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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: July 24, 2018

Breach of Fiduciary Duty Claim Dismissed on Summary Judgment for Lack of Damages

On July 10, 2018, Justice Schecter of the New York County Commercial Division issued a decision in Board of Directors of Windsor Owners Corp. v. Platt, 2018 NY Slip Op 31600(U), dismissing a breach of fiduciary duty claim on summary judgment for lack of damages, explaining:

Damages is an essential element of breach of fiduciary duty and a plaintiff must establish that the misconduct alleged was the direct and proximate cause of the losses claimed. In fact, a breach of fiduciary duty claim is not enforceable until the aggrieved party sustains actual damage. Plaintiff maintains that its damages fall into two categories:
a. “the attorneys’ fees incurred in having to defend against a new state court action that in part is based upon Platt’s improper disclosure of confidential communications. That same disclosure can also be used by the same plaintiff [Mazzocchi] in a pre-existing federal discrimination action. Plaintiff has already incurred attorneys’ fees directly related to the improper disclosure. While the full amount of the damages plaintiff may suffer is dependent upon the trial of that federal action, as this court has repeatedly held, and panels of the Appellate Division have also
held, that is a viable claim not dismissible on summary judgment; and
b. “Plaintiff’s right to seek sanctions against Platt for her entirely frivolous and baseless more than four year li tiga ti on onslaught in this court and on appeal. The second purported category of “damages” for breach of fiduciary duty can easily be dispensed with. This court already dismissed plaintiff’s independent cause of action for sanctions and, to the extent that plaintiff moved for sanctions, its motions have been addressed on a motion by motion basis. Sanctions for frivolous litigation, which are available by motion, are not recoverable under the guise of damages for breach of fiduciary duty.

Though in theory it is plausible that plaintiff could sustain damage as a result of Platt’s disclosure (which explains how the cause of action has survived to date), despite certifying its readiness for trial, Windsor has not shown that it actually sustained· any monetary damages resulting from Platt’s revelation of privileged information. Significantly, Windsor has not demonstrated that it incurred extra attorneys’ fees as a consequence of the disclosure that it would not have incurred in the absence of the disclosure. Nor has it shown that it is actually any worse off in the federal or state-court litigations because of what Platt revealed. Though plaintiff is certainly not required to show the full extent of its damages if they are ongoing, it has to show some actual damage that it sustained as a result of Platt’s alleged breach as opposed to costs that it would have expended anyway defending Mazzocchi’s cases even in the absence of Platt’s disclosures. This is particularly true where, as here, Windsor completed discovery, filed its NOI and certified that it is ready for trial.

(Internal citations omitted).

Fiduciaries have special duties, but the question of whether a defendant is a fiduciary, and thus can be liable for a breach of fiduciary duty, is sometimes a complicated one. Further, as this decision shows, there is no claim if there have been no damages. We both bring and defend breach of fiduciary duty and professional malpractice claims and other claims relating to the duties of trustees and professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of such claims.

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