. While its reconsideration motion was pending, Park Place also moved for summary judgment on the remaining claims for tortious interference with business relations. The district court granted Park Place’s motion for summary judgment, thus disposing of the entire case. Catskill Dev., LLC v. Park Place Entm’t Corp, 217 F. Supp. 2d 423, 446 (S.D.N.Y. 2002) (“Catskill III“). With respect to Count I, the court held (as it had originally held in Catskill I, but for different reasons) that the LPA was void without NIGC approval. Id. at 433. With respect to Count II, the court dismissed the interference with business relations claim on the grounds that the Catskill Group (1) offered no evidence that Park Place used “wrongful means” to induce the Tribe to terminate its relationship with the Catskill Group, and (2) could not meet its burden of showing that Park
While the Catskill Group’s appeal from that decision was pending, it moved in the district court pursuant to
Shortly thereafter, in January 2004, the members of the Catskill Group assigned “all of their right, title and interest in . . . any and all [its] claims . . . against Park Place” to a trust (the “Litigation Trust“). See Declaration of Trust of Catskill Litigation Trust, § 2.1.10 The Litigation Trust was then added as a plaintiff to the case.
After further briefing following the close of the additional discovery period, the district court held that the Catskill Group still had failed to produce any evidence of wrongful means for purposes of the interference with business relations claim, and reaffirmed its grant of summary judgment in favor of Park Place. Catskill Dev., LLC v. Park Place Entm’t Corp., 345 F. Supp. 2d 360, 368 (S.D.N.Y. 2004) (“Catskill V“). The Catskill Group, now joined by the Litigation Trust, reinstated its earlier appeal.
On appeal, a jurisdictional defect was revealed for the first time: two of the original plaintiffs, Catskill and Mohawk, were not completely diverse from Park Place. Absent complete diversity, federal jurisdiction did not exist under
Upon the parties’ stipulation, the district court signed an order, pursuant to
After six district court opinions and two prior appeals, the case now returns to us for a third time.
DISCUSSION
I. JURISDICTION
Although the parties do not contest our jurisdiction, we are obliged to ascertain it independently. See, e.g., Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006) (“Although neither party has suggested that we lack appellate jurisdiction, we have an independent obligation to consider the presence or absence of subject matter jurisdiction sua sponte.“). We conclude that we have jurisdiction over both the original and consolidated action. First, with respect to the original action that we previously remanded for a jurisdictional finding, we see no factual error in the district court’s determination that the remaining parties—Monticello and Park Place—were completely diverse at the time that action was commenced.
Second, with respect to the subsequently commenced action by the trustees, we are satisfied upon our review of the trust agreement and our questioning of the parties at oral argument that diversity jurisdiction exists over that action as well. For purposes of diversity jurisdiction, the citizenship of the fiduciary—not the beneficiary—generally controls. See O’Brien v. AVCO Corp., 425 F.2d 1030, 1032 (2d Cir. 1969) (citing Dodge v. Tulleys, 144 U.S. 451 (1892)). An exception exists where there is evidence of collusion for the purpose of obtaining federal jurisdiction. See
Specifically, under the so-called “anti-collusion” statute,
We give careful scrutiny to assignments which might operate to manufacture diversity jurisdiction, the reasons for which we have made abundantly clear: such devices, unless controlled, can provide a simple means of expanding federal diversity jurisdiction far beyond [its] purpose. The cautious eye with which we view such assignments ensures that parties do not inappropriately channel ordinary tort and contract litigation, essentially disputes of a local nature, into the federal courts. Accordingly, we construe section 1359 broadly to bar any agreement whose “primary aim” is to concoct federal diversity jurisdiction.
58 F.3d 857, 862 (2d Cir. 1995) (citations and quotation marks omitted); see also Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 825–26 (1969) (explaining that the purpose of the anti-collusion statute was “to prevent the manufacture of Federal jurisdiction by the device of assignment“) (internal quotation marks omitted). In assessing whether an assignment is improper or collusive, several factors may be relevant, including but not limited to: “the assignee’s lack of a previous connection with the claim assigned; the remittance by the assignee to the assignor of any recovery; whether the assignor actually controls the conduct of the litigation; the timing of the assignment; the lack of any meaningful consideration for the assignment; and the underlying purpose of the assignment.” Airlines Reporting Corp., 58 F.3d at 863 (citations omitted). No single factor is dispositive. Id.
II. INTERFERENCE WITH CONTRACT CLAIM
To state a contract-interference claim under New York law, a plaintiff must demonstrate the existence of a valid contract, the defendant’s knowledge of the contract’s existence, that the defendant intentionally procured a contract breach, and the resulting damages to the plaintiff. E.g., Int’l Minerals & Res., S.A. v. Pappas, 96 F.3d 586, 595 (2d Cir. 1996); Lama Holding Co. v. Smith Barney Inc., 88 N.Y. 2d 413, 424, 646 N.Y.S. 2d 76, 82, 668 N.E.2d 1370, 1375 (1996). Only the first element—the existence of a contract—is at issue here. The district court held that the Catskill Group could not satisfy this element as a matter of law because its contracts with the Tribe were void in the absence of prior NIGC approval under
On appeal, the Catskill Group raises three principal challenges to the district court’s determination in this regard. First, it claims that the federal voiding provisions do not apply to
A. “Indian Lands”
IGRA defines “Indian lands,” in relevant part, as “lands within the limits of any Indian Reservation” or “lands title to which is . . . held in trust by the United States for the benefit of any Indian tribe.”
Even if we were to read an “Indian land” requirement into the governing statutes and regulations at issue, we would nevertheless reject the Catskill Group’s proposed application of any such requirement to the circumstances of this case. The Dictionary Act,
Moreover, the Catskill Group’s argument that states would fill the IGRA regulatory gap falls short. Congress intended that there would be both federal and state review of gaming contracts; however, the two serve entirely separate functions. Federal approval is designed to ensure that the contracts tribes enter into are fair and reasonable. State compacts, however, are
In reaching our conclusion that the NIGC’s review and approval authority extends to the contracts at issue, we have considered the 2000 opinion letter by the deputy general counsel for the NIGC issued in an unrelated case—but relied upon by the Catskill Group here—that asserts that land intended to be placed into trust, but not yet held in trust by the United Sates, is not Indian land. Letter from Penny J. Coleman, Deputy General Counsel, NIGC to Chief, Region V (July 30, 2001) (“Coleman Opinion Letter“).17 Because this position was set forth in an opinion letter and has not been promulgated by an NIGC regulation, this Court owes it only the limited deference set forth in Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). See Christensen v. Harris County, 529 U.S. 576, 587 (2000) (holding that agency interpretations in opinion letters “lack the force of law” and are entitled only to Skidmore deference). As such, the interpretation reflected in the Coleman Opinion Letter is entitled to deference only to the extent that it has the power to persuade us. Id. We conclude this letter lacks persuasive power.
The Opinion Letter is based on nothing more than a literal reliance on the statutory language’s use of the present tense, which, for the reasons we have already explained, is contrary to the Dictionary Act and would be inconsistent with congressional design. Moreover, we have reason to doubt that the deputy counsel expected her opinion to be binding in future, unrelated cases. Her conclusions were hedged as “preliminary” and were expressly limited to the facts
B. “Operative” Versus “Precursory” Obligations
We also reject the Catskill Group’s assertion that the federal voiding provisions apply at most to the “operative” provisions of the contracts at issue, but not the “precursory” obligation of the Tribe to use reasonable best efforts in obtaining the requisite government approvals. The same argument was rejected by the Ninth Circuit in A.K. Mgmt. Co. v. San Manuel Band of Mission Indians, 789 F.2d 785, 788–89 (9th Cir. 1986). In A.K., a bingo contractor entered into an agreement to construct a bingo facility and operate bingo games on the Indian tribe’s reservation. Id. at 786. The agreement was never signed or approved by the BIA, which, prior to the establishment of the NIGC, was the agency responsible for overseeing gaming contracts under
Whatever the persuasive force of these arguments, it is doubtful that general contract principles apply to an agreement subject to
25 U.S.C. § 81 (1982). Section 81 explicitly provides that a contract is “null and void” without written approval from the BIA. Therefore it is logical to conclude that an agreement without BIA approval must be null and void in its entirety. No part of it may be enforced or relied upon unless and until BIA approval is given. BIA approval is an absolute prerequisite to the enforceability of the contract. To give piecemeal effect to a contract as urged by [appellant], would hobble the statute. The plain words of section 81 simply render this contract void in the absence of BIA approval. Since it is void, it cannot be relied upon to give rise to any obligation by the [tribe], including an obligation of good faith and fair dealing. Accordingly, we find that general contract principles do not impose a duty on the [tribe] to seek BIA approval of the Agreement.
Id. at 789 (footnote omitted).
We are persuaded by both the reasoning and holding of A.K. Like § 81, the federal review provisions at issue in our case are broadly worded, are designed to protect the best interests of Indian tribes, and do not draw the distinction between operational and precursory obligations urged upon us by the Catskill Group.
Moreover, we are unmoved by the Catskill Group’s broader policy argument that the enforcement of good faith obligations is, on balance, in the best interest of Indian tribes. Specifically, the Catskill Group argues that it “hardly serves tribal interests to have ‘freedom’ to walk away from a bargained-for obligation to seek approval after its contracting partner has spent much time and money doing the arduous legwork involved in the approval process; rather, this will only imperil a tribe’s ability in the first instance to find worthy partners prepared to contract on favorable terms.”
While in theory it is possible that investors may be less inclined to deal with Indians who are free to disregard obligations to perform in good faith, we are aware of no empirical evidence that supports this concern. Indeed, to allow tribes the ability to walk away from a deal prior to
Finally, the Catskill Group’s reliance on Vanadium Corp. of Am. v. Fidelity & Deposit Co., 159 F.2d 105 (2d Cir. 1947), is unavailing. In Vanadium, two non-Indian parties contracted for a variety of mining lease assignments. Id. at 106. Because the land underlying the leases belonged to the Navajo tribe of Indians, a federal statute was triggered, requiring pre-approval by the Secretary of the Interior for any transfer or assignment of a mining lease on Indian land. Id. (citing
While the above-quoted language from Vanadium offers some support for the Catskill Group’s theory that agreements to act in good faith are enforceable even prior to receipt of government approval, Vanadium did not establish a per se rule to that effect. Moreover, Vanadium is distinguishable from this case in two crucial respects. First and foremost, in Vanadium the plaintiff’s argument that the agreement was void absent federal approval had a
C. Management and Collateral Agreements
Having rejected the Catskill Group‘s threshold “Indian land” and “precursory obligation” arguments, we now turn to the question of whether the contracts at issue were “management contracts” void under
As noted above,
As an initial matter, the MA (Management Agreement) entered into between Mohawk and the Tribe, which provided for the management of the putative casino, is clearly subject to section 533.7‘s voiding provision. The more difficult question is whether the remaining two contracts at issue—the LPA (Land Purchase Agreement) entered into between Catskill and the Tribe, and the DCA (Development and Construction Agreement), entered into between Monticello and the Tribe—are also subject to the voiding provision or are otherwise unenforceable.
It is undisputed that both the DCA and LPA are “collateral agreements” to the MA insofar as they are “related” to that contract. See
In this case, Park Place argues that the DCA and LPA were management contracts insofar as they contained hidden management fees. In particular, Park Place claims that the DCA‘s 5% development fee and the LPA‘s $10 million purchase price were intended as back-door management compensation. Further, with respect to the DCA only, Park Place points out that Monticello was to be repaid for the construction of the proposed casino from the proceeds derived from the operation of the casino. See Machal, 387 F. Supp. 2d at 667–68 (holding that one of the agreements at issue was a management contract, in part, because it required the tribe to repay from gaming revenues the loans it received from plaintiff for construction of the casino and other costs); see also In re SRC Holding Corp., 352 B.R. 103, 174–78 (Bankr. D. Minn. 2006) (pledge agreement that purported to assign to lender the manager‘s rights to management fees constituted a management contract subject to NIGC approval), rev‘d in part on other grounds, 364 B.R. 1 (D. Minn. 2007).
We need not independently determine whether the DCA or LPA are collateral agreements subject to agency approval because: (1) the agency appears already to have made that determination, see United States ex. rel. Bernard v. Casino Magic Corp., 293 F.3d 419, 425 (8th Cir. 2002) (deferring to NIGC‘s determination that agreement was a management contract
Specifically, both the DCA and the LPA were submitted to the NIGC for review. With respect to the DCA, the NIGC‘s Director of Contracts stated in an April 19, 2000 letter denying agency approval that it had “determined that the [MA] and DCA together are management contracts and are subject to NIGC approval.” Moreover, with respect to the LPA, the NIGC Director of Contracts by letter twice requested an explanation for the Tribe‘s proposed purchase price for the land, and expressed the concern that the purchase price was a hidden management compensation. Although the Catskill Group responded that the purchase price was a fair one, at no time did it challenge, at the agency level, the NIGC‘s determination that the LPA was subject to its approval. The same is true with respect to the terms of the DCA. Indeed, in Master Agreements entered into between the Tribe and the Catskill Group in 2000, the parties expressly recited that the agreements “for the purchase of the property, [i.e., the LPA] and the development, [and] construction . . . of the gaming facility” [i.e., the DCA] had been submitted to the NIGC and the BIA “for review and approval.” (emphasis added). Moreover, by their terms both the LPA and DCA contemplated prior agency approval by the BIA. In particular, the DCA‘s effective date was contingent upon receipt of BIA approval, while the LPA‘s land deal was contingent upon the BIA‘s approval of the transfer of land into trust for the Tribe.
III. INTERFERENCE WITH BUSINESS RELATIONS CLAIM
In the absence of enforceable contracts, the Catskill Group hopes to prevail on a claim for tortious interference with business relations. To state a claim for this tort under New York law, four conditions must be met: (1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant‘s acts injured the relationship. See Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002) (describing the tort by an alternative name, “tortious interference with prospective economic advantage“); Goldhirsh Group, Inc. v. Alpert 107 F.3d 105, 108–09 (2d Cir. 1997) (stating the elements as constitutive of “tortious interference with . . . business relations“). Only the third and fourth elements are at issue here, and we do not reach the latter because we conclude below that the Catskill Group has failed to present a triable issue of fact on element three, wrongful means.
The wrongful means requirement makes alleging and proving a tortious interference claim with business relations “more demanding” than proving a tortious interference with contract claim. Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 191, 428 N.Y.S.2d 628, 632, 406 N.E.2d 445, 449–50 (1980) (describing the interference with business relations tort by an alternative name, “interference with prospective contractual relations” and describing element three as “wrongful means“). The standard is more demanding because a
While a defendant‘s commission of a “crime or an independent tort” clearly constitutes wrongful means, such acts are not essential to find wrongful means. See Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189, 785 N.Y.S.2d 359, 361–62, 818 N.E.2d 1100, 1102–03 (2004); see also Hannex Corp. v. GMI, Inc., 140 F.3d 194, 206 (2d Cir. 1998) (holding that participating in a knowing breach of fiduciary duty can constitute wrongful means).
Here, the Catskill Group contends that the record contains ample evidence to permit reasonable jurors to conclude that Park Place engaged in wrongful means. The Catskill Group‘s claim centers around the following three themes:
- Park Place defrauded two individuals—Gary Melius and Ivan Kaufman—to obtain favorable introductions to the Tribe, and then defrauded the Tribe by falsely representing to the Tribe that no delay in the project would be occasioned by partnering with Park Place;
- Park Place committed the tort of knowing participation in another‘s breach of fiduciary duty, specifically Kaufman‘s breach of his fiduciary duty to the Tribe, by intentionally slowing payroll at the Akwesasne casino. Park Place then “ratified” or knowingly accepted the benefits of that breach by positioning itself as the Tribe‘s financial savior; and
- Park Place exerted economic pressure on the Tribe by making Park Place‘s $3 million loan to the Tribe contingent upon the Tribe‘s abandonment of the Catskill Group.
We reject each of these theories.
A. Park Place‘s Alleged Fraud
1. Alleged Fraud Against Melius and Kaufman
The district court—without determining whether Park Place had engaged in the fraud alleged—held that Park Place‘s action could not form the basis of an interference with business relations claim because the alleged conduct was not directly injurious to either the Catskill Group or the Tribe. Catskill III, 217 F. Supp. 2d at 439–40. The district court‘s holding is entirely consistent with what we have previously recognized in other contexts: a plaintiff must “demonstrate both wrongful means and that the wrongful acts were the proximate cause” of the alleged injury. State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 171–72 (2d Cir. 2004) (citing Pacheco v. United Med. Assocs., P.C., 305 A.D.2d 711, 712, 759 N.Y.S.2d 556 (3d Dep‘t 2003)); Jabbour v. Albany Med. Ctr., 237 A.D.2d 787, 790, 654 N.Y.S.2d 862 (3d Dep‘t 1997). Because any fraud by Park Place against Kaufman and Melius did not directly cause the Catskill Group (or the Tribe) any harm, this theory of liability fails as a matter of law. See Excel Group, Inc. v. Permis Constr. Corp., 254 A.D.2d 451, 452, 678 N.Y.S.2d 778, 778 (2d Dep‘t 1998) (defendant‘s improper use of a report in violation of its agreement with a third-party did not make the defendant‘s interference with plaintiff‘s business relationship “wrongful“).
Two cases upon which the Catskill Group relies—Sommer v. Kaufman, 59 A.D.2d 843, 399 N.Y.S.2d 7 (1st Dep‘t 1977), and Pagliaccio v. Holborn Corp., 289 A.D.2d 85, 734 N.Y.S.2d 148 (1st Dep‘t 2001)—are inapposite. In both of those cases the defendant‘s wrongful conduct against third-parties bore a direct nexus to the relationship with which the defendant interfered. See Sommer, 59 A.D.2d at 843, 399 N.Y.S.2d at 7–8 (defendants directly injured plaintiff by bribing public official to deny plaintiff a building permit for the subject project); Pagliaccio, 289 A.D.2d at 85, 734 N.Y.S.2d at 149 (defendants alleged to have directly injured plaintiff by threatening plaintiff‘s employer with harm if plaintiff‘s employment was not terminated). Here, by contrast, the alleged fraud against Melius and Kaufman—which netted an introduction to the Tribe—had at most a tenuous relation to the harm alleged.
2. Alleged Fraud Against the Tribe
The Catskill Group‘s claim that Park Place also committed fraud against the Tribe when, in the final stages of negotiations, Park Place announced that it could “switch” the limited approval the Catskill Group had obtained to Park Place‘s site “without any significant loss of time.” The district court held that Park Place‘s assurance (which turned out to be false) was not actionable because it was mere “puffery,” and the Tribal Chiefs testified that they “did not rely on [Park Place‘s] corporate braggadoccio.” Catskill III, 217 F. Supp. 2d at 437.
Although the Catskill Group acknowledges the general principle that statements of opinion generally cannot constitute fraud, see, e.g., George Backer Mgmt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211, 220, 413 N.Y.S.2d 135, 140, 385 N.E.2d 1062, 1067 (1978), the Catskill Group relies on the narrow exception to that rule: namely, that opinions “may constitute actionable fraud where a present intent to deceive exists.” Magnaleasing, Inc. v. Staten Island Mall, 563 F.2d 567, 569 (2d Cir. 1977) (emphasis added); see also Harsco Corp. v. Segui, 91 F.3d 337, 346 n.7 (2d Cir. 1996) (“[F]raud liability may attach when a person state[s] that
The fatal shortcoming of the Catskill Group‘s theory, however, is the absence of any facts to support it. Clive Cummis—Park Place‘s former vice-president, who made the alleged assurance—testified that his statement was based upon his then-knowledge of the federal approval process, which was based on advice of counsel. Moreover, the Tribal Chiefs testified in their depositions that they did not rely on Park Place‘s alleged assurance, and that testimony stands uncontroverted. Absent any evidence that Cummins‘s statement was motivated by an attempt to deceive, that it did in fact deceive the Tribe, or that Park Place had any knowledge superior to the Tribe‘s with respect to the anticipated timing of events beyond either party‘s control, the district court properly rejected the Catskill Group‘s allegation of wrongful means against the Tribe.
B. Participation in Kaufman‘s Breach of Fiduciary Duty to the Tribe
The Catskill Group further contends that Park Place used wrongful means insofar as it knowingly participated in a breach of fiduciary duty owed to the Tribe by Kaufman as the principal of the manager of the Tribe‘s Akwesasne casino. More specifically, the Catskill Group contends that Kaufman improperly used his position at Akwesasne to “slow” that casino‘s payroll, in an attempt to put a financial “squeeze” on the Tribe, with the ultimate aim of inducing the Tribe to look to Park Place for a financial bailout. The Catskill Group contends that Kaufman was motivated by the significant fee allegedly promised to him by Park Place in the
In Hannex Corp., we recognized that the commission of the tort of knowing participation in a breach of fiduciary duty supports a finding of wrongful means. 140 F.3d at 206. The elements of that tort are: (1) a breach by a fiduciary of obligations to another; (2) the defendant‘s knowing inducement of or participation in the breach; and (3) damages suffered by the plaintiff from the breach. Id. at 203. With respect to the second element, “[o]ne participates in a fiduciary‘s breach if he or she affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables it to proceed.” Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 284 (2d Cir. 1992), overruled on other grounds by Gerosa v. Savasta & Co., 329 F.3d 317, 319 (2d Cir. 2003).
As factual support for its claim that Park Place knowingly participated in Kaufman‘s alleged breach of duty to the Tribe, the Catskill Group relies almost exclusively on an excerpt from a taped conversation on February 16, 2000 between Kaufman and Cummis:
KAUFMAN: . . . But you got to remember the pressure on them with how we‘re squeezing them in Akwesasne is huge. I mean they—you know, I have kind of delayed their payrolls and—
CUMMIS: Yeah.
KAUFMAN: —slowed it down so badly that, you know, they‘re looking at Arthur as the savior [i.e., Arthur Goldberg, Park Place‘s then-CEO].
CUMMIS: Yep, they are.
KAUFMAN: And it is great. I mean I never would have thought that you would have gotten where you have gotten, but I guess Arthur is a genius.
CUMMIS: He‘s pretty good. I‘m not bad. He‘s pretty good.
KAUFMAN: You must be a hell of a team. CUMMIS: Yeah.
KAUFMAN: I mean I have been around a little bit, but not as much as you guys. But to take a situation like this—remember we started with our letter of intent and they said never would they give an exclusive.
CUMMIS: Yeah.
KAUFMAN: But you guys can maneuver. I‘m impressed.
CUMMIS: They‘ve given it to us now. Now, we had better get together about the financial situation.
* * *
The Catskill Group contends that reasonable jurors could infer from this conversation that Park Place: (1) devised the alleged scheme to financially squeeze the Tribe; (2) provided advice or encouragement to act; (3) provided financial comfort to Kaufman by offering him money in the event that Park Place took over the management of Akwesasne; and (4) ratified Kaufman‘s breach by entering into agreements with the Tribe notwithstanding Park Place‘s knowledge of Kaufman‘s breach.
The first two contentions warrant little discussion. The tape at most suggests that Park Place knew about Kaufman‘s plan to financially squeeze the Tribe through payroll slowdown. There is no evidence, however, that Park Place devised the scheme. Moreover, given that the conversation in the tape occurred after the payroll slowdowns, the tape itself cannot be used to demonstrate that Park Place provided advice or encouragement to act.
Nor is Park Place‘s alleged ratification of Kaufman‘s breach sufficient, either alone or in combination with plaintiff‘s other assertions, to establish wrongful means. The Catskill Group‘s “ratification” theory is drawn principally from Diduck, in which we affirmed the district court‘s finding that a defendant had participated in a union official‘s breach of fiduciary duty to an ERISA fund. 974 F.2d at 284. We held that the defendant‘s continued association with the union official and underpayments to the union, after the defendant was put on notice of the breach, crossed the threshold of tortious participation:
Once put on notice of the breach, [the defendant] could not continue its association with [the union official] as if his conduct were not questionable. Its failure to inquire into the propriety of that conduct and take appropriate action was a substantial factor facilitating the breach. Making payments that [the defendant] knew or should have known “short-changed” the funds effectively ratified [the union official‘s] conduct.
Diduck is distinguishable, however, because the defendants’ conduct of, inter alia, making
Moreover, the Catskill Group‘s claim that Park Place should be accountable simply because it continued associating with Kaufman after, and with knowledge of, his alleged breach cannot be squared with our decision in S & K Sales Co. There, we questioned the propriety of a jury instruction that permitted a finding of liability if the defendant “participated in [the third-party‘s] breach of his duty of loyalty, or that [defendant] knowingly accepted the benefits of [the third-party‘s] breach of his duty of loyalty.” S & K Sales Co., 816 F.2d at 849. It was the instruction‘s disjunctive “or“—and in particular the “knowing[] accept[ance]” prong of it—that troubled us. Ultimately, we did not in S&K resolve the issue of whether the challenged instruction was legally erroneous, because we found no prejudice to the defendant in light of the charge as a whole, which made clear that liability could attach only if the defendant both participated in the third-party‘s breach and if the defendant accepted the benefits of the breach. Id. at 849–50.
We now hold what we intimated in S & K Sales Co.: the knowing acceptance of benefits alone is insufficient to sustain a claim for participating in the breach of a fiduciary duty. See id. at 849 (“Nike could not have been prejudiced because the charge as a whole correctly conveyed to the jury the proper standard and emphasized the element of ‘participation’ as the essence of the claim.“).
C. Park Place‘s Allegedly Improper Economic Pressure
Finally, we reject the Catskill Group‘s claim that Park Place used wrongful means, in the form of economic pressure, to interfere with the Catskill Group‘s business relations with the Tribe. In particular, the Catskill Group claims that Park Place sought to capitalize on the Tribe‘s financial difficulty by agreeing to loan the Tribe $3 million in exchange for a contract giving Park Place exclusive development rights with the Tribe.
In Carvel Corp., the New York Court of Appeals explained that for economic pressure to constitute wrongful means, such pressure must have been for the “sole purpose of inflicting intentional harm on plaintiffs.” 3 N.Y.3d at 190, 785 N.Y.S.2d at 362, 818 N.E.2d at 1103
The situation here is relatively simple. The Tribe needed money. Park Place had money. The Tribe asked Park Place for money. Park Place had no obligation to give the Tribe any money. So it bargained with the Tribe. Both parties came to the decision that an exclusive casino development contract was a fair trade for the immediate $3 million loan. That is not improper economic pressure.
Catskill III, 217 F. Supp. 2d at 439. We agree.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court‘s judgments.
Notes
The DCA provided that its provisions would become effective only upon receipt of the required regulatory approvals and further required the parties “to cooperate and to use their commercially reasonable efforts to satisfy [this] condition at the earliest possible date.”
Likewise, the MA provided that the agreement would be effective on the date when “the Chairman of the NIGC grants written approval of this Agreement. The parties agree to cooperate and to use their commercially reasonable efforts to satisfy the above condition at the earliest possible date.”
Subject to the Chairman’s approval, an Indian tribe may enter into a management contract for the operation of a class II or class III gaming activity.
(a) Such contract shall become effective upon approval by the Chairman.
(b) Contract approval shall be evidenced by a Commission document dated and signed by the Chairman. No other means of approval shall be valid.
(c) Contracts approved by the Secretary remain effective until approved or disapproved by the Chairman.
Management contracts and changes in persons with a financial interest in or management responsibility for a management contract, that have not been approved by the Secretary of the Interior or the Chairman in accordance with the requirements of this part, are void.