Ccbn.Com, Inc v. Thomson Finanacial, Inc.
| Decision Date | 02 July 2003 |
| Docket Number | No. CIV.A.02-11532 PBS.,CIV.A.02-11532 PBS. |
| Parties | CCBN.COM, INC., Plaintiff, v. THOMSON FINANCIAL, INC., Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Joseph J. Samarias, Wilmer, Cutler & Pickering, Washington, DC, Peter Knight, Tory A. Weigand, Morrison, Mahoney, & Miller LLP, Boston, Andrew Kaizer, Wilmer, Cutler & Pickering, New York, NY, Michael Klein, Robert Hoyt, Christopher Davies, Michael R. Klein, Wilmer, Cutler & Pickering, Washington, DC, Steven F. Cherry, Wilmer, Cutler & Pickering, James W. Frost, Wilmer, Cutler & Pickering, Washington, DC, for CCBN. COM, Plaintiff.
Anthony S. Fiotto, Goodwin Procter, LLP, Boston, Martin Flumenbaum, Alex Young K. Oh, John W.R Murray, Paul, Weiss, Rifkind, Wharton & Garrison, Henry Seiji Newman, Paul, Weiss, Rifkind, Wharton & Garrison, Aidan Synnott, Pauli, Weiss, Rifkind, Wharton, & Garrison, New York, NY, for Thomson Corporation, Thomson Financial, In, Defendants.
Plaintiff CCBN.com Inc. ("CCBN") alleges that defendant Thomson Financial, Inc. breached its fiduciary duty to plaintiff, violated the antitrust laws, and engaged in a host of other statutory and common law transgressions.1 The defendant has moved, on numerous grounds, to dismiss all claims. After hearing and briefing, the motion to dismiss is ALLOWED in part and DENIED in part.
The complaint alleges the following facts.
CCBN is a Delaware corporation, currently headquartered in Boston, Massachusetts. In 1997, CCBN began to market an internet-based calendaring and webcasting service—called "StreetEvents"—to Investor Relations ("IR") departments of companies that employ such services as part of their investor outreach programs. Defendant Thomson Financial, a New York corporation, sells investment information services, including its signature "First Call" aggregation of analyst reports on publicly traded companies, to a wide range of clients such as investment banks, institutional investors, and brokers.
In October 1997, CCBN's founders invited Thomson Financial to become an investor in CCBN. This would not be the first business deal between the parties. Jeffrey Parker, one of the founders of CCBN, had started two information services companies in the early 1980s and sold both to Thomson in 1986. Those companies became the foundation of Thomson Financial. CCBN envisioned that the synergies between CCBN and Thomson Financial, as well as the past relationship between the parties, would make for a successful partnership in CCBN's IR venture.
A deal between the two companies was consummated in October 1997. Thomson Financial invested $1.5 million in CCBN, acquiring a 13 percent equity interest in the company. As a condition of that investment, Thomson Financial obtained the right to designate two of the five members of CCBN's Board of Directors. CCBN and Thomson Financial also agreed that CCBN would have the exclusive right to publish Thomson Financial's First Call consensus estimates on its customers' IR web pages, and that Thomson Financial would be entitled to receive information periodically from CCBN, through Thomson Financial's Board representatives and informally through CCBN management, regarding the development of CCBN's business.
After Thomson Financial's investment, CCBN viewed Thomson Financial as a strategic business partner. Believing that the two companies had an agreement that Thomson Financial would not compete with CCBN in the provision of IR communication services, CCBN openly shared with Thomson Financial extensive proprietary information, including the organization and structure of its content, customer data, and analyses of customer strengths and weaknesses.
In 2000, Thomson Financial began to use confidential CCBN information, obtained by Thomson Financial representatives on CCBN's board, to openly compete with CCBN in various ways. First, Thomson Financial board members employed numerous delaying tactics to stall CCBN's planned expansion into the European market. Second, various Thomson Financial officials encouraged plaintiff to delay the introduction of new investment products, such as an "intelligence dashboard" tab on its popular "StreetEvents" service, in order to give Thomson Financial time to develop products to compete directly with CCBN. The intelligence dashboard tab would have provided CCBN clients with detailed and easily accessible information concerning shareholder targeting data, trading volume, and analyst estimates. Third, Thomson Financial misappropriated CCBN corporate opportunities, and interfered with prospective business arrangements of CCBN, using information obtained from Thomson Financial board members. Fourth, Thomson Financial used confidential information obtained in its role as a CCBN fiduciary to launch "First Call Events," an IR product that provides services that are virtually identical to CCBN's StreetEvents calendar. To advance its efforts to compete with CCBN Thomson Financial also used passwords it had obtained in connection with its service on CCBN's board to access CCBN's computer systems.
For purposes of this motion, the Court takes as true "the well-pleaded facts as they appear in the complaint, extending [the] plaintiff every reasonable inference in [her] favor." Coyne v. City of Somerville, 972 F.2d 440, 442-43 (1st Cir.1992) (citing Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir.1990)). A complaint should not be dismissed under Fed. R.Civ.P. 12(b)(6) unless "`it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief.'" Roeder v. Alpha Indus., Inc., 814 F.2d 22, 25 (1st Cir.1987) (quoting Conley v. Gibson, 355 U.S. 41, 45-16, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
Defendant claims that CCBN has failed to allege facts sufficient to support its breach of fiduciary duty claims. Under the law of Delaware2, the state of incorporation, a minority shareholder is not a fiduciary of a corporation unless it exercises actual control over the corporation. "[A] shareholder holding less than a 50% interest is not a controlling shareholder, with the fiduciary obligations accompanying that status, unless the shareholder exercises actual control over the conduct of the corporation." In re Healthco Int'l Inc., 203 B.R. 515, 518 (Bankr.D.Mass. 1996) (applying Delaware law). The right to appoint a minority of the board members does not, without more, demonstrate a minority shareholder's control of the corporation. Id.
Nonetheless, CCBN argues that Thomson Financial is liable under the doctrine of respondeat superior for the breach of fiduciary duty by its own employees and former executives who sat on CCBN's board. See generally RESTATEMENT (SECond) OF AGENCY §§ 140, 212 (1958). While this is an interesting theory, courts applying Delaware law have rejected it. See U.S. Airways Group, Inc. v. British Airways PLC, 989 F.Supp. 482, 494 (S.D.N.Y. 1997) (); cf. Medical Self Care, Inc. v. National Broadcasting Company, Inc., 01-CIV-4191, 2003 WL 1622181, *7 (S.D.N.Y. March 28, 2003) (); but see In re Papercraft Corp., 165 B.R. 980, 991 (Bankr.W.D.Pa.1994) (), vacated on other grounds, 187 B.R. 486 (Bankr. W.D.Pa.1995), rev'd on other grounds, 211 B.R. 813 (W.D.Pa.1997).
Plaintiff also relies on Blau v. Lehman, 368 U.S. 403, 410, 82 S.Ct. 451, 7 L.Ed.2d 403 (1962) in which the Supreme Court held that for the purposes of determining director liability under § 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), the federal insider-trading statute, a corporation that "deputizes" a representative to serve as a director of another corporation could itself be considered a director. While Blau has been influential in the application of § 16(b), see, e.g. Feder v. Martin Marietta Corp., 286 F.Supp. 937, 94L42 (S.D.N.Y.1968), it has not been extended in Delaware to impose liability on a corporation for a breach of fiduciary duty by its representative on a board of directors. I decline to create a novel theory of liability under Delaware law. As the First Circuit has stated, "in diversity cases the federal courts do not undertake to restructure state law." Howse v. Zimmer Mfg. Co. Inc., 757 F.2d 448, 451 (1st Cir.1985). Plaintiffs claim based on respondeat superior must therefore be rejected.
CCBN has a comeback argument that Thomson is liable for joining with a fiduciary in a breach of her fiduciary duties. Under Delaware law, "one who knowingly joins with a fiduciary, including corporate officials, in a breach of a fiduciary obligation is liable to the beneficiaries of the trust relationship." Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1344 (Del.1987). The elements of an aiding and abetting claim are: "`(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary's duty, ... (3) knowing participation in that breach by the defendant ], and (4) damages proximately caused by the breach." Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001).
As directors on CCBN's board, Thomson Financial's designees owed a fiduciary duty to CCBN. See Skeen v. Jo-Ann Stores, Inc., 750 A.2d 1170, 1172 (Del. 2000) (). These designees allegedly passed along confidential...
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