Opinion
MEMORANDUM DECISION ON PARTIAL SUMMARY JUDGMENT
DENNIS MONTALI, Bankruptcy Judge
The following are the court's rulings on portions of plaintiffs' Lehman Brothers Holdings, Inc. ("Lehman"), on its own behalf, and on behalf of the bankruptcy estate of The Kontrabecki Group LP ("TKG")(together with Lehman, the "plaintiffs"), Motion for Partial Summary Judgment on Plaintiffs' Second, Third, Fourth and Sixth Causes of Action in their Third Amended Complaint, and defendant John Kontrabecki's ("Kontrabecki") Fifth Affirmative Defense and Eighth Affirmative Defense stated in Kontrabecki's Amended Answer. The following is also the court's ruling on a portion of defendant Kontrabecki's Motion for Partial Summary Judgment on plaintiffs' Second, Third, Fourth and Sixth Causes of Action, as well as plaintiffs' claim for attorneys fees and Kontrabecki's Fifth Affirmative Defense and his Eighth Affirmative Defense.
I. Second Cause of Action by Lehman
On the Second Cause of Action by Lehman, Impairment of Collateral, Lehman is entitled to partial summary judgment as to all elements except damages. It has established harm to its security package, far more than merely the value of the WDC/OBC stock. Kontrabecki's motion on the Second Cause of Action is denied. Lehman must prove its damages; the court rejects Civil Code § 3336 but recognizes that the so-called "pursuit of property" or the "tort of another" may be sufficient, subject to proof.
II. Third Cause of Action by TKG
On the Third Cause of Action by TKG, Conversion, TKG has shown a loss of management and control of the Polish subsidiaries and that the Trustee has incurred fees, both in pursuing recovery and by way of administrative expense. It has not proven any specifics, and is therefore not entitled to summary judgment as to any amount of damages; it has shown some minimum amount of damages and Kontrabecki has not proven the absence of damages, so he is not entitled to summary judgment against either TKG or Lehman. In granting TKG partial summary judgment, the court rejects the specific theory that TKG lost ownership of the projects, as they were owned by the subsidiaries.
In denying Kontrabecki summary judgment on the Third Cause of Action by TKG, the court rejects his theory of no right to immediate possession of Piotr Kukulka's shares; the conversion was of the control aspect of the previously owned 100% of the shares, the intangible rights that were harmed.
Kontrabecki's motion on the Third Cause of Action must also be denied as to Lehman. The automatic stay argument is not persuasive, and Lehman's reliance on Hartford Finl. v. Burns , 96 Cal.App. 3d 591 (1979), is persuasive. The damages are available under Civil Code § 3336 and the other two theories referred to in the Second Cause of Action.
III. Fourth Cause of Action by Lehman and TKG
On the Fourth Cause of Action by Lehman and TKG, Breach of Fiduciary Duty, the court agrees with Lehman and TKG that Kontrabecki owed TKG a fiduciary duty. But answering the critical question of whether he intentionally sought to harm the estate or sought to maximize its value is an inherently fact-based inquiry, not appropriate for summary judgment.
Lehman and TKG challenge the availability to Kontrabecki of the business judgment rule defense because under any stretch of the imagination, the share dilution fell outside of TKG's ordinary course of business. While that argument might itself present a factual determination not appropriate for summary judgment, the court has already determined that the share dilution was adverse to the interests of the TKG estate. See Finding of Fact #14, Sept. 17, 2003. Thus it could not - as a matter of law - have been ordinary. That aspect of Kontrabecki's defense is foreclosed.
The court agrees with Kontrabecki, however, on the issue of whether he owed a fiduciary duty to Lehman. He did not, so he is entitled to partial summary judgment against Lehman on the Fourth Cause of Action.
As for damages, TKG has neither sought nor proven any specifics, and is therefore not entitled to summary judgment as to any amount of damages; it has shown some minimum of damages and Kontrabecki has not proven the absence of damages, so he is not entitled to summary judgment against TKG.
IV. Kontrabecki's Fifth Affirmative Defense
As to Kontrabecki's Fifth Affirmative Defense, the court is unclear what Lehman seeks at the present time. In its motion, it says it is entitled to summary judgment as to this defense, then acknowledges that there are limitations to such awards; that it accepts the limitations; that the court will be fully informed about them and observe them. For his part, Kontrabecki argues that because Lehman acknowledges the above limitations, it is not entitled to partial summary judgment.
At the risk of stating the obvious, there is really nothing substantive to grant or deny here. As a matter of form, the court will deny Lehman's motion on the Fifth Affirmative Defense and assure the parties that it intends to comply with applicable law if and when it is presented with a basis to consider awarding or denying punitive damages.
V. Plaintiffs' Attorneys Fees
On the question of whether Lehman may recover attorneys fees, the court agrees with Kontrabecki that Lehman, for itself and on behalf of TKG, may not recover their attorneys fees for prosecution of the tort claims beyond what Kontrabecki describes as the "pursuit of property" and "tort of another" exceptions to the general rule. The court will not at this time arbitrarily cut off any award beyond December, 2005, but will await trial to determine how much may be recoverable under these two theories.
VI. Sixth Cause of Action by Lehman and Kontrabecki's Eighth Affirmative Defense.
Remaining undecided at present within the parties' motions dealt with by this Memorandum Decision are Lehman's Sixth Cause of Action (Interference with Contract) and Kontrabecki's Eighth Affirmative Defense (Manager's Privilege), and issues of Kontrabecki's intent. These matters will be dealt with later by separate decision.