## Facts

- Tyco International Ltd. (a Bermuda holding company) and its U.S. subsidiary sued former CEO and chairman L. Dennis Kozlowski to recover funds and benefits allegedly obtained through misconduct.
- Kozlowski rose through Tyco’s ranks and served as CEO and chairman; Tyco compensated him through salary, bonuses, and multiple deferred-compensation and retirement arrangements (including a Retention Agreement, Executive Retirement Agreement, Deferred Compensation Plan, and Supplemental Executive Retirement Plan).
- Kozlowski was prosecuted and convicted in New York state court for conspiring to misappropriate corporate funds and assets.
- Tyco brought a federal diversity action asserting claims including fraud, breach of fiduciary duty, conversion, and unjust enrichment, seeking recovery based on the same core misconduct.
- Kozlowski counterclaimed for over $100 million under the deferred-compensation and retirement arrangements and sought indemnification for legal expenses and related liabilities.
- The parties filed cross-motions for summary judgment addressing liability and the viability of Kozlowski’s counterclaims; damages and certain equitable remedies were left for later proceedings.

## Issues

1. Whether New York or Bermuda law governed Tyco’s claims and Kozlowski’s compensation and indemnification counterclaims.
2. Whether Kozlowski’s New York criminal conviction collaterally estopped him from disputing key facts of wrongdoing in the civil action.
3. Whether Kozlowski could enforce deferred-compensation and retirement agreements despite criminal misconduct established in the conviction.
4. Whether Tyco was required to indemnify Kozlowski for defense costs or liabilities tied to criminal and related proceedings.

## Decision

- New York law governed the principal disputes, notwithstanding Tyco’s Bermuda incorporation.
- Kozlowski’s criminal conviction had issue-preclusive effect, barring him from contesting core facts of misappropriation and bad-faith conduct.
- Tyco was granted partial summary judgment on liability for most of its claims (including fraud and breach of fiduciary duty), relying substantially on the preclusive criminal findings and undisputed record evidence.
- Kozlowski’s motion for partial summary judgment was denied in full.
- Kozlowski’s counterclaims for deferred compensation and indemnification were largely dismissed because the established misconduct defeated contractual entitlement and statutory/contractual prerequisites (including good-faith conditions) and triggered public-policy limits.
- Issues concerning damages and the scope of further monetary or equitable recovery were reserved for later proceedings.

## Legal Principles

- In a diversity action, the governing law may be the jurisdiction with the most significant relationship to the conduct and injury, even where the corporation is foreign-incorporated, when the operative facts and managerial nexus are centered in the forum state.
- A final criminal conviction can collaterally estop a defendant in subsequent civil litigation from relitigating facts necessarily decided in the criminal case, where the defendant had a full and fair opportunity to litigate.
- An executive’s established criminal self-dealing and disloyalty can bar enforcement of compensation and retirement arrangements when the claimed benefits depend on lawful, good-faith service or are otherwise defeated by equitable defenses and public policy.
- Corporate indemnification is unavailable for adjudicated criminal conduct and bad-faith acts and may be denied where statutory or contractual conditions (including acting in good faith and in the corporation’s interests) cannot be satisfied.

## Conclusion

The court applied New York law and treated the former CEO’s New York criminal conviction as dispositive of key wrongdoing, granting Tyco summary judgment on liability for most claims and largely rejecting the CEO’s counterclaims for deferred compensation and indemnification, while reserving damages and further remedial questions for later proceedings.


Tyco Int'l Ltd. v. Kozlowski, 756 F. Supp. 2d 553 (S.D.N.Y. 2010)