Sawabeh Information Services Company v. Eagle

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