Preview
FILED: NEW YORK COUNTY CLERK 07/03/2013 INDEX NO. 650159/2010
NYSCEF DOC. NO. 149 RECEIVED NYSCEF: 07/03/2013
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
HARVEY RUDMAN and HAROLD KUPLESKY, on
Index No. 650159/10
Behalf of Each of Them Individually And On Behalf Of
Starrett City Preservation LLC, Derivatively,
Hon. Shirley Werner Kornreich
Plaintiffs,
Motion Seq. No. 8
- against -
CAROL GRAM DEANE, THE ESTATE OF DISQUE
D. DEANE by CAROL G. DEANE,
as TEMPORARY EXECUTRIX, SALT KETTLE LLC,
ST. GERVAIS LLC, STARRETT CITY
PRESERVATION LLC, DD SPRING CREEK LLC,
SK SPRING CREEK LLC, SPRING CREEK PLAZA
LLC, DD SHOPPING CENTER LLC and SK
SHOPPING CENTER LLC,
Defendants.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF
HARVEY RUDMAN'S MOTION FOR SUMMARY
JUDGMENT DISMISSING THE COUNTERCLAIMS
TABLE OF CONTENTS
PreliminaryStatement......................................................................................................................1
BACKGROUND.............................................................................................................................3
TheRelevant Facts.............................................................................................................. 3
Rudman's Employment With Starrett and Deane-Related Entities ..............................3
Rudman's Access to Documents ...................................................................................4
Rudman's Employment is Terminated ..........................................................................5
Rudman Has Not Been Employed in the Real Estate Business Since
LeavingStarrett..............................................................................................................7
The Deane Estate Counterclaims ........................................................................................ 8
TheFirst Counterclaim ..................................................................................................8
The Second Counterclaim..............................................................................................9
ARGUMENT...................................................................................................................................9
STANDARD ON SUMMARY NDGMENT.................................................................................9
I. SUMMARY NDGMENT DISMISSING THE FIRST COUNTERCLAIM,
BASED ON BREACH OF FIDUCIARY DUTY, SHOULD BE GRANTED .................10
A. The Deane Estate Has No Standing Because Any Fiduciary Duties
Would Have Been Owed to the Entities, Not Individually to Deane ................... 10
B. Any Employment Relationship Was "At Will" And Did Not Give Rise
ToFiduciary Duties .............................................................................................. 11
C. There Is No Proof that Deane Was Harmed by Rudman's Conduct .................... 13
D. The Undisputed Facts Relating To Rudman's Conduct With Respect
To The Documents Do Not A Breach Of Fiduciary Duty
Support
Claim..................................................................................................................... 16
II. SUMMARY NDGMENT DISMISSING THE SECOND
COUNTERCLAIM SHOULD BE GRANTED ................................................................18
III. THE COURT SHOULD STRIKE THE DEANE ESTATE'S REQUESTS
FORPUNITIVE DAMAGES............................................................................................21
CONCLUSION..............................................................................................................................22
1731636.2 1
TABLE OF AUTHORITIES
Pages)
CASES
Accent Designs, Inc. v. Jan Jewelry Designs, Inc.,
827 F. Supp. 957 (S.D.N.Y. 1993) ..........................................................................................18
Alvarez v. Prospect Hosp.,
68 N.Y.Zd 320 (1986) ..............................................................................................................10
Capitol Records, Inc. v. Naxos ofAmerica,
4 N.Y.3d 540 (2005) ................................................................................................................18
Chauvet v. Local 1199, Drug, Hosp. andHealth Care Employees Union,
1996 WL 665610 (S.D.N.Y. Nov. 18, 1996) ...........................................................................17
Cohen v. New York Prop. Ins. Unde~rv~iting Assn,
65 A.D.2d 71 (1st Dept 1978) ................................................................................................21
Edelman v. Stat°wood Capital Group,
LLC, 70 A.D.3d 246 (1st Dept 2009) .....................................................................................18
Gettinger Associates v. One Move Upward, Inc.,
2008 WL 1724010 (Sup. Ct. N.Y. Co. 2008) ..........................................................................10
Gibbs v. Breed, Abbott &Morgan,
271 A.D.2d 180 (1st Dept 2000) ............................................................................................17
Guarino v. N. Country Mortg. Banking Corp.,
79 A.D.3d 805 (2d Dep't 2010) ...............................................................................................13
Lorillard TobaccoCo. V. Jamelis Grocery, Inc.,
378 F. Supp. 2d 448 (S.D.N.Y. 2005)......................................................................................18
Manley v. Ambase Corp.,
126 F. Supp. 2d 743 (S.D.N.Y. 2001)......................................................................................17
Ocean Partners, LLC v. N. River Ins. Co.,
2004 WL 3131984 (Sup. Ct. N.Y. Co. 2004) ..........................................................................10
Putter v. Feldman,
13 A.D.3d 57 (1st Dept 2004) ................................................................................................21
Rather v. CBS Corp.,
68 A.D.3d 49, 886 N.Y.S.2d 121 (lst Dept 2009) .................................................................11
Rocanova v. Equitable Life Assur. Soc. of U.S,,
83 N.Y.2d 603 (1994) ........................................................................................................21, 22
1731636.2 11
Rooney v. Tyson,
91 N.Y. 2d 685 (1998) .............................................................................................................11
Roy Export Co. Establishment of Vaduz, Lichtenstein v. Columbia Broadcasting System,
Inc., _672 F.2d 1095 (2d Cir. 1982), cent. denied, 459 U.S. 826 (1982) ...................................18
Shea v. Hambro Am. Inc.,
200 A.D.2d 371 (1st Dept 1994) ............................................................................................10
Sullivan &Cromwell LLP v. Charney,
2007 WL 1240437 (Sup. Ct. N.Y. Co. Apr. 30, 2007) ................................................11, 12, 13
Supreme Auto. Mfg. Corp. v. Cont'l Cas. Co.,
126 A.D.2d 153 (1st Dept 1987) ............................................................................................21
Toto v. McMahan, Brafman, Morgan & Co.,
1997 WL 458764 (S.D.N.Y. Aug. 11, 1997) ...........................................................................10
W. Elec. Co. v. Brenner,
41 N.Y.2d 291 (1977) ..............................................................................................................12
Yurman Studio, Inc. v. Castaneda,
591 F. Supp. 2d 471 (S.D.N.Y. 2008)......................................................................................1.9
Zuckerman v. New York,
49 N.Y.2d 557 (1980) ..............................................................................................................10
STATUTES
CPLR§ 3212................................................................................................................................1, 9
1731636.2 111
Plaintiff Harvey Rudman ("Rudman") submits this Memorandum of Law in
support of his motion, pursuant to Rule 3212 of the Civil Practice Law and Rules ("CPLR"), for
summary judgment dismissing the Counterclaims of Defendant Estate of Disque D. Deane (the
"Deane Estate").
Preliminary Statement
By this motion, Rudman, one of the two Plaintiffs in this action, seeks summary
judgment dismissing the two counterclaims that the Deane Estate has asserted against him.
Rudman and the other Plaintiff, Harold Kuplesky ("Kuplesky"), worked in
various officer and employee capacities at Starrett City ("Starrett"). bisque D. Deane ("bisque
Deane") was the Managing General Partner ("MGP") of Starrett City Associates LP ("SCA"),
the limited partnership that beneficially owns Starrett. In addition to working for Starrett,
Rudman (and Kuplesky) also performed services for other Deane-related entities.
Rudman and Kuplesky initiated this lawsuit to recover amounts owing to them as
members of a limited liability company called Starrett City Preservation ("Preservation"), and
pursuant to Preservation's operating agreement (the "Preservation Agreement"). bisque Deane
and Salt Kettle LLC, the other general partner in SCA, assigned their economic interests SCA
in
to Preservation. Rudman and Kuplesky, as well as certain other Starrett employees and certain
Deane family members and entities, received membership interests in Preservation as a
mechanism for them to benefit from the sale or refinancing of Starrett. By this lawsuit, Rudman
and Kuplesky seek to recover the amounts they are entitled to, but did not receive, as a result of
the half-billion dollar refinancing of Starrett City in December 2009.
After this action was commenced, bisque Deane died and the Deane Estate was
substituted in his place. His wife, Defendant Carol Deane, is the managing member of
Preservation. In her capacity as Executrix of the Deane Estate, Carol Deane filed an Answer on
behalf of the Estate asserting two counterclaims against Rudman. The first ("First
Counterclaim") is for breach of fiduciary duty based on Rudman's alleged "removal" of
documents from the "Deane Group premises" and the retention of documents after the
termination of Rudman's employment on April 29, 2009. The second ("Second Counterclaim")
is for unfair competition and alleges that Rudman is employed in the real estate management
business and that the documents give him an unfair competitive advantage over Disque Deane.
Summary judgment of dismissal should be granted as to both Counterclaims. The
First Counterclaim asserts that Rudman breached his fiduciary duty arising from "the
employment of Rudman by various entities ...." The Deane Estate lacks standing to assert this
claim because any fiduciary duties would be owed to the entities that employed Rudman, not to
Disque Deane individually. Nor can the Deane Estate salvage the claim by ignoring its own
pleading and claiming that "various entities" is intended somehow to encompass employment by
Disque Deane individually. There is no evidence to support the existence of such employment.
Moreover, even if there were, such employment would be "at will," and under New York law, at-
will employment relationships do not give rise to fiduciary duties.
The First Counterclaim is also deficient as a matter of law because the Deane
Estate is unable to identify any harm from the removal of documents from the office premises or
Rudman's retention of documents following his termination.
Finally, the facts cannot support a claim for breach of fiduciary duty given the
uncontested facts that Rudman took only copies of documents and did sa for work purposes, that
there was no company policy against doing so, and that he did not disclose any Deane-related
documents to any third party, did not use any such documents for any business purpose other
than for the Deane entities and delivered the documents to his attorneys.
1731636.2 2
The Second Counterclaim, asserting unfair competition, must likewise be
dismissed. As with the First Counterclaim, the Deane Estate lacks standing to assert the Second
Counterclaim. According to the Counterclaim, the "removed" and "retained" documents
belonged to Deane-related entities. Disque Deane individually, or through his Estate, has no
standing to assert a claim based on the alleged misappropriation of these documents. In any
event, the Deane Estate cannot establish any of the elements of unfair competition. There is no
evidence of bad faith; the Deane Estate and Rudman are not in direct competition in any respect;
and the Deane Estate has not even pleaded, no less adduced evidence of, actual harm.
The First and Second Counterclaims are defective on the law and the facts.
Rudman is entitled to summary judgment dismissing both Counterclaims.
BACKGROUND
The Relevant Facts
The facts relevant to this Motion are set forth in the Affidavit of Harvey Rudman
("Rudman Aff."), executed July 2, 2013, the Affirmation of David J. Eiseman, executed July 3,
2013 (Eiseman Aff.") and the deposition excerpts and documents attached thereto and the Joint
Statement of Undisputed Material Facts ("Joint Statement"), all of which are being submitted
together with this Motion. The relevant facts axe reviewed briefly below.
Rudman's Employment With Starrett
and Deane-Related Entities
Rudman was appointed in 1989 as Chief Operating Officer of SCA and thereafter
served as President of both SCA and Starrett City, Inc. ("SCI"). At the time he was terminated
from Starrett on Apri129, 2009, Rudman carried the title of President of SCA and SCI, and Chief
1731636.2
Operating Officer of SCA. (Joint Statement ¶¶ 1-2; Rudman Tr., 13:1-7; 15:23-16:15; 17:6-
18:16; 31:16-32:19)I
When Rudman began working for Starrett, Disque Deane was the MGP of SCA
and, from time to time, Rudman also provided services to certain other Deane-related entities.
(Rudman, 214:1-215:11) Rudman's paycheck was issued by SCA; Disque Deane, individually,
did not pay Rudman for his services. (Rudman Aff., ~ 5)
Rudman did not have an employment agreement. (Rudman Aff., ¶ 4) At all
times, Rudman was an employee at will.
Rudman's Access to Documents
In connection with his work for Starrett and other Deane-related entities, Rudman
had access to, and regularly used, a wide range of business and financial documents relating to
Starrett, other Deane-related entities and the Deane family. At his deposition, Rudman testified
that in connection with the performance of his duties, he sometimes took copies of documents or
forwarded emails to himself at home in order to be able to work outside the office. This was not
for any improper purpose, but rather part of Rudman's performance of his employment duties,
providing him access to information he needed "in the ordinary course of business, or as a
follow-up to a request by either Mr. Deane or someone else whereIthoughtImay have needed
something ...." (Rudman Tr., 197:13-198:24; Rudman Aff., ¶ 6) As Rudman explains, even
after Starrett set up a system for accessing office documents through the Internet, frequent
reliability problems made it difficult to access documents that way. (Rudman Aff., ¶ 7) There
was no policy against taking copies of documents for work purposes and, indeed, this was a
' The cited pages of deposition transcripts are attached to the Eiseman Aff., and are referred to by the
deponent's name, followed by the relevant pages and lines.
1731636.2 4
regular practice of other Starrett employees as well. (Rudman Af£, ¶ 7) Rudman, however,
never took original documents from the office. (Rudman Aff., ¶ 6)
In December, 20Q8, Rudman requested LMS, Starrett's computer consultant, to
download certain files to a flash drive. The evidence shows that there was a reasonable and
appropriate reason for the request. At that time, Starrett was deep in the process of seeking and
evaluating bids for the sale of Starrett City. Rudman was leaving for aseveral-week vacation
and wanted to make sure he had on hand any information he might need while on vacation to
address matters relating to the bidding process, as well as other work matters that had recently
come up or were anticipated to come up. (Rudman Tr., 191:8-192:8; 205:10-16; Rudman Af£, ¶
8) Rudman's request to LMS to download information for him was made openly, during office
hours; in fact, once the information was downloaded, Rudman, marveling at the technology,
showed the flash drive to others in the office. (Rudman Aff., ¶ 9) Additionally, LMS's work
was reflected on an invoice that LMS sent to the Starrett office within days after the information
was downloaded, was directed to Starrett's then comptroller (and now CFO) Iris Sutz, and was
paid. (Sutz Tr., 539:24-541:22; Eiseman Aff., ¶ 8 & Ex. F) Significantly, no one raised an
objection to Rudman's downloading of the information until some five months later, after
Rudman was terminated. (Rudman Aff., ¶ 10)
Rudman's Employment is Terminated
On April 29, 2009, after more than 20 years of service, Rudman's employment
was summarily terminated. (Joint Statement, ¶ 2) At the time, Rudman had in his possession, as
a result of his work for Deane-related entities, copies of documents reflecting business
information of Starrett and other Deane-related entities, and certain personal information
concerning Disque Deane or his family members. (Rudman Af£, ¶ 11)
17316362
In the period preceding his termination, Rudman's suspicions had been
heightened that there was an effort underway to deprive him of his interest in Starrett City
Preservation (defined earlier as "Preservation"). Disque Deane, as MGP of SCA, and Salt Kettle
LLC (Carol Deane's entity), as SCA's general partner, had both assigned their economic
interests in SCA to Preservation. Rudman held a 15.01 percent membership interest in
Preservation pursuant to Preservation's operating agreement (the "Preservation Agreement"),
which implemented the management incentive arrangement that had been promised to Rudman
and other management personnel. The Deane family held approximately two-thirds of
Preservation's membership interests. After years of effort, a refinancing had been announced
and was proceeding. If the transaction came to fruition, Rudman would reap a large share of its
benefits. Rudman was concerned that false allegations might be leveled against him in an attempt
to find a way to reduce or eliminate his interest in Preservation. (Rudman Aff., ¶ 12)2
To protect himself against false allegations, Rudman held on to the copies of
documents that were in his possession at the time of his termination. The need to do this was
heightened by the fact that an enormous number of Starrett-related files had been destroyed in
2008 at the direction of Carol Deane, assisted by her sister, Mary Clarke, and others, and
Rudman did not know what had been retained and what had been destroyed. (Carol Deane Tr.
235:21-238:10; Rudman Aff., ¶ 13) Rudman, moreover, had no contractual obligation to deliver
the documents to SCA or anyone else. (Rudman Aff., ¶ 14)
Rudman did not disclose the documents he retained to any third-party, and at no
time did he use them in connection with any business other than aDeane-related business.
Additionally, he delivered all the documents to his attorneys. (Rudman Aff., ¶ 15) All Defendants
ZRudman's concerns were well-founded. Iris Sutz conceded at her deposition that she and Curt Deane
considered using alleged inappropriate conduct by Rudman as a basis for depriving him of his interest
under the Preservation Agreement. (Sutz Tr., 421:18-423:5)
1731636.2 6
were apprised of this. By letter dated July 8, 2010, counsel for Rudman informed counsel for
Defendants that "Rudman has delivered to our firm all documents reflecting business information
of any of the Deane entities, as well as personal information concerning Deane or his family
members, that Mr. Rudman obtained during the course of his work for the Deane entities... .
These documents will be held by our firm." (Eiseman Aff., Ex. B) These documents, including
the documents on the flash drive, were produced to Defendants in discovery in this action.
(Eiseman Aff., ¶ 3)
Rudman Has Not Been Employed in the Real Estate
Business Since Leaving Starrett
As Rudman attests, since leaving Starrett, he has not been employed in the real
estate management business. (Rudman Aff., ¶ 16)
In its Second Counterclaim, the Deane Estate nevertheless asserts that "Rudman is
employed in the real estate management business ...." (Deane Answer, ¶ 194) In their response
to Plaintiffs' First Set of Interrogatories, the Deane Estate identifies the "real estate management
business" that allegedly employs Rudman as Andrea Bunis Management, Inc. ("ABMI")
(Eiseman Aff., Ex. G, at p.8, Response to Interrogatory 13). The basis for the Deane Estate's
assertion that Rudman is employed by ABMI is a printout from ABMI's website, which lists
Rudman as chief financial officer, and which the Deane Estate and other office employees have
known about, without complaint, since 2006. (Carol Deane Tr., 192:21-193:10; Sutz Tr.,
391:10-392:13)
The uncontradicted testimony of both Rudman and Andrea Bunis, however,
establishes that Rudman was never employed by ABMI, never held any position with the
company and was never the chief financial officer. (Rudman Tr., 585:14-586:12; Bunis Tr.,
26:17-20; 29:17-25; 52:7-16; 53:8-12; 130:8-10; Rudman Af£, ¶ 18) As Rudman explained, and
1731636.2 7
Bunis confirmed, he and Bunis have been family friends for 40 years. (Rudman Tr., 588:7-12)
When Bunis was in the process of expanding her company in 2005, they discussed the possibility
of Rudman (and Harold Kuplesky) serving as a consultant, which resulted in the listing on the
website. In fact, however, Rudman's prospective association with ABMI never occurred
because a large piece of business that ABMI expected to get failed to materialize, and Rudman
was advised that he could not be an officer of a real estate brokerage without being a licensed
real estate broker, which he was unwilling to do. Rudman informed Bunis that "I can't help
you." (Rudman Tr., 591:3-595:12; Bunis Tr., 42:5-21; 43:11-21; 44:4-46:2; 47:24-48:24; 56:18-
57:15; Rudman Aff., ¶ 18)
ABMI and the Deane-related entities do not compete in the same market. The
deposition testimony established that ABMI is a co-op and condo management firm and has
never been involved in the subsidized housing business, which is the market in which the Deane-
related entities compete. (Bunis Tr., 25:13-17; 61:22-62:8) Similarly, Carol Deane
acknowledged at her deposition that the Deane-related entities do not compete in the market for
co-op and condo management.: "Q. And does any Deane entity engage in the business of
property management of co-ops and condos such as described in this document as to what
Andrea Bunis Management does? A. No." (Carol Deane Tr., 255:7-12)
The Deane Estate Counterclaims
The initial Complaint named Disque Deane as a defendant. Deane died on
November 8, 2010, before serving an Answer, and the Deane Estate (by Carol Deane, as
Executrix) was substituted for him as a Defendant.
The Fist Counterclaim
In its Answer, the Deane Estate asserts two counterclaims. The First
Counterclaim alleges that Rudman breached his fiduciary duty to Disque Deane "individually
1731636.2 g
and as MGP." (Eiseman Aff., Ex. A, ¶ 190) The source of this fiduciary duty, according to the
counterclaim, was "the employment of Rudman by various entities ...." (Id., ¶ 184) The
counterclaim alleges that during Rudman's employment by these unspecified entities, he gained
access to documents and records "belonging to Deane (in his individual and MGP capacities) and
to various Deane-family and Deane Group entities"; that he ceased to have any rights with
respect to the documents after his employment with Deane-related entities was terminated; that,
nevertheless, "with the intention of retaining them after his employment terminated, Rudman
removed from the Deane Group premises multiple documents and records and electronic files";
and that "Rudman to date has persistently refused to return any of them, or even to identify"
them. (Id., ¶¶ 185-189)
Asserting that "Deane has been and continues to be harmed by Rudman's breach
of fiduciary duty," the Counterclaim seeks a judgment directing the immediate return of all
documents "referred to and improperly removed, retained and concealed," and an award of
punitive damages. (Id., ¶¶ 191-92 &Wherefore clause).
The Second Counterclaim
In the Second Counterclaim, the Deane Estate asserts a claim of unfair
competition against Rudman, based on the assertion that Rudman is employed in the real estate
business and that his purported possession of documents and records belonging to Deane and to
various Deane-family and Deane Group entities gives Rudman and unfair competitive advantage.
(Id., ¶ 194) This Second Counterclaim seeks the identical relief as the First Counterclaim.
ARGUMENT
STANDARD ON SUMMARY JUDGMENT
The Court is familiar with the standard for summary judgment. Summary
judgment is appropriate where the moving party has established its defense "sufficiently to
1731636.2 9
warrant the court as a matter of law in directing judgment in [its] favor." CPLR 3212(b). While
the burden is on the moving party to make a prima facie showing of entitlement to summary
judgment, once that showing is made the burden shifts to the opposing party to produce
evidentiary proof sufficient to establish the existence of triable issues of material fact. Ocean
Partners, LLC v. N. River Ins. Co., 2004 WL 3131984, at *2 (Sup. Ct. N.Y. Co. 2004)
(Kornreich, J.). Mere conclusions, unsubstantiated allegations, or expressions of hope are
insufficient to defeat a summary judgment motion. Alvarez v. Prospect Hosp., 68 N.Y.2d 320,
325 (1986); Zuckerman v. New York, 49 N.Y.2d 557, 562 (1980); GettingerAssociates v. One
Move Upward, Inc., 2008 WL 1724010, at *2 (Sup. Ct. N.Y. Co. 2008) (Kornreich, J.).
As we show below, under this standard, summary judgment dismissing the Deane
Estate's Counterclaims should be granted.
I. SUMMARY JUDGMENT DISMISSING THE FIRST COUNTERCLAIM, BASED
ON BREACH OF FIDUCIARY DUTY, SHOULD BE GRANTED
A. The Deane Estate Has No Standing Because Any Fiduciary Duties Would
Have Been Owed to the Entities, Not Individually to Deane
The case law makes clear that fiduciary duties that arise by virtue of a defendant's
relationship with an entity, such as a corporation or a partnership, can be enforced only on behalf
of the entity; an individual member, partner or manager of the entity has no standing to enforce
the claim in his ar her own name. See, e.g., Shea v. Hambro Am. Inc., 200 A.D.2d 371, 371 (1st
Dept 1994) ("a partnership cause of action belongs only to the partnership itself or to the
partners jointly, and ... an individual member of the partnership may only sue and recover on a
partnership obligation on the partnership's behalf'); Toto v. McMahan, Brafman, Morgan & Co.,
1997 WL 458764, at *5 (S.D.N.Y. Aug. 11, 1997) (dismissing plaintiff's claims for breach of
fiduciary duty and fraud, finding that he "lack[ed] standing to sue for this harm" because "the
loss was suffered by the partnership directly and only by him derivatively").
1731636.2 ]~
The Deane Estate's First Counterclaim alleges that the source of Rudman's
fiduciary duty is "the employment of Rudman by various entities." The above-cited cases
establish that if Rudman owed a fiduciary duty by virtue of his "employment with various
entities," that duty would run to those entities, and neither Disque Deane nor any other officer or
partner of those entities would have standing to enforce a claim for alleged breach of that duty.
The Deane Estate's addition of an allegation that Rudman also owed a fiduciary
duty to Disque Deane "in Deane's capacity as MGP" of SCA does not cure the Deane Estate's
lack of standing. If a fiduciary duty was owed, it was owed to, and was enforceable only on
behalf of, SCA, not individually by the manager or general partner of the entity.
Because the Deane Estate has no standing to pursue a claim in its own name
based on an alleged breach of fiduciary duty to "various entities" that employed Rudman, as
alleged in the Counterclaim, the First Counterclaim must be dismissed.
B. Any Employment Relationship Was "At Will" And Did Not Give Rise To
Fiduciary Duties
"In New York, `[aJbsent an agreement establishing afzxed duration, an
employment relationship is presumed to be a hiring at will, terminable at any time by either
party."' Rooney v. Tyson, 91 N.Y. 2d 685, 689 (1998) (quoting cases; alteration and emphasis in
original).
Further, in New York, "[t]he law is ...clear that no fiduciary duties exist
between an employer and an at-will employee." Sullivan &Cromwell LLP v. Charney, 2007
WL 1240437, at *5 (Sup. Ct. N.Y. Co. Apr. 30, 2007) (citing cases) (hereinafter "Sullivan &
Cromwell") (a copy of Sullzvan &Cromwell is attached to the Eiseman Aff. as Exhibit J). See
also Rather v. CBS Corp., 68 A.D.3d 49, 55, 886 N.Y.S.2d 121, 125 (1st Dept 2009) ("The law
in this Departnnent, and indeed enunciated in every reported appellate-division-level case, is that
1731636.2 11
employment relationships do not create fiduciary relationships."). While an employee does owe
the employer a duty of loyalty, this duty "has been limited to cases where the employee, acting
as the agent of the employer, unfairly competes with his employer, diverts business opportunities
to himself or others to the financial detriment of the employer, or accepts improper kickbacks."
Sullivan &Cromwell, at *5 (citing cases). See, e.g., W. Elec. Co. v. Brenner, 41 N.Y.2d 291
(1977) (involving kickbacks).
Rudman was an employee at will. There was no employment agreement
establishing a fixed duration for his employment relationship. (Rudman Af£, ¶ 4) It follows that
Rudman's employment by or on behalf of Deane entities did not give rise to any fiduciary duty,
and there is no basis, therefore, for the Deane Estate's claim for breach of fiduciary duty. This
holds true even if the Deane Estate contradicts its own pleading and asserts that Rudnnan was
employed directly by Disque Deane. There is no evidence that any such relationship, if it
existed, was other than as an employee at will.
Sullivan &Cromwell is right on point. There, the Sullivan &Cromwell law firm
("S&C") sued a former associate alleging, among other things, that the associate had publicly
disclosed attorney-client privileged information and confidences and secrets concerning S&C's
clients, as well as proprietary, non-public information concerning S&C. S&C further alleged
that the associate had emailed from his email account at the firm to his home email accounts a
large number of confidential, non-public documents, as well as S&C work product. S&C
asserted several causes of action, including breach of fiduciary duty.
The Court (Hon. Bernard Fried) dismissed the cause of action based on breach of
fiduciary duty, pointing out that no fiduciary duties exist between an employer and an at-will
employee. It went on to hold that the allegations also did not establish a breach of the duty of
1731636.2 IZ
loyalty, because that duty is limited to cases where the employee, while acting as the employer's
agent, unfairly competes with him, diverts business opportunities away from. the employer or
accepts improper kickbacks.
Like S&C's first claim against the associate, the Deane Estate chose to base its
First Counterclaim against Rudman on an alleged breach of fiduciary duty arising from an at-will
employment relationship. Here, as in Sullivan &Cromwell, that relationship does not give rise
to fiduciary duties, and the claim must be dismissed.3
C. There Is No Proof that Deane Was Harmed by Rudman's Conduct
Proof of "damages that were directly caused by the defendant's misconduct" is an
essential element of a claim for breach of fiduciary duty. Guarino v. N. Country Mo~tg. Banking
Corp., 79 A.D.3d 805, 807 (2d Dep't 2010). The evidence adduced in discovery fails to
demonstrate that the Deane Estate suffered any harm from the alleged breach of fiduciary duty,
providing yet another reason why the First Counterclaim must be dismissed.
The alleged breach of fiduciary duty asserted in the First Counterclaim is that
"Rudman removed from the Deane Group premises multiple documents and records and
electronic files — either in original format or copies or both ...." (Deane Answer, ¶187)
No evidence has been adduced showing that Rudman removed original
documents from the office premises. And as Rudman states in his Affidavit, he "never took
originals of documents from the office." (Rudman Aff., ¶ 6) Defendants, moreover, have never
identified the original documents that they allege Rudman removed. Carol Deane testified to
two categories of documents supposedly missing from the office: corporate books for an entity
3 The outcome would be the same if the Deane Estate had chosen to base its counterclaim on breach of the
duty of loyalty. Here, as in Sullivan &Cromwell, the allegations do not establish a claim for breach of
the duty of loyalty since there is no allegation, and certainly no evidence, that Rudman, while he was
employed, unfairly competed, diverted business opportunities or accepted improper kickbacks.
1731636.2 13
called Landings at Fresh Creek and certain unidentified documents that Starrett's computer
consultant says could not be located after Starrett changed over to a new computer system.
(Carol Deane Tr., 201:23-202:18; 207:20-208:10) She had no basis, however, for attributing the
supposed absence of these documents to Rudman. Ms. Deane's sole basis for asserting any
connection between Rudman and the corporate books for Landings at Fresh Creek was that she
had seen them in his office, but could not recall when that was, other than that it was less than
ten years ago. (Carol Deane Tr., 204:17-206:11) Similarly, when asked whether the documents
that were supposedly removed from the server were connected with Rudman in any way, Ms.
Deane responded: "I don't know that it is, butI don't know that it isn't." (Carol Deane Tr.,
210:16-21) At the same time, Ms. Deane acknowledged that there was a transfer of electronic
files from Starrett's old computer system to its new system; that the initial transfer was
unsuccessful; that she does not know what documents were supposedly removed from the server;
and that she did not personally speak to the computer consultant about the supposedly missing
files. (Carol Deane Tr., 208:11-210:4) Since there is no evidence that Rudman removed any
original documents, any harm attributable to the absence of originals cannot be attributed to
Rudman.
In any event, the Deane Estate has proffered no evidence showing how the
inability to locate corporate books for the entity Landings at Fresh Creek, and unidentified
documents that Starrett's computer consultant could not find on Starrett's server after Starrett
changed over to a new computer system, damaged the Deane Estate.
As for copies, Rudman freely admitted that while working at Starrett, he had
copies made of certain documents, and that he forwarded emails to his home computer, so that he
could use them for work purposes when he was outside of Starrett's offices. (Rudman Tr., 198:
1731636.2 14
17-24); that in connection with a vacation that he was taking in December 2008, he requested
Starrett's computer consultant to download copies of documents to a flash drive, so that he could
have the information with him (Rudman Tr., 191:8-192:8; 205:10-16); and that when his
employment was abruptly terminated, he retained documents that were in his possession in order
to protect himself against false allegations (Rudman Aff., ¶¶ 12-13). As discussed below, pp.
16-18, there was nothing improper about any of this, and it does not support a claim for
infra,
breach of fiduciary duty.
Even apart from that, however, there is no evidence that Rudman's possession of
Deane-related documents resulted in any harm to the Deane Estate, or that it might result in
future harm. This, of course, is not surprising since the uncontested evidence shows that
Rudman did not use the documents for any business purpose unrelated to his work for the Deane
entities, that he did not disclose them to any third-party, that the only thing he did with the
documents was to turn them over to his litigation counsel, and that they were produced to
Defendants in discovery. (Rudman Aff., ¶ 15; Eiseman Aff, ¶ 3) Significantly, Carol Deane
acknowledged that she does not know whether Rudman used anything he took or copies from the
Starrett offices for other than his work. (Carol Deane Tr., 211:14-22)
Preview
FILED: NEW YORK COUNTY CLERK 07/03/2013 INDEX NO. 650159/2010 NYSCEF DOC. NO. 149 RECEIVED NYSCEF: 07/03/2013 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK HARVEY RUDMAN and HAROLD KUPLESKY, on Index No. 650159/10 Behalf of Each of Them Individually And On Behalf Of Starrett City Preservation LLC, Derivatively, Hon. Shirley Werner Kornreich Plaintiffs, Motion Seq. No. 8 - against - CAROL GRAM DEANE, THE ESTATE OF DISQUE D. DEANE by CAROL G. DEANE, as TEMPORARY EXECUTRIX, SALT KETTLE LLC, ST. GERVAIS LLC, STARRETT CITY PRESERVATION LLC, DD SPRING CREEK LLC, SK SPRING CREEK LLC, SPRING CREEK PLAZA LLC, DD SHOPPING CENTER LLC and SK SHOPPING CENTER LLC, Defendants. MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF HARVEY RUDMAN'S MOTION FOR SUMMARY JUDGMENT DISMISSING THE COUNTERCLAIMS TABLE OF CONTENTS PreliminaryStatement......................................................................................................................1 BACKGROUND.............................................................................................................................3 TheRelevant Facts.............................................................................................................. 3 Rudman's Employment With Starrett and Deane-Related Entities ..............................3 Rudman's Access to Documents ...................................................................................4 Rudman's Employment is Terminated ..........................................................................5 Rudman Has Not Been Employed in the Real Estate Business Since LeavingStarrett..............................................................................................................7 The Deane Estate Counterclaims ........................................................................................ 8 TheFirst Counterclaim ..................................................................................................8 The Second Counterclaim..............................................................................................9 ARGUMENT...................................................................................................................................9 STANDARD ON SUMMARY NDGMENT.................................................................................9 I. SUMMARY NDGMENT DISMISSING THE FIRST COUNTERCLAIM, BASED ON BREACH OF FIDUCIARY DUTY, SHOULD BE GRANTED .................10 A. The Deane Estate Has No Standing Because Any Fiduciary Duties Would Have Been Owed to the Entities, Not Individually to Deane ................... 10 B. Any Employment Relationship Was "At Will" And Did Not Give Rise ToFiduciary Duties .............................................................................................. 11 C. There Is No Proof that Deane Was Harmed by Rudman's Conduct .................... 13 D. The Undisputed Facts Relating To Rudman's Conduct With Respect To The Documents Do Not A Breach Of Fiduciary Duty Support Claim..................................................................................................................... 16 II. SUMMARY NDGMENT DISMISSING THE SECOND COUNTERCLAIM SHOULD BE GRANTED ................................................................18 III. THE COURT SHOULD STRIKE THE DEANE ESTATE'S REQUESTS FORPUNITIVE DAMAGES............................................................................................21 CONCLUSION..............................................................................................................................22 1731636.2 1 TABLE OF AUTHORITIES Pages) CASES Accent Designs, Inc. v. Jan Jewelry Designs, Inc., 827 F. Supp. 957 (S.D.N.Y. 1993) ..........................................................................................18 Alvarez v. Prospect Hosp., 68 N.Y.Zd 320 (1986) ..............................................................................................................10 Capitol Records, Inc. v. Naxos ofAmerica, 4 N.Y.3d 540 (2005) ................................................................................................................18 Chauvet v. Local 1199, Drug, Hosp. andHealth Care Employees Union, 1996 WL 665610 (S.D.N.Y. Nov. 18, 1996) ...........................................................................17 Cohen v. New York Prop. Ins. Unde~rv~iting Assn, 65 A.D.2d 71 (1st Dept 1978) ................................................................................................21 Edelman v. Stat°wood Capital Group, LLC, 70 A.D.3d 246 (1st Dept 2009) .....................................................................................18 Gettinger Associates v. One Move Upward, Inc., 2008 WL 1724010 (Sup. Ct. N.Y. Co. 2008) ..........................................................................10 Gibbs v. Breed, Abbott &Morgan, 271 A.D.2d 180 (1st Dept 2000) ............................................................................................17 Guarino v. N. Country Mortg. Banking Corp., 79 A.D.3d 805 (2d Dep't 2010) ...............................................................................................13 Lorillard TobaccoCo. V. Jamelis Grocery, Inc., 378 F. Supp. 2d 448 (S.D.N.Y. 2005)......................................................................................18 Manley v. Ambase Corp., 126 F. Supp. 2d 743 (S.D.N.Y. 2001)......................................................................................17 Ocean Partners, LLC v. N. River Ins. Co., 2004 WL 3131984 (Sup. Ct. N.Y. Co. 2004) ..........................................................................10 Putter v. Feldman, 13 A.D.3d 57 (1st Dept 2004) ................................................................................................21 Rather v. CBS Corp., 68 A.D.3d 49, 886 N.Y.S.2d 121 (lst Dept 2009) .................................................................11 Rocanova v. Equitable Life Assur. Soc. of U.S,, 83 N.Y.2d 603 (1994) ........................................................................................................21, 22 1731636.2 11 Rooney v. Tyson, 91 N.Y. 2d 685 (1998) .............................................................................................................11 Roy Export Co. Establishment of Vaduz, Lichtenstein v. Columbia Broadcasting System, Inc., _672 F.2d 1095 (2d Cir. 1982), cent. denied, 459 U.S. 826 (1982) ...................................18 Shea v. Hambro Am. Inc., 200 A.D.2d 371 (1st Dept 1994) ............................................................................................10 Sullivan &Cromwell LLP v. Charney, 2007 WL 1240437 (Sup. Ct. N.Y. Co. Apr. 30, 2007) ................................................11, 12, 13 Supreme Auto. Mfg. Corp. v. Cont'l Cas. Co., 126 A.D.2d 153 (1st Dept 1987) ............................................................................................21 Toto v. McMahan, Brafman, Morgan & Co., 1997 WL 458764 (S.D.N.Y. Aug. 11, 1997) ...........................................................................10 W. Elec. Co. v. Brenner, 41 N.Y.2d 291 (1977) ..............................................................................................................12 Yurman Studio, Inc. v. Castaneda, 591 F. Supp. 2d 471 (S.D.N.Y. 2008)......................................................................................1.9 Zuckerman v. New York, 49 N.Y.2d 557 (1980) ..............................................................................................................10 STATUTES CPLR§ 3212................................................................................................................................1, 9 1731636.2 111 Plaintiff Harvey Rudman ("Rudman") submits this Memorandum of Law in support of his motion, pursuant to Rule 3212 of the Civil Practice Law and Rules ("CPLR"), for summary judgment dismissing the Counterclaims of Defendant Estate of Disque D. Deane (the "Deane Estate"). Preliminary Statement By this motion, Rudman, one of the two Plaintiffs in this action, seeks summary judgment dismissing the two counterclaims that the Deane Estate has asserted against him. Rudman and the other Plaintiff, Harold Kuplesky ("Kuplesky"), worked in various officer and employee capacities at Starrett City ("Starrett"). bisque D. Deane ("bisque Deane") was the Managing General Partner ("MGP") of Starrett City Associates LP ("SCA"), the limited partnership that beneficially owns Starrett. In addition to working for Starrett, Rudman (and Kuplesky) also performed services for other Deane-related entities. Rudman and Kuplesky initiated this lawsuit to recover amounts owing to them as members of a limited liability company called Starrett City Preservation ("Preservation"), and pursuant to Preservation's operating agreement (the "Preservation Agreement"). bisque Deane and Salt Kettle LLC, the other general partner in SCA, assigned their economic interests SCA in to Preservation. Rudman and Kuplesky, as well as certain other Starrett employees and certain Deane family members and entities, received membership interests in Preservation as a mechanism for them to benefit from the sale or refinancing of Starrett. By this lawsuit, Rudman and Kuplesky seek to recover the amounts they are entitled to, but did not receive, as a result of the half-billion dollar refinancing of Starrett City in December 2009. After this action was commenced, bisque Deane died and the Deane Estate was substituted in his place. His wife, Defendant Carol Deane, is the managing member of Preservation. In her capacity as Executrix of the Deane Estate, Carol Deane filed an Answer on behalf of the Estate asserting two counterclaims against Rudman. The first ("First Counterclaim") is for breach of fiduciary duty based on Rudman's alleged "removal" of documents from the "Deane Group premises" and the retention of documents after the termination of Rudman's employment on April 29, 2009. The second ("Second Counterclaim") is for unfair competition and alleges that Rudman is employed in the real estate management business and that the documents give him an unfair competitive advantage over Disque Deane. Summary judgment of dismissal should be granted as to both Counterclaims. The First Counterclaim asserts that Rudman breached his fiduciary duty arising from "the employment of Rudman by various entities ...." The Deane Estate lacks standing to assert this claim because any fiduciary duties would be owed to the entities that employed Rudman, not to Disque Deane individually. Nor can the Deane Estate salvage the claim by ignoring its own pleading and claiming that "various entities" is intended somehow to encompass employment by Disque Deane individually. There is no evidence to support the existence of such employment. Moreover, even if there were, such employment would be "at will," and under New York law, at- will employment relationships do not give rise to fiduciary duties. The First Counterclaim is also deficient as a matter of law because the Deane Estate is unable to identify any harm from the removal of documents from the office premises or Rudman's retention of documents following his termination. Finally, the facts cannot support a claim for breach of fiduciary duty given the uncontested facts that Rudman took only copies of documents and did sa for work purposes, that there was no company policy against doing so, and that he did not disclose any Deane-related documents to any third party, did not use any such documents for any business purpose other than for the Deane entities and delivered the documents to his attorneys. 1731636.2 2 The Second Counterclaim, asserting unfair competition, must likewise be dismissed. As with the First Counterclaim, the Deane Estate lacks standing to assert the Second Counterclaim. According to the Counterclaim, the "removed" and "retained" documents belonged to Deane-related entities. Disque Deane individually, or through his Estate, has no standing to assert a claim based on the alleged misappropriation of these documents. In any event, the Deane Estate cannot establish any of the elements of unfair competition. There is no evidence of bad faith; the Deane Estate and Rudman are not in direct competition in any respect; and the Deane Estate has not even pleaded, no less adduced evidence of, actual harm. The First and Second Counterclaims are defective on the law and the facts. Rudman is entitled to summary judgment dismissing both Counterclaims. BACKGROUND The Relevant Facts The facts relevant to this Motion are set forth in the Affidavit of Harvey Rudman ("Rudman Aff."), executed July 2, 2013, the Affirmation of David J. Eiseman, executed July 3, 2013 (Eiseman Aff.") and the deposition excerpts and documents attached thereto and the Joint Statement of Undisputed Material Facts ("Joint Statement"), all of which are being submitted together with this Motion. The relevant facts axe reviewed briefly below. Rudman's Employment With Starrett and Deane-Related Entities Rudman was appointed in 1989 as Chief Operating Officer of SCA and thereafter served as President of both SCA and Starrett City, Inc. ("SCI"). At the time he was terminated from Starrett on Apri129, 2009, Rudman carried the title of President of SCA and SCI, and Chief 1731636.2 Operating Officer of SCA. (Joint Statement ¶¶ 1-2; Rudman Tr., 13:1-7; 15:23-16:15; 17:6- 18:16; 31:16-32:19)I When Rudman began working for Starrett, Disque Deane was the MGP of SCA and, from time to time, Rudman also provided services to certain other Deane-related entities. (Rudman, 214:1-215:11) Rudman's paycheck was issued by SCA; Disque Deane, individually, did not pay Rudman for his services. (Rudman Aff., ~ 5) Rudman did not have an employment agreement. (Rudman Aff., ¶ 4) At all times, Rudman was an employee at will. Rudman's Access to Documents In connection with his work for Starrett and other Deane-related entities, Rudman had access to, and regularly used, a wide range of business and financial documents relating to Starrett, other Deane-related entities and the Deane family. At his deposition, Rudman testified that in connection with the performance of his duties, he sometimes took copies of documents or forwarded emails to himself at home in order to be able to work outside the office. This was not for any improper purpose, but rather part of Rudman's performance of his employment duties, providing him access to information he needed "in the ordinary course of business, or as a follow-up to a request by either Mr. Deane or someone else whereIthoughtImay have needed something ...." (Rudman Tr., 197:13-198:24; Rudman Aff., ¶ 6) As Rudman explains, even after Starrett set up a system for accessing office documents through the Internet, frequent reliability problems made it difficult to access documents that way. (Rudman Aff., ¶ 7) There was no policy against taking copies of documents for work purposes and, indeed, this was a ' The cited pages of deposition transcripts are attached to the Eiseman Aff., and are referred to by the deponent's name, followed by the relevant pages and lines. 1731636.2 4 regular practice of other Starrett employees as well. (Rudman Af£, ¶ 7) Rudman, however, never took original documents from the office. (Rudman Aff., ¶ 6) In December, 20Q8, Rudman requested LMS, Starrett's computer consultant, to download certain files to a flash drive. The evidence shows that there was a reasonable and appropriate reason for the request. At that time, Starrett was deep in the process of seeking and evaluating bids for the sale of Starrett City. Rudman was leaving for aseveral-week vacation and wanted to make sure he had on hand any information he might need while on vacation to address matters relating to the bidding process, as well as other work matters that had recently come up or were anticipated to come up. (Rudman Tr., 191:8-192:8; 205:10-16; Rudman Af£, ¶ 8) Rudman's request to LMS to download information for him was made openly, during office hours; in fact, once the information was downloaded, Rudman, marveling at the technology, showed the flash drive to others in the office. (Rudman Aff., ¶ 9) Additionally, LMS's work was reflected on an invoice that LMS sent to the Starrett office within days after the information was downloaded, was directed to Starrett's then comptroller (and now CFO) Iris Sutz, and was paid. (Sutz Tr., 539:24-541:22; Eiseman Aff., ¶ 8 & Ex. F) Significantly, no one raised an objection to Rudman's downloading of the information until some five months later, after Rudman was terminated. (Rudman Aff., ¶ 10) Rudman's Employment is Terminated On April 29, 2009, after more than 20 years of service, Rudman's employment was summarily terminated. (Joint Statement, ¶ 2) At the time, Rudman had in his possession, as a result of his work for Deane-related entities, copies of documents reflecting business information of Starrett and other Deane-related entities, and certain personal information concerning Disque Deane or his family members. (Rudman Af£, ¶ 11) 17316362 In the period preceding his termination, Rudman's suspicions had been heightened that there was an effort underway to deprive him of his interest in Starrett City Preservation (defined earlier as "Preservation"). Disque Deane, as MGP of SCA, and Salt Kettle LLC (Carol Deane's entity), as SCA's general partner, had both assigned their economic interests in SCA to Preservation. Rudman held a 15.01 percent membership interest in Preservation pursuant to Preservation's operating agreement (the "Preservation Agreement"), which implemented the management incentive arrangement that had been promised to Rudman and other management personnel. The Deane family held approximately two-thirds of Preservation's membership interests. After years of effort, a refinancing had been announced and was proceeding. If the transaction came to fruition, Rudman would reap a large share of its benefits. Rudman was concerned that false allegations might be leveled against him in an attempt to find a way to reduce or eliminate his interest in Preservation. (Rudman Aff., ¶ 12)2 To protect himself against false allegations, Rudman held on to the copies of documents that were in his possession at the time of his termination. The need to do this was heightened by the fact that an enormous number of Starrett-related files had been destroyed in 2008 at the direction of Carol Deane, assisted by her sister, Mary Clarke, and others, and Rudman did not know what had been retained and what had been destroyed. (Carol Deane Tr. 235:21-238:10; Rudman Aff., ¶ 13) Rudman, moreover, had no contractual obligation to deliver the documents to SCA or anyone else. (Rudman Aff., ¶ 14) Rudman did not disclose the documents he retained to any third-party, and at no time did he use them in connection with any business other than aDeane-related business. Additionally, he delivered all the documents to his attorneys. (Rudman Aff., ¶ 15) All Defendants ZRudman's concerns were well-founded. Iris Sutz conceded at her deposition that she and Curt Deane considered using alleged inappropriate conduct by Rudman as a basis for depriving him of his interest under the Preservation Agreement. (Sutz Tr., 421:18-423:5) 1731636.2 6 were apprised of this. By letter dated July 8, 2010, counsel for Rudman informed counsel for Defendants that "Rudman has delivered to our firm all documents reflecting business information of any of the Deane entities, as well as personal information concerning Deane or his family members, that Mr. Rudman obtained during the course of his work for the Deane entities... . These documents will be held by our firm." (Eiseman Aff., Ex. B) These documents, including the documents on the flash drive, were produced to Defendants in discovery in this action. (Eiseman Aff., ¶ 3) Rudman Has Not Been Employed in the Real Estate Business Since Leaving Starrett As Rudman attests, since leaving Starrett, he has not been employed in the real estate management business. (Rudman Aff., ¶ 16) In its Second Counterclaim, the Deane Estate nevertheless asserts that "Rudman is employed in the real estate management business ...." (Deane Answer, ¶ 194) In their response to Plaintiffs' First Set of Interrogatories, the Deane Estate identifies the "real estate management business" that allegedly employs Rudman as Andrea Bunis Management, Inc. ("ABMI") (Eiseman Aff., Ex. G, at p.8, Response to Interrogatory 13). The basis for the Deane Estate's assertion that Rudman is employed by ABMI is a printout from ABMI's website, which lists Rudman as chief financial officer, and which the Deane Estate and other office employees have known about, without complaint, since 2006. (Carol Deane Tr., 192:21-193:10; Sutz Tr., 391:10-392:13) The uncontradicted testimony of both Rudman and Andrea Bunis, however, establishes that Rudman was never employed by ABMI, never held any position with the company and was never the chief financial officer. (Rudman Tr., 585:14-586:12; Bunis Tr., 26:17-20; 29:17-25; 52:7-16; 53:8-12; 130:8-10; Rudman Af£, ¶ 18) As Rudman explained, and 1731636.2 7 Bunis confirmed, he and Bunis have been family friends for 40 years. (Rudman Tr., 588:7-12) When Bunis was in the process of expanding her company in 2005, they discussed the possibility of Rudman (and Harold Kuplesky) serving as a consultant, which resulted in the listing on the website. In fact, however, Rudman's prospective association with ABMI never occurred because a large piece of business that ABMI expected to get failed to materialize, and Rudman was advised that he could not be an officer of a real estate brokerage without being a licensed real estate broker, which he was unwilling to do. Rudman informed Bunis that "I can't help you." (Rudman Tr., 591:3-595:12; Bunis Tr., 42:5-21; 43:11-21; 44:4-46:2; 47:24-48:24; 56:18- 57:15; Rudman Aff., ¶ 18) ABMI and the Deane-related entities do not compete in the same market. The deposition testimony established that ABMI is a co-op and condo management firm and has never been involved in the subsidized housing business, which is the market in which the Deane- related entities compete. (Bunis Tr., 25:13-17; 61:22-62:8) Similarly, Carol Deane acknowledged at her deposition that the Deane-related entities do not compete in the market for co-op and condo management.: "Q. And does any Deane entity engage in the business of property management of co-ops and condos such as described in this document as to what Andrea Bunis Management does? A. No." (Carol Deane Tr., 255:7-12) The Deane Estate Counterclaims The initial Complaint named Disque Deane as a defendant. Deane died on November 8, 2010, before serving an Answer, and the Deane Estate (by Carol Deane, as Executrix) was substituted for him as a Defendant. The Fist Counterclaim In its Answer, the Deane Estate asserts two counterclaims. The First Counterclaim alleges that Rudman breached his fiduciary duty to Disque Deane "individually 1731636.2 g and as MGP." (Eiseman Aff., Ex. A, ¶ 190) The source of this fiduciary duty, according to the counterclaim, was "the employment of Rudman by various entities ...." (Id., ¶ 184) The counterclaim alleges that during Rudman's employment by these unspecified entities, he gained access to documents and records "belonging to Deane (in his individual and MGP capacities) and to various Deane-family and Deane Group entities"; that he ceased to have any rights with respect to the documents after his employment with Deane-related entities was terminated; that, nevertheless, "with the intention of retaining them after his employment terminated, Rudman removed from the Deane Group premises multiple documents and records and electronic files"; and that "Rudman to date has persistently refused to return any of them, or even to identify" them. (Id., ¶¶ 185-189) Asserting that "Deane has been and continues to be harmed by Rudman's breach of fiduciary duty," the Counterclaim seeks a judgment directing the immediate return of all documents "referred to and improperly removed, retained and concealed," and an award of punitive damages. (Id., ¶¶ 191-92 &Wherefore clause). The Second Counterclaim In the Second Counterclaim, the Deane Estate asserts a claim of unfair competition against Rudman, based on the assertion that Rudman is employed in the real estate business and that his purported possession of documents and records belonging to Deane and to various Deane-family and Deane Group entities gives Rudman and unfair competitive advantage. (Id., ¶ 194) This Second Counterclaim seeks the identical relief as the First Counterclaim. ARGUMENT STANDARD ON SUMMARY JUDGMENT The Court is familiar with the standard for summary judgment. Summary judgment is appropriate where the moving party has established its defense "sufficiently to 1731636.2 9 warrant the court as a matter of law in directing judgment in [its] favor." CPLR 3212(b). While the burden is on the moving party to make a prima facie showing of entitlement to summary judgment, once that showing is made the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of triable issues of material fact. Ocean Partners, LLC v. N. River Ins. Co., 2004 WL 3131984, at *2 (Sup. Ct. N.Y. Co. 2004) (Kornreich, J.). Mere conclusions, unsubstantiated allegations, or expressions of hope are insufficient to defeat a summary judgment motion. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 325 (1986); Zuckerman v. New York, 49 N.Y.2d 557, 562 (1980); GettingerAssociates v. One Move Upward, Inc., 2008 WL 1724010, at *2 (Sup. Ct. N.Y. Co. 2008) (Kornreich, J.). As we show below, under this standard, summary judgment dismissing the Deane Estate's Counterclaims should be granted. I. SUMMARY JUDGMENT DISMISSING THE FIRST COUNTERCLAIM, BASED ON BREACH OF FIDUCIARY DUTY, SHOULD BE GRANTED A. The Deane Estate Has No Standing Because Any Fiduciary Duties Would Have Been Owed to the Entities, Not Individually to Deane The case law makes clear that fiduciary duties that arise by virtue of a defendant's relationship with an entity, such as a corporation or a partnership, can be enforced only on behalf of the entity; an individual member, partner or manager of the entity has no standing to enforce the claim in his ar her own name. See, e.g., Shea v. Hambro Am. Inc., 200 A.D.2d 371, 371 (1st Dept 1994) ("a partnership cause of action belongs only to the partnership itself or to the partners jointly, and ... an individual member of the partnership may only sue and recover on a partnership obligation on the partnership's behalf'); Toto v. McMahan, Brafman, Morgan & Co., 1997 WL 458764, at *5 (S.D.N.Y. Aug. 11, 1997) (dismissing plaintiff's claims for breach of fiduciary duty and fraud, finding that he "lack[ed] standing to sue for this harm" because "the loss was suffered by the partnership directly and only by him derivatively"). 1731636.2 ]~ The Deane Estate's First Counterclaim alleges that the source of Rudman's fiduciary duty is "the employment of Rudman by various entities." The above-cited cases establish that if Rudman owed a fiduciary duty by virtue of his "employment with various entities," that duty would run to those entities, and neither Disque Deane nor any other officer or partner of those entities would have standing to enforce a claim for alleged breach of that duty. The Deane Estate's addition of an allegation that Rudman also owed a fiduciary duty to Disque Deane "in Deane's capacity as MGP" of SCA does not cure the Deane Estate's lack of standing. If a fiduciary duty was owed, it was owed to, and was enforceable only on behalf of, SCA, not individually by the manager or general partner of the entity. Because the Deane Estate has no standing to pursue a claim in its own name based on an alleged breach of fiduciary duty to "various entities" that employed Rudman, as alleged in the Counterclaim, the First Counterclaim must be dismissed. B. Any Employment Relationship Was "At Will" And Did Not Give Rise To Fiduciary Duties "In New York, `[aJbsent an agreement establishing afzxed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party."' Rooney v. Tyson, 91 N.Y. 2d 685, 689 (1998) (quoting cases; alteration and emphasis in original). Further, in New York, "[t]he law is ...clear that no fiduciary duties exist between an employer and an at-will employee." Sullivan &Cromwell LLP v. Charney, 2007 WL 1240437, at *5 (Sup. Ct. N.Y. Co. Apr. 30, 2007) (citing cases) (hereinafter "Sullivan & Cromwell") (a copy of Sullzvan &Cromwell is attached to the Eiseman Aff. as Exhibit J). See also Rather v. CBS Corp., 68 A.D.3d 49, 55, 886 N.Y.S.2d 121, 125 (1st Dept 2009) ("The law in this Departnnent, and indeed enunciated in every reported appellate-division-level case, is that 1731636.2 11 employment relationships do not create fiduciary relationships."). While an employee does owe the employer a duty of loyalty, this duty "has been limited to cases where the employee, acting as the agent of the employer, unfairly competes with his employer, diverts business opportunities to himself or others to the financial detriment of the employer, or accepts improper kickbacks." Sullivan &Cromwell, at *5 (citing cases). See, e.g., W. Elec. Co. v. Brenner, 41 N.Y.2d 291 (1977) (involving kickbacks). Rudman was an employee at will. There was no employment agreement establishing a fixed duration for his employment relationship. (Rudman Af£, ¶ 4) It follows that Rudman's employment by or on behalf of Deane entities did not give rise to any fiduciary duty, and there is no basis, therefore, for the Deane Estate's claim for breach of fiduciary duty. This holds true even if the Deane Estate contradicts its own pleading and asserts that Rudnnan was employed directly by Disque Deane. There is no evidence that any such relationship, if it existed, was other than as an employee at will. Sullivan &Cromwell is right on point. There, the Sullivan &Cromwell law firm ("S&C") sued a former associate alleging, among other things, that the associate had publicly disclosed attorney-client privileged information and confidences and secrets concerning S&C's clients, as well as proprietary, non-public information concerning S&C. S&C further alleged that the associate had emailed from his email account at the firm to his home email accounts a large number of confidential, non-public documents, as well as S&C work product. S&C asserted several causes of action, including breach of fiduciary duty. The Court (Hon. Bernard Fried) dismissed the cause of action based on breach of fiduciary duty, pointing out that no fiduciary duties exist between an employer and an at-will employee. It went on to hold that the allegations also did not establish a breach of the duty of 1731636.2 IZ loyalty, because that duty is limited to cases where the employee, while acting as the employer's agent, unfairly competes with him, diverts business opportunities away from. the employer or accepts improper kickbacks. Like S&C's first claim against the associate, the Deane Estate chose to base its First Counterclaim against Rudman on an alleged breach of fiduciary duty arising from an at-will employment relationship. Here, as in Sullivan &Cromwell, that relationship does not give rise to fiduciary duties, and the claim must be dismissed.3 C. There Is No Proof that Deane Was Harmed by Rudman's Conduct Proof of "damages that were directly caused by the defendant's misconduct" is an essential element of a claim for breach of fiduciary duty. Guarino v. N. Country Mo~tg. Banking Corp., 79 A.D.3d 805, 807 (2d Dep't 2010). The evidence adduced in discovery fails to demonstrate that the Deane Estate suffered any harm from the alleged breach of fiduciary duty, providing yet another reason why the First Counterclaim must be dismissed. The alleged breach of fiduciary duty asserted in the First Counterclaim is that "Rudman removed from the Deane Group premises multiple documents and records and electronic files — either in original format or copies or both ...." (Deane Answer, ¶187) No evidence has been adduced showing that Rudman removed original documents from the office premises. And as Rudman states in his Affidavit, he "never took originals of documents from the office." (Rudman Aff., ¶ 6) Defendants, moreover, have never identified the original documents that they allege Rudman removed. Carol Deane testified to two categories of documents supposedly missing from the office: corporate books for an entity 3 The outcome would be the same if the Deane Estate had chosen to base its counterclaim on breach of the duty of loyalty. Here, as in Sullivan &Cromwell, the allegations do not establish a claim for breach of the duty of loyalty since there is no allegation, and certainly no evidence, that Rudman, while he was employed, unfairly competed, diverted business opportunities or accepted improper kickbacks. 1731636.2 13 called Landings at Fresh Creek and certain unidentified documents that Starrett's computer consultant says could not be located after Starrett changed over to a new computer system. (Carol Deane Tr., 201:23-202:18; 207:20-208:10) She had no basis, however, for attributing the supposed absence of these documents to Rudman. Ms. Deane's sole basis for asserting any connection between Rudman and the corporate books for Landings at Fresh Creek was that she had seen them in his office, but could not recall when that was, other than that it was less than ten years ago. (Carol Deane Tr., 204:17-206:11) Similarly, when asked whether the documents that were supposedly removed from the server were connected with Rudman in any way, Ms. Deane responded: "I don't know that it is, butI don't know that it isn't." (Carol Deane Tr., 210:16-21) At the same time, Ms. Deane acknowledged that there was a transfer of electronic files from Starrett's old computer system to its new system; that the initial transfer was unsuccessful; that she does not know what documents were supposedly removed from the server; and that she did not personally speak to the computer consultant about the supposedly missing files. (Carol Deane Tr., 208:11-210:4) Since there is no evidence that Rudman removed any original documents, any harm attributable to the absence of originals cannot be attributed to Rudman. In any event, the Deane Estate has proffered no evidence showing how the inability to locate corporate books for the entity Landings at Fresh Creek, and unidentified documents that Starrett's computer consultant could not find on Starrett's server after Starrett changed over to a new computer system, damaged the Deane Estate. As for copies, Rudman freely admitted that while working at Starrett, he had copies made of certain documents, and that he forwarded emails to his home computer, so that he could use them for work purposes when he was outside of Starrett's offices. (Rudman Tr., 198: 1731636.2 14 17-24); that in connection with a vacation that he was taking in December 2008, he requested Starrett's computer consultant to download copies of documents to a flash drive, so that he could have the information with him (Rudman Tr., 191:8-192:8; 205:10-16); and that when his employment was abruptly terminated, he retained documents that were in his possession in order to protect himself against false allegations (Rudman Aff., ¶¶ 12-13). As discussed below, pp. 16-18, there was nothing improper about any of this, and it does not support a claim for infra, breach of fiduciary duty. Even apart from that, however, there is no evidence that Rudman's possession of Deane-related documents resulted in any harm to the Deane Estate, or that it might result in future harm. This, of course, is not surprising since the uncontested evidence shows that Rudman did not use the documents for any business purpose unrelated to his work for the Deane entities, that he did not disclose them to any third-party, that the only thing he did with the documents was to turn them over to his litigation counsel, and that they were produced to Defendants in discovery. (Rudman Aff., ¶ 15; Eiseman Aff, ¶ 3) Significantly, Carol Deane acknowledged that she does not know whether Rudman used anything he took or copies from the Starrett offices for other than his work. (Carol Deane Tr., 211:14-22)