     14-403-cv(L)
     Sawabeh Information Services Company v. Eagle

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 25th day of March, two thousand fifteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                RAYMOND J. LOHIER, JR.,
 8                              Circuit Judges,
 9                FRANK P. GERACI, JR.,*
10                              District Judge.
11
12       - - - - - - - - - - - - - - - - - - - -X
13       SAWABEH INFORMATION SERVICES COMPANY,
14       EDCOMM, INC.,
15                Plaintiffs-Appellees-Cross-
16                Appellants,
17
18                    -v.-                                               14-403-cv(L)
19                                                                       14-610-cv(XAP)
20       LINDA EAGLE, DAVID SHAPP, CLIFFORD
21       BRODY,




                *
                  Chief Judge Frank P. Geraci, Jr., of the United
         States District Court for the Western District of New York,
         sitting by designation.
                                                  1
 1            Defendants-Appellants-Cross-
 2            Appellees.**
 3   - - - - - - - - - - - - - - - - - - - -X
 4
 5   FOR PLAINTIFFS:            PHILIP R. BERWISH, Berwish Law,
 6                              New York, New York.
 7
 8   FOR DEFENDANTS:            DAVID SHAPP, pro se (Linda
 9                              Eagle, pro se, New York, New
10                              York, Clifford Brody, pro se,
11                              Ambler, Pennsylvania, on the
12                              brief), Buckingham,
13                              Pennsylvania.
14
15        Appeal from a judgment of the United States District
16   Court for the Southern District of New York (Scheindlin,
17   J.).
18
19        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
20   AND DECREED that the judgment of the district court be
21   AFFIRMED IN PART AND REVERSED IN PART.
22
23        The parties cross-appeal from the judgment of the
24   United States District Court for the Southern District of
25   New York (Scheindlin, J.), which: requires defendants to
26   indemnify Sawabeh Information Services Company (“SISCOM”)
27   for any judgment entered in a related state court action;
28   declares that Edcomm, Inc. (“Edcomm”) owns certain
29   intellectual property; and dismisses with prejudice the
30   parties’ remaining claims and counterclaims. We assume the
31   parties’ familiarity with the underlying facts, the
32   procedural history, and the issues presented for review.
33
34        “In reviewing a district court’s decision in a bench
35   trial, we review the district court’s findings of fact for
36   clear error and its conclusions of law de novo.” White v.
37   White Rose Food, a Div. of DiGiorgio Corp., 237 F.3d 174,
38   178 (2d Cir. 2001).
39
40        In all respects but one, we affirm the judgment for the
41   reasons set forth by the district court.
42

         **
              The Clerk of Court is respectfully directed to
     amend the official caption in this case to conform with the
     caption above.
                                  2
 1        The district court erroneously concluded that
 2   defendants breached their fiduciary duty to SISCOM by
 3   failing to disclose a series of loans from Debra Slater (the
 4   “Slater Loans”). The court’s factual findings are not
 5   clearly erroneous; the error is in the legal analysis.
 6   Under New York law, “[t]he elements of a claim for breach of
 7   a fiduciary obligation are: (i) the existence of a fiduciary
 8   duty; (ii) a knowing breach of that duty; and (iii) damages
 9   resulting therefrom.” Johnson v. Nextel Commc’ns, Inc., 660
10   F.3d 131, 138 (2d Cir. 2011).
11
12        The district court found that defendants (former
13   directors and shareholders of Edcomm) entered into a
14   fiduciary relationship with SISCOM1 when SISCOM acquired
15   Edcomm. But by that point, it was already too late for
16   SISCOM to avoid any loss or potential liability arising out
17   of the Slater Loans; SISCOM became liable for those loans,
18   if at all, upon its acquisition of Edcomm. To the extent
19   that defendants breached a fiduciary duty by failing to
20   disclose the loans after the acquisition, there were no
21   “damages resulting therefrom” because any injury to SISCOM
22   resulted from defendants’ failure to disclose the Slater
23   Loans before the acquisition, when defendants did not yet
24   owe SISCOM a fiduciary duty. On the facts found by the
25   district court, SISCOM’s claim fails as a matter of law.
26
27        For the foregoing reasons, and finding no merit in the
28   parties’ other arguments, we hereby AFFIRM the judgment of
29   the district court, except as to SISCOM’s breach of
30   fiduciary duty claim. We REVERSE the portion of the
31   judgment requiring defendants to indemnify plaintiffs for
32   any judgment entered in the state court litigation
33   concerning the Slater Loans.
34
35                              FOR THE COURT:
36                              CATHERINE O’HAGAN WOLFE, CLERK
37




         1
              The district court correctly dismissed Edcomm’s
     breach of fiduciary duty claim.
                                  3
