Loyalty Claim Revived In ValCom's Suit Against Ex-Brass
Law360, New York (July 01, 2014, 8:17 PM ET) -- A New Jersey federal judge on Tuesday reinstated a breach of loyalty claim against a former ValCom Inc. employee in the entertainment company’s suit accusing its top brass and others of scheming to defraud it out of millions of shares, finding the court erred in characterizing it as a fiduciary claim.
U.S. District Judge William H. Walls said that upon reconsideration, the claim against former ValCom administrative assistant Ingrid Clavijo that she violated the duty of loyalty to ValCom as an employee contains no specific reference to as to whether Clavijo had a fiduciary duty to the company.
“Plaintiff is correct that the complaint is cast in terms of the general duty of loyalty owed by an employee. For that reason, it was wrong to analyze the claim only as breach of a fiduciary duty,” Judge Walls said in a written order.
The judge said that under New Jersey law, all employees owe to their employers a duty of loyalty which “consists of certain very basic and common sense obligations,” including that one must not “act contrary to the employer’s interest.”
Since the complaint accuses Clavijo of assisting former ValCom CEO Vincent Vellardita and others in a scheme to divert profits and assets for their own benefit and to ValCom’s detriment, that suffices as a plausible claim that she breached the duty of loyalty that she owed to ValCom, he said.
Vellardita resigned from ValCom in 2012 amid a power struggle between himself and members of the company's board. The Boonton, N.J.-based company, which owns the faith-based MyFamilyTV network along with film, television and music libraries, later sued him and others in New Jersey federal court over a litany of alleged misdeeds.
Those include Vellardita's purported self-dealing, use of ValCom funds to pay personal legal bills, and usurping of corporate opportunities. ValCom also accuses the former CEO of entering into a scheme with other defendants that would enable them to take over the company's board in violation of law in Delaware, where ValCom is incorporated.
Ex-Director Frank O’Donnell and Vellardita’s wife, Teresa Vellardita, were among others also named in the complaint.
In April, Judge Walls dismissed racketeering charges from the suit, saying that neither Vincent Vellardita nor his co-defendants could be held liable under the Racketeer Influenced and Corrupt Organizations Act, a federal statute used to fight organized crime. The judge found ValCom failed to plausibly suggest the existence of an enterprise structure characterized by “some mechanism for controlling and directing the affairs of the group on an ongoing, rather than ad hoc, basis.”
But most of ValCom's other charges survived the defendants’ challenge, including common-law fraud claims against Clavijo and O’Donnell, and charges that O’Donnell, Vellardita and his wife breached their fiduciary duty to ValCom.
Judge Walls noted that ValCom presented enough evidence for its charges of civil conspiracy to defraud the company and divert its assets continue, and that ValCom adequately pled its case that Vellardita and his wife tortiously interfered with ValCom’s business prospects.
On Tuesday, the judge also tweaked a dismissal of a count of breach of the covenant of good faith and fair dealing by Vellardita, modifying that toss to be without prejudice.
Attorneys for the parties did not respond Tuesday to requests for comment.
ValCom is represented by Neal H. Flaster of Neal H. Flaster LLC.
The defendants are represented by John G. Balestriere, Stefan Savic and Roberto Cuan of Balestriere Fariello & Abrams LLP.
The case is ValCom Inc. v. Vellardita et al., case number 2:13-cv-03025, in the U.S. District Court for the District of New Jersey.
--Additional reporting by Ed Beeson. Editing by Richard McVay.
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