Kravitz v. Binda

Background

Peter Kravitz, acting as trustee of Advance Watch Company’s Creditor Trust, sued Marcello Binda and Simone Binda for breach of fiduciary duties and common-law commercial waste. The commercial-waste claim had already been dismissed, leaving a fiduciary-duty claim concerning the Bindas’ alleged role in directing a June 2013 repayment to Binda Italy.

Advance Watch had received a $45 million asset-based credit line from Wells Fargo. It used $14,857,380 of that financing to repay part of its revolving-credit debt to Binda Italy. Kravitz contended that the money should instead have been used to pay overdue vendors and support Advance Watch’s operations. He claimed that the repayment contributed to later operating and profit losses.

Marcello and Simone Binda were directors of Advance Watch. They were also co-CEOs and co-owners of Binda Italy. The parties disputed whether the Bindas were personally responsible for the repayment decision. The court considered the evidence in the light most favorable to Kravitz because the defendants sought summary judgment, which is judgment without a trial when no genuine dispute over an important fact requires a trial.

New Claim Raised During Summary Judgment

The court declined to allow Kravitz to assert a new fiduciary-duty theory for the first time in opposition to summary judgment. The court stated that the amended complaint did not plead a separate duty-of-care claim and that Kravitz had not obtained the defendants’ consent or sought permission to amend after discovery had closed. The court also found undue delay and likely prejudice to the defendants.

Marcello Binda

The court granted summary judgment for Marcello Binda on the fiduciary-duty claim. It found no evidence that he approved the $14.8 million repayment. The record showed that he did not participate in board meetings, generally had no operational role at Advance Watch, and had not discussed the Wells Fargo loan or its use with Jeffrey Gregg, another Advance Watch director. The court concluded that no reasonable jury could find on the record that Marcello breached a fiduciary duty to Advance Watch.

Simone Binda

The court found enough evidence to create a factual dispute about whether Simone Binda approved or otherwise made the repayment decision. Jeffrey Gregg testified about discussions with Simone and about Simone’s participation in discussions with Wells Fargo. Because Simone was Advance Watch’s board chairman and was also a co-CEO and co-owner of Binda Italy, a jury could potentially find that he approved a transaction benefiting Binda Italy at Advance Watch’s expense.

The court therefore concluded that the business-judgment rule did not require judgment for Simone at that stage. That rule generally protects directors’ business decisions from judicial interference, but the court stated that the protection can be overcome by evidence of bad faith or a breach of the duty of loyalty. The court also noted that the parties disputed whether the transaction was fair to Advance Watch.

Causation and Remaining Claim

Even assuming Simone breached a fiduciary duty, the court held that Kravitz had not produced substantial evidence that the repayment caused Advance Watch’s claimed losses. Under Michigan law, the plaintiff had to show that the losses would not have occurred without the alleged breach and that the breach was a substantial factor in causing them.

The court emphasized that Advance Watch had been undercapitalized, had experienced vendor-payment delays, had accumulated increasing debt to Binda Italy, and had already lost important brand licenses before the repayment. The court also found that the financial projections relied on continued financing and did not establish that the repayment, rather than Advance Watch’s preexisting financial problems and other conditions, caused the later losses. The court additionally declined to treat certain employee emails offered by Kravitz as sufficient evidence because it considered them hearsay.

Disposition

The court granted in part and denied in part the defendants’ motion for summary judgment. It granted judgment concerning Marcello Binda and rejected Kravitz’s causation theory concerning Simone’s alleged breach. The conclusion states that potentially triable issues remained only on a fiduciary-breach claim against Simone Binda under Delaware law. The parties were ordered to file a joint pretrial order within 30 days.