Return on Intelligence, Ltd. v. Shenkman

Background

Return on Intelligence, Ltd. and Return on Intelligence, Inc. brought claims against Gregory Shenkman for intentional interference with prospective economic relations and breach of fiduciary duty. The plaintiffs withdrew a civil-conspiracy claim on the first day of trial. The matter proceeded to a bench trial, meaning the court—not a jury—decided the facts and legal issues.

The dispute involved loans that Shenkman and the Grigory and Yelena Shenkman Family Trust made to ROI Ltd. The plaintiffs argued that a 2012 Letter Agreement converted or extinguished certain loans. The court found that the plaintiffs did not prove by a preponderance of the evidence—a showing that something was more likely than not—that the Letter Agreement covered the three loans addressed in a later Loan Agreement. The ROI entities had continued carrying the loans on their financial statements until their board declared them void in June 2015.

The plaintiffs were negotiating a proposed asset transaction with EPAM. Shenkman knew about the negotiations but was not involved in them. After Shenkman was removed from the ROI entities’ boards, he sent the ROI entities an arbitration demand asserting that they owed him and the Trust money on the loans. The arbitration was later dismissed for lack of arbitral jurisdiction, and the claims were not renewed. The proposed EPAM transaction ultimately did not close. Shenkman also presented EPAM with unrelated business opportunities, including opportunities involving Vimpelcom and buddybank.

Legal standards and analysis

For intentional interference with prospective economic advantage, the plaintiffs had to prove that Shenkman intentionally engaged in wrongful conduct designed to disrupt the relationship with EPAM and that his conduct proximately caused economic harm. The interference had to involve an independently wrongful act—conduct prohibited by a legal standard—not merely an improper motive.

For breach of fiduciary duty, the plaintiffs had to prove a fiduciary relationship, a breach, and damages proximately caused by the breach. The court concluded that Shenkman owed the ROI entities and their shareholders fiduciary duties while he served on their boards. Shenkman did not dispute that duty.

The court concluded that the loan dispute was a good-faith dispute. Shenkman’s decision to file the arbitration demand therefore was not an independently wrongful act. The court also found no evidence that Shenkman or his counsel sent the demand letter to EPAM, and thus no evidence that the letter caused the transaction to fail. The plaintiffs also failed to show that filing the arbitration, rather than their unwillingness to resolve the dispute directly with Shenkman, probably caused the transaction’s failure.

The court ruled that Shenkman could not be held liable for presenting the buddybank opportunity. Regarding Vimpelcom, the court found no evidence that Shenkman used confidential information from the ROI entities or information that EPAM’s decision maker did not already possess to discourage EPAM from completing the transaction. The plaintiffs also presented no evidence contradicting testimony about why EPAM withdrew.

Disposition

The court found in favor of Gregory Shenkman and against the ROI entities. The court stated that it would issue a separate judgment and directed the Clerk to close the file.