Massachusetts Court Affirms Assessment of Damages for Breach of Fiduciary Duty

Massachusetts Court Affirms Assessment of Damages for Breach of Fiduciary Duty

      In a recent decision, the Massachusetts Court of Appeals affirmed the trial court's assessment of damages for breach of fiduciary duty.  Integrated Pharmaceuticals, Inc. v Chatterjee, No. 14-P-955, 2015 WL 5206457 (Mass. App. Sept. 8, 2015).

      Chinmay and Nilu Chatterjee, among others, founded Integrated Pharmaceuticals, Inc., to which the Chatterjee's licensed patent rights relating to a water-soluble calcium powder. Several years later, without making any disclosure to Integrated Pharmaceuticals, Chinmay Chatterjee, along with others, formed a company, Naples Marketing Systems, LLC. Chinmay then proposed to Integrated’s board that Naples be hired as the distributor and marketing agent for the calcium powder. Ultimately some “$200,000 would be paid to Naples for marketing services that, in fact, were never performed. Chinmay would later take complete control of Naples, and Nilu would continue working for Integrated until such time as it ran out of money. Thereafter, it was discovered in Integrated's accounting records various communications to and entries for Naples and another company created by Chinmay. Ultimately, Integrated would sue the Chatterjees for a variety of claims including breach of fiduciary duty.

      After finding that the Chatterjee's had breached their fiduciary duties to Integrated, damages were assessed in the amount of the salaries received by Chinmay and Nilu for the period they were acting with divided loyalties and as well liability for the $200,000 paid to Naples for marketing services that were never provided.

      On appeal, it appears (the opinion is rather short) that the main argument made by the Chatterjee's was that the three-year statute of limitations under Massachusetts law barred the fiduciary duty claims. While there may have been suspicions, as early as 2005 that Chinmay was being dishonest, they “did not know the extent of his involvement until the accounting records were discovered on Nilu’s computer” in 2008. Suit having been brought in 2010, the plaintiffs acted within the statute of limitations.

      As for the damages, the Court of Appeals affirmed damages in the amount of the salaries paid to Chinmay and Nilu for the period 2005 through their separations from Integrated. Also, the Court of Appeals affirmed the assignment to each of them of one half of the $200,000 paid to Naples.