## Facts

- Robert B. Whitney, Carl Berger, and Richard Timpone formed Urban Recycle One Associates (URO), a New York general partnership, to acquire and develop an 11-acre parcel in Edgewater, New Jersey (the “Alcoa property”).
- Whitney contributed an option to purchase the property and prior development expenditures; Berger contributed architectural services; Timpone contributed funds and legal work product.
- The partnership arrangement gave Whitney a controlling interest, and Berger and Timpone owed fiduciary duties to Whitney and URO.
- The district court found that Berger and Timpone engaged in disloyal conduct that diverted project benefits and control away from Whitney and URO.
- Citibank, through its officers, was found to have known of the fiduciary relationship and the conflict, and to have induced and knowingly participated in Berger and Timpone’s breach.
- Whitney also pleaded fraud, civil conspiracy, commercial bribery, and negligent misrepresentation, all relying on the same factual core as the fiduciary-duty claim.

## Issues

1. Whether Citibank could be held liable under New York law for inducing and knowingly participating in Berger and Timpone’s breach of fiduciary duty, including exposure to compensatory and punitive damages.
2. Whether the district court committed reversible error by declining to decide Whitney’s alternative tort claims after granting full relief on the fiduciary-duty theory.

## Decision

- The Second Circuit affirmed the judgment for Whitney and URO in all respects.
- The court upheld findings that Berger and Timpone owed fiduciary duties and that Citibank had sufficient knowledge of the relationship and conflict to support liability for inducing and knowingly participating in the breach.
- The court upheld compensatory and punitive damages against Citibank, finding no basis to disturb the district court’s determination that Citibank’s conduct met New York’s punitive-damages standard.
- The court rejected Whitney’s cross-appeal, holding the district court did not err in declining to reach alternative causes of action resting on the same facts where full relief had already been awarded.

## Legal Principles

- Under New York law, a non-fiduciary may be liable for a fiduciary’s breach when the non-fiduciary induces the breach or knowingly participates in it, requiring knowledge of the fiduciary relationship and active involvement in the wrongful conduct.
- Punitive damages may be available in a commercial tort setting, including for participation in a fiduciary breach, where the conduct shows a high degree of moral culpability, wanton dishonesty, or comparable aggravation beyond ordinary wrongdoing.
- A trial court may decline to adjudicate alternative, overlapping tort theories based on the same nucleus of facts once liability is established and complete relief is granted on one theory, absent a showing of prejudice from not reaching the others.

## Conclusion

The Second Circuit affirmed that a bank may be held liable, and subjected to punitive damages, when it knowingly assists partners in breaching fiduciary duties, and it approved the trial court’s decision to forgo redundant rulings on alternative tort claims once complete relief had been awarded.


Whitney v. Citibank, N.A., 782 F.2d 1106 (2d Cir. 1986)