Full opinion text
ORDER JED S. RAKOFF, District Judge. On July 19, 2010, Special Master Daniel J. Capra issued a Report and Recommendation in the above-captioned case recommending that the Court adopt the following conclusions: Count I, Breach of Contract: • Count I should be dismissed as to Aaron and Castranova, with prejudice. • The claim that Mellon is liable for breaching the Service Agreement should be dismissed with prejudice. Count II, Breach of the Covenant of Good Faith and Fair Dealing: • Count II should be dismissed with prejudice. Count III, Indemnity: • Count III should be dismissed as to Mellon, with prejudice. Count VI, Declaratory Relief: • Count IV should be dismissed as to Castranova, with prejudice. Count V, Breach of Fiduciary Duty: • The DPM entities’ motion to dismiss should be denied. • PlusFunds’ claim against Aaron should be dismissed, with prejudice. • Aaron’s motion to dismiss SMFF’s claim should be denied. • Count V should be dismissed as to Castranova, with prejudice. • Count V should be dismissed as to Mellon, with prejudice. Count VI, Aiding and Abetting Breach of Fiduciary Duty: • The motions to dismiss should be denied with respect to all Defendants except Mellon. • Count VI should be dismissed as to Mellon, with prejudice. Count VII, Interference with Contract/Prospective Contract: • Count VII should be dismissed with prejudice. Count VIII, Fraud/Misrepresentation: • The motions to dismiss should be denied with respect to all Defendants except Mellon. • Count VII should be dismissed as to Mellon, with prejudice. Count IX, Aiding and Abetting Interference with Contract/Prospective Contract: • Count IX should be dismissed with prejudice. Count X, NJRICO: • Count X should be dismissed with prejudice. See 07/19/10 R & R at 62-64. After the various parties timely submitted objections to the Special Master’s recommendations and responses to those objections, the Court heard oral argument on October 28, 2010. Having now reviewed the matter de novo, the Court finds itself fully persuaded by the Special Master’s typically comprehensive and well-reasoned Report and Recommendation and hereby adopts it in full as if incorporated herein. Finding nothing to add to the Special Master’s excellent Report and Recommendation, the Court hereby affirms and adopts in all respects the conclusions set forth above. SO ORDERED. REPORT AND RECOMMENDATION OF THE SPECIAL MASTER ON MOTIONS TO DISMISS DANIEL J. CAPRA, Special Master. The defendants in this action move to dismiss almost all the counts in the complaint against them arising from losses suffered when assets were allegedly transferred from segregated accounts at Refco LLC to unprotected accounts at Refco Capital Markets, Ltd. (“RCM”). According to the First Amended Complaint, this action is brought to recover (i) $263 million plus interest in damages suffered by the SPhinX family of hedge funds (“SPhinX”); (ii) the lost business enterprise value and deepening insolvency damages suffered by SPhinX’s investment manager, PlusFunds Group, Inc., (“PlusFunds”); and (iii) damages suffered by the Assignors, a group comprised of SPhinX investors. First Amended Complaint (“FAC”) ¶ 1. The gravamen of the complaint is that SPhinX’s excess cash was diverted “from protected, customer segregated accounts to unprotected offshore accounts, where those assets were ultimately lost in the Refco scandal.” Id. I. Introduction A. The Parties There are three sets of claimants: 1. The SPhinX family of funds, organized under Cayman Islands law, entered into voluntary liquidation after the fall of Refco. Plaintiffs Kenneth M. Krys and Margot Maclnnis are them Joint Official Liquidators. 2. Plaintiff The Harbor Trust Co. Ltd. is the Trustee of the SPhinX Trust. The SPhinX Trust is the assignee of claims from the estate of PlusFunds. PlusFunds created SPhinX and served as its investment manager. 3. Mr. Krys and Ms. Maclnnis are also pursuing claims that have been assigned by sixteen entities that were SPhinX Funds investors. These claims will be referred to as “Investors’ claims” or “Assignors’ claims.” B. The Standing Opinion In an Order dated March 31, 2010, Judge Rakoff adopted the conclusions in a Report and Recommendation of the Special Master regarding issues of standing. Insofar as relevant here, that Order provides the following: 1. All claims brought by the Assignors have been dismissed with prejudice for lack of standing, because they replicate claims brought by SPhinX. 2. All claims brought by any SPhinX entities other than SPhinX Managed Futures Fund (“SMFF”) have been dismissed with prejudice, because the claims of the other entities are derivative of those pursued by SMFF. 3. The motions to dismiss the claims of PlusFunds on grounds of standing have been denied because PlusFunds is alleging direct injury and damages independent from those of SMFF. Accordingly, this Report and Recommendation will consider the instant motions to dismiss only insofar as they involve SMFF and PlusFunds. C. The Defendants 1. Derivative Portfolio Management LLC (a Delaware company), and Derivative Portfolio Management Ltd. (a Cayman Islands entity) together served as SPhinX’s administrator pursuant to a Service Agreement. The assets and liabilities of both entities were acquired in 2005 by Mellon Financial Corporation, after which they were operated respectively as DPM-Mellon LLC, a Delaware limited liability company, and DPM-Mellon Ltd., a Cayman Islands entity (collectively, “DPM-Mellon”). After the acquisitions, DPM-Mellon served as SPhinX’s administrator pursuant to the Service Agreement. This Report and Recommendation will refer to all the DPM and DPM-Mellon entities collectively as “DPM.” or “the DPM entities.” 2. Bank of New York Mellon Corporation f/k/a Mellon Financial Corporation (“Mellon”), a Delaware corporation, allegedly “controlled DPM-Mellon” (FAC ¶ 35) and is assertedly liable for the acts and omissions of DPM. 3. Robert Aaron was a director of SPhinX from 2002 to 2006 and was the-founder, Chief Executive Officer, part owner and member of the board of directors of DPM “at all times relevant.” FAC ¶ 38. 4. Guy Castranova was President, Chief Operating Officer, part-owner and member of the board of directors of DPM “at all times relevant.” FAC ¶ 39. Aaron and Castranova will from time to time be referred to as “the Individual Defendants.” D. Facts Forming the Basis of the Complaint The gravamen of the complaint is that SMFF excess cash in segregated accounts at Refco LLC were — without authorization — swept into commingled accounts at RCM and ultimately lost in the Refco scandal because they were not protected from RCM’s insolvency. The basic allegations in the First Amended Complaint specific to the Defendants can be summarized as follows: 1. SMFF entered into an Investment Management Agreement (IMA) with Plus-Funds, under which PlusFunds was the exclusive investment manager for SMFF. FAC ¶¶ 86-88. PlusFunds retained Refco LLC to provide execution, clearing and margin services. FAC ¶ 95. SMFF funds at Refco LLC were protected in the event of Refco LLC’s insolvency. FAC ¶ 97. 2. PlusFunds engaged DPM to serve as administrator for the SPhinX funds. The relationship among SPhinX, Plus-Funds, and DPM was governed by a Service Agreement dated July 9, 2002, and amended on May 1, 2003 and June 30, 2004 (collectively, the “Service Agreement”). FAC 1103. The Service Agreement required DPM to perform all services necessary for administration and reconciliation of the SPhinX funds, including but not limited to providing: daily activity reports; daily reconciliations; daily and monthly valuations and NAV reports; reconciliations of marketable instruments, cash and security positions; monthly reports, including gains and losses, accrued dividend and interest analysis; market and credit risk reports; corporate secretarial functions; and quarterly, unaudited financial statements. FAC ¶ 107. The Service Agreement required DPM to perform treasury functions including investment of excess cash. FAC ¶ 115. 3. Aaron, Castranova, and DPM knew that most of SMFF’s excess cash was being swept into RCM and thus exposed to loss. They also knew that innocents at PlusFunds were unaware that the excess cash was unprotected. FAC ¶ 153. 4. The First Amended Complaint alleges that Aaron signed a letter on behalf of SPhinX that allowed SMFF excess cash at Refco LLC to be transferred to RCM. FAC ¶¶ 130-132. But the Plaintiffs have since backed off from that allegation. The Plaintiffs now concede that the so-called “Aaron letter” does not authorize the transfer of excess cash to RCM. See Plaintiffs’ Memorandum in Opposition to Motion to Dismiss by DPM Defendants at 27; Transcript of Oral Argument at 114, Statement of Plaintiffs’ counsel (“When you read the letter it was for margin money, it was not what would go to RCM”). The Plaintiffs still assert, however that Aaron failed to assure the segregation of SMFF’s excess cash. FAC ¶ 249; Transcript of Oral Argument at 115 (“the $312 million ... has nothing to do with the July 31st letter and we allege it separately”). 5. Each of the Defendants authorized and facilitated the movement of SMFF cash to unprotected accounts at RCM. FAC ¶¶ 270-71. 6. DPM in its weekly risk reports misstated and/or omitted the fact that SMFF excess cash was at risk in unprotected accounts. See, e.g., FAC ¶ 337. Also, various statements in SPhinX offering memoranda, marketing materials, and financial statements misrepresented the fact that the excess cash was at risk and Aaron, Castranova and DPM helped to prepare all of these materials. FAC ¶¶ 380-388. 7. Mellon exercised control over DPM-Mellon, promised to bring DPM’s performance “up to Mellon standards,” and assumed each and every contractual and fiduciary duty owed by DPM to PlusFunds and SMFF. FAC ¶¶ 293-95. E. The Right to Have the SMFF Funds Maintained in a Segregated Account The founding premise for most of the Plaintiffs’ claims is that SMFF’s excess cash was wrongfully transferred from segregated accounts at Refco LLC to commingled accounts at RCM. The Defendants in this action and in Krys v. Sugrue have argued that the Plaintiffs’ basic premise is faulty on a number of grounds, including: 1) there was no right to have the excess cash in a segregated account; 2) the transfers to RCM were authorized by Plus-Funds and SPhinX; and 3) the Plaintiffs are precluded from arguing for a right to segregation by Judge Drain’s ruling in the Refco bankruptcy proceeding. In a Report and Recommendation dated March 1, 2010, entered in Krys v. Sugrue, the Special Master recommended among other things that the Court rule that 1) the Plaintiffs have sufficiently alleged that SMFF had a right to have its excess cash segregated in accounts at Refco LLC; and 2) the Plaintiffs are not precluded by Judge Drain’s ruling and have sufficiently alleged that the transfer of SMFF excess cash from Refco LLC to RCM was unauthorized and wrongful. Objections to that Report and Recommendation have been filed with the Court and the Court has heard argument on those objections. The Court’s ruling on the Special Master’s Recommendations will have an impact on most of the counts in the Amended Complaint in the instant case. For purposes of the instant Report and Recommendation, it will be assumed that the Plaintiffs have sufficiently alleged that SMFF had a right to have its excess cash segregated in accounts at Refco LLC and that the transfer to RCM was unauthorized and wrongful. If the Court in Krys v. Sugrue rejects the Special Master’s recommendations on the segregation question, then the Special Master will issue a new R and R to assess the impact of that ruling in the instant case. F. Wagoner Issues As in Krys v. Sugrue, the Defendants in this action — specifically in Aaron’s briefs— argue that most of the Plaintiffs’ claims should be dismissed under the Wagoner/in pari delicto doctrine because the Plaintiffs stand in the shoes of wrongdoers. See Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir.1991). The effect of Wagoner is one of the “omnibus” issues that affects almost all of the claims brought by these Plaintiffs in this action as well as in Krys v. Sugrue and Krys v. Butt. The contours of the Wagoner defense are currently being considered by the New York Court of Appeals on certification of questions from the Second Circuit. See Kirschner v. KPMG LLP, 13 N.Y.3d 933, 922 N.E.2d 898, 895 N.Y.S.2d 309 (2010). This Report and Recommendation will not consider Wagoner issues — they will be considered if necessary at a later point in accordance with the sequencing established for omnibus issues. II. Standards on a Motion to Dismiss The legal standards for evaluating a pleading on a motion to dismiss are as follows: 1) The Plaintiff need not establish that he will ultimately prevail. The question is whether the Plaintiff is entitled to obtain discovery and offer evidence to support his claim. Triestman v. Fed. Bureau of Prisons, 470. F.3d 471, 476 (2d Cir.2006). 2) “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, ‘to state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 [(2009)], quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). If the Plaintiff has not “nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed.” Twombly, 550 U.S. at 547[, 127 S.Ct. 1955]. 3) Claims sounding in fraud must be “stated with particularity.” Fed.R.Civ.P. 9(b). “The purpose of Rule 9(b) is to protect the defending party’s reputation, to discourage meritless accusations, and to provide detailed notice of fraud claims to defending parties.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.1994). The Plaintiff must specifically describe the acts or statements alleged to be fraudulent and provide some factual basis that creates a plausible inference of fraudulent intent. 4) Under Rule 9(b), a plaintiff pleading fraud based on deceptive conduct “must specify what deceptive or manipulative acts were performed, which defendants performed them, when the acts were performed, and the effect the scheme had on [plaintiffs].” In re Parmalat Sec. Litig., 383 F.Supp.2d 616, 622 (S.D.N.Y.2006). As the Second Circuit has stated: Although malice, intent, knowledge and other condition of mind of a person may be averred generally, this leeway is not a license to base claims of fraud on speculation and conclusory allegations. Plaintiffs must allege facts that give rise to a strong inference of fraudulent intent, which may be established either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d Cir.2004) (internal citations omitted); see also In re Agape Litigation, [681 F.Supp.2d 352, 361-62], 2010 WL 335621 at *6 (E.D.N.Y.[2010]) (same). III. Review of Counts in the Complaint A. Count I — Breach of Contract (Against All Defendants). The Plaintiffs allege that each of the Defendants breached the Service Agreement by: 1) placing SMFF’s cash — or allowing it to be placed — in unprotected accounts at RCM; 2) failing to produce accurate and timely NAV’s and reconciliations; 3) failing to produce accurate financial statements; 4) failing to reconcile all cash and securities positions; and 5) failing to provide accurate credit and risk reporting. In addition, the Plaintiffs claim that DPM-Mellon and Mellon entered into a contract in 2006 with the JOLs to maintain SPhinX assets in Mellon accounts at a market rate of interest, but that those defendants breached the agreement by failing to provide interest on SPhinX assets from January to June 2007. The DPM entities do not move to dismiss Count I. Mellon, however, does move to dismiss the breach of contract claim insofar as it seeks relief against it for breach of the Service Agreement. (It does not move to dismiss the claim against it relating to the 2006 contract). In addition, both Aaron and Castranova move to dismiss Count I. The ground for dismissing Count I as to the individual defendants is simply stated: they were not parties to the Service Agreement, so they argue that they cannot be liable for breaching it. The Plaintiffs claim that the Service Agreement imposed contractual obligations on the Individual Defendants due to their roles as officers and agents of DPM. (FAC ¶ 301). But the Plaintiffs provide no legal theories or case law to support this allegation. Nor do they respond to the arguments by the Individual Defendants regarding the inadequacy of the breach of contract claims against them. Notably, the Plaintiffs’ proposed Second Amended Complaint removes the Individual Defendants from the breach of contract claim. The Plaintiffs’ failure to seriously contest the motion to dismiss the Individual Defendants from Count I is sufficient to warrant granting the motion. At any rate, the Service Agreement specifically provides that the contract is between DPM and the SPhinX entities, and there is no evidence that either Aaron or Castranova purported to bind himself individually to the Agreement. Acting only as agents for DPM, Aaron and Castranova each signed above the reference to their corporate office. Thus, Aaron and Castranova cannot be personally liable for breach of the Service Agreement. See, e.g., Metropolitan Switch Bd. Co., Inc. v. Amici Associates, Inc., 20 A.D.3d 455, 799 N.Y.S.2d 531, 531-32 (2d Dept.2005) (individual defendants not liable for breach of contract where they executed the contract solely in their capacities as corporate officers). With respect to the claim against Mellon for breach of the Service Agreement, the Plaintiffs claim that Mellon assumed DPM’s contractual obligations under that Agreement. (FAC ¶ 302). But the Plaintiffs provide little case law to support their position and it is difficult to understand what legal theories they rely on. First, the Plaintiffs contend that Mellon assumed contractual obligations under the Agreement when it purchased DPM’s assets and liabilities. The Plaintiffs also set forth “allegations with respect to the corporate history of the DPM entities and its officers, directors, and shareholders; the date of the transaction at issue; the parties to and participants in the transaction; the amount of the transaction; and, after the transaction, Mellon’s direct involvement with DPM’s former business.” Letter from Plaintiffs’ Counsel to Special Master dated Feb. 8, 2010, at 1. Second, the Plaintiffs assert that Mellon’s agents promised PlusFunds and SPhinX that DPM’s subpar performance under the Service Agreement would be “brought up to Mellon standards.” FAC ¶ 293. The Plaintiffs contend that under Rule 8(a) these allegations collectively are sufficient to show that Mellon is liable under the Service Agreement. “Under New York law, contracts are freely assignable absent language which expressly prohibits assignment.” Corbett v. Firstline Security, Inc., 687 F.Supp.2d 124, 129 (E.D.N.Y.2009) (internal quotation omitted). However, in the instant ease, the Service Agreement is not freely assignable because it expressly prohibits assignment without written consent. The Service Agreement provides: This Agreement shall be binding on and inure to the benefit of the respective parties hereto and their heirs, executors, successors and assigns. No party shall assign the rights or delegate the duties pursuant to this Agreement without the prior written consent of the other parties. Service Agreement § 22. There is nothing in the Amended Complaint alleging that written consent was obtained to assign Mellon the rights and duties pursuant to the Service Agreement. Even if the Service Agreement had been assigned to Mellon, the Plaintiffs would still fail to establish Mellon’s contractual liability. New York courts hold that even if an agreement purports to bind successors and assigns of the parties to the agreement, “an assignee or successor will not be bound to the terms of a contract absent an affirmative assumption of the duties under the contract.” Amalgamated Transit Union Local 1181, AFL-CIO v. City of New York, 45 A.D.3d 788, 790, 846 N.Y.S.2d 336 (2d Dept.2007) (citing cases); see also IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 404-05 (S.D.N.Y.2009) (express assumption required under New York law). In addition, absent an agreement to the contrary, “the mere assignment of a contract is an assignment of the rights in the contract and not of the assignor’s duties and liabilities incurred prior to the assignment.” A.C. Associates v. American Bridge Division of U.S. Steel Corp., 1989 WL 1111034, at *1 (S.D.N.Y.). Again, there is nothing in the Amended Complaint to support an inference that Mellon expressly assumed DPM’s duties and/or liabilities under the Service Agreement. Plaintiffs rely heavily on Mellon’s asserted promise to bring DPM’s performance up to “Mellon standards.” But mere participation or support in the performance of a contract does not constitute assumption. See Mellencamp v. Riva Music Ltd., 698 F.Supp. 1154, 1160 (S.D.N.Y.1988) (finding no authority to support the plaintiffs assertion that “defendants may be liable for the breach of a contract which they are strangers to simply because they share the same director and/or owner as the other corporate defendants or because they assisted the other corporate defendants in the [administration of the contracts].”). While they do not come out and say it, the Plaintiffs rely in the end on a lack of separate corporate identity between Mellon and DPM — they want to pierce the corporate veil. It is axiomatic that, “[p]arent and subsidiary or affiliated corporations are, as a rule, treated separately and independently so that one will not be held liable for the contractual obligations of the other absent a demonstration that there was an exercise of complete dominion and control but evidence of domination alone does not suffice without an additional showing that it led to inequity, fraud or malfeasance.” Sheridan Broadcasting Corp. v. Small, 19 A.D.3d 331, 332, 798 N.Y.S.2d 45 (1st Dept.2005). In considering whether a corporation exercised “complete domination” over a related entity, courts consider such factors as: (1) disregard of corporate formalities; (2) inadequate capitalization; (3) intermingling of funds; (4) overlap in ownership, officers, directors, and personnel; (5) common office space, address and telephone numbers of corporate entities; (6) the degree of discretion shown by the allegedly dominated corporation; (7) whether the dealings between the entities are at arms’ length; (8) whether the corporations are treated as independent profit centers; (9) payment or guarantee of the corporation’s debts by the dominating entity, and (10) intermingling of property between the entities. IMG Fragrance Brands, LLC v. Houbigant, Inc., supra, 679 F.Supp.2d at 403-05. The Plaintiffs’ allegations in the Complaint do not come close to contending that Mellon exercised “complete domination” over DPM under the above case law. Certainly the fact that Mellon appointed a majority of board members of DPM-Mellon is not sufficient to establish “complete domination.” See United States v. Bestfoods, Inc., 524 U.S. 51, 118 S.Ct. 1876, 141 L.Ed.2d 43, 61-62 (1998) (noting that “it is hornbook law that ‘the exercise of the ‘control’ which stock ownership gives to the stockholders ... will not create liability beyond the assets of the subsidiary. That ‘control’ includes the election of directors, the making of by-laws ... and the doing of all other acts incident to the legal status of stockholders. Nor will a duplication of some or all of the directors or executive officers be fatal’ ”) (quoting Douglas & Shanks, Insulation from Liability Through Subsidiary Corporations, 39 Yale L.J. 193, 196 (1929)). The proposed Second Amended Complaint adds certain allegations about Mellon’s relationship to DPM after the acquisition. But there is not enough to indicate that the once-amended Complaint could be amplified to add plausible factual allegations 1) that Mellon affirmatively assumed the obligations of the Service Agreement or 2) that Mellon exercised “complete dominion” over DPM. The allegations of the proposed Second Amended Complaint do not come close to providing sufficient factual assertions on either of these points. See, e.g., Kropelnicki v. Siegel, 290 F.3d 118, 130-131 (2d Cir.2002) (court considers proposed amended complaint in deciding whether leave to amend should have been granted). Recommendations: 1. Count I should be dismissed as to Aaron and Castranova, with prejudice. 2. The claim that Mellon is liable for breaching the Service Agreement should be dismissed with prejudice. B. Count II — Breach of the Covenant of Good Faith and Fair Dealing (Against All Defendants) The Plaintiffs allege that, “[t]he Service Agreement, like all contracts, included implied mutual covenants of good faith and fair dealing, whereby each party agrees to refrain from behavior that would prevent any other party from enjoying rights due under the Service Agreement.” (FAC ¶ 314). Each of the Defendants move to dismiss Count II in its entirety. The positions of the respective Defendants, and thus their arguments, differ. Those defendants who were not parties to the Service Agreement argue that because they did not breach the Service Agreement they could not possibly breach a covenant of good faith and fair dealing. That argument is meritorious and dispositive as to Aaron, Castranova, and Mellon. See Cyber Media Group, Inc. v. Island Mortgage Network, Inc., 183 F.Supp.2d 559, 582 (E.D.N.Y.2002): New York common law supports the proposition that no covenant of good faith and fair dealing arises in the absence of a contract. American-European Art Assocs., Inc. v. Trend Galleries, Inc., 227 A.D.2d 170, 171, 641 N.Y.S.2d 835 (1st Dept.1996). Where, as here, Plaintiffs and Defendants have not entered into any contract * * * Plaintiffs cannot sustain a cause of action based on a breach of the covenant of good faith and fair dealing. Accordingly, the claims in Count II against Aaron, Castranova and Mellon should be dismissed with prejudice. The DPM entities — who were of course parties to the Service Agreement— argue that the Plaintiffs’ claim for breach of the covenant of good faith and fair dealing must be dismissed because it does nothing but duplicate the breach of contract claim. The Plaintiffs respond that the claim should not be dismissed, because “at this early stage, it is possible that duties that are not explicitly defined in the Service Agreement may need to be implied.” Brief in Opposition to the Motion to Dismiss at 8. The Plaintiffs posit that the court might find that the Service Agreement does not explicitly set parameters on DPM’s duties with respect to “investment of excess cash.” Under New York law, a claim for breach of the implied covenant can survive a motion to dismiss only “if it is based on allegations different than those underlying the accompanying breach of contract claim” and if the relief sought is not “intrinsically tied to the damages allegedly resulting from the breach of contract.” ARI and Co., Inc. v. Regent Intern. Corp., 273 F.Supp.2d 518, 521-22 (S.D.N.Y.2003) (internal citations and quotations omitted). See also Harris v. Provident Life and Acc. Ins. Co., 310 F.3d 73, 81 (2d Cir.2002) (“New York law * * * does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled.”). In ARI and Co., supra, the plaintiff was hired as a sales representative for the defendant, a manufacturer and distributor of clothing. The claim for breach of the implied covenant rested on the allegation that the defendant unlawfully terminated the Agreement in order to benefit from the plaintiffs contacts in the clothing industry and to avoid paying commissions. The court held that this assertion was almost identical to that contained in the breach of contract claims, which alleged that the defendant unlawfully terminated the Agreement and failed to pay commissions owed to the plaintiff. As a result, the court dismissed the breach of the implied covenant claim as duplicative of the breach of contract claim. Similarly, in the instant case, the claim for a breach of the implied covenant must be dismissed as duplicative of the Plaintiffs’ breach of contract claim. The Plaintiffs rely on three cases, but none of the cases are on point. Two of the cases—Pension Committee of University of Montreal Pension Plan v. Banc of America Secs., LLC, 446 F.Supp.2d 163, 199 (S.D.N.Y.2006), and in In re Allou Distributors, Inc., 387 B.R. 365, 412 (E.D.N.Y.2008) — do not involve claims for breach of the covenant of good faith and fair dealing. They make only general comments that plaintiffs are allowed to proceed on multiple theories. In the third case, Bakerman v. Sidney Frank Importing Co., Inc., 2006 WL 3927242, at *20 (Del.Ch.), the court stated that the plaintiff “may, after discovery, be able to show some independent breach of the duty of good faith and fair dealing that falls outside the ambit of’ previously pled breaches and so declined to dismiss the claim. But even if a Delaware case has any bearing on the subject, the Bakerman court recognized that the implied covenant of good faith and fair dealing is operative only when it is “clear from what was expressly agreed upon that the parties who negotiated the express terms of the contract would have agreed to proscribe the act later complained of as a breach of the implied covenant of good faith had they thought to negotiate with respect to that matter.” Id. In other words, the implied covenant applies when the spirit, if not the letter of the contract was violated. In this case, the Amended Complaint belies the possibility of a violation of the spirit rather than the letter of the Service Agreement. The Complaint lays out the detailed obligations that DPM had under the service agreement. See FAC ¶¶ 108-118. The litany of alleged failings in performing the contractual obligation is also set forth in detail. See FAC ¶¶ 272-279. There is no allegation that any of the listed failings is somehow outside the terms of the contract. The Plaintiffs assert the possibility that duties that are not explicitly defined in the Service Agreement may need to be implied. But New York law provides that “[a] claim for breach of the implied covenant will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.” I CD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243-44 (S.D.N.Y.1997). See also Wolff v. Rare Medium, Inc., 171 F.Supp.2d 354, 360 (S.D.N.Y.2001) (“Plaintiffs’ allegation of a breach of the obligation of good faith is duplicative of the cause of action for breach of contract since New York courts generally assume an obligation of good faith and fair dealing between parties to a contract.”). Accordingly, the Plaintiffs have failed to plead — and cannot plead — a cause of action for violation of the implied covenant of good faith and fair dealing. Recommendation: Count II should be dismissed in its entirety, with prejudice. C. Count III — Indemnity (Against DPM entities and Mellon) The Service Agreement includes the following indemnity provision: DPM and DPM Ltd. agree to indemnify and hold harmless the Companies and the Portfolio Fund Series and their officers and employees and their respective successors and permitted assigns from and against any and all liabilities, claims, costs, fines, damages, expenses, losses and attorneys’ fees arising out of or in connection with any failure of DPM or DPM Ltd. to perform their obligations hereunder ... (FAC ¶ 321; Service Agreement § 18). The Plaintiffs claim that the losses suffered by SMFF were caused by and arose out of the DPM entities’ failures to perform their obligations under the Service Agreement. (FAC ¶ 322). The Plaintiffs state that the DPM entities and Mellon are obligated under the Service Agreement to indemnify SMFF for its losses (FAC ¶¶ 323-24). As this claim is based on the terms of the Service Agreement, its treatment is the same as the breach of contract claim in Count I. As discussed above, the DPM entities do not move to dismiss the contract-related claims (and no specific mention of Count III is made in the DPM briefs). Mellon, however, contests all Service Agreement-related liability on the ground that it was never a party to that agreement and never assumed any obligations thereunder. As discussed above under Count I, the Plaintiffs have not sufficiently pled a claim against Mellon under the Service Agreement. Therefore, Mellon is entitled to dismissal of Count III. Recommendation: Count III should be dismissed as to Mellon, with prejudice. D. Count IV — Declaratory Relief (Against DPM, DPM-Mellon, Aaron and Castranova) In Count IV, the Plaintiffs state that Defendants Aaron and the DPM entities have asserted claims for indemnity under the Service Agreement. (FAC ¶ 326). The Plaintiffs seek a declaration from the Court that Aaron, Castranova and the DPM entities are not entitled to indemnity under the Service Agreement or any other document and that their claims for indemnity are improper and unenforceable. (FAC ¶ 327) The DPM entities and Aaron do not move to dismiss Count TV. But Castranova moves to dismiss Count IV on the ground that he has not asserted and is not seeking any indemnification. DPM Brief in Support of Motion to Dismiss at 25 (citing Pendleton Deck, Ex. 37, Proof of Debt). The Plaintiffs respond that declaratory relief is proper anyway, because declaratory relief is by definition not dependent on an adverse claim having been brought. In United States v. Doherty, 786 F.2d 491, 498-99 (2d Cir.1986), the court described the proper role of declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq.: Essentially, a declaratory relief action brings an issue before the court that otherwise might need to await a coercive action brought by the declaratory relief defendant; the fundamental purpose of the [Declaratory Judgment Act] is to avoid accrual of avoidable damages to one not certain of his rights and to afford him an early adjudication without waiting until his adversary should see fit to begin suit, after damage has accrued .... [T]he declaratory judgment procedure ... enables a party who is challenged, threatened or endangered in the enjoyment of what he claims to be his rights, to initiate the proceedings against his tormentor and remove the cloud by an authoritative determination of the plaintiffs legal right, privilege and immunity and the defendant’s absence of right, and disability. (internal quotations and citations omitted) The Plaintiffs rely on Doherty, but Doherty emphasizes that declaratory relief is available only if there is an actual controversy between the parties — in such a circumstance, a party who would be prejudiced by having to wait to be sued can ask for declaratory relief. In this case, Castranova has unequivocally admitted in his briefs that he is not seeking indemnity under any agreement. Under these circumstances, Castranova will be estopped from bringing any indemnity claim — even assuming that one could be timely brought at this point. Therefore there is no controversy about indemnity with respect to Castranova and declaratory relief is not proper. Recommendation: Count TV should be dismissed as to Castranova, with prejudice. E. Count Y — Breach of Fiduciary Duty (Against All Defendants) This is the third opportunity for the Special Master to review motions to dismiss breach of fiduciary duty claims in this MDL This case differs at the threshold, however, because the parties do not agree on which law applies to the claims for breach of fiduciary duty. This section treats the choice of law dispute first, and then addresses the viability of breach of fiduciary duty claims as to each of the Defendants. 1. Choice of Law: This action was originally filed in New Jersey. When an action is transferred as part of a multidistrict litigation, a transferee court applies its own interpretation of federal law, but to the extent that the action involves issues of state law, the choice-of-law rules of the transferor forum govern. In re Parmalat Securities Litigation, 479 F.Supp.2d 332, 340 (S.D.N.Y.2007). Thus in the first instance, New Jersey’s choice-of-law principles govern the applicability of state law claims for breach of fiduciary duty. The Plaintiffs contend that all of their tort claims are governed by New Jersey law. The Defendants assert that New York Law applies to the breach of fiduciary duty claims to the extent they are derived from obligations in the Service Agreement. The Defendants are correct. Section 20 of the Service Agreement provides that New York law governs the agreement and all performance thereunder. Under New Jersey law, where a choice-of-law provision in a contract is sufficiently broad to encompass contract-related tort claims, the parties’ choice will be honored. For example, in Re-Source America, Inc. v. Corning Inc., 2007 WL 174714, at *5-6 (D.N.J. Jan. 19, 2007), the court held that a choice-of-law provision governed both breach of contract and related tort claims. The court concluded that plaintiffs may not avoid forum selection clauses by “simply pleading non-contractual claims in cases involving the terms of a contract containing the parties’ choice of forum.” (quoting Crescent Int’l Inc. v. Avatar Communities, Inc., 857 F.2d 943, 945 (3d Cir.1988)). The court’s analysis aptly describes the facts of the instant case: [T]he pleadings indicate that the tort claims alleged arise out of events that transpired during the contractual period. Thus, absent the contractual relationship, [Defendant’s] actions would not have occurred. Therefore, the Court holds that the choice of law and forum selection clause applies to [Plaintiffs] tort claims as there “is no evidence suggesting that the [choice of law and forum selection clause] was not intended to apply to all claims growing out of the contractual relationship.” Id. While the Plaintiffs claim that New Jersey law should apply, it is notable that they cite primarily to New York law in their breach of fiduciary duty analysis. And at any rate, the parties do not indicate that there is any actual conflict between New York and New Jersey law with respect to breach of fiduciary duty. Therefore, New York law should apply to the non-contractual claims of fraud and breach of fiduciary duty. See Schwartz v. Hilton Hotels Corp., 639 F.Supp.2d 467, 471 (D.N.J.2009) (“If there is no actual conflict, then the choice-of-law question is inconsequential, and the forum state applies its own law to resolve the disputed issue.”). Aaron’s Fiduciary Duty The parties do not agree on which law applies to determine Aaron’s fiduciary duties to SMFF by virtue of being on the SPhinX Board of Directors. Aaron claims that under the “internal affairs doctrine,” Cayman law should govern because the SPhinX Funds are organized under the laws of the Cayman Islands and the SMFF Articles of Association are governed by the Companies Law of the Cayman Islands. But Aaron has not established an actual conflict of law between Cayman Islands and New York law with respect to a breach of fiduciary duty claim. Compare Boardman v. Phipps, [1967] 2 A[1]C 46, 47F (U.K.) (under Cayman Islands law, a claim for breach of fiduciary duty requires: (1) a fiduciary duty; (2) a breach of the duty; and (3) a showing that the breach caused a loss to the beneficiary of the duty or resulted in a profit for the fiduciary), with Pension Committee of University of Montreal Pension Plan v. Banc of America Sec., LLC, 591 F.Supp.2d 586, 589-90 (S.D.N.Y.2008) (“The elements of a claim for breach of fiduciary duty under New York law are ‘breach by a fiduciary ... a knowing participation in the breach, and damages.’ ”). In fact, Aaron cites both Cayman Islands and New York for the proposition that both require a showing of proximate cause. Compare Target Holdings Ltd. v. Redferns, (No. 1) [1996] 1 AC 421, 432 G (U.K.) (Cayman Island law requires that the defendant’s conduct proximately caused the plaintiffs alleged loss), with LNC Invs., Inc. v. First Fidelity Bank, 173 F.3d 454, 465 (2d Cir.1999) (New York law requires that the plaintiff demonstrate that the defendant’s conduct proximately caused injury in order to establish liability). Because there is no actual conflict of law, New York law governs the claims for breach of fiduciary duty against Aaron arising from his position on the Board. “In the absence of substantive difference ... a New York court will dispense with choice of law analysis; and if New York law is among the relevant choices, New York courts are free to apply it.” International Bus. Mach. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir.2004). The Plaintiffs also claim that Aaron owed a fiduciary duty to PlusFunds. This claim arises out of the Service Agreement, and for the reasons expressed above New York law controls. Vicarious Liability of DPM for Aaron’s Actions as a SPhinX Director DPM Defendants claim that under the internal affairs doctrine, Cayman Islands law governs whether DPM is vicariously liable for Aaron’s actions as a SPhinX director. The choice of law is potentially important because there is at least arguably a difference between Cayman and New Jersey and New York law on the subject of vicarious liability for the acts of a director appointed by a company to represent its interests on another company. In the Cayman case of Paget-Brown & Co. b. Omni Secs. [1999] CILR 184, a Cayman company (appellant) that offered services to overseas companies entered into a contract with another company (respondent). Under the contract, appellant agreed to provide a person to act as a company director for respondent. This director could have been removed by respondents’ shareholders but wasn’t. The court found that appellant was not vicariously liable for the director’s actions; it reasoned that there was no control by the appellant over the director’s performance. That holding is arguably in tension with the basic principle of vicarious liability for the acts of a director appointed by another corporation to represent its interests that would apply under New Jersey and New York law. See, e.g., Montreal Pension Plan, supra, 446 F.Supp.2d at 189 (holding knowledge gained while acting as a director may be imputed to a fund administrator because the director sat on the board in furtherance of their duties on behalf of the administrator). See also In re Sunbeam Securities Litig., 89 F.Supp.2d 1326, 1340 (S.D.Fla.1999) (“While Sunbeam is correct that not all acts of a corporation’s officers can be attributed to the corporation, courts have uniformly held that the acts of a corporate officer that are intended to benefit a corporation to the detriment of outsiders are properly imputed to the corporation.”). The internal affairs doctrine “is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs— matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.” Edgar v. MITE Corp., 457 U.S. 624, 645, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). But the internal affairs doctrine is not directly applicable here because the question is not about the internal affairs of a single corporation (for example, the duties owed by a director to a shareholder or to the corporation itself) but rather about the relationship between two unrelated entities, DPM and SPhinX, connected by the appointment of a director. In the words of Edgar, supra, this case does not involve the relationship “among or between” the corporation (i.e., DPM) and its current directors. The Plaintiffs do not contest the DPM Defendants’ reading of Cayman law on vicarious liability. But they argue that New Jersey law governs whether DPM is vicariously liable for the alleged breach of Aaron’s fiduciary duty as a SPhinX director, as no significant events occurred in the Cayman Islands. They note that in Montreal Pension Plan, supra, 446 F.Supp.2d at 191-95 — a case involving analogous issues of agency and tort law— the court declined to apply British Virgin Islands law under the internal affairs doctrine and instead applied New York law under an “interest analysis” because New York was the jurisdiction where the tort occurred. In Montreal Pension Plan, Judge Scheindlin concluded that there was no reason to apply the internal affairs doctrine where the Funds were defunct, the directors no longer served on their boards, and the allegedly tortious conduct of the Directors in relation to the management of the Funds had little more than a nominal connection to the BVL The same basic factors apply here. The New Jersey Supreme Court applies the “significant relationship test” for choice of law questions. P.V. ex rel T.V. v. Camp Jaycee, 197 N.J. 132, 962 A.2d 453 (2008). If an actual conflict exists, the significant relationship test presumes that the law of the place of injury should govern, unless another state has a more significant relationship. Buccilli v. National R.R. Passenger Corp., 2010 WL 624113, at *2 (D.N.J.). In this case, the injuries are most logically placed in New Jersey and New York, and definitely not in the Cayman Islands. Board meetings occurred in New York. Aaron’s actions were located in New Jersey. Nothing important happened in the Cayman Islands. Nor is there an overriding interest of the Cayman Islands at stake — because imposing vicarious liability in this case does not involve regulating the internal affairs of a Cayman Islands entity. Therefore, because Cayman Islands law does not apply, and because there is no cited conflict between New York and New Jersey law, the Special Master will apply New York law and recommends that DPM be found vicariously liable for the acts of Aaron and specifically for any breach of fiduciary duty on Aaron’s part that the Plaintiffs have sufficiently pled. 2. Standards for a Breach of Fiduciary Duty Claim Under New York Law As discussed in previous R and Rs, the New York law on breach of fiduciary duty is broad, vague, and not very helpful in determining whether any particular relationship rises to the level of “fiduciary.” It is often stated that a fiduciary relationship “may exist where one party reposes confidence in another and reasonably relies on the other’s superior expertise or knowledge, but an arms-length business relationship does not give rise to a fiduciary obligation.” WIT Holding Corp. v. Klein, 282 A.D.2d 527, 724 N.Y.S.2d 66, 68 (2d Dept.2001). “Broadly stated, a fiduciary relationship is one founded upon trust or confidence reposed by one person in the integrity and fidelity of another. It is said that the relationship exists in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed. The rule embraces both technical fiduciary relations and those informal relations which exist whenever one man trusts in, and relies upon, another.” Penato v. George, 52 A.D.2d 939, 383 N.Y.S.2d 900, 904-5 (2d Dept.1976). 3. Breach of Fiduciary Claims Against DPM Plaintiffs allege that DPM had a fiduciary duty to SPhinX and PlusFunds based on a relationship of trust and confidence. Under New York law, a fiduciary duty arises if “confidence is reposed on one side and there is resulting superiority and influence on the other.” United States v. Chestman, 947 F.2d 551, 568 (2d Cir.1991) (internal quotation omitted). See also Daly v. Metropolitan Life Ins. Co., 4 Misc.3d 887, 782 N.Y.S.2d 530, 535 (Sup.Ct.N.Y.Co.1992) (“[A] fiduciary duty arises, even in a commercial transaction, where one party reposed trust and confidence in another who exercises discretionary functions for the party’s benefit or possesses superior expertise on which the party relied.”) (internal quotation omitted). The Plaintiffs seek to establish a relationship of trust and confidence in DPM by virtue of DPM’s role as SPhinX’s administrator and DPM’s detailed responsibilities under the Service Agreement. (FAC ¶¶ 332-33). The Plaintiffs claim that it was DPM’s responsibility to protect SPhinX’s assets, oversee the investment of SMFF’s cash, ensure segregation of funds, and perform services necessary for administration and reconciliation of the SPhinX Funds, including recordkeeping, accounting, financial reporting, and cash management functions. (FAC ¶¶ 20, 103, 105, 107, 265, 332-33, 338). Further, the Plaintiffs allege DPM did much more than merely make ministerial transfers of cash; they claim that DPM authorized those transactions (or purported to authorize them), an act that “inherently involves the exercise of discretion.” (Memorandum in Opposition to Motion to Dismiss at 12-13, citing FAC ¶¶ 23, 105, 106, 266, 270-71, 331). In addition, the Plaintiffs allege that DPM, through Castranova, was a signatory on SPhinX’s accounts. FAC ¶¶ 23, 331. Finally, the Plaintiffs allege that DPM owed fiduciary duties because it had the contractual right and obligation to appoint a SPhinX director and therefore had a fiduciary duty to do so in a way that would promote SPhinX’s -interests. The Plaintiffs allege that DPM thus owed “fiduciary duties by virtue of Aaron’s role as DPM’s representative on SPhinX’s board of directors.” (FAC ¶ 330). According to the Complaint, DPM knew that SPhinX and PlusFunds relied upon it to fulfill its delegated responsibilities. First, DPM’s role required DPM to understand SPhinX’s business plan and objectives. Second, DPM allegedly signed off on SPhinX’s offering memoranda, each of which identified DPM as administrator and discussed the customer segregation requirements. Third, the Service Agreement expressly required DPM to review the Funds’ subscription documents. (FAC ¶¶ 269, 336). The Plaintiffs allege that DPM breached fiduciary duties by, among other things: failing to ensure that SPhinX’s assets were maintained in customer segregated accounts; allowing SPhinX’s assets to be moved from customer segregated accounts at Refeo LLC to unregulated accounts at RCM; failing to disclose that SPhinX’s customer assets were at risk; and withholding relevant information regarding the SPhinX Funds’ exposure to Refco in the weekly risk summary reports, which misleadingly stated that SPhinX’s exposure to Refco was in the range of $10 to $20 million at any given time. (FAC ¶¶ 340-41). DPM essentially contends that it was little more than a functionary and denies that it exercised any discretionary authority over SMFF’s excess cash. This dispute over the extent of DPM’s services raises questions of fact. DPM’s view of its services rendered does not justify a motion to dismiss — the terms of the Service Agreement itself provide substantial support for the Plaintiffs’ assertion that DPM exercised important, discretionary functions that go well beyond the “back-office” interpretation offered by DPM. The Service Agreement provides DPM Defendants with accounting, cash management, corporate secretarial, and treasury functions, including the following duties: • “Generate and distribute on a trade date basis daily activity reports, portfolio summary reports, fund summary reports, realized profit and loss reports, net and gross asset value reports by computing, adjusting, verifying, updating and reconciling data obtained from the Investment Manager (if applicable), Portfolio Managers who invest and trade the assets in the Portfolio Fund Series, futures commission merchants (‘FCMs’), prime and executing brokers and counterparties for contracts.” (Service Agreement 2(A); FAC ¶ 108). • “Calculate, adjust, verify, update, reconcile and value security positions ... DPM will monitor all daily price fluctuations. Upon detecting a price or valuation irregularity, DPM will initiate an investigation and either take immediate corrective action or make a request to the Pricing Committee for resolution of a price irregularity.” (Service Agreement 2(A.l) & 2(A.l)(e)). • “Reconcile for readily marketable instruments, all cash and security positions reported by prime brokers and any other brokers where securities are held at another custodial agent.” (Service Agreement 2(A.2); FAC ¶ 109). • “Produce daily NAV’s for each share class and each Portfolio Fund Series ...” (Service Agreement 2(A.4); FAC ¶ 110). • “Monthly-Compile and prepare monthly reports of realized and unrealized gain/loss, accrued dividends and interest analysis; calculate monthly net and gross asset value; prepare monthly purchase-sales journal, dividends and interest journal ...; prepare a monthly general ledger accompanied by appropriate documentation including reconciliations and detailed fee schedules; provide trading advisors with monthly balance sheets; and prepare and provide reconciliations to brokers and commodity trading advisors.... ” (Service Agreement 2(B); FAC ¶ 111). • “Full reconciliation of all cash and security positions, interest income/expense, dividend accruals reported by prime brokers and any other brokers where securities are held at another custodial agent. At calendar year end, the reconciliation of positions between DPM’s records and the prime brokers’ records shall be prepared in such a manner to facilitate audit without providing supplementary oral explanation. Reasons for position differences and disposition of those differences should be documented in writing and such documentation shall be made available to the SPhinX entities’ auditors.... ’’(Service Agreement 2(B.2); FAC ¶ 112). • “Produce final NAVS ... Provide market and credit risk reporting ... Maintain records of the general ledger, FCMs’ and brokers’ statements, trader reports and other relevant reports received.” (Service Agreement Section 2(B.3), 2(B.3(Q), 2(B.5(D)); AAC ¶¶ 113-14). • “Perform treasury functions consisting of the (i) preparation of accounts payable; (ii) signing and distribution of corporate checks; (iii) preparation and delivery of bank deposit forms; (iv) wire transfers of funds as requested by the Investment Manager and the Portfolio Managers; (v) confirmation of income receipts; and (vi) investment of excess cash in the Companies and each of the Portfolio Fund’s cash accounts .... ” (Service Agreement 2(H), 2(0); FAC ¶ 115) (emphasis added). • Fulfill one board of director position of the SPhinX Funds. (Service Agreement 2(N); FAC ¶ 116). • “Prepare complete financial statements ... Perform all other services necessary for administration and the reconciliation of all previously mentioned treasury transactions of the Companies.” (Service Agreement 0; FAC ¶ 117). • Promptly notify the Companies [SPhinX Funds] of any questions or issues that may arise as to existing or prospective investors or as to any suspicious activity. (Service Agreement 12(j); FAC ¶ 118) (Emphasis added). By virtue of these extensive obligations, it is plausible to believe that DPM had an extensive role in overseeing the SMFF funds — far more extensive than the backroom, ministerial role asserted by the DPM Defendants. Accordingly, it is also plausible that the Plaintiffs reposed trust and confidence in DPM and reasonably relied on it for discretionary services. It is true that an arm’s-length business relationship does not, without more, establish a fiduciary duty. See, e.g., WIT Holding Corp. v. Klein, 282 A.D.2d 527, 724 N.Y.S.2d 66, 68 (2d Dept.2001). But the allegations in the Complaint about the SPhinX-DPM relationship — replete with a Board member and discretionary decisions over excess cash — at the very least create a question of fact on whether there was more than an arm’s-length relationship here. Other cases in which a fiduciary rela-' tionship has been found involve facts that are comparable to, or less compelling, than the facts alleged here. See e.g., Jordan (Bermuda) Inv. Co. v. Hunter Green Invs., Ltd., 2003 WL 21263544, at *4 (S.D.N.Y.) (holding that fund administrator had “a fiduciary duty to all Fund shareholders to implement all trades on behalf of those shareholders and to report the status of each shareholder’s account accurately”); Ross v. FSG PrivatAir, Inc., 2004 WL 1837366, at *5 (S.D.N.Y.) (allegations that defendant “held itself out to be expert in aircraft sales and acquisitions, including without limitation, in negotiating contracts for the purchase and sale of aircraft,” and that plaintiff “relied on those representations sufficient to allege a fiduciary relationship”). See also EBC I, Inc. v. Goldman Sachs & Co., 5 N.Y.3d 11, 799 N.Y.S.2d 170, 176-7, 832 N.E.2d 26 (2005), where the issuer of newly offered stock alleged that it had relied on the underwriter’s expertise with respect to an IPO; the issuer further alleged that the underwriter failed to disclose a kick-back scheme that gave the underwriter an incentive to advise the issuer to undervalue its stock. The Court of Appeals found that the issuer had properly pleaded an action for breach of fiduciary duty, because its allegations indicated that the parties “created their own relationship of higher trust beyond that which arises from the underwriting agreement alone, which required Goldman Sachs to deal honestly -with eToys and disclose its conflict of interest * * *.” Similarly, in this case, it is plausible to believe that the extensive reliance on DPM in the placement and monitoring of SPhinX’s position with regard to the excess cash created a relationship of trust and confidence. New York cases establish that a breach of fiduciary duty claim is usually a fact-specific inquiry. See, e.g., E.P. Lehmann Co. v. Polk’s Modelcraft Hobbies, Inc., 770 F.Supp. 202, 205 (S.D.N.Y.1991) (denying motion to dismiss where the claim that defendant had a fiduciary duty was “not without some plausibility”). In AHA Sales, Inc. v. Creative Bath Products, Inc., 58 A.D.3d 6, 10-12, 21-22, 867 N.Y.S.2d 169 (2d Dept.2008), the court held that despite the appearance of a conventional business relationship, the plaintiff sales representative adequately pled a breach of fiduciary duty claim because the plaintiff alleged a long-established and dependent relationship with the defendant manufacturer. The court stated, “[w]hether plaintiff was obliged to accept the requirements allegedly imposed by defendants because of defendants’ position of dominance or whether plaintiff assumed such obligations voluntarily are questions of fact not properly decided on a motion to dismiss.” Id. at 22, 867 N.Y.S.2d 169 (internal quotation omitted). Similarly, in Manela v. Garantia Banking Ltd., 5 F.Supp.2d 165, 180 (S.D.N.Y.1998), the court held that the existence of a fiduciary relationship was a triable issue of fact where the plaintiff spoke to one of defendant’s employees “on a near-daily basis and often acted in reliance on [employee’s] advice, such as when he invested in the [debt fund managed by defendants].” Thus, the case law covering comparable situations establishes that the Plaintiffs have alleged sufficient facts to plausibly state that the relationship between DPM and SPhinX, arising out of the Service Agreement, was one of trust and confidence. Finally, while the Plainti