In Wantickets RDM, LLC v. Eventbrite, Inc., No. 654277/2016, 2017 BL 261099 (Sup. Ct. Jul. 21, 2017), New York Commercial Division Justice Shirley Werner Kornreich denied defendant Eventbrite’s motion to dismiss plaintiff Wantickets’ claims for aiding and abetting breach of fiduciary duty, among other claims. In doing so, she applied Delaware law to assess plaintiff’s allegations of an underlying breach of fiduciary duty and New York law to the remaining elements.
The parties are two competing Delaware companies in the event-promotion and ticketing business. According to the complaint, while Eventbrite was exploring an acquisition of Wantickets in 2016, Wantickets’ two most senior executives engaged in a campaign to promote Eventbrite to current and potential Wantickets customers even though the acquisition was not certain to close. Wantickets alleged that Eventbrite took advantage of the executives’ disloyalty by pitching business to potential clients introduced by these executives and by paying for one of the executives to travel to Ibiza, Spain to develop business for Eventbrite. Wantickets alleged that Eventbrite was aware that the diversion of business by the executives violated the executives’ duties to Wantickets.
Ultimately, the deal with Eventbrite did not close, and Wantickets learned that its executives had been decimating its business for months. Wantickets terminated their employment. Wantickets brought claims in arbitration against the executives for breach of fiduciary duty.
Wantickets also sued Eventbrite in New York State court for, among other things, aiding and abetting the executives’ alleged breaches. “‘[A] claim for aiding and abetting a breach of fiduciary duty requires: (1) a breach of fiduciary obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that plaintiff suffered damages as a result of the breach.’” Justice Kornreich held that Wantickets stated a cause of action for aiding and abetting breach of fiduciary duty under a combination of Delaware and New York law, and denied Eventbrite’s motion to dismiss the claim.
Specifically, as for the first element – an underlying breach of fiduciary duty – the court found that “Delaware law governs the question of whether [the executives] breached their fiduciary duties to Wantickets (a Delaware LLC)” under the internal affairs doctrine. The court assessed the adequacy of Wantickets’ allegations of an underlying breach under Delaware law even though, as the court noted, that question will be adjudicated in the separate arbitration. The court noted that, under Delaware law, the “alleged solicitation of Wantickets’ clients for the benefit of a competitor (Eventbrite) while continuing to work for Wantickets may be theft of a corporate opportunity and, therefore, a breach of fiduciary duty.”
The court then applied New York law to assess the adequacy of plaintiff’s allegations regarding the second and third elements – knowing inducement or participation in the breach and damages as a result of the breach. Justice Kornreich found that “[s]ince the question of whether a fiduciary duty breach was aided and abetted by another does not implicate the internal affairs of Wantickets, Delaware law does not apply.” The court reasoned that “while a choice of law analysis would lead this court to conclude that New York law should be applied because Eventbrite, though based in California, allegedly committed a tort that caused injury to a New York based company (ergo, New York has the greatest interest in the claim), the court may simply apply New York law because the parties do not point to a dispositive difference between New York and California law.”
The court stated that New York law requires allegations that a party “provide[d] ‘substantial assistance’ to the primary violator” in order to plead knowing participation in a breach of fiduciary duty. The court found that plaintiff “properly pleaded the essential element of substantial assistance.” The court reasoned that “these pitches and the trip to Ibiza would not be possible without Eventbrite’s actively participating in the scheme to divert Wantickets’ clients.”
The court found that Wantickets had sufficiently alleged damages when it provided an example of a client that was solicited by Eventbrite along with “facts permitting a reasonable inference that others were solicited.”