Bullard v. Drug Policy Alliance

Background

Carol Bullard, also known as Asha Bandele, sued her former employer, the Drug Policy Alliance (DPA), and DPA employees Maria McFarland and James Ferguson. She alleged that DPA terminated her because of her race and sex, violating federal, New York State, and New York City laws. DPA asserted counterclaims against Bandele for breach of fiduciary duty and fraud. DPA alleged that Bandele arranged four contracts between DPA and her personal friend, journalist Kirsten West Savali, and concealed that DPA was paying West Savali personally rather than through her employer, The Root.

The contracts called for payments totaling $45,000 for articles and coverage connected to DPA’s work. DPA alleged that Bandele concealed the contracts from her supervisors, obtained an accountant’s signature without substantive review, and arranged payments for personal reasons unrelated to DPA’s legitimate business interests. DPA further alleged that The Root did not know about the payments and that the arrangement violated The Root’s rules and journalistic standards. DPA claimed financial losses, reputational harm, and possible loss of future funding.

Bandele moved to dismiss DPA’s remaining counterclaims under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a pleading does not state a legally sufficient claim. She also asked the court not to exercise supplemental jurisdiction over the state-law counterclaims. DPA had previously withdrawn its conversion counterclaim, leaving fraud and breach of fiduciary duty at issue in this motion.

Fraud Counterclaim

Under New York law, a fraud claim requires a false material statement or omission, knowledge that it was false, an intent to induce reliance, justifiable reliance, and injury. The court held that DPA plausibly alleged these elements. It explained that DPA was not alleging only that Bandele failed to disclose a friendship. Rather, DPA alleged that she concealed that she was using DPA’s money to benefit her friend for personal reasons and that at least one payment was based partly on the friend’s need for a car down payment rather than the value of the work.

The court also found material DPA’s allegations that The Root did not know about the payments. According to the counterclaims, the arrangement caused West Savali to violate her employment agreement and The Root’s ethical standards. The fact that The Root had not sued DPA did not make the alleged omissions immaterial or establish that DPA suffered no harm.

The court rejected Bandele’s argument that DPA could not have relied on the contracts because they were available for review. DPA alleged that Bandele presented them in a way designed to avoid substantive review. At the pleading stage, the court concluded that DPA was entitled to rely on a senior employee to act in the organization’s best interests and that the alleged reliance was legally sufficient.

Breach of Fiduciary Duty

Under New York law, a breach-of-fiduciary-duty claim requires a fiduciary relationship, a knowing breach, and resulting damages. The court found that DPA adequately alleged that Bandele owed fiduciary duties to DPA as an employee, breached those duties by directing DPA assets to a personal friend for purposes unrelated to legitimate DPA business, and caused financial and reputational damage.

Bandele argued that she could not have breached a fiduciary duty because another employee, Ryan Chavez, signed the contracts and authorized the payments. The court rejected that argument. It held that DPA’s allegations that Bandele negotiated the contracts and took steps to ensure their execution were sufficient at the pleading stage, even though she did not personally sign them or control the final release of funds.

Damages

The court also rejected Bandele’s argument that DPA suffered no damages because it received services from West Savali. DPA alleged that Bandele caused it to spend money that otherwise would have been used for legitimate business purposes and caused reputational harm. The court held that those allegations were sufficient at the pleading stage.

Supplemental Jurisdiction

Supplemental jurisdiction allows a federal court to hear related state-law claims that form part of the same case or controversy as federal claims. The court concluded that DPA’s counterclaims were closely connected to Bandele’s discrimination claims because DPA identified the conduct underlying the counterclaims as its nondiscriminatory reason for terminating her.

The court found that the circumstances cited by Bandele—including the existence of a related state case, overlapping facts, and potentially overlapping discovery—were not exceptional. It therefore exercised supplemental jurisdiction over DPA’s counterclaims.

Disposition

Judge Katherine Polk Failla denied Bandele’s motion to dismiss the counterclaims in full. The court ordered Bandele to file a responsive pleading by January 31, 2020, and directed the parties to submit a proposed case-management plan and joint status letter by February 7, 2020. The opinion did not decide whether Bandele ultimately committed fraud or breached a fiduciary duty; it decided only that DPA’s allegations were sufficient to continue past the dismissal stage.