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Taras Lyssenko v. International Titanium Powder

December 17, 2010

TARAS LYSSENKO, PLAINTIFF,
v.
INTERNATIONAL TITANIUM POWDER, LLC AND STANLEY BORYS, DEFENDANTS.



The opinion of the court was delivered by: Judge Sharon Johnson Coleman

Magistrate Judge Martin C. Ashman

MEMORANDUM OPINION AND ORDER

Plaintiff, Taras Lyssenko, moves for summary judgment on Count I*fn1 of defendants International Titanium Powder, LLC and Stanley Borys' (collectively "ITP") counterclaim for breach of fiduciary duty. Lyssenko claims that he is entitled to judgment as a matter of law because the undisputed facts establish that he neither breached his obligations to ITP nor damaged ITP in any way. The motion is granted in part and denied in part.

Factual Background

The following undisputed facts are taken from the statements of fact submitted by the parties pursuant to Local Rule 56.1. (Dkt. #221, 235, 241) International Titanium Powder LLC was formed in 1997 to produce of low-cost titanium powder and titanium alloyed powder through its patented Armstrong Process. Initially, ITP was a small research and development company, but later began seeking government funding in order to further its production capabilities. ITP hired Taras Lyssenko ("Lyssenko") to assist with business development and government relations to obtain government funding. Stanley Borys ("Borys") is ITP's CEO. When Lyssenko began working with ITP, he was not prohibited from working with all other entities. ITP did not require Lyssenko to sign an employment agreement or any other document until its formal ethics policy in April 2005. ITP, through its former CEO and board member, Arthur Wong, asked Lyssenko to provide government relations services to a company that was not in the titanium industry.

ITP formed short-term strategic partnerships with titanium consolidators and fabricators including ADMA Products, Inc. ("ADMA"). ITP tasked Lyssenko with developing relationships with titanium consolidators and fabricators because business development is tied to obtaining government funds. ITP benefitted from showing potential investors that there was a market for its titanium powder. ADMA has been in the business of consolidating titanium powder and other advanced metals into metallurgy parts since 1985. ITP and ADMA formed a "strategic partnership" that was "mutually beneficial". Through that strategic partnership ITP provided ADMA with ITP titanium powder and ADMA consolidated it. ITP and ADMA worked jointly on various projects. On occasion, ITP and ADMA attended government meetings with various units of government responsible for defense funding, including Army Research Labs and others not specified by the parties. ITP and ADMA shared a booth at the Defense Manufacturing Conference in 2004 and 2005, and gave a joint presentation at the conference. ITP informed the government that ADMA would benefit if ITP received government funds. ADMA provided letters of intent to ITP for the purchase of titanium powder, which ITP wanted to show the government and investors to obtain funding.

Lyssenko claims he was authorized to assist ADMA with obtaining government funding. ITP asserts that although it authorized Lyssenko to assist ADMA with obtaining government funding, that authorization extended only to the benefit of ITP. ADMA received government funding and paid Lyssenko for his services.

Lyssenko assisted ITP with obtaining Title III funding from the government, beginning in 2001 until 2007. ITP wanted Title III funding to construct a manufacturing plant that would produce titanium powder for commercial use. In the fall of 2007, Congress appropriated $5 million in Title III funds, ITP received $4,512, 500 out of its government contract.

On July 30, 2007, the ITP board voted to eliminate the position that Lyssenko occupied with ITP. Thereafter, Lyssenko filed suit claiming inter alia breach of contract and wrongful discharge. ITP filed a counterclaim alleging breach of fiduciary duty by providing services, during his employment with ITP, to direct competitors of ITP and to entities who competed for federal funding with ITP. The counterclaim also alleged that Lyssenko engaged in conduct , without ITP's knowledge or consent, that was counter to ITP's best interests, including diverting an ITP 2007 federal funding request from an Army line item to a Title III request, which greatly increased the risk of losing the funding. Lyssenko moves for summary judgment on the counterclaim.

Legal Standard

A party is entitled to summary judgment if all of "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). When deciding a motion for summary judgment the Court construes all reasonable inferences in the light most favorable to the non-moving party. Abdullahi v. City of Madison, 423 F. 3d 763, 773 (7th Cir. 2005) . The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). "Thus, to survive summary judgment, the nonmoving party must present evidence sufficient to establish a triable issue of fact on all essential elements of its case." Lewis v. CITGO Petroleum Corp., 561 F. 3d 698, 702 (7th Cir. 2009). On a motion for summary judgment, a court cannot make credibility determinations or weigh the evidence because those issues are for the fact finder. Betaco Inc. v. Cessna Aircraft Co., 32 F. 3d 1126, 1138 (7th Cir. 1994). With these principles in mind this Court turns to the matter at bar.

Discussion

Lyssenko argues that he is entitled to summary judgment because the undisputed facts establish that Lyssenko neither breached his obligations to ITP nor damaged ITP. To prevail on a claim of breach of fiduciary duty, a plaintiff must establish: "(1) a fiduciary duty on the part of the defendant, (2) the defendant's breach of that duty, and (3) damages that were proximately caused by the defendant's breach." DOD Techs. v. Mesirow Ins. Servs., Inc., 381 Ill. App. 3d 1042, 1046 (Ill. App. Ct. 2008)(citing Neade v. Portes, 193 Ill. 2d 433, 444 (2000)). It is undisputed in this case that Lyssenko owed ITP a duty as an employee. This Court will therefore focus its discussion on whether Lyssenko breached that duty proximately causing damages to ITP.

Lyssenko argues that his efforts to obtain Title III funding in 2007 were not a breach of his duty to ITP because ITP asked him to seek that government funding. ITP responds that a jury could reasonably find that Lyssenko breached his duty by failing to follow ITP's instruction to request U.S. Army Research Lab funding for FY 2007/2008. ITP's counterclaim alleges that Lyssenko breached his duty by "diverting an ITP 2007 federal funding request from an Army line item to a Title III request." (Counterclaim, Dkt. #9, ΒΆ18). The undisputed evidence establishes that ITP sought Title III funding in 2007, that Stanley Borys, ITP's CEO, was aware of and authorized Lyssenko to seek Title III funding. ITP has provided no evidence to the Court that creates a genuine issue of material fact on this point. Borys' testimony was clear, ITP sought Title III funding and ITP did not object to Lyssenko seeking the funding through Title III. (Dkt. # 235, Ex. 2, Borys dep. at 59). Borys also testified that he signed letters as CEO of ITP to Senator Durbin in support of Title III funding. Although he could not recall which years he signed those letters, Borys testified that "we started requesting Title III funding probably '04 or so looking at future years, sometimes for multiple years, so my guess is there's probably several letters that go back that request Title III funding for '06, '07, '08, '09, 2010. (Dkt. # 235, Ex. 2, Borys dep. at 117). That testimony, even when construed in the light most favorable to ITP, clearly establishes that ITP sought Title III funding. The fact that ITP received $5 million in Title III funding rather than the $100 million it wanted does not create a genuine issue of material fact when the record indicates that ITP approved the request for Title III funding. ...


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