Bullard v. Drug Policy Alliance

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CAROL A. BULLARD, also known as ASHA

BANDELE,

Plaintiff,

-v.-

18 Civ. 8081 (KPF)

DRUG POLICY ALLIANCE, MARIA

McFARLAND, and JAMES FERGUSON,

OPINION AND ORDER

Defendants.

DRUG POLICY ALLIANCE,

Counter-Claimant,

-v.-

CAROL A. BULLARD, also known as ASHA

BANDELE,

Counter-Defendant.

KATHERINE POLK FAILLA, District Judge:

Plaintiff Carol Bullard, also known as Asha Bandele (“Bandele”), brought

the instant action against her former employer, the Drug Policy Alliance

(“DPA”), and several of its employees, alleging claims of race and sex

discrimination in violation of federal, state, and local law. DPA then filed

counterclaims against Bandele for breach of fiduciary duty and fraud, alleging

that she misappropriated DPA’s funds by arranging for DPA to enter into a

series of contracts with a personal friend, Kirsten West Savali (“West Savali”),

to provide press coverage about DPA. DPA claims that Bandele actively

concealed the true nature of the contracts from DPA, and that DPA would not

have entered into the transactions if it had known that Bandele was paying

West Savali personally, rather than through West Savali’s employer. Bandele

has moved to dismiss DPA’s counterclaims for failure to state a claim, and

alternatively asks the Court to decline to exercise supplemental jurisdiction

over these state-law counterclaims. For the reasons explained below, Bandele’s

motion to dismiss is denied in full.

BACKGROUND1

A. Factual Background

DPA is a non-profit organization and a leading advocate for drug policy

reform. (Countercl. ¶ 148). Bandele became affiliated with DPA in 2006 and

joined as an employee on January 1, 2009. (Id. at ¶ 20; Answer ¶ 2). As of

2015, Bandele held the title of Senior Director of Grants, Partnerships, and

Special Projects. (Countercl. ¶ 166; Answer ¶ 2). As a Senior Director, Bandele

reported to Widney Brown, who became the Managing Director for Policy in

October 2017. (Countercl. ¶¶ 167, 173). In turn, Brown reported to DPA’s

Executive Director, Maria McFarland. (Id. at ¶¶ 167, 170).

DPA operates on donations and, consequently, structures its budget to

focus on expenses that aid its mission. (Countercl. ¶ 234). DPA typically

receives journalistic coverage for free; it does not pay news organizations or

1 The facts contained in this Opinion are drawn principally from DPA’s Answer and

Counterclaims (“Countercl.”). (Dkt. #23). References in this Opinion to “Defendant”

pertain to DPA, the only defendant to bring counterclaims in this action.

For ease of reference, the Court refers to the parties’ briefing as follows: Plaintiff

Bandele’s opening brief as “Pl. Br.” (Dkt. #33); Defendant DPA’s opposition brief as “Def.

Opp.” (Dkt. #35); and Plaintiff Bandele’s reply brief as “Pl. Reply” (Dkt. #37).

journalists on staff at other news organizations directly for coverage of DPA,

except in the form of “sponsored content” that is clearly labeled as such. (Id. at

¶¶ 223-24). DPA’s viability as a successful non-profit organization depends on

its reputation of credibility and fair-dealing. (Id. at ¶ 238). In 2016, DPA

engaged in a journalistic partnership with The Root, an online magazine with a

focus on African-American news and culture. (Id. at ¶¶ 225, 151). The

partnership consisted only of working together on stories and cross-publishing

material. (Id. at ¶ 225). It did not include any exchange of funds. (Id.).

In March 2017, DPA received a significant grant from a funder.

(Countercl. ¶ 174). Bandele was tasked with supervising much of the work

under this grant. (Id.). Between 2016 and 2018, Bandele entered into four

contracts on behalf of DPA with West Savali, a journalist for The Root and a

personal friend. (Id. at ¶¶ 151, 152, 154, 175). Each of the contracts indicated

that West Savali would be paid for content that supported DPA’s mission and

would be published in The Root. (Id. at ¶ 176).2 Of potential note, the

contracts were each addressed to West Savali’s home address and personal

email account. (Id. at ¶ 178). All of the payments for the contract were made

to West Savali personally, and not to The Root or any other journalistic entity.

(Id. at ¶ 179).

2 Several of the contracts provided that West Savali would engage in live Facebook chats

coordinated by Bandele and The Root. (Countercl. ¶ 177). Additionally, several of the

contracts provided that West Savali’s content would be cross-posted to DPA’s website

after appearing in The Root. (Id.).

Specifically, on December 1, 2016, West Savali entered into a contract

with DPA according to which West Savali would be paid $5,000 to report four

articles designed to engage African American and Southern communities about

the drug war to be featured in The Root or other publications. (Countercl.

¶ 181). On April 1, 2017, West Savali entered into another contract with DPA

according to which West Savali would be paid $15,000 for seven articles

addressing the impact of the drug war on the American South to be featured in

The Root. (Id. at ¶ 182). On November 3, 2017, West Savali entered into a

third contract with DPA according to which West Savali would receive $15,000

to write five articles about the drug war in connection with Black History

Month in The Root. (Id. at ¶ 183). And on March 14, 2018, West Savali

entered into a fourth contract with DPA according to which West Savali would

be paid $10,000 for coverage of a DPA delegation to Portugal for The Root. (Id.

at ¶ 184).

As a director-level employee, Bandele was responsible for the content of

the contracts. (Countercl. ¶ 192). Bandele did not obtain substantive review of

the contracts from either her supervising Managing Director or the Executive

Director. (Id. at ¶ 194). Rather, she actively concealed the contracts from her

direct supervisors because she knew that her supervisors would not approve

them. (Id. at ¶ 195).

Bandele endeavored to comply with the letter, but not the spirit, of DPA

policy, which requires that all contracts be signed by either the Executive

Director or the Managing Director of Finance, Ryan Chavez. (Countercl. ¶ 191).

Bandele presented the contracts to Chavez, who is an accountant, for his

signature. (Id. at ¶ 193). While Chavez reviewed and approved the procedural

and accounting aspects of the contracts, he was not qualified (as Bandele well

knew) to challenge the substance of the contracts. (Id. at ¶¶ 193, 195).

In order to obtain his signature, Bandele led Chavez to believe that the

contracts were negotiated in the normal course and would have been approved

by Bandele’s supervisors if they had been shown to those individuals.

(Countercl. ¶ 196). She repeatedly told Chavez that the contracts needed to be

signed with urgency, so as not to permit Chavez time to consult with other

senior DPA management. (Id. at ¶ 197). For example, on March 14, 2018, at

4:00 p.m., Bandele emailed Chavez with high importance, with the subject-line

“RYAN — Can you sign this pleeeeease???????,” attaching the contract with

West Savali for the Portugal trip. (Id. at ¶ 200). Bandele stated that she

“neglected to move Kirsten’s contract for Portugal. Would you mind signing

this so that we can provide her funds to her via PayPal tomorrow? Thank you

so much!!!!!!!!!” (Id.). Chavez responded to Bandele indicating that he was out

of the office and suggested that Bandele have the contract reviewed and signed

by McFarland to expedite the matter. (Id. at ¶ 204). Despite the professed

urgency, Bandele declined to present the contract to McFarland and told

Chavez she preferred to wait for him to sign the contract when he returned to

the office. (Id. at ¶ 205).

On March 14, 2018, DPA’s Policy Team revised its internal procedures to

require all contracts to be reviewed substantively by a supervising Managing

Director or the Executive Director. (Countercl. ¶ 199). Around this time,

Brown expressed concern to Bandele that she was not receiving all of Bandele’s

expenses or contracts for approval. (Id. at ¶ 199). On March 14, 2018, at 5:14

p.m., Brown followed up on her earlier conversation with Bandele and sent a

direct message to all of her direct reports, including Bandele, indicating that

going forward she would need to review all contracts before they were executed.

(Id. at ¶ 201). At 5:21 p.m. the same day, Bandele wrote to Brown, forwarding

her note to Chavez asking him to sign the contract and stating, “Just saw your

email. This is an outgoing contract via [the funder].” (Id. at ¶ 202). Due to the

upcoming Portugal delegation, Brown did not have an opportunity to approve

the contract or respond to Bandele until Brown returned from Portugal. (Id. at

¶ 203).

Soon after the Portugal trip, Brown asked Chavez for all of Bandele’s

contracts so that Brown could review them. (Countercl. ¶ 206). After reviewing

the contracts, Brown expressed concern about them to McFarland. (Id. at

¶ 207). It was around this time that McFarland first learned about the series of

DPA contracts with West Savali. (Id.). On April 17, 2018, a DPA employee also

brought the contracts to McFarland’s attention and informed her that The Root

may not have been aware that West Savali was receiving direct payments from

DPA. (Id. at ¶ 208). This employee also told McFarland that Bandele had

arranged the Portugal contract for West Savali because West Savali was “going

through a rough time.” (Id. at ¶ 209). At the time, West Savali’s husband had

lung cancer and West Savali had been affected by Hurricane Harvey. (Id.).

McFarland also learned from this employee how Bandele determined the

amount of the $10,000 contract for the Portugal delegation: $5,000 for West

Savali to fly first class to Portugal and $5,000 for West Savali to put a down

payment on a car. (Id. at ¶ 210).

On April 28, 2018, McFarland contacted an expert in journalistic ethics.

(Countercl. ¶ 211). The expert advised McFarland that the arrangement

between Bandele and West Savali was a serious breach of journalistic ethics

and that no legitimate journalist would engage in this conduct, which appeared

to constitute double-dipping. (Id.). The expert also indicated that, for DPA,

this was a big reputational issue. (Id.). Finally, the expert said that even if the

payments had been ethical, the rates being paid for this work were heavily

inflated and that the standard rate for articles of this type is in the hundreds of

dollars — not the thousands of dollars. (Id.). The expert recommended that

DPA find out what The Root knew. (Id.).

On May 4, 2018, McFarland spoke to an attorney for Univision, the

parent company for The Root. (Countercl. ¶ 212). The attorney confirmed that

West Savali was a staff writer and could not receive separate payments for her

work in The Root. (Id.). The attorney also indicated that The Root was not

aware of any written agreement or exchange of money between DPA and West

Savali, and that it would be highly problematic for West Savali to be receiving

payments in a personal capacity from DPA. (Id.). In a follow-up conversation

with an attorney for The Root, the attorney clarified that staff writers for The

Root are not allowed to receive payments from others for their work in The

Root, and that any such payments would need to be approved by The Root.

(Id. at ¶ 213). The attorney noted that for situations in which groups like DPA

wanted to pay for content on The Root’s website, they would have to pay for

“sponsored content” that is clearly labeled as such and goes through an

entirely different process — not through the journalists. (Id.).

On May 16, 2018, McFarland spoke with the Executive Committee of the

DPA Board. (Countercl. ¶ 214). She briefed the Committee on the

investigation and told them that she was planning to terminate Bandele’s

employment on the basis of the improper contracts and payments to West

Savali. (Id.).3 The Executive Committee expressed deep concern and approved

Bandele’s termination. (Id. at ¶ 215). The Committee further indicated that

the termination should be completed quickly so that it did not appear that DPA

was complicit in Bandele’s actions. (Id.). On May 21, 2018, Bandele’s

employment was terminated. (Id. at ¶ 216).

On June 5, 2018, DPA shared with The Root details of the investigation

into Bandele’s conduct. (Countercl. ¶ 219). The Root indicated that they had

3 During the course of DPA’s investigation into the contracts, DPA uncovered other

instances in which Bandele appeared to have misused DPA funds. (Countercl. ¶ 217).

For example, in June 2017, Bandele used DPA’s corporate credit card to pay for an

approximately $1,200 first-class one-way ticket from California to New York for a

consultant and disguised it as a round-trip coach ticket. (Id.). Bandele separately

submitted an expense reimbursement request for a $600 one-way ticket for the same

consultant for the same trip. (Id.). Bandele concealed that she was reimbursing the

consultant for a first-class ticket by dividing up the expenses in order to circumvent

DPA’s policy prohibiting first class travel. (Id.). In addition, in January 2017, Bandele

submitted an invoice for reimbursement for a dinner with a leader in a partner

organization and drinks with a now-current DPA staff member who was not employed

by DPA at the time. (Id. at ¶ 218). During its investigation, DPA learned that the now-

current DPA staff member did not meet Bandele on the date in question and had never

had drinks with Bandele. (Id.).

not been aware of the contracts and payments to West Savali. (Id.). One week

later, on June 12, 2018, The Root announced on its website that it had

“separated from [its] associate editor, Kirsten West Savali, because of an

editorial standards issue.” (Id. at ¶ 220). The posting indicated that “[a]fter the

Drug Policy Alliance discovered and brought to our attention a previously

undisclosed and improper arrangement, Gizmodo Media Group [owner of The

Root] conducted a thorough investigation and made the difficult decision to

terminate her.” (Id.). The posting also noted that The Root “will be removing

any stories related to Drug Policy Alliance written by and/or edited by Kirsten

and replacing each with an editor’s note and a linked to a cached version of the

story.” (Id. at ¶ 221). DPA subsequently removed all of West Savali’s content

that had been cross-posted on DPA’s website. (Id. at ¶ 222).

B. Procedural Background

On September 5, 2018, Bandele initiated the instant action against DPA,

McFarland, and DPA board member James Ferguson by filing a complaint in

this Court. (Dkt. #1). Her complaint alleges that she was wrongfully

terminated by DPA on the basis of both her race and sex, in violation of Title

VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e to 2000e-

17; the New York State Human Rights Law, N.Y. Exec. Law §§ 290-297; and the

New York City Human Rights Law, N.Y. City Admin. Code §§ 8-107 to 8-131.

(Id.). The complaint alleges that other white and/or male DPA employees were

not terminated for similar conduct, or that those employees were treated in a

more favorable manner during the course of their terminations. (See id.).

On the same day that she filed the instant action, Bandele also

commenced an action in Kings County Supreme Court for defamation and

intentional infliction of emotional distress. See Bullard v. Drug Policy Alliance,

Index No. 518007/2018, Dkt. #1 (Sup. Ct. Kings Cty., Sept. 5, 2018). In that

state action, Bandele alleges that McFarland circulated a false and defamatory

email to DPA donors following Bandele’s termination. (See id.).

On October 23, 2018, DPA filed both an answer to Bandele’s complaint

and counterclaims against Bandele in the instant action for breach of fiduciary

duty, fraud, and conversion. (Dkt. #23).4 On November 13, 2018, Bandele

filed a letter noting her intent to move to dismiss the counterclaims against

her. (Dkt. #25). The Court held a conference on February 1, 2019. (Dkt. #31

(transcript)). On March 4, 2019, Bandele filed a motion to dismiss the

counterclaims on the grounds that they fail to state a claim and that the Court

should decline to exercise supplemental jurisdiction over the counterclaims.

(Dkt. #33). On April 3, 2019, DPA voluntarily dismissed its conversion

counterclaim and filed a brief opposing the dismissal of its breach of fiduciary

duty and fraud counterclaims. (Dkt. #34, 35, 36). Bandele filed a reply brief

on April 17, 2019. (Dkt. #37). Accordingly, the instant motion is ripe for the

Court’s review.

4 The counterclaim for conversion was subsequently withdrawn. (Dkt. #34).

DISCUSSION

A. Motions to Dismiss Under Rule 12(b)(6)

A court evaluates a motion to dismiss a counterclaim under Federal Rule

of Civil Procedure 12(b)(6) using the same standard as a motion to dismiss a

complaint. A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC, 131 F. Supp. 3d

196, 203 (S.D.N.Y. 2015) (internal citations omitted). When evaluating a

motion to dismiss counterclaims for failure to state a claim, a court “must

accept all well-pleaded facts as true and construe the answer and

counterclaims in the light most favorable to the nonmoving party.” Meridien

Int’l Bank Ltd. v. Gov’t of the Republic of Liberia, 23 F. Supp. 2d 439, 445

(S.D.N.Y. 1998); see Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir.

1995).

A counterclaim defendant prevails on a motion to dismiss if the

counterclaim “contain[s] sufficient factual matter, accepted as true, to ‘state a

claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). And

while a court should accept the counterclaim-plaintiff’s allegations as true, it

need not follow that course for any of counterclaim-plaintiff’s legal conclusions.

See id. “Threadbare recitals of the elements of a cause of action, supported by

mere conclusory statements, do not suffice.” Id. Nor must a court “accept as

truth conflicting pleadings ... that are contradicted either by statements in the

complaint itself or by documents upon which its pleadings rely, or by facts of

which the court may take judicial notice.” In re Livent, Inc. Noteholders Sec.

Litig., 151 F. Supp. 2d 371, 405-06 (S.D.N.Y. 2001). In sum, “[a] motion to

dismiss should be granted ‘where the well-pleaded facts do not permit the court

to infer more than the mere possibility of misconduct.’” Nielsen v. AECOM

Tech. Corp., 762 F.3d 214, 218 (2d Cir. 2014) (quoting Iqbal, 556 U.S. at 679).

B. Analysis

1. DPA Has Stated a Claim for Fraud

“In an action to recover damages for fraud, the plaintiff must prove a

misrepresentation or a material omission of fact which was false and known to

be false by defendant, made for the purpose of inducing the other party to rely

upon it, justifiable reliance of the other party on the misrepresentation or

material omission, and injury[.]” Lama Holding Co. v. Smith Barney Inc., 88

N.Y.2d 413, 421 (1996); see also Vermeer Owners, Inc. v. Guterman, 78 N.Y.2d

1114, 1116 (1991) (the elements of fraud are “a representation of material fact,

falsity, scienter, reliance and injury”); Gordon & Co. v. Ross, 84 F.3d 542, 546

(2d Cir. 1996) (In New York, “[t]he proper test of reliance in a fraud case is not

‘reasonable’ reliance, it is ‘justifiable’ reliance, a clearly less burdensome test.”).

The concealment of conflicts of interest or bias, and of undisclosed fees, are

sufficient to constitute a material misrepresentation or omission to support a

claim for fraud. See Syncora Guar. Inc. v. Alinda Capital Partners LLC,

No. 651258/2012, 2013 WL 3477133, at *9-10 (N.Y. Sup. Ct. N.Y. Cty. July 1,

2013) (citing cases). An employee may commit a fraud by diverting or steering

contracts on the basis of undisclosed personal friendship or other personal

interest. See, e.g., Rose v. Simms, No. 95 Civ. 1466 (LMM), 1995 WL 702307,

at *10-11 (S.D.N.Y. Nov. 29, 1995); Twenty First Century L.P.I. v. LaBianca, 19

F. Supp. 2d 35, 39-40 (E.D.N.Y. 1998) (concluding defendant-employee was

liable for common law fraud where he steered contracting work to a

construction company from which he received kickbacks).

In support of its claim for fraud, DPA alleges that Bandele intentionally

led DPA and her supervisors to believe that she was engaged in legitimate

transactions connected to DPA’s business purpose, when in reality, she was

paying a staff journalist from The Root under the table, without The Root’s

knowledge, and for personal reasons unrelated to any benefit to DPA.

(Countercl. ¶¶ 247-48). DPA claims that Bandele omitted key material facts

from DPA and was purposefully deceptive about the true nature of the

contracts, precisely because she knew that if their true nature was revealed,

the contracts and payments to West Savali would not have been approved.

(See id. at ¶¶ 249-50).

Bandele, for her part, argues that DPA has not stated a claim for

fraudulent concealment because the omissions DPA identifies were either

immaterial or could not have been reasonably relied upon by DPA. (See Pl.

Br. 15). Bandele categorizes the omissions DPA alleges as follows: (i) the

existence of her friendship with West Savali; (ii) The Root’s lack of knowledge

that DPA was paying West Savali; and (iii) the “nature” of the contracts, i.e.,

that DPA was paying a journalist for coverage. (See id. at 15-17). For ease of

analysis, the Court adopts Bandele’s taxonomy of misrepresentations.

First, Bandele claims that the mere existence of her friendship with West

Savali is not a material fact. (See Pl. Br. 15). She argues that she “does not

see how knowing that [Bandele] was allegedly friends with [West Savali] might

have discouraged DPA from doing business with [West Savali] or, for that

matter, from having [Bandele] be DPA’s liaison with [West Savali].” (Id.). She

also claims that if DPA’s position were adopted, then any employee who

befriends her employer’s contractor or vendor would be obligated to make full

disclosure of the friendship to the employer, or risk liability should the

employer later find out that another contractor or vendor that would have been

willing to do the same work for a lower price or for free. (See Pl. Reply 3).

Second, Bandele contends that The Root’s lack of knowledge about the

contracts is immaterial because DPA’s contracts were with West Savali and not

with The Root, and consequently, The Root did not take action against DPA

over the contracts, nor was DPA exposed to liability as a result of the contracts.

(See Pl. Br. 16).

These two arguments fail because Bandele fundamentally misconstrues

the nature of the material omissions DPA alleges. The omissions are that

Bandele was acting to enrich her friend for personal reasons unrelated to DPA’s

legitimate business interests. As an example, DPA alleges that the payment

under at least one of the contracts was calibrated not to the amount of work

West Savali would be doing for DPA, but to the amount of money she would

need for a down payment on her car. Thus, the allegations are not just that

Bandele had an undisclosed personal friendship with West Savali, but that she

squandered DPA’s resources to West Savali because of such friendship.

Further, Bandele’s argument regarding what DPA’s position means for

employees who befriend vendors or contractors undersells what DPA alleges

happened here. DPA’s claim is not merely that it could have procured West

Savali’s services for a lower price, but that the purpose of the contracts — to

pay a journalist under the table for press coverage — is antithetical to DPA’s

mission.

Additionally, Bandele’s representations to DPA, or lack thereof, regarding

what information The Root knew is relevant to the question of whether the

contracts had a legitimate business purpose. These contracts caused West

Savali to breach her employment contract with The Root and violate its ethical

standards. It is entirely plausible that DPA’s actions would have been different

had it known that The Root, as the publishing organization, was unaware of

the source of its content. Bandele’s omissions regarding what The Root knew

are, therefore, material. That The Root has not sued DPA does not mean that

Bandele’s omissions to DPA were immaterial, nor does it mean that DPA was

not harmed by Bandele’s omissions.

Third, and finally, Bandele argues that the “true nature” of the

contracts — in other words, that DPA was paying for journalistic coverage — is

not actionable. Bandele argues that DPA cannot claim that she failed to

disclose the contracts because they were written contracts presented to DPA for

approval and DPA, including Brown and Chavez, had full access to them at all

times. (See Pl. Br. 17). Further, she claims that even if she did fail to disclose

the contents of the contracts, DPA has not alleged reasonable reliance because

DPA could have learned of the essence of the contracts with relatively little

effort. (See id. at 17-18). She argues that the counterclaims reveal that DPA

was indeed able to ascertain the substance of the contracts with very little

effort. (See id. at 18).

These arguments also fail. At the outset, the Court notes that even

though Bandele was not the employee with final sign-off on the contracts, DPA

alleges that Bandele presented the contracts to her supervisors for approval in

a manner designed to evade substantive review. That Bandele’s supervisors

did not go out of their way to scrutinize her work is of no moment — to the

contrary, the success of Bandele’s fraudulent scheme depended on such

inattention.

As DPA points out, Bandele’s suggestion that the Executive Director of

an organization is required to investigate every contract — rather than rely on

the senior executives of the organization — is patently unreasonable. DPA was

entitled to rely on Bandele, a senior employee who had been affiliated with the

organization for over a decade, to act in the best interests of the organization

when carrying out her job functions and spending the organization’s money.

See Needham & Co., LLC v. Access Staffing, LLC, No. 15 Civ. 2487 (NRB), 2016

WL 4399288, at *16 (S.D.N.Y. Aug. 12, 2016) (“Reliance on [a] company’s own

employees to approve invoices in the usual course of business is justifiable.”);

Brassco, Inc. v. Klipo, No. 99 Civ. 3014 (PAC), 2006 WL 223154, at *16

(S.D.N.Y. Jan. 27, 2006) (“As Klipo was a trusted employee, Brassco justifiably

relied on Klipo’s reports and communications to board directors.”); LaBianca,

19 F. Supp. 2d at 39 (concluding that plaintiff’s reliance on its employee’s

approval of construction vendors was justified where the “very purpose of their

positions in the company was to monitor the hiring of contractors and the

construction itself.”). Accordingly, DPA has adequately pleaded a fraud claim.

2. DPA Has Stated a Claim for Breach of Fiduciary Duty

Under New York law, the elements of a claim for breach of fiduciary duty

are: (i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and

(iii) damages resulting therefrom. Johnson v. Nextel Commc’ns., Inc., 660 F.3d

131, 138 (2d Cir. 2011) (citing Barrett v. Freifeld, 883 N.Y.S.2d 305, 308 (2d

Dep’t 2009)). An employee’s fiduciary duty to her employer prohibits her from

“acting in any manner inconsistent with h[er] agency or trust,” and she is “at

all times bound to exercise the utmost good faith and loyalty in the

performance of h[er] duties.” Lamdin v. Broadway Surface Adver. Corp., 272

N.Y. 133, 138 (1936); see also Slue v. New York Univ. Med. Ctr., 409 F. Supp.

2d 349, 373-74 (S.D.N.Y. 2006). The gravamen of fiduciary duty is “undivided

and undiluted loyalty,” barring self-dealing, use of confidential information,

and other conflicts of interest. Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466

(1989); see also CBS Corp. v. Dumsday, 702 N.Y.S.2d 248, 251 (1st Dep’t

2000); LaBianca, 19 F. Supp. 2d at 40-42 (concluding defendant-employee

breached his fiduciary duty to his employer by approving inflated invoices for

which he obtained kickbacks).

DPA alleges that: (i) Bandele owed it fiduciary duties as an employee;

(ii) Bandele breached her fiduciary duty to it by authorizing DPA assets to be

paid to a personal friend for purposes unrelated to any legitimate DPA business

purpose; and (iii) as a result of Bandele’s conduct, DPA lost tens of thousands

of dollars, suffered reputational harm, and potentially may lose future funding.

(See Countercl. ¶¶ 241-45).

Bandele focuses on the second element, arguing that she did not breach

her fiduciary duties to DPA. She claims that: (i) she did not have authority to

authorize the payments to West Savali; (ii) Chavez, not she, authorized the

payments to West Savali; and (iii) she did not have dominion or control over

DPA’s funds, as evidenced by her having to submit requests to DPA for

reimbursement. (See Pl. Br. 19). Accordingly, she argues that because she did

not control the flow of DPA’s funds, she could not have breached her fiduciary

duties to DPA by authorizing the payments. (See id. at 20; see also Pl. Reply 4-

5).

Here, too, Bandele’s arguments are too clever by half. The fact that

Chavez, rather than Bandele, signed and authorized the contracts to release

payment to West Savali does not defeat DPA’s breach of fiduciary duty claim.

As noted above, DPA alleges that despite presenting the contracts to Chavez for

his review, Bandele took other intentional actions to avoid substantive review of

the contracts. That DPA may have lacked certain oversight functions that

would have prevented the contracts from being executed does not foreclose

DPA from proving that Bandele acted in a manner inconsistent with the agency

and trust placed in her by DPA. By negotiating the contracts on behalf of DPA

and then taking steps to see that the contracts were executed (even if not by

her personally), Bandele breached her fiduciary duties to DPA.

3. DPA Has Alleged That It Suffered Damages

At the pre-motion conference in this case (see Dkt. #31 at 21:25-22:8),

and in Bandele’s reply brief (see Pl. Reply 5-6), she has argued that because it

is undisputed that DPA received services from West Savali pursuant to the

contracts, DPA has not adequately alleged that it suffered damages. Such an

argument is wholly without merit. DPA alleges that Bandele’s actions caused

DPA to spend thousands of dollars that would have otherwise gone to

legitimate business purposes and to suffer reputational harm. That is all DPA

needs to allege at the pleading stage.

C. The Court Will Exercise Supplemental Jurisdiction Over the

Counterclaims

Bandele’s remaining argument is that “exceptional circumstances” exist

such that the Court should decline to exercise supplemental jurisdiction over

DPA’s counterclaims. A court “shall” exercise supplemental jurisdiction if a

supplemental claim is related to the claim within the court’s original

jurisdiction such that they form the same case or controversy. 28 U.S.C.

§ 1367(a); see Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d

442, 447 (2d Cir. 1998). Nonetheless, a court “may” decline to exercise

supplemental jurisdiction over a claim in “exceptional circumstances.” 28

U.S.C. § 1367(c)(4). However, such circumstances must be “quite unusual.”

Itar-Tass, 140 F.3d at 448.

The allegedly “exceptional circumstances” cited by Bandele are that:

(i) this case is still in its early stages; (ii) she has a state case, in which DPA

can bring its counterclaims, that may proceed faster; (iii) the state case

includes the same parties as the parties to the counterclaims; (iv) the state

case involves the same questions of fact as the counterclaims; and (v) discovery

in the state case will mirror discovery for the counterclaims. (See Pl. Br. 21-

22). These circumstances are far from exceptional.

Bandele chose to file her claims in two separate actions. That is her

prerogative. Cf. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (“The

rule makes the plaintiff the master of the claim; he or she may avoid federal

jurisdiction by exclusive reliance on state law.”). But having chosen to file a

federal case against DPA in federal court, she cannot dictate where DPA

litigates its counterclaims, which are plainly related to the federal claims in this

action. See Metro Found. Contractors, Inc. v. Arch Ins. Co., 498 F. App’x 98, 103

(2d Cir. 2012) (summary order) (holding that plaintiff could not assert the

existence of a parallel state court proceeding as a reason for court to decline to

exercise supplemental jurisdiction over counterclaims where plaintiff was

“solely responsible for the existence of the parallel proceedings”).

Further, the Court is not moved by Bandele’s judicial efficiency

argument. The counterclaims asserted by DPA in this action are intertwined

with the claims asserted by Bandele. Bandele alleges that she was illegally

terminated on the basis of her race and sex. DPA’s defense is that it had a

non-discriminatory reason for her termination: the conduct that makes out

DPA’s counterclaims. Because DPA would be using such conduct as a defense

to Bandele’s claims against it, it makes perfect sense for DPA to bring its

counterclaims in this action. Accordingly, the Court will exercise supplemental

jurisdiction over DPA’s counterclaims.

CONCLUSION

For the reasons stated in this Opinion, Bandele’s motion to dismiss the

counterclaims is DENIED.

On or before January 31, 2020, Bandele shall file a responsive pleading.

On or before February 7, 2020, the parties to this case shall submit a

proposed Case Management Plan, as well as the joint status letter

contemplated by the Plan.

The Clerk of Court is directed to terminate the motion at docket entry 33.

SO ORDERED. _,

Dated: December 30, 2019 Kathe Mall ful

New York, New York

KATHERINE POLK FAILLA

United States District Judge

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