Opinion
No. 17 C 6086
2022-12-02
OVERWELL HARVEST LIMITED, a British Virgin Islands company, Individually and derivatively on behalf of Neurensic, Inc., Plaintiff, v. David WIDERHORN, Paul Giedraitis, and Trading Technologies International, Inc., Defendant.
Joanne Hannaway Sweeney, John Joseph Scharkey, Lucas Broderick Terna, Nicole Elizabeth DiOrio, William O'Hara, Robert D. Sweeney, Sweeney, Scharkey & Blanchard LLC, Chicago, IL, for Plaintiff. Christopher Michael Goodsnyder, Allen R. Perl, Perl & Goodsnyder, Ltd., Chicago, IL, Vlad Valentin Chirica, Robbins DiMonte, Ltd., Chicago, IL, for Defendant Paul Giedraitis. David James Doyle, Dylan D. Smith, Kirk Watkins, Smith Gambrell Russell LLP, Chicago, IL, Gillian Breuer Lepore, Hannah Danielle Vanderlaan, Freeborn & Peters LLP, Chicago, IL, for Defendant Trading Technologies International, Inc. David Widerhorn, Wilmette, IL, Pro Se.
Joanne Hannaway Sweeney, John Joseph Scharkey, Lucas Broderick Terna, Nicole Elizabeth DiOrio, William O'Hara, Robert D. Sweeney, Sweeney, Scharkey & Blanchard LLC, Chicago, IL, for Plaintiff. Christopher Michael Goodsnyder, Allen R. Perl, Perl & Goodsnyder, Ltd., Chicago, IL, Vlad Valentin Chirica, Robbins DiMonte, Ltd., Chicago, IL, for Defendant Paul Giedraitis. David James Doyle, Dylan D. Smith, Kirk Watkins, Smith Gambrell Russell LLP, Chicago, IL, Gillian Breuer Lepore, Hannah Danielle Vanderlaan, Freeborn & Peters LLP, Chicago, IL, for Defendant Trading Technologies International, Inc. David Widerhorn, Wilmette, IL, Pro Se. ORDER Sara L. Ellis, Judge
The Court denies in part and defers ruling in part on Defendant Trading Technologies International, Inc.'s motion to preclude windfall damages and for other pretrial relief [262]. The Court previously denied Defendant's requests to bar Plaintiff Overwell Harvest Limited from recovering windfall damages and attorneys' fees. See Doc. 295. The Court requested further briefing from the parties relating to Defendant's request to bar Plaintiff from seeking disgorgement and punitive damages. See Docs. 296-298. After considering the parties' arguments, the Court denies Defendant's motion to prevent Plaintiff from seeking disgorgement; Plaintiff may seek disgorgement, but the Court, and not the jury, will hear its entire breach of fiduciary duty claim. The Court defers ruling on Defendant's request to bar Plaintiff from seeking punitive damages. See Statement.
STATEMENT
Although the parties did not file their supplemental briefs under seal, they filed their original briefs—to which the Court refers—under seal, also providing redacted versions. When the Court refers to a sealed document, it attempts to do so without revealing any information that could reasonably be deemed confidential. Nonetheless, if the Court discusses confidential information, it has done so because it is necessary to explain the path of its reasoning. See City of Greenville v. Syngenta Crop Prot., LLC, 764 F.3d 695, 697 (7th Cir. 2014) ("[D]ocuments that affect the disposition of federal litigation are presumptively open to public view . . . unless a statute, rule, or privilege justifies confidentiality." (citation omitted)); Union Oil Co. of Cal. v. Leavell, 220 F.3d 562, 568 (7th Cir. 2000) (explaining that a judge's "opinions and orders belong in the public domain").
I. Disgorgement
Trading Technologies International, Inc. ("Trading Technologies") has moved to preclude Overwell Harvest Limited ("Overwell") from seeking disgorgement of profits as a remedy at trial. As the Court outlined in its November 18, 2022 Order on Trading Technologies' motion to preclude windfall damages and for other pretrial relief, disgorgement is an equitable remedy available to a "plaintiff who proves liability on a breach of fiduciary duty claim." Cont'l Vineyard LLC v. Dzierzawski, No. 12 C 3375, 2018 WL 11195945, at *1 (N.D. Ill. Apr. 5, 2018). Trading Technologies argued that if the Court allows Overwell to seek disgorgement, Overwell's aiding and abetting claim should not be presented to a jury because disgorgement is an equitable remedy. Because this argument was only addressed briefly in a footnote, the Court requested supplemental briefing from the parties regarding whether a jury may hear a claim for aiding and abetting a breach of fiduciary duty where the plaintiff seeks legal and equitable relief. After considering the parties' arguments, the Court agrees with Trading Technologies that, in light of its request for disgorgement, Overwell may not present its aiding and abetting claim to a jury.
The Court recognizes that courts have reached different conclusions when considering whether a jury may hear the legal issues presented in an otherwise equitable claim for breach of fiduciary duty. Compare Palmer v. Reali, No. CV 15-994, 2017 WL 4319320, at *4 (D. Del. Sept. 28, 2017) (finding trustee was entitled to a jury trial on his breach of fiduciary duty claims), and Cont'l Vineyard LLC, 2018 WL 11195945, at *2 (allowing jury to decide legal relief on fiduciary duty claim while reserving equitable relief for itself), with Client Funding Sols. Corp. v. Crim, 943 F. Supp. 2d 849 (N.D. Ill. 2013) (concluding that the court had to resolve a breach of fiduciary duty claim because it was equitable in nature), and Sunny Handicraft (H.K.) Ltd. v. Envision This!, LLC, No. 14-CV-1512, 2018 WL 723223, at *2 (N.D. Ill. Feb. 6, 2018) (following the court's reasoning in Client Funding Solutions Corp. and concluding that plaintiff's "breach of fiduciary duty claim is more equitable than legal and must be resolved by the Court"). However, the Court finds the reasoning in Client Funding Solutions Corp. persuasive. Applying the two-stage inquiry used to decide whether a remedy is equitable or legal, see Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), the court concluded that (1) historically, actions for breaches of fiduciary duty were considered equitable, and (2) the remedies sought—disgorgement, money damages, and punitive damages—were both equitable and legal in nature. Client Funding Sols. Corp., 943 F. Supp. 2d at 855. The second element presented a new question: "whether a judge or a jury should resolve a single claim [alleging a breach of fiduciary duty] in which the plaintiff seeks both legal and equitable relief as a remedy." Id. at 858. The court decided that, with the first factor tipping toward equity and the second sitting "inconclusively in equipoise[,]" the scales tipped toward equity. Id. (citing Cantor v. Perelman, No. 97-586, 2006 WL 318666, at *8-9 (D. Del. Feb. 10, 2006)). The court therefore concluded that it, and not a jury, must resolve the breach of fiduciary duty claim. Id. at 855.
The Court reaches the same conclusion here. First, Overwell brings only one claim against Trading Technologies: aiding and abetting a breach of fiduciary duty, which was historically an equitable claim. See Cantor, 2006 WL 318666, at *6 (characterizing as "inarguable" the fact that a "breach of fiduciary claim under Delaware corporate law is historically equitable"). This is not a case wherein Overwell has levied multiple claims against Trading Technologies and therefore is entitled to a jury to hear its legal claims, with the Court deciding its equitable claim. Cf. Client Funding Sols. Corp., 943 F. Supp. 2d at 858-859 (holding a bench trial to decide breach of fiduciary duty claim and a jury trial to hear remaining legal claims and allowing jury to hear overlapping evidence among the claims). Second, Overwell seeks both equitable and legal relief resulting from its claim; it does not request an equitable remedy as alternative relief. Cf. Angelopoulos v. Keystone Orthopedic Specialists, S.C., No. 12-CV-5836, 2017 WL 2215038, at *3 (N.D. Ill. May 19, 2017) (plaintiff was entitled to a jury trial because his requests for compensatory damages, punitive damages, and damages for his share of defendant's "administrative fee" were legal in nature, "and only Plaintiff's alternative request for relief [was] equitable in nature"). Because Overwell seeks disgorgement as a result of Trading Technologies allegedly aiding and abetting a breach of fiduciary duty, the Court, and not a jury, will hear this case.
II. Punitive Damages
Trading Technologies also seeks to preclude Overwell from presenting a claim for punitive damages to the jury. The Court appreciates the parties' supplemental briefs, which demonstrate the uncertainty surrounding whether Delaware law permits an award of punitive damages for aiding and abetting a breach of fiduciary duty. Compare Buchwald v. Renco Grp., 539 B.R. 31, 54 (S.D.N.Y. 2015) (applying the Erie doctrine to analyze the availability of punitive damages on plaintiff's breach of fiduciary duty claim and concluding that "punitive damages are unavailable under Delaware law on Plaintiff's claim"), aff'd sub nom. Matter of Magnesium Corp. of Am., 682 F. App'x 24 (2d Cir. 2017), and Accident Ins. Co., Inc. v. U.S. Bank Nat'l Ass'n, No. 3:16-CV-02621-JMC, 2019 WL 2865222, at *3 (D.S.C. July 3, 2019) ("[T]he court concludes that the application of Delaware law is appropriate in precluding an award of punitive damages based on the jurisdiction of the Delaware Court of Chancery." (citing Buchwald, 539 B.R. at 54)), with In re Extended Stay, Inc., No. 09-13764-JLG, 2020 WL 10762310, at *121 (Bankr. S.D.N.Y. Aug. 8, 2020) (rejecting defendants' argument that Delaware law does not recognize punitive damages as recovery for breach of fiduciary duties claims and collecting cases), and AluminumSource, LLC v. LLFlex, LLC, No. CVN18C07231EMDCCLD, 2021 WL 1997893, at *2 (Del. Super. Ct. May 19, 2021) (noting that although punitive damages cannot generally be recovered for a breach of contract in Delaware, they can be recovered pursuant to a few exceptions, including "breach of a fiduciary duty"), appeal refused, 254 A.3d 397 (Del. 2021).
In light of the Court's above ruling that Overwell is not entitled to a jury trial on its claim, the Court need not decide whether Overwell may present its request to a jury. After the parties' present their evidence at trial, the Court will determine whether punitive damages are proper and warranted.