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.