Summary Judgment Victory in Case Involving Breach of Fiduciary Duty by a Foreign LLC Owner
I.S. Law Firm is proud to announce that in a recent Memorandum Opinion, Judge Trenga of the U.S. District Court for the Eastern District of Virginia has ruled in favor of our client, a Moldovan limited liability company RitLabs, S.R.L., in a case that involved a Breach of Fiduciary Duty by one of the RitLabs, S.R.L. owners.
Our client, Plaintiff RitLabs S.R.L. (“SRL”), is a Moldova-based internet technology and software provider that at the time of founding had three principal members. One of the SRL’s three owners, the Defendant, served as the director, or Chief Executive Officer, of the SRL, and owned a 40% share in the SRL, and two other members held 30% shares.
In 2008, the Defendant formed RitLabs, Inc. (“INC.”) in Virginia, without informing the other two owners of the Moldovan entity, SRL, and assigned himself 100% of the INC.’s ownership. The Defendant, on behalf of SRL, entered into a License Agreement giving INC. the exclusive right to sell SRL products in the United States. Under the Agreement, INC. would receive 60% of the gross revenue generated from the sale of SRL’s software, while SRL would receive 40%. In addition, on behalf of SRL, the Defendant cancelled a software distributorship already in place with a U.S.-based distributor and then re-entered the distributorship agreement on behalf of INC.
Upon discovering Defendant’s actions, SRL filed suit alleging a variety of federal and state claims, including several violations of the Anti-cybersquatting Consumer Protection Act (ACPA) and the Computer Fraud and Abuse Act (CFAA).
On August 9, 2012, Judge Trenga of the U.S. District Court for the Eastern District of Virginia held that there was “no question” that Defendant’s actions in connection with INC. violated his fiduciary duties to SRL as its director. Under Moldovan law, the Defendant had a duty of loyalty to SRL, which the court analyzed using generally accepted principles of corporate law in the United States. Although the Defendant argued that his actions benefited the SRL, the Court found that his actions provided greater benefit to him and violated his duty of loyalty to the other shareholders in SRL.
The court also granted summary judgment to Plaintiff on those claims that were premised on the validity of the License Agreement that the Defendant had entered: a violation of the Anti-cybersquatting Consumer Protection Act; false designation of origin in violation of the Lanham Act; violation of the Computer Fraud and Abuse Act; and tortious interference with contractual relations.
The Court also ruled in favor of the Plaintiff as to every counterclaim raised by the Defendants, dismissing every counterclaim as baseless and not grounded in fact.
The trial to assess damages will conclude on October 9, 2012.
PLEASE NOTE THAT CASE RESULTS DEPEND UPON A VARIETY OF FACTORS UNIQUE TO EACH CASE. CASE RESULTS DESCRIBED BELOW DO NOT GUARANTEE OR PREDICT A SIMILAR RESULT IN ANY FUTURE CASE UNDERTAKEN BY I.S. LAW FIRM, PLLC.
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