Yukos Capital S.A.R.L. v. Feldman
| Decision Date | 08 October 2020 |
| Docket Number | August Term 2019,19-1254,Docket Nos. 19-1109 |
| Citation | 977 F.3d 216 |
| Parties | YUKOS CAPITAL S.A.R.L., Yukos Hydrocarbons Investments Limited, Stichting Administratiekantoor Yukos International, Stichting Administratiekantoor Financial Performance Holdings, Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants, Mark Fleischman, as Trustee of the 2015 Security Trust, as successor in interest to the 2014 Security Trust, Plaintiff-Third-Party-Defendant-Counter-Defendant-Appellee-Cross-Appellant, Luxtona Limited, Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. Daniel Caleb FELDMAN, Defendant-Third-Party-Plaintiff-Counter-Claimant-Appellant-Cross-Appellee, David Godfrey, Steven Theede, Fair Oaks Trade and Invest Limited, Third-Party-Defendants-Cross-Appellees, Directors Protection Ltd., Financial Performance Holdings B.V., Gretchen King, Michel De Guillenchmidt, Bruce Misamore, Third-Party-Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
Jeffrey D. Brooks (Mary E. Flynn, on the brief), Morrison Cohen LLP, New York, NY, for Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants, Plaintiff-Third-Party-Defendant-Counter-Defendant-Appellee-Cross-Appellant, and Third-Party-Defendants-Cross-Appellees.
Robert Glunt (Rishi Bhandari, on the brief), Mandel Bhandari LLP, New York, NY, for Defendant-Third-Party-Plaintiff-Counter-Claimant-Appellant-Cross-Appellee.
Before: Livingston, Chief Judge, Park, Circuit Judge, and Underhill, District Judge.‡
This is a case about a disloyal employee, Daniel Feldman, the Defendant.1 After trial, a jury found that Feldman had, through his actions in two distinct schemes, breached his fiduciary duty to (1) Yukos Capital S.A.R.L. ("Yukos Capital"), Yukos Hydrocarbons Investments Limited ("YHIL"), Stichting Administratiekantoor Yukos International ("Foundation 1"), and Stichting Administratiekantoor Financial Performance Holdings ("Foundation 2") (together, the "Yukos Group"),2 and (2) Mark Fleischman, as Trustee of the 2015 Security Trust, as successor in interest to the 2014 Security Trust.3 (The Yukos Group and Fleischman, together with Luxtona Limited,4 are the "Plaintiffs.") Neither the Yukos Group nor Fleischman had sought compensatory damages for Feldman's alleged breaches, and the jury declined to award them any disgorgement of Feldman's compensation pursuant to New York's faithless servant doctrine; accordingly, the district court awarded the Yukos Group entities and Fleischman each $1 in nominal damages (for a total of $5).
Feldman appeals from the district court's decision to deny his Rule 50 motion for judgment as a matter of law, in which he argued that all breach of fiduciary claims against him for which the Plaintiffs did not allege or prove compensatory damages should have been dismissed. The Yukos Group and Fleischman appeal the district court's allegedly erroneous jury instructions regarding the level of misconduct necessary to warrant forfeiture of a disloyal employee's compensation under New York's faithless servant doctrine.
Before trial, Feldman brought a third-party claim against David Godfrey.5 In that third-party claim, Feldman alleged that Godfrey had directed a third-party forensic accounting firm to access Feldman's gmail account without authorization, which violated the Stored Communications Act (the "SCA"), 18 U.S.C. §§ 2701 – 12. The district court (Kaplan, J. ) granted Godfrey summary judgment on Feldman's third-party claim. Feldman appeals that ruling.
Also before trial, the district court denied the Plaintiffs’ request that it impose sanctions on Feldman for perjurious deposition testimony and improper withholding of documents. The Plaintiffs appeal that decision.
We AFFIRM the district court's granting summary judgment to Godfrey, its non-imposition of sanctions, and its decision to instruct the jury as it did regarding the standard for disgorgement of a faithless servant's compensation. However, because we conclude that Foundation 1 and Foundation 2 (together, the "Foundations") failed to prove breach of fiduciary duty claims against Feldman, we REVERSE the district court's denial of Feldman's Rule 50 motion with respect to them.
Based in Moscow, the Yukos Oil Company ("Yukos Oil") was founded in the mid-1990s, and it became Russia's largest exporter of crude oil. Beginning in 2003, the Russian Federation alleged that Yukos Oil had underpaid its taxes over many years by billions of dollars. Yukos Oil rapidly became bankrupt and its assets were sold at auction. The Plaintiffs believe that the bankruptcy and auction were politically motivated and that the Russian Federation had simply appropriated Yukos Oil's assets. As relevant to this case, some of Yukos Oil's foreign assets were purchased by OOO Promneftstroy ("Promneftstroy").
Before Yukos Oil's dissolution, numerous executives anticipated that the Russian Federation would come for Yukos Oil's assets, and so they formed several legal entities—some of which are the Plaintiffs here—that could take control of billions of dollars of Yukos Oil's international assets to protect those assets for Yukos Oil's shareholders. Those legal entities have fought for control of the former Yukos Oil's foreign assets. For example, in January 2019 in a Netherlands court, the Plaintiffs and their affiliates successfully obtained title to the former Yukos Oil assets that Promneftstroy had "purchased" at auction.
The Defendant in this case—Daniel Feldman—is an American lawyer who worked as a corporate secretary for Yukos Oil. Between Yukos Oil's 2006 dissolution and 2014, Feldman was involved in the leadership structure of several Yukos Group entities. More specifically, Feldman was the corporate secretary for the Foundations. He also served as the sole director of Yukos Capital from 2007 to 2014 and as one of several directors of YHIL from 2006 to 2012. Yukos Capital was a wholly-owned subsidiary of Foundation 1. And YHIL was a wholly-owned subsidiary of Foundation 2. Feldman was also the trustee of the 2015 Security Trust (and its predecessor) from 2006 to 2013.
The Plaintiffs allege that Feldman stole money from them in numerous ways over the years. (At trial, the Plaintiffs alleged that Feldman perpetrated eight separate, duplicitous schemes.) Feldman maintained that this case was a cover-up: The Plaintiffs were fabricating Feldman's disloyalty to hide their own disloyalty. Feldman thus brought counterclaims against the Plaintiffs and third-party claims against several individuals associated with the Yukos Group for SCA violations and defamation. (None of those counterclaims or third-party claims made it to trial, but one is at issue in this appeal.)
Three schemes are relevant here. The first is the Promneftstroy Scheme. As described above, the Yukos Group and its affiliates were engaged in litigation with Promneftstroy in the Netherlands. Due to his personal connections with individuals at Promneftstroy, Feldman was tapped to broker a settlement. The Plaintiffs alleged that Feldman sought a cash payment from Promneftstroy before negotiating with them. The jury found Feldman not liable for breach of fiduciary duty in the Promneftstroy Scheme, but it is relevant to the discussion below regarding the district court's decision not to impose sanctions.
The second is the Trust Scheme. The Plaintiffs alleged that when Feldman was serving as trustee of the 2004 Security Trust (the "Trust")—a Yukos-affiliated entity that held money for the Yukos Group's future litigation expenses—Feldman withdrew $500,000 and invested it under his own name in a hedge fund for three years. Feldman did not tell the Trust's protector that he was investing the Trust's assets in his own name. When the Trust's protector discovered what Feldman had done, the protector demanded that Feldman return the funds to the Trust's account, and Feldman was removed as trustee. The investment that Feldman made had almost doubled in value. As a result, the Plaintiffs did not seek compensatory damages from Feldman for his role in the Trust Scheme. At trial, the jury found Feldman liable for breach of fiduciary duty in the Trust Scheme.
The third is the Julius Baer Scheme. Julius Baer is a Swiss bank that agreed to hold some of the Yukos Group's assets. A Yukos Group employee—Dmitri Merinson—had secured that arrangement with Julius Baer. Feldman subsequently approved a $2.6 million "finder's fee" payment from Julius Baer to Merinson. At trial, the Plaintiffs claimed that the "finder's fee" was really a kickback. Indeed, sometime after Feldman approved Julius Baer's $2.6 million payment to Merinson, Merinson "loaned" Feldman $1.2 million so Feldman could buy a house in the Hamptons. The Plaintiffs elicited expert testimony suggesting that the $2.6 million payment to Merinson resulted in Julius Baer's charging the Yukos Group higher rates on certain foreign exchanges; the expert estimated the damage to the Yukos Group to be $3 million. (Feldman contested that characterization.) Still, the Plaintiffs did not seek compensatory damages from Feldman for his role in the Julius Baer Scheme because, before trial, the Plaintiffs had already settled with Julius Baer for the full amount of their out-of-pocket harm. At trial, the jury found Feldman liable for breach of fiduciary duty in the Julius Baer Scheme.
In October 2016, the Plaintiffs and several Third-Party-Defendants made a motion for partial summary judgment on Feldman's counterclaims and third-party claims, which, as relevant here, asserted a claim under the SCA against David Godfrey,6 the former general counsel of Yukos Oil and the de facto general counsel of the Yukos Group and its affiliates. Feldman claimed that Godfrey had improperly directed a third-party forensic accounting firm to access without authorization certain of Feldman's emails.
In 2014, Godfrey determined that an internal...
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