Hay v. The Gernert Company, Inc.

Background

Bruce Hay sued The Gernert Company, Inc. (TGC) and Sarah Burnes, alleging breach of fiduciary duty under New York law. TGC is described as a literary agency, and Burnes as a literary agent and TGC principal. Hay alleged that Burnes, TGC, and United Talent Agency personnel provided services in connection with potential film and television deals involving Hay’s life story. He also alleged that Burnes helped Kera Bolonik develop and circulate a book proposal based on Hay’s life story while discouraging Hay from pursuing his own memoir.

The defendants moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court treated the complaint’s factual allegations as true for purposes of the motion, but did not accept conclusory legal assertions as facts. The parties’ submissions assumed that New York law governed the dispute.

Fiduciary Duty and Breach

Under New York law, a breach-of-fiduciary-duty claim requires a fiduciary duty, a knowing breach, and damages directly caused by the breach. A fiduciary relationship exists when one person must act for, or advise, another person’s benefit within the scope of their relationship.

The court held that Hay adequately alleged the existence of a fiduciary duty independent of any contract. The allegations described TGC and Burnes as literary agents who agreed to act for Hay, advised him about offers, communicated with producers, told him to refer producers to them, and represented that they were acting as his agents. The court stated that a literary agent has a fiduciary duty to the agent’s client.

The court also held that Hay plausibly alleged a breach. In particular, he alleged that the defendants represented both him and Bolonik, helped Bolonik prepare and circulate a book proposal, discouraged Bolonik from including Hay as a co-author, and discouraged Hay from continuing his memoir. Accepting those allegations and reasonable inferences in Hay’s favor, the court found they supported a claim that the defendants placed Bolonik’s interests ahead of Hay’s.

Damages

The court held that the complaint did not plausibly allege damages caused by the alleged breach. As to the book project, the complaint did not establish that Hay lost proceeds: Bolonik’s competing book had not been written or published, Hay remained free to write and market his own memoir, and any potential earnings depended on uncertain events, including whether Hay would write the book, whether a publisher would accept it, whether readers would buy it, and how much it might earn.

As to the film and television deal, the complaint alleged that the defendants reached a deal and submitted it to Hay for signature, but did not explain why the deal failed or how the defendants’ alleged breach caused its failure. The court therefore found that the alleged damages were too speculative.

Disposition

The court granted the defendants’ motion to dismiss. It denied the defendants’ request for oral argument as moot. The court stated that, by February 8, 2023, Hay could request permission by letter to file a Second Amended Complaint explaining how it would cure the identified deficiencies. If he did not file that letter, the court stated that it would enter final judgment of dismissal and direct the Clerk of Court to close the case. The opinion itself did not state that the motion was granted with or without prejudice.