Bardwil Industries Incorporated v. Kennedy

Background

Bardwil Industries Incorporated imports and wholesales textiles, and George C. Bardwil is its sole shareholder and chief executive officer. The amended complaint alleged that Frederick M. Rogers was the company’s secretary and executive vice president of global procurement. It also alleged that Rogers and the other defendants moved about $6 million in assets from a warehouse in Columbus, Ohio, to a warehouse in Dallas, Texas; failed to pay a $132,000 licensing fee to Lenox Textiles Corporation; helped move the company’s license to Arlee Home Fashions; and liquidated company assets for their personal benefit.

The plaintiffs asserted claims for breach of fiduciary duty, conversion, and an injunction. Rogers moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legally recognized claim.

Breach of Fiduciary Duty

The court rejected Rogers’s argument that he owed no fiduciary duties to the company. Applying New York law, the court held that a secretary and vice president are corporate officers and that Rogers therefore owed fiduciary duties to the company.

The court nevertheless dismissed the fiduciary-duty claim because the amended complaint did not satisfy even the ordinary pleading requirements of Federal Rule of Civil Procedure 8. With one exception involving Tassello, the allegations referred generally to defendants rather than identifying what each defendant did. The court held that these undifferentiated allegations did not give Rogers fair notice of the conduct supporting the claim against him. They also raised doubt about whether Rogers’s positions involved the alleged liquidation of inventory, payment of licensing fees, or oversight of company finances.

Conversion

The court also dismissed the conversion claim. Conversion is the intentional and unauthorized control of another person’s personal property in a way that interferes with the person’s right to possess it. The court found that the complaint did not identify which allegations supported the claim against Rogers or what conduct he allegedly committed.

The court further held that the conversion claim failed on its substance. Lenox’s decision to license the property to Arlee after the company failed to pay the licensing fee was not a conversion of the license by the defendants. The allegations that the defendants liquidated the company for personal benefit and stole computers, furniture, and artwork were described as unsupported assertions rather than factual allegations showing that the defendants exercised control over those assets. The complaint also did not allege that the defendants lacked authority to liquidate company inventory and other assets.

Injunction

The court dismissed the request for an injunction barring Rogers from transferring company licenses, breaching fiduciary duties, or diverting assets. Because the amended complaint failed to state a claim against Rogers and the company no longer employed him, the court found that no injunction was warranted.

Disposition

Judge Naomi Reice Buchwald granted Rogers’s motion to dismiss and dismissed the claims against him with prejudice. The court explained that the plaintiffs had already amended their complaint after Rogers identified pleading deficiencies in a pre-motion letter and conference, and they had not sought permission to amend again. The court directed the clerk to terminate the pending motions listed at ECF Nos. 37 and 40.