Kravitz v. Binda

Background

Peter Kravitz, acting as creditor trustee for the creditor trust of Advance Watch Company, Ltd., sued Marcello Binda and Simone Binda. The remaining claim alleged that the Bindas breached fiduciary duties owed to Advance Watch. The earlier proceedings had dismissed the commercial-waste claim and limited the fiduciary-duty claims to conduct occurring after September 29, 2009 and duties owed to Advance Watch or GWGI.

The dispute focused on a June 2013 repayment. Advance Watch obtained a $45 million asset-based credit line from Wells Fargo. Around the same time, it repaid $14,857,380 to Binda Italy through an existing revolving credit facility. Kravitz contended that the money should instead have been used to pay overdue vendors and that redirecting it to Binda Italy harmed Advance Watch. The parties disputed whether the Bindas were personally responsible for that decision and whether it caused Advance Watch’s claimed operating and profit losses.

Summary-judgment standards and evidentiary rulings

The court applied the summary-judgment standard, under which judgment is proper when no genuine dispute exists about a fact that could affect the result and the moving party is entitled to judgment as a matter of law. The court viewed disputed evidence in Kravitz’s favor and could not decide witness credibility or choose between competing versions of events.

The court declined to consider unsupported denials in Kravitz’s factual response where the response lacked required record citations. It also declined to treat expert Michael Goldman’s opinions as undisputed facts. The court did not exclude the challenged portions of Goldman’s expert testimony at that stage. It ruled, however, that several internal emails cited to prove the truth of statements about cash shortages were hearsay and could not create a genuine issue for trial.

The court also refused to permit Kravitz to assert a new claim for breach of the duty of care for the first time in opposition to summary judgment. The claim had not been pleaded, and Kravitz had not obtained the Bindas’ consent or sought permission to amend after discovery had closed. The court found undue delay and likely prejudice to the defendants.

Fiduciary-duty analysis

Applying Michigan law, the court explained that a breach-of-fiduciary-duty claim requires proof of a fiduciary duty, a breach, and damages caused by the breach. Because Marcello and Simone served as directors of Advance Watch, they owed fiduciary duties to that company in their individual capacities as directors. The court ruled that the bankruptcy settlement barred claims against them in their capacities as owners, directors, or officers of Binda Italy, but preserved claims based on acts taken as officers or directors of the debtor companies.

Marcello Binda

The court granted summary judgment concerning Marcello. The undisputed evidence showed that he did not participate in Advance Watch board meetings, generally had no operational role, and had no discussions with Jeffrey Gregg about the Wells Fargo agreement, use of its funds, or other financial or business matters. Kravitz offered no contrary evidence showing that Marcello approved the June 2013 repayment or acted in bad faith. The court therefore found no evidence from which a reasonable jury could find that Marcello breached his fiduciary duties to Advance Watch. The court also stated that any claim against Marcello on behalf of GWGI could not survive because Kravitz could not prove a breach.

Simone Binda

The court found sufficient evidence to create a factual dispute about whether Simone approved or otherwise made the decision to direct the repayment to Binda Italy. Evidence included Gregg’s testimony about possible conversations with Simone, Simone’s participation in discussions with Wells Fargo, and Simone’s roles as Advance Watch’s board chairman and as co-CEO and co-owner of Binda Italy. Viewed in Kravitz’s favor, a jury could find that Simone approved the repayment to benefit Binda Italy at Advance Watch’s expense.

The court rejected the argument that the business-judgment rule required judgment for Simone. That rule generally protects corporate decisions unless directors act in bad faith or commit a willful abuse of discretion. The court found that the evidence could allow a jury to find a breach of the duties of loyalty and good faith. The court also noted that conflicting evidence about whether the interested transaction was fair to Advance Watch prevented summary judgment on that issue.

Causation and Delaware-law claim

The court nevertheless ruled that Kravitz could not establish under Michigan law that Simone’s alleged breach caused Advance Watch’s operating and profit losses. Michigan law requires proof that the alleged conduct was a factual and legal cause of the injury, including that the losses would not have occurred without the conduct. The court emphasized evidence that Advance Watch had been undercapitalized, had struggled to pay vendors, had accumulated increasing debt to Binda Italy, and had already suffered significant license losses before the June 2013 repayment. The court found that the projections relied on by Kravitz did not establish that the repayment caused the later losses, and that the evidence offered only speculation rather than a sufficiently supported sequence of cause and effect.

The opinion states in its conclusion that potentially triable issues remained only on a fiduciary-breach claim against Simone under Delaware law. It explains that, under Delaware law as discussed in the opinion, the relevant elements were the existence of a fiduciary duty and a breach, rather than the Michigan-law causation analysis applied to the damages claim. The court therefore granted in part and denied in part the defendants’ motion for summary judgment. It directed the parties to file a joint pretrial order within 30 days and directed the clerk to close the case and enter judgment.