Galvstar Holdings, LLC v. Harvard Steel Sales, LLC

Background

Galvstar Holdings, LLC and DSB Holdings, LLC brought the action against Harvard Steel Sales, LLC and Jeremy Jacobs. DSB was the assignee of Galvstar’s non-plant and equipment assets, including potential causes of action. The original complaint asserted claims for breach of a joint venture agreement, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and fraud.

The defendants initially moved to dismiss the amended complaint. The court granted that motion, and the Second Circuit affirmed the dismissal of all claims except the claim for breach of the implied covenant of good faith and fair dealing. The Second Circuit vacated the dismissal of that claim and sent it back for further proceedings.

Harvard then moved for summary judgment. It argued that the record did not support DSB’s claim that Harvard breached the implied covenant and that DSB lacked standing because the assignment violated New York’s prohibition against champerty. Champerty, as discussed by the court, is an assignment of a claim made with the intent and purpose of bringing a lawsuit on it.

Summary-Judgment Standard

Summary judgment is appropriate when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law. The party opposing summary judgment must present admissible evidence—not merely speculation, conclusory allegations, or a small amount of unsupported evidence—that could allow a reasonable jury to rule in its favor. The court must view the evidence favorably to the opposing party but may not decide credibility disputes or weigh competing evidence.

Court’s Analysis

The remaining claim alleged that Harvard and Jacobs participated in a scheme to sabotage Galvstar and take over its business. To avoid summary judgment, DSB needed evidence supporting the allegation that Harvard entered the Toll Processing Agreement with the intent not to honor it.

The court concluded that DSB had not produced such evidence, even after extensive discovery. DSB relied on circumstances including a meeting that excluded Galvstar’s founder, changes in the parties’ communications, Harvard’s demand that the agreement be signed, reduced prices for non-performing steel, and Harvard’s later failure to place orders. The court determined that these facts did not support the further conclusion that Harvard signed the agreement as part of a scheme to injure Galvstar financially.

The court also rejected DSB’s reliance on evidence concerning the quality of Galvstar’s steel and Harvard’s expectations. Even if Harvard’s expectations about steel quality were unreasonable, the court explained, that would not establish that Harvard intended to dishonor the agreement. The court found that DSB could not counter Harvard’s evidence with facts supporting its theory and instead relied on broad assertions and conclusions.

Champerty Issue

The court did not decide whether DSB’s role as assignee and plaintiff violated New York’s champerty restriction. It stated that the case could be resolved on alternative grounds and therefore did not need to reach that issue. The court noted that DSB might not have had an opportunity to gather evidence concerning the issue, but the court’s ruling did not rest on it.

Disposition

Judge George B. Daniels granted Harvard’s motion for summary judgment. The ruling resolved the remaining claim for breach of the implied covenant of good faith and fair dealing on the ground that the record did not contain evidence from which a reasonable jury could find for DSB. The order did not state that the motion was granted with or without prejudice.