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State Court Lawsuit Dismisses Business Corporation’s Claim Against Employee for Interference with Prospective Business Advantage

12 Jul 2011
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By Lewis Tesser, Partner, and Timothy Nolen, Associate, of Tesser, Ryan & Rochman, LLP

A New York County Supreme Court decision provides an interesting example of what liabilities employees may face when the employees engage in self-dealing against his employer’s business.

The case, Newtok Video Corp. v. Koike, 2011 N.Y. Slip Op. 31430U, 2011 N.Y. Misc. LEXIS 2592, Index No. 600380/2010 (Sup. Ct. N.Y. County, May 25, 2011), involved a video distributor which sued its former salesperson for selling videos to customers at a discounted rate and overstating the discount to the corporation. The corporation alleged that the salesperson had committed conversion (stole from the corporation), committed fraud, breached a fiduciary duty to the corporation, and interfered with the corporation’s business advantage. Although the Court allowed the corporation to sue for conversion and breach of fiduciary duty, it dismissed the claims for fraud and interference with business. The Court reasoned that the salesperson’s behavior was not solely intended to harm the corporation and that the harm was not “wrongful or improper independent of the interference allegedly caused thereby.” Moreover, the corporation’s fraud claims were duplicative of their breach of fiduciary duty claims. Therefore, the fraud and interference with a business advantage claims were dismissed.

Despite the Court’s dismissal of two of the four claims, the employee here could certainly face serious liability for the two remaining claims.

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About Post Author

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Lewis Tesser is a senior partner in the New York law firm of Tesser, Ryan & Rochman, LLP, concentrating his practice in litigation and mediation, representing licensed professionals and professional practices, administrative law and commercial law. Lew Tesser is Vice-President of the New York County Lawyers’ Association and Director of its Ethics Institute. Prior to private practice, Mr. Tesser was an Assistant United States Attorney in the Eastern District of New York. In that capacity, he represented various agencies of the United States government in litigation in the United States District Court and United States Court of Appeals. Mr. Tesser also served as a Judge Advocate in the United States Army where he prosecuted and defended criminal cases and was the chief legal advisor to the Commanding General of the U.S. Army War College, Carlisle, Pennsylvania. He also has served as an Arbitrator for the American Arbitration Association, New York City Civil Court, a Judge for the Environmental Control Board of the City of New York and a lecturer for various Bar Associations and New York area law schools. Mr. Tesser, who was admitted to practice in 1971, is a 1970 Honors graduate from the National Law Center, George Washington University, a Masters graduate from the Wharton Business School, University of Pennsylvania (l974) and a graduate of the Harvard Law School Program of Instruction for Lawyers. He is a past President of Congregation Sons of Israel, Nyack, NY. Publications and Speaking Engagements Editor-In-Chief, “The New York Rules of Professional Conduct Annotated”, Oxford University Press, New York, 2010. A complete list of Mr. Tesser’s speaking engagements and publications is available if you would like to learn more about Mr. Tesser’s work. Representative Cases In Re Zhang, 376 Fed. Appx. 104 (2d Cir. 2010) Continental Casualty Co. v. JBS Construct. Mgmt., 2010 U.S. Dist. LEXIS 85467 (S.D.N.Y. 2010)

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Tesser, Ryan, & Rochman Blog

At Tesser, Ryan, & Rochman we are committed to keeping current, former, and future clients up to date. Here on our blog we will have news regarding our firm, as well as business analysis, various cases, case studies, and legal findings for the benefit of our clients.