IDT Corp. v. Morgan Stanley Dean Witter & Co.

Order, Supreme Court, New York County (Herman Cahn, J.), entered April 27, 2006, which, to the extent appealed from, denied defendants’ motion to dismiss the first, second, fourth and fifth causes of action in the complaint for failure to state a cause of action, affirmed, without costs.

Plaintiff, a telecommunications company, alleges in its complaint that Morgan Stanley, its former investment banker, engaged in a variety of improper conduct in an effort to maximize the fees it collected, thereby breaching its fiduciary duty to plaintiff and causing it substantial financial harm in the process. The complaint asserts claims for breach of fiduciary duty, tortious interference with contract, tortious interference with prospective business relations, misappropriation of confidential and proprietary business information, and unjust enrichment. Morgan Stanley’s motion was granted only to the extent of dismissing the third cause of action for tortious interference with prospective business relations.

Morgan Stanley contends that all of the remaining claims are barred by collateral estoppel, which prevents a party from relitigating an issue previously decided against it in a proceeding where there was a fair opportunity to fully litigate the matter (see Kaufman v Eli Lilly & Co., 65 NY2d 449, 455 [1985]), pointing to plaintiff’s prior arbitration against Telefonica International, S.A. where, according to Morgan Stanley, the arbitrators decided critical issues that preclude plaintiffs present claims. In that arbitration, however, plaintiff never had an opportunity to conduct discovery on the extent of the damages it suffered due to Morgan Stanley’s alleged tortious conduct (see PenneCom B.V. v Merrill Lynch & Co., Inc., 372 F3d 488, 492-493 [2d Cir 2004]). Nor are plaintiffs remaining claims time-barred or insufficient to state causes of action. While Telefonica’s breach of its memorandum of understanding with IDT was allegedly a result of Morgan Stanley’s tortious interference, no cause of action for such interference arose until plaintiff actually suffered damages, and such damages were not necessarily suffered at the time the contract was breached (see Kronos, Inc. v AVX Corp., 81 NY2d 90, 96-97 [1993]). The equitable breach of fiduciary duty claim seeking disgorgement of $10 million is governed by a six-year limitations period (CPLR 213 [1]; Kaufman v Cohen, 307 AD2d 113, 118 [2003]), and should not be dismissed at this stage of the litigation as “duplicative” of the unjust enrichment claim, when it properly serves as an alternative theory for the relief sought. Finally, the rule that an award for punitive damages must be limited to conduct directed at the general public applies in breach of contract cases, not tort cases for breach of fiduciary duty (see Sherry Assoc. v SherryNetherland, Inc., 273 AD2d 14, 15 [2000]).

We have considered defendant’s remaining arguments and find them unpersuasive. Concur—Andrias, J.P., Saxe, Nardelli and Sweeny, JJ.