606 751 federal supplement, 2d series

606 751 FEDERAL SUPPLEMENT, 2d SERIES

TYCO INTERNATIONALLTD., Plaintiff,

v.

Frank E. WALSH, Jr., Defendant.

No. 02 Civ. 4633 (DLC).

United States District Court,S.D. New York.

Oct. 20, 2010.Background: Bermuda corporation suedits lead outside director, alleging that hebreached his fiduciary duty to the corpora-tion’s board by failing to disclose a $20million payment by the corporation’s chiefexecutive officer to the director for his rolein facilitating a merger, and seeking torecover interest on the payment, which thedirector returned to the company pursuantto a plea agreement in a criminal proceed-ing, as well as consequential and punitivedamages.Holdings: The District Court, DeniseCote, J., held that:(1) Bermuda law, rather than New York

law, governed, and(2) corporation’s board implicitly ratified

the director’s breach of fiduciary duty.Ordered accordingly.

1. Corporations and Business Organiza-tions O3188

Under New York choice of law rules,Bermuda law, rather than New York law,governed Bermuda corporation’s claimsagainst an outside director for breach offiduciary duty in failing to disclose to theboard a $20 million payment for his role infacilitating a merger, seeking to recoverinterest on the payment as well as conse-quential and punitive damages; activitiescentral to the corporation’s claim occurredin Bermuda, and there was no reason notto follow New York’s internal affairs doc-trine, which typically applied the law of thestate of incorporation to claims involving a

director’s duties to the corporation, despiteclaim that the director was not serving onthe board when suit was brought.


Under Bermuda law, corporation’slead outside director breached his fiducia-ry duty to the corporation by failing todisclose and seek board approval for a $20million payment received for his role infacilitating a merger.


Under Bermuda law, corporation’sboard implicitly ratified a lead outside di-rector’s breach of fiduciary duty in failingto disclose and seek board approval for a$20 million payment received for his rolein facilitating a merger, despite claim thata dishonest breach of fiduciary duty wasincapable of ratification; corporate by-lawspermitted the board to approve a grant ofspecial compensation to a director, and theboard ratified the breach through its pub-lic filings and statements signaling approv-al of the payment, as well as its failure toseek return of the payment until monthsafter learning of it.

4. Corporations and Business Organiza-tions O1841, 1880

Under Bermuda law, corporateboard’s ratification of a $20 million pay-ment to an outside director defeated cor-poration’s claim that the director induced abreach of fiduciary duty by the corpora-tion’s chief executive officer and chief fi-nancial officer.

5. Conversion and Civil Theft O132Under Bermuda law, corporate

board’s ratification of a $20 million pay-ment to an outside director defeated cor-poration’s conversion claim against the di-rector; because the board ratified thepayment, the $20 million could not be

607TYCO INTERN. LTD. v. WALSHCite as 751 F.Supp.2d 606 (S.D.N.Y. 2010)

considered the corporation’s property forpurposes of the conversion analysis.


Under Bermuda law, corporateboard’s ratification of a $20 million pay-ment to an outside director defeated cor-poration’s equitable claims against the di-rector for restitution, unjust enrichment,and constructive trust, seeking recovery ofinterest on the payment.


Under Bermuda law, corporationwould not have been entitled to punitivedamages for outside director’s breach ofhis fiduciary duty in failing to disclose andseek board approval for a $20 million pay-ment received for his role in facilitating amerger, even if the board had not implicit-ly ratified the payment.


Under Bermuda law, even absent rati-fication of outside director’s breach of hisfiduciary duty in failing to disclose andseek board approval for a $20 million pay-ment received for his role in facilitating amerger, corporation would not have beenable to recover consequential damages re-sulting from a private civil action againstthe corporation, absent any showing thatdisclosure of the payment caused the filingof the action; the action was one of severalopt-out suits filed after the settlement ofconsolidated securities litigation againstthe corporation, and asserted all manner ofalleged misconduct by corporation’s board,with the payment being only one of multi-ple alleged breaches of fiduciary duty bythe board.

9. Interest O60Under Bermuda law, even if corpora-

tion had prevailed on its claims against anoutside director for breach of fiduciaryduty in failing to disclose to the board a

$20 million payment for his role in facilitat-ing a merger, the court would have award-ed interest on the payment at the rate ofseven percent for only the period beforethe director repaid the $20 million, and notthe interest on interest for a subsequenteight-year period.

10. Costs O194.10

Under a New York choice-of-law anal-ysis, Bermuda attorneys’ fees rule wouldbe treated as substantive, rather than pro-cedural, and thus, New York would applythe Bermuda rule where Bermuda lawgoverned plaintiff’s claims.

Mark Levine, Bartlit Beck Herman Pa-lenchar & Scott LLP, Chicago, IL, BryanLeach, Bartlit Beck Herman Palenchar &Scott LLP, Denver, CO, Brian Pumphrey,McGuireWoods LLP, Richmond, VA, forPlaintiff.

Michele L. Pahmer, Jeremy Rosof, Eliz-abeth Cronise, Rodger Pichardo, Stroock& Stroock & Lavan LLP, Lane New York,NY, for Defendant.

OPINION & ORDER

DENISE COTE, District Judge:

This action arises from a dispute con-cerning a corporation’s payment of a so-called ‘‘finder’s fee’’ to its lead outsidedirector for his role in facilitating a merg-er. In July 2001, L. Dennis Kozlowski(‘‘Kozlowski’’), the Chief Executive Officerof plaintiff Tyco International, Ltd.(‘‘Tyco’’), paid Tyco’s director, defendantFrank E. Walsh, Jr. (‘‘Walsh’’), a $20 mil-lion fee in connection with Tyco’s acquisi-tion of CIT Group, Inc. (‘‘CIT’’). Tyco’sboard first became aware of the paymentto Walsh in January of 2002. Tyco eventu-ally brought suit against Walsh, alleging


that he breached his fiduciary duty to theboard by failing to disclose the payment.Shortly thereafter, Walsh pleaded guilty toa violation of New York’s Martin Act andreturned the $20 million to Tyco.

Tyco now seeks recovery of interest onthe $20 million payment to Walsh andconsequential and punitive damages. Abench trial was held October 12–13, 2010.This Opinion presents the Court’s findingsof fact and concludes that although Walshbreached his fiduciary duty to Tyco byfailing to timely disclose the $20 millionpayment, Tyco’s board implicitly ratifiedthe payment through its public actions andstatements in the period immediately fol-lowing disclosure of the payment to theboard.Procedural History

On June 17, 2002, Tyco filed this actionagainst Walsh, asserting claims for restitu-tion, breach of fiduciary duty, conversion,unjust enrichment, constructive trust, andinducing breach of fiduciary duty. Thiscase returned to this Court for trial in2010, following the completion of proceed-ings before the Multi–District Litigationcourt.

The bench trial was conducted, withoutobjection, in accordance with this Court’scustomary practices for the conduct ofnon-jury proceedings. On September 17,2010, the parties submitted a Joint PretrialOrder and proposed findings of fact andconclusions of law. The parties alsoserved affidavits containing the direct tes-timony of their witnesses and copies of allthe exhibits and deposition testimony thatthey intended to offer as evidence in theircase in chief at trial.

Tyco presented affidavits constitutingthe direct testimony of David Boies(‘‘Boies’’), a lawyer at the firm Boies Schil-ler & Flexner LLP (‘‘Boies Schiller’’)which served as outside counsel to Tyco;Elizabeth Edwards (‘‘Edwards’’), a lawyerat the firm McGuireWoods LLP which

represented Tyco in the Franklin litiga-tion; and John Jenkins (‘‘Jenkins’’), theVice President, Corporate Secretary, andInternational Counsel of Tyco.

Walsh presented affidavits constitutingthe direct testimony of Andrew Martin(‘‘Martin’’), a partner in the Bermuda lawfirm of Mello Jones & Martin; and Walshhimself.

Excerpts from the depositions of someof the testifying witnesses, as well as thefollowing individuals, were offered and re-ceived into evidence at trial. The partiesoffered excerpts from the depositions ofthe following former Tyco directors: Mi-chael Ashcroft (‘‘Ashcroft’’); Joshua Ber-man (‘‘Berman’’); Richard Bodman (‘‘Bod-man’’); John Fort (‘‘Fort’’); Stephen Foss(‘‘Foss’’); Wendy Lane (‘‘Lane’’); JamesPasman (‘‘Pasman’’); W. Peter Slusser(‘‘Slusser’’); Mark Swartz (‘‘Swartz’’),Tyco’s former Chief Financial Officer;Kozlowski, the former President and ChiefExecutive Officer of Tyco and Chairmanof the Board; and Joseph Welch(‘‘Welch’’). The parties also offered thedepositions of former Tyco Chief CounselMark Belnick (‘‘Belnick’’) and Tyco in-house counsel Fatemah Sadeghi–Nejad(‘‘Sadeghi–Nejad’’), as well as the deposi-tion of Meredith Cross (‘‘Cross’’), outsidecounsel to Tyco at the firm Wilmer CutlerPickering Hale and Dorr LLP (‘‘WilmerCutler’’). The parties also offered the de-positions of the following Tyco employees:Jackson Blackstock (‘‘Blackstock’’), a for-mer analyst; Mark Foley (‘‘Foley’’), seniorvice president of finance; Maryanne Kane(‘‘Kane’’), former Chief CommunicationsOfficer; Kevin MacKay (‘‘MacKay’’), avice president and assistant controller;Kathy Manning (‘‘Manning’’), former sen-ior vice president of investor relations;Jeffrey Mattfolk (‘‘Mattfolk’’), senior vicepresident of business development; Brad-ley McGee (‘‘McGee’’), a manager of busi-


ness analysis; Patricia Prue (‘‘Prue’’), asenior vice president of human resources;and Michael Robinson (‘‘Robinson’’), atreasurer. The parties offered the testi-mony of CIT employees Albert Gamper,Jr. (‘‘Gamper’’), the former Chief Execu-tive; and William Taylor (‘‘Taylor’’), a for-mer controller. The parties also offeredthe testimony of the following auditors atPricewaterhouseCoopers: Kevin Burney(‘‘Burney’’), Dustin Minton (‘‘Minton’’), andChrista Dewire (‘‘Dewire’’).

On October 4, this Court denied Tyco’smotions in limine to exclude the testimonyof Martin, an expert in Bermuda law, andto exclude evidence of Walsh’s reliance oncounsel. The Court granted in part Tyco’smotion to exclude testimony related tocompensation received by other Tyco di-rectors. Also on October 4, the Courtdenied Walsh’s motion to preclude evi-dence of damages associated with an inves-tigation conducted by Boies Schiller andthe Franklin litigation.

The Court also ruled on October 10 thatTyco would not be entitled to punitivedamages. The adoption of Bermuda law,for the reasons described below, precludesany award of punitive damages. Follow-ing the Court’s ruling, Tyco withdrew Jen-kins’ affidavit, as it related solely to theissue of punitive damages.

The following constitutes the Court’sfindings of fact and conclusions of law inthis case. While many of the findings offact appear in the next section of thisOpinion, additional findings appear later inthe Opinion as well.Findings of Fact

Plaintiff Tyco is a corporation engagedin manufacturing and services. It hadbeen a New Hampshire corporation until1997, when it became a Bermuda corpora-tion through a reverse merger with anoth-er corporation. In its Form 10–K filed onDecember 28, 2001, Tyco listed the loca-tion of its principal executive office as Ber-

muda. Defendant Walsh, a former invest-ment banker, served on Tyco’s board ofdirectors from 1992 to 2002. Walsh wasappointed Lead Director in January 2001.The appointment of Lead Director con-ferred the responsibility for helping to co-ordinate the agenda of board meetings, thenomination of new directors, and theboard’s review of the performance of theChairman. Walsh also served on Tyco’sCompensation Committee from 1997 to2000 and its Corporate Governance andNominating Committee in 2001.Walsh introduces Tyco and CIT

In late 2000, Walsh became aware thatTyco was interested in acquiring a finan-cial services company and suggested thatTyco consider acquiring CIT. After Tycoexpressed interest in CIT, Walsh arrangedfor a meeting between Kozlowski andGamper, whom Walsh knew. The meetingtook place at the Park Avenue Club inFlorham Park, New Jersey. After theinitial meeting between Kozlowski andGamper, Kozlowski thanked Walsh for hisassistance and mentioned that Walsh couldreceive a finder’s fee for his services if thetransaction were successfully consummat-ed. The two men agreed to discuss thematter further in the event Tyco succeed-ed in acquiring CIT.

In 2001, two provisions of Tyco’s Bye–Laws addressed the performance of spe-cial duties undertaken by directors for thebenefit of Tyco. In the section of the Bye–Laws addressed to ‘‘Directors’ interests,’’the Bye–Laws provided that ‘‘Any Di-rector may act by himself or his firm in aprofessional capacity for the Company,and he or his firm shall be entitled toremuneration for professional services asif he were not a Director, provided thatnothing herein contained shall authorise aDirector or his firm to act as Auditor tothe Company.’’ (Emphasis supplied.) La-ter, in a section entitled ‘‘Remuneration ofDirectors,’’ the Bye–Laws provided that


The Directors may grant special remu-neration to any Director who, beingcalled upon, shall perform any specialor extra services for or at the request ofthe Company. Such special remunera-tion may be made payable to such Di-rector in addition to or in substitutionfor his ordinary remuneration (if any) asa Director, and may be made payable bya lump sum or by way of a salary, orcommission on the dividends or profitsof the Company or of any other compa-ny in which the Company is interestedor other participation in any such profitsor otherwise, or by any or all or partlyby one and partly by another or other ofthose modes.

(Emphasis supplied.)Tyco’s Bye–Laws also required directors

to disclose conflicts of interest to theboard:

A Director who to his knowledge is inany way, whether directly or indirectly,interested in a contract or arrangementor proposed contract or arrangementwith the Company shall declare the na-ture of his interest at the meeting of theDirectors at which the question of enter-ing into the contract or arrangement isfirst taken into consideration, if heknows his interest then exists, or in anyother case at the first meeting of theDirectors after he knows that he is orhas become so interested. A generalnotice to the Directors given by a Di-rector to the effect that he is a memberof a specified company or firm and is tobe regarded as interested in any con-tract or arrangement which may afterthe date of the notice be made with suchcompany or firm shall be sufficient dec-laration of interest under this Bye–Law

in relation to any contract or arrange-ment so made; provided that no suchnotice shall be effective unless either itis given at a meeting of the Directors orthe Director giving the same takes rea-sonable steps to secure that it is broughtup and read at the next meeting of theDirectors after it is given.

(Emphasis supplied.)

Tyco Acquires CIT

Tyco’s board voted on the acquisition ofCIT during its March 12, 2001 meeting inBermuda. After Kozlowski explained theterms of the proposed merger, the boardunanimously ratified the transaction.Walsh was not present at the meeting.1

Kozlowski did not inform the board thatany compensation was owed or would bepaid to Walsh.

In the Agreement and Plan of Mergerfor the $9.5 billion acquisition of CIT, dat-ed March 12, 2001, Tyco represented that,with the exception of its investment bank-ers Lehman Brothers and Goldman, Sachs& Co., ‘‘there is no investment banker,broker, finder or other intermediary thathas been retained by or is authorized toact on behalf of [Tyco] who might be enti-tled to any fee or commission from [Tyco]TTT in connection with the transactionscontemplated by this Agreement.’’ TheAgreement was incorporated by referenceand attached to the registration statementon Form S–4 that Tyco filed with theSecurities and Exchange Commission(‘‘SEC’’) on March 29, 2001. Walsh signedthe registration statement in his capacityas a director of Tyco.Walsh Requests and Receives $20 million

After the closing of the CIT transactionin early June 2001, Walsh and Kozlowski

1. Walsh stated in his plea allocution that hehad been present at the board meeting andhad voted in favor of the merger with CIT.The board minutes indicate, however, thatWalsh was not present. Walsh had attended

a prior meeting of the board in which heendorsed the acquisition of CIT without dis-closing that he stood to gain a payment forassisting in the acquisition.


again discussed Walsh receiving a fee forintroducing CIT and Tyco. As they werenegotiating a fee of $20 million, Kozlowskitold Walsh that he hoped to avoid makingany payment to Walsh over $15 million,since a payment of that size would have tobe disclosed publicly. Ultimately, on July18, Walsh submitted an invoice for $10million for ‘‘investment banking services’’rendered in connection with the CIT acqui-sition. The cover letter attaching the in-voice was addressed to Swartz in Florida,although the invoice itself was addressedto Tyco’s New York office and it was faxedto Swartz at a New York telephone num-ber. The invoice was paid out of the Pitts-burgh, Pennsylvania bank account of TycoAcquisition Corp., a Tyco subsidiary basedin Boca Raton, Florida. In a letter of July25, addressed to Swartz in Florida al-though again faxed to a New York num-ber, Walsh thanked Tyco for agreeing tocontribute $10 million to a charity selectedby him, and designated the CommunityFoundation of New Jersey (‘‘CommunityFoundation’’) as the charity. Walsh ad-vised the Community Foundation on itsinvestment and distribution of the $10 mil-lion it received from Tyco. Tyco recordedthe entire $20 million payment on its booksas a cost related to the acquisition of CIT.It also received a receipt from the Commu-nity Foundation for use in claiming the $10million donation as a charitable contribu-tion.

During the negotiation of the fee in July,Kozlowski had asked Walsh not to discussthe fee with anyone other than Swartz andKozlowski. Walsh had not mentioned hisexpectation of a fee during the board’sdiscussion of the CIT transaction and hedid not advise his fellow directors about itat the board meeting he attended in Octo-ber. Nonetheless, at the end of the year,

on December 21, 2001, Walsh filled out aDirectors’ and Officers’ Questionnaire (‘‘D& O Questionnaire’’) in connection with thepreparation of proxy materials for a share-holders meeting. In the questionnaire,Walsh disclosed his receipt of the $20 mil-lion fee, stating:

In connection with the acquisition ofCIT Corporation, Tyco paid me a fee of$10 million for Investment Banking Ser-vices rendered. At my request, Tycocontributed $10 million to The Commu-nity Foundation of New Jersey, a publiccharity, and I was given the authority torecommend to the Foundation how thefunds would be disbursed to appropriatecharitable causes.

Walsh forwarded the questionnaire toSwartz and advised members of Tyco’slegal department that he had done so.Tyco’s Form 10–K for the fiscal year end-ing September 30, 2001, filed with the SECon December 28, did not disclose the $20million payment.

January 16, 2002 Board Discussion of TycoPayment to Walsh

Walsh’s decision to disclose the $20 mil-lion payment on his D & O Questionnairebegan a chain reaction of disclosures with-in the company that culminated in thedisclosure of the payment to Tyco’s boardand then to the public. Before the boardmeeting in which the payment was dis-closed, however, Kozlowski asked Walsh toreturn the fee. Walsh refused. Awarethat at least some board members wantedhim to repay the fee, Walsh consulted anattorney in advance of the Tyco boardmeeting.

The first time the board discussed the$20 million payment to Walsh was during aboard huddle in Boca Raton, Florida onJanuary 16, 2002, held on the eve of aformal board meeting scheduled to takeplace in Bermuda.2 The huddle was de-

2. A board huddle is a meeting of the board held to discuss informally matters that will be


scribed in an itinerary prepared for thedirectors as a ‘‘board of directors’ businessreview.’’ The main topic of discussion atthe huddle was a proposal put forth byKozlowski to separate Tyco into four inde-pendent, publicly traded companies, usingthe proceeds from the initial public offer-ings to pay down Tyco’s debt. Walsh par-ticipated in the board’s discussion of thebreak-up proposal and other issues, whichlasted several hours.

Near the end of the huddle, the boardtook up the issue of the $20 million pay-ment to Walsh for his role in Tyco’s acqui-sition of CIT. During its initial discussionof the payment, the Board told Walsh toreturn the payment and advised him that ifhe refused, he would not be renominatedto the Board. Walsh refused to return thepayment, referring to a letter dated Janu-ary 15, 2002 that he had received fromJames R. Tannenbaum at Stroock &Stroock & Lavan LLP in support of hisposition that he was entitled to the pay-ment,3 and walked out, bidding his fellowdirectors ‘‘adios.’’

After Walsh left the meeting, the re-maining directors agreed that Walsh wouldnot be renominated to the board. Manyboard members were deeply distressed tolearn that a payment of this magnitudehad been made by Kozlowski to a director,but the board took no other steps at themeeting either to ratify the payment or toseek its return. The decision to take nofurther steps to get Walsh to repay themoney can be attributed principally to twofactors. First, there was confusion amongthe directors as to whether Kozlowski had

the authority to approve the $20 millionpayment to Walsh. Second, Kozlowski es-sentially made the payment a referendumon him. He told the board that if it chal-lenged Walsh’s right to keep the payment,it was challenging him. In effect, Kozlow-ski gave the board the option to removehim as Chief Executive Officer, and it de-clined to do so. In presenting this ultima-tum, Kozlowski was well aware that Tyco’sboard would be particularly reluctant toremove him at a time when Tyco wasfacing serious challenges and as the boardwas considering and Tyco was likely toembark upon a major restructuring of thecompany. As of January 16, the boardstill had great confidence in Kozlowski’sleadership of Tyco, and therefore theboard chose not to pursue the issue of thepayment to Walsh any further. The dayafter the board huddle, Kozlowski reportedto Walsh that ‘‘the board finally camearound’’ on the issue of the payment.

A special meeting of the board held inBermuda on January 20 addressed theKozlowski proposal to break up the compa-ny into four separate companies that hadbeen presented at the January 16 boardhuddle. The board unanimously approvedthe plan. The board took no action what-soever regarding the payment to Walsh,and the Walsh payment is not mentionedin the minutes of the January 20 meeting.

Tyco promptly disclosed the $20 millionpayment to Walsh in its January 28, 2002proxy statement, prepared for Tyco’s an-nual shareholders meeting. Kozlowski’scover letter to the proxy statement drew

presented at formal board meetings. Al-though Tyco prepared agendas for the hud-dles, there is no evidence that it preparedminutes for the huddles.

3. The letter stated that ‘‘there is neither anyprovision of Bermuda law known to us, norany provision of Tyco’s Memorandum of Asso-ciation and Bye–Laws, which would in any

way limit the ability of Tyco to pay you TTT aninvestment banking fee or finder’s fee in con-nection with the acquisition [of CIT].’’ Theletter went on to note that ‘‘a cursory reviewof our database has identified a number ofinstances in which finder’s fees have beenpaid to a director in connection with an ac-quisition.’’


shareholders’ attention to the plan Tycohad announced on January 22 to separateitself into four independent, publicly trad-ed companies. Within the proxy state-ment, under the section titled ‘‘RelatedParty Transactions,’’ the payment toWalsh was described in a passage whichreads in its entirety as follows:

Mr. Walsh, a director, was instrumentalin bringing about the acquisition by asubsidiary of the Company of The CITGroup, Inc. (now Tyco Capital Corpora-tion) of Livingston, New Jersey. Forhis services, Tyco paid Mr. Walsh a feeof $10 million. In addition, at Mr.Walsh’s request, Tyco contributed $10million to a charitable fund establishedunder The Community Foundation ofNew Jersey. Mr. Walsh, as trustee ofthis fund, recommends the public chari-ties to which contributions are made.At the time of the acquisition, Mr. Walshowned 50,000 shares of common stock ofThe CIT Group, Inc., which were con-verted to 34,535 Tyco common shares atthe exchange ratio applicable to allstockholders of CIT.4

(Emphasis supplied). Berman, a Tyco di-rector and employee, who had been ap-palled to learn of the payment to Walsh,reviewed and approved this disclosure.Berman was a corporate securities attor-ney, had practiced law at a major NewYork law firm before joining Tyco in 2000,and had been present at the January 16meeting.

The Response to the Public Disclosure ofthe $20 Million Payment

The market reaction to the Tyco break-up proposal had been severely critical.Similarly, the press and corporate-gover-nance experts were highly critical of the

Tyco payment to a director for his work inbrokering an acquisition. In response,Tyco chose to defend the payment. AJanuary 29 Wall Street Journal articlereported that ‘‘Tyco spokeswoman Mar-yanne Kane said Tyco’s board decided,without any outside help, that the $20 mil-lion payment was ‘appropriate based onthe amount of work’ Mr. Walsh did, whichshe said included providing guidance, ad-vice and facilitating meetings.’’ On thesame day, Tyco released a statementwhich quoted Kozlowski as saying that thepayment of the fee had been ‘‘fully dis-closed’’ in Tyco’s proxy statement, that thefee was paid because Walsh had been ‘‘in-strumental in bringing about’’ the $9.2 bil-lion acquisition of CIT, and that the pay-ments of a $10 million fee and a $10 millioncharitable contribution were made for the‘‘services’’ that Walsh had performed. Ko-zlowski added, ‘‘ ‘The Board felt that [the]fee was appropriate in light of Mr. Walsh’sefforts.’ ’’ Referring to the post-Enronbusiness environment, Kozlowski acknowl-edged that ‘‘we are in an environmentwhere people are intensely skeptical ofcorporate America, and for that matter ofTyco.’’ The press release had been thor-oughly vetted and heavily edited beforeTyco issued it.

Several board members remember beingunhappy with the press coverage of theWalsh payment. Berman recalls telephon-ing Kozlowski and inquiring, ‘‘what’s thisin the Wall Street Journal about the boardfelt the amount of the fee was appropri-ate[?]’’ As a result of the controversy,Kozlowski asked Belnick, who had not at-tended the board’s discussion of the Walshpayment during the January 16 huddle, tospeak with the directors about Tyco’s

4. The proxy statement mistakenly stated thatWalsh owned shares in CIT prior to the publicannouncement of the merger. Walsh did pur-chase CIT shares and exchange those sharesfor Tyco stock at the time the merger was

consummated. The proxy statement also mis-takenly described Walsh as a trustee of thecharitable fund; Walsh was an advisor to thefund.


treatment of the Walsh payment in itsstatements to the press.5

Belnick got as many of the directors aspossible on the telephone for a conferencecall. The participants included Berman,Bodman, Pasman, Kane, and others. Bod-man and other directors expressed their‘‘great displeasure’’ at Tyco’s statements tothe press, particularly the statement thatthe board felt the payment to Walsh was‘‘appropriate.’’ Belnick reminded the di-rectors that he had not been present dur-ing the board’s discussion of the payment,but that based on what Kozlowski andSwartz had told him of the discussion, andfrom his work with Berman on the proxystatement, he understood that the boardhad ‘‘ratified’’ or ‘‘approved’’ the payment.Belnick emphasized repeatedly that the actof ratifying or approving the payment im-plied a judgment that the payment was‘‘appropriate.’’ At no point during the calldid any director correct Belnick and advisehim that the board had not ratified orapproved the payment. To the contrary,when Belnick explained that the board hadmany options, such as firing Kozlowski,filing suit, or setting up an independentcommittee to inquire and advise the board,Bodman disagreed, explaining ‘‘it was afait accompli, what else could we do.’’

In a February telephone call betweenBelnick and Berman, Belnick pressed Ber-man to get him the minutes from theJanuary 16 meeting reflecting the ratifica-tion so that Tyco would have back-up forthe disclosure made in the proxy state-ment. Alternatively, he asked Berman toget a board resolution ratifying the Walshpayment. Berman adamantly refused andexplained, to Belnick’s surprise, that theboard had not actually ratified the pay-

ment. Belnick pressed Berman, observingthat the only reasonable interpretation ofthe January 28 proxy statement was thatthe board had in fact approved the pay-ment to Walsh. Berman pointed out thata recent inquiry from the SEC conveyedthat the SEC had also understood theproxy disclosure of the Walsh payment toindicate that the board had approved thepayment. The SEC’s inquiry had asked,inter alia, that Tyco ‘‘address the factorsthat the board considered in arriving atthe aggregate figure of $20 million.’’ Ber-man denied that that was what the disclo-sure meant. Berman explained that hewas simply ‘‘trying to steer a middlecourse’’ in which ‘‘the Board just doesn’tratify, doesn’t not ratify.’’

Also in February 2002, at Belnick’s re-quest, Tyco’s outside counsel Wilmer Cut-ler prepared a chronology describing thecompany’s handling of the Walsh payment.An email dated February 19, sent to Bel-nick from Cross at Wilmer Cutler, at-tached the chronology as well as a sum-mary of other public transactions in whichdirectors had received finder’s fees. TheCross email stated that the ‘‘attached chro-nology shows that various news sourcesand the SEC believe that the Tyco boardapproved the Walsh payment.’’ Email cor-respondence between Wilmer Cutler andBelnick in March 2002 reflects that Bel-nick reviewed the chronology and that hisrevisions were incorporated into the docu-ment.6

During this same time period, Tyco re-ceived at least two inquiries from share-holders relating to the Walsh payment.One letter observed that ‘‘this transac-tion[ ] should have been given to a non

5. At the time, Kozlowski was ‘‘on the road’’trying to win support for the Tyco break-upplan.

6. Even though Belnick revised the chronologyso that it would conform to his understandingof events, this Opinion has not based its find-ings of fact on the description of events con-tained in the chronology.


fiduciary to complete’’ and requested that‘‘the company seek to recover the Walshpayments for the benefit of the company.’’Another shareholder wrote that he was‘‘outraged’’ to read of the Walsh paymentin the Wall Street Journal. The sameletter also noted that in a ‘‘very shortperiod of time, my investment in Tyco hasdecreased in value by almost 50 [percent].’’The shareholder warned that he was send-ing a copy of his letter to the SEC and hisU.S. Senators. Swartz’s response to thisletter on behalf of Tyco, dated March 19,2002, gives no indication that the companywas seeking to recover the payment. In-stead, it lists Walsh’s contributions to theCIT transaction, noting that ‘‘Mr. Walshoriginated the idea that Tyco acquire afinance company’’ and that prior toWalsh’s involvement, ‘‘there had been noindication that CIT management was re-ceptive to the idea of CIT being acquiredTTTT’’

At its February 20 board meeting, theboard discussed a shareholder demand let-ter regarding the Walsh payment and re-ferred the matter to its Corporate Gover-nance Committee. The board also passeda resolution amending the Bye–Laws toprovide that ‘‘no independent director shallreceive any payment for services renderedto, for or at the request of the Companyother than the director’s fees received forhis or her services as a director and thereimbursement of out-of-pocket expensesincurred in performing services as a di-rector.’’

Meanwhile, a February 11, 2002 Bar-ron’s article noted that the announcementof the break-up had unleashed a ‘‘fire-storm’’ of ‘‘rumors and innuendo’’ sur-rounding the company. The article re-

ported that ‘‘[o]ver the past two weeks,Kozlowski has been accused of everythingfrom self-dealing for having ‘dumped’ $70million of Tyco stock at higher prices inthe last fiscal year to cronyism for havingallowed outside director Frank Walsh togarner a $20 million fee from Tyco forhelping engineer the company’s $9 billiontakeover of the finance company CIT lastyear.’’ The article quoted Kozlowski asacknowledging that the Walsh paymentwas ‘‘ ‘inappropriate’ ’’ and noting that‘‘ ‘[a]fter the situation arose, the boardunanimously voted to change our bylawsso such a situation would never againarise.’ ’’ 7

Also on February 11, Walsh released astatement to the Wall Street Journalabout his role in the CIT transaction. Thestatement was released following coordina-tion with Tyco and with its prior approval.The statement noted that the ‘‘implicittrust both [Gamper and Kozlowski] had inMr. Walsh’s judgment and integrity actedas a catalyst and accelerated the negotia-tions leading to Tyco’s successful offer forCIT Group.’’ The statement went on toexplain that Kozlowski and Walsh had had‘‘a cordial, businesslike, and definitive dis-cussion about how to structure compensat-ing Mr. Walsh for his role’’ in the CITacquisition after the merger was consum-mated. The statement concluded by not-ing that ‘‘further questions about discus-sions between Mr. Kozlowski and Mr.Walsh should be referred to the company.’’

In an April 2 response to a February 12inquiry from the SEC regarding Tyco’sfailure to disclose the payment and wheth-er Walsh had voted on the CIT acquisitionin its 10–K,8 Tyco responded that the pay-ment was included as a cost related to the

7. There is no evidence in the board minutesthat this vote occurred before February 20.

8. The February 12 SEC inquiry was ad-dressed to Tyco’s December 28, 2001 Form

10–K and the January 28, 2002 Proxy State-ment. It included scores of questions, two ofwhich concerned the Walsh payment.


CIT acquisition and that Tyco did not in-clude a separate discussion of the paymentbecause ‘‘we believe that $20 million is notmaterial to our Consolidated FinancialStatements.’’ Tyco inadvertently advisedthe SEC that Walsh had ‘‘voted’’ on theCIT acquisition. The Tyco response didnot advise the SEC of any position takenby the board vis-a-vis the payment, despitethe SEC request recited above that Tycoaddress the factors that the board consid-ered in arriving at the amount of the pay-ment. It simply listed the factors thatKozlowski considered in determining theamount of the payment, noting that it rep-resented approximately two tenths of onepercent of the total transaction value. TheSEC responded on May 13, 2002 that it‘‘continued to believe’’ that Tyco needed torevise its treatment of the $20 million pay-ment and include it as a related partytransaction.Boies Schiller Retention

On April 29, at a meeting held by tele-phone conference, the Corporate Gover-nance Committee decided to recommend tothe board that action be taken to recoverthe $20 million payment.9 It expected tosupervise any lawsuit that ‘‘would bebrought.’’ The Committee also resolved to‘‘conduct a review TTT of the Company’scorporate expenditures’’ and to ‘‘ask L.D.Kozlowski and M.H. Swartz for all infor-mation concerning their transactions (andthose of affiliates) in the Company’sshares.’’ The committee promptly re-tained the law firm Boies Schiller to con-duct an investigation into the payment toWalsh and make appropriate recommenda-tions regarding corporate governance. Itasked Boies Schiller to complete that in-vestigation in roughly six weeks. The re-tention letter, dated May 17, however,gave Boies Schiller a broader mandate. It

explains that Tyco retained the firm ‘‘inconnection with the Committee’s reviewand analysis of transactions between andamong Tyco and its subsidiaries and cer-tain of Tyco’s directors and officers, andany litigation arising from or relating tothat review and analysis TTTT’’

During May, Tyco’s General CounselBelnick had advised Boies that he did notbelieve that a lawsuit by Tyco againstWalsh ‘‘was in the company’s best inter-est.’’ Tyco’s position changed in June. OnJune 1, Tyco’s board and Boies learnedthat Kozlowski was being criminally inves-tigated for a tax-related offense. Beforethat date, the only board members whowere aware that the District Attorney ofNew York County was investigating Ko-zlowski were Swartz and Kozlowski him-self. Kozlowski resigned early in themorning of June 3. With the departure ofKozlowski and Belnick, the board askedBoies Schiller for the first time to recom-mend whether litigation should be pursued‘‘as a means of recovering the Walsh pay-ment.’’ At its June 3 meeting held bytelephone conference, the board resolvedto investigate all transactions betweenTyco and its senior management, includingKozlowski.

Tyco paid Boies Schiller a $250,000 re-tainer. The law firm’s representation ofTyco during May was entirely related toits investigation into the $20 million pay-ment to Walsh. On June 1, Boies Schillerexpanded the scope of its representation ofTyco. The law firm estimates that legalfees attributable to the Walsh investigationfor May and June 2002 are in the range of$495,901, which represents the sum of theretainer fee, the fees of $193,198 for workin May, and conservatively five percent ofthe June 2002 fees, an amount equal to$52,703.10

9. The members of the committee were Ash-croft, Berman, Bodman and Fort.

10. While Boies estimates that five to fifteenpercent of the June time is attributable to the


Criminal Proceedings

Kozlowski was indicted in New YorkState court in June 2002 and resignedfrom all of his positions in the companyshortly thereafter.11 On December 17,2002, Walsh pleaded guilty in New YorkState court to a violation of General Busi-ness Law § 352(c)(6). Walsh allocutedthat at the time Tyco’s board was consid-ering the proposed acquisition of CIT andpreparing to vote on the transaction, he‘‘intentionally did not disclose to any of themembers of the Board, other than Kozlow-ski and Swartz, that [he] stood to receive asubstantial fee if the transaction was ap-proved.’’ Walsh also advised the courtthat

following the Board’s approval [of theCIT merger], a securities filing wasdone by Tyco in which the companyomitted to disclose that I was to get afee. That made the filing false. There-after, I reached an agreement with L.Dennis Kozlowski that I would receive aten million dollar fee for my services,and Tyco would further contribute tenmillion dollars to a charity recommendedby me.

A plea agreement required Walsh to payTyco restitution of $20 million, which hedid on the same day. Walsh also paid $2.5million to the State and City of New Yorkand $250,000 to the New York DistrictAttorney’s Office in lieu of fines.

The interest on the $10 million cashpayment between its receipt by Walsh onJuly 19, 2001 and his repayment to Tycoon December 17, 2002, if calculated usingNew York’s statutory rate of 9%, is$1,272,328.77. The interest on the $10 mil-lion contribution to the Community Foun-dation, between its delivery on July 30,

2001 and Walsh’s repayment to Tyco onDecember 17, 2002 is $1,245,205.48, result-ing in a total amount of interest as ofDecember 17, 2002 of $2,517,534.22. Theinterest that would have accumulated be-tween December 17, 2002 and October 5,2010 on the $2,517,534.22 figure is$1,768,550.56. These figures total$4,286,084.81.

If calculated using Bermuda’s statutoryrate of 7%, the interest on the $10 millioncash payment between its receipt byWalsh on July 19, 2001 and his repaymentto Tyco on December 17, 2002 is$989,589.04. The interest on the $10 mil-lion charitable contribution from July 30,2001 to December 17, 2002 is $968,493.15,resulting in a total amount of interest as ofDecember 17, 2002 of $1,958,082.19. Theinterest that would have accumulated be-tween December 17, 2002 and October 5,2010 on the $1,958,082.19 figure is$1,069,863.92. These figures total$3,027,946.11.

Walsh also entered into a consent judg-ment with the SEC on December 13, 2002.The consent judgment ordered restitutionof the $20 million payment, which wasdeemed satisfied by the restitution Walshpaid in the New York criminal case.

Private Civil Litigation

Tyco’s stock dropped precipitously inthe period after Tyco announced its break-up plan and disclosed the $20 million pay-ment to Walsh in its annual proxy state-ment. Numerous lawsuits were filedagainst Tyco, its officers and directors, andits outside auditor PricewaterhouseCoop-ers LLP. The securities class action law-suits were consolidated in the District ofNew Hampshire and a consolidated class

Walsh investigation, Tyco seeks only 5% ofthe fees.

11. Kozlowski and Swartz were subsequentlyconvicted at trial of grand larceny and viola-

tions of New York’s Martin Act for authoriz-ing over $100 million in ‘‘bonuses’’ fromTyco’s treasury. See People v. Kozlowski, 47A.D.3d 111, 846 N.Y.S.2d 44, 50 (2007).


action complaint was filed on January 28,2003. The consolidated complaint allegedthat Tyco’s senior management ‘‘failed todisclose and falsely denied the falsificationof Tyco’s financial reporting, reported ac-quisition costs, and the purported successof its acquisition strategy. Defendantsalso failed to disclose the looting of theCompany by its senior executives whowere conducting Tyco as a criminal enter-prise.’’ The complaint treats Tyco’s state-ments regarding the payment to Walsh aspart of a general pattern of misleading andfalse disclosures of the company’s finances.On May 30, 2007, Tyco paid $2.975 billionto settle the consolidated securities classaction.

After the consolidated securities classaction was settled, seven opt-out suitswere filed over a period of months, includ-ing Franklin Mutual Advisers, LLC v.Tyco International Ltd., No. 07–4575–B(D.N.H. filed September 24, 2007) (the‘‘Franklin litigation’’), which largely reiter-ated the allegations in the consolidatedcomplaint. Tyco calculates that it incurred$336,483.24 in attorneys’ fees in connectionwith the Franklin litigation.

Conclusions of Law

Tyco asserts claims of restitution,breach of fiduciary duty, conversion, un-just enrichment, constructive trust, and in-ducing breach of fiduciary duty againstWalsh. To resolve Tyco’s claims, it isnecessary to first address the issue ofchoice of law.

Choice of Law

[1] The parties disagree as to the gov-erning law in this case. Walsh argues thatBermuda law governs Tyco’s claims, whileTyco contends that New York law ap-plies.12

In cases where jurisdiction is based onthe diversity of citizenship of the parties, afederal court will apply the choice-of-lawrules of the forum state. Klaxon Co. v.Stentor Elec. Mfg. Co., 313 U.S. 487, 496,61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Baka-lar v. Vavra, 619 F.3d 136, 139 (2d Cir.2010). In New York, the forum state inthis case, the choice-of-law analysis gener-ally begins with a threshold determinationas to whether an actual conflict of lawsexists. GlobalNet Financial.Com, Inc. v.Frank Crystal & Co., Inc., 449 F.3d 377,382 (2d Cir.2006) (quoting Schultz v. BoyScouts of America, Inc., 65 N.Y.2d 189,197, 491 N.Y.S.2d 90, 480 N.E.2d 679(1985)). The choice of law analysis mustbe conducted separately for each claim.Id. at 383. Where an actual conflict oflaws exists, New York applies an ‘‘interestanalysis’’ to determine which jurisdiction’slaws will apply to tort claims. Id. at 384.The ‘‘interest analysis’’ provides that ‘‘ ‘thelaw of the jurisdiction having the greatestinterest in the litigation will be applied andthe only facts or contacts which obtainsignificance in defining State interests arethose which relate to the purpose of theparticular law in conflict.’ ’’ Id. (citationomitted). Where the conflict is over a lawthat regulates conduct, such as rules of theroad, ‘‘the law of the jurisdiction where thetort occurred will generally apply becausethat jurisdiction has the greatest interestin regulating conduct within its borders.’’Id. (citation omitted).

In cases involving the fiduciary duties ofa foreign corporation’s directors, however,New York courts typically will apply thelaw of the state of incorporation under the‘‘internal affairs’’ doctrine. See, e.g.,Hausman v. Buckley, 299 F.2d 696, 703(2d Cir.1962). The doctrine recognizes the

12. Tyco has not briefed or argued that the lawof a state other than New York, such as New

Hampshire or Florida, should apply here.


state of incorporation’s ‘‘authority to regu-late a corporation’s internal affairs—mat-ters peculiar to the relationships among orbetween the corporation and its currentofficers, directors, and shareholders—be-cause otherwise a corporation could befaced with conflicting demands.’’ Edgar v.MITE Corp., 457 U.S. 624, 645, 102 S.Ct.2629, 73 L.Ed.2d 269 (1982). Although thedoctrine generally governs choice-of-law insuits involving the duties of shareholdersor directors, the New York Court of Ap-peals has rejected an ‘‘automatic applica-tion’’ of the internal affairs rule. Green-spun v. Lindley, 36 N.Y.2d 473, 478, 369N.Y.S.2d 123, 330 N.E.2d 79 (1975). Thelaw of a state other than the state ofincorporation may be applied if there aresignificant contacts with that state. Id.Breach of Fiduciary Duty Applying Ber-muda Law

Bermuda’s substantive law applies toTyco’s breach of fiduciary duty claimagainst Walsh. Tyco is a Bermuda corpo-ration, and there is no reason in this casenot to follow New York’s internal affairsdoctrine, which typically applies the law ofthe state of incorporation to claims involv-ing a director’s duties to the corporation.Indeed, activities central to Tyco’s claim ofbreach of fiduciary duty occurred in Ber-muda. The March 2001 meeting at whichthe directors ratified the acquisition ofCIT took place in Bermuda, and the inter-pretation of Tyco’s Bye–Laws is governedby Bermuda law.

By contrast, New York has little connec-tion to the underlying events at issue inthis litigation. The meeting of Kozlowski,Gamper, and Walsh to discuss the mergertook place in New Jersey, while the Janu-ary 2002 board huddle took place in Flori-da.

Tyco argues against the application ofthe ‘‘internal affairs’’ doctrine, contendingthat it does not apply in cases like the oneat hand in which the director was not

serving on the board at the time suit wasbrought. Tyco relies on dicta in Edgarthat the internal affairs doctrine governsrelationships between the corporation and‘‘its current officers, directors, and share-holders.’’ Edgar, 457 U.S. at 645, 102S.Ct. 2629 (emphasis supplied). TheCourt’s use of that one word is insufficientto require deviation from the ordinaryrule. The policies that underpin the inter-nal affairs doctrine suggest applying thatdoctrine to an evaluation of conduct under-taken while the defendant was a directorof Tyco. The state of incorporation main-tains the greatest interest in regulatingthe conduct of corporations and theirboards.

Tyco has not shown, in any event, thatNew York has any particular, much less astrong, interest in Tyco’s claims againstWalsh. Tyco cites principally the follow-ing contacts with New York in support ofits contention that New York law shouldapply: (1) Walsh’s July 18, 2001 invoicewas addressed to Tyco’s New York office;(2) Walsh, Kozlowski, and Swartz wereprosecuted by the New York District At-torney’s Office and were sentenced byNew York’s courts; (3) the SEC brought afraud enforcement action against Walsh inNew York; and (4) Walsh initiated suitagainst Tyco in New York state court onclaims of indemnification. Only one ofthese contacts directly relates to the con-duct at issue in this case; all of the litiga-tion occurred after Walsh’s receipt anddisclosure of the $20 million payment andthe board’s response. As for the invoice,although addressed to Tyco’s New Yorkoffice, it was actually paid out of the Penn-sylvania bank account of a Florida-basedTyco subsidiary. It is also worth notingthat Tyco previously assented to the appli-cation of Bermuda law in a shareholderderivative suit alleging that Tyco’s di-rectors failed to disclose and fully investi-gate the extent of past misconduct by its


board. In re Tyco Int’l Ltd., 340F.Supp.2d 94, 96 (D.N.H.2004).Duties of a Fiduciary under English andBermuda Law

[2] Tyco claims that Walsh breachedhis fiduciary duty to the corporation byfailing to disclose and seek board approvalfor the $20 million payment he received inconnection with the CIT acquisition. Be-cause Bermuda law governs Tyco’s claim,it is necessary to outline the duties of afiduciary under Bermuda law.

Although Bermuda has its own courtsystem, as a British overseas territory itclosely follows English law. See CromerFinance Ltd. v. Berger, 137 F.Supp.2d 452,492 (S.D.N.Y.2001). Turning first then toan examination of English agency law, it isnot surprising to discover that the Englishand American common law of fiduciaryduty is largely the same. As in America, adirector is a fiduciary of the corporationand as such owes certain duties to thecompany:

The starting-point in general law is thata director, as a fiduciary, is not entitledto profit from his position. This rulecan be mitigated by the consent of thecompany. That consent can be given ina number of different ways: either adhoc in a general meeting or, more conve-niently, by providing a mechanism underthe articles by which directors can con-tract with the company and receive re-muneration.

Guinness PLC v. Saunders, [1990] 2 A.C.663, 667. The emphasis is on the agent’sduty to make full disclosure to his princi-pal:

Stated comprehensively in terms of theliability to account, the principle of equi-ty is that a person who is under a fidu-ciary obligation must account to the per-son to whom the obligation is owed forany benefit or gain (i) which has beenobtained or received in circumstanceswhere a conflict or significant possibility

of conflict existed between his fiduciaryduty and his personal interest in thepursuit or possible receipt of such abenefit or gain or (ii) which was obtainedor received by use or by reason of hisfiduciary position or of opportunity orknowledge resulting from it. Any suchbenefit or gain is held by the fiduciaryas a constructive trustee.

BOWSTEAD & REYNOLDS ON AGENCY 6–056(18th ed. 2006). Thus, the Court of Ses-sion in Scotland held that a director of anoil and gas company had breached hisfiduciary duty to the company by divertinga valuable commercial opportunity to asecond gas company in which he had aninterest without first disclosing the oppor-tunity to the company on whose board heserved. The court held that the directorshould have sought the ‘‘informed consent’’of the corporation’s board before pursuinga business opportunity for his own benefit.Commonwealth Oil & Gas Co., Ltd. v.Baxter, [2009] S.L.T. 1123, 1138. The par-ties have presented no evidence and thisCourt has uncovered none suggesting thatBermuda’s courts do not follow these well-established English law principles.

Walsh has acknowledged that prior tothe board’s approval of the CIT merger,he ‘‘intentionally did not disclose to any ofthe members of the Board, other thanKozlowski and Swartz, that [he] stood toreceive a substantial fee if the transactionwas approved.’’ Walsh pleaded guilty to aviolation of New York General BusinessLaw Section 352(c)(6), which prohibits anindividual from

intentionally engag[ing] in fraud, decep-tion, concealment, suppression, falsepretense or fictitious or pretended pur-chase or sale, or [making] any materialfalse representation or statement withintent to deceive or defraud, while en-gaged in inducing or promoting the issu-ance, distribution, exchange, sale, nego-


tiation or purchase within or from thisstate of any securities or commoditiesTTT and thereby wrongfully obtain[ing]property of a value in excess of twohundred fifty dollars TTTT

N.Y. Gen. Bus. Law. § 352–c(6).As a fiduciary to Tyco, Walsh had a duty

to disclose to Tyco’s board that he stood tobenefit personally from its approval ofTyco’s acquisition of CIT. Indeed, § 64(7)of Tyco’s Bye–Laws requires directors ofthe company to disclose potential conflictsof interest to the board. Therefore, Tycohas shown that Walsh breached his fiducia-ry duty to Tyco.Defenses to Tyco’s Breach of FiduciaryDuty Claim

Walsh does not contest that he breachedhis fiduciary duty to Tyco. He vigorouslydenies, however, that Tyco is entitled torecovery of any damages from him. Herelies principally on three affirmative de-fenses: ratification, waiver, and estoppel.It is only necessary to address the defenseof ratification.Bermuda Law on Ratification

[3] Although Walsh breached his fidu-ciary duty by failing to disclose his receiptof the $20 million payment, Tyco’s boardimplicitly ratified his breach. It did sothrough its public filings and statementssignaling approval of the payment, as wellas its failure to seek return of the paymentuntil months after learning of it.

Walsh’s ratification defense is governedby Bermuda law, which follows Englishlaw. English law recognizes the generalprinciple of ratification, which provides forthe retroactive validation of the acts ofagents who act outside their given scope ofauthority. Ratification can either be ex-pressly given or implied from the conductof the principal. An express ratification‘‘is a clear manifestation by one on whosebehalf an unauthorized act has been donethat he treats the act as authorized andbecomes a party to the transaction in ques-

tion. The express manifestation need notbe communicated to the third party or tothe agent.’’ Norwich Union Life & Pen-sions Ltd. v. Strand Street Properties Ltd.,[2010] E.W.C.A. (Civ.) 444, 2010 WL1608533 (citation omitted).

Ratification will be implied wherethe conduct of the person on whose be-half the unauthorized act has been done,is such as to amount to clear evidencethat he adopts or recognizes such act ortransaction and such can be impliedfrom the mere acquiescence or inactivityof the principal. The adoption of part ofa transaction operates as a ratification ofthe whole.

Id. (citation omitted). To constitute a val-id ratification, the principal ratifying theact must have ‘‘full knowledge of what [theacts in question] were, or such an unquali-fied adoption that the inference may prop-erly be drawn that the principal intendedto take upon himself the responsibility forsuch acts whatever they were.’’ Hambrov. Burnand, [1903] 2 K.B. 399, 414–15(citation omitted).

Under English law, the directors of acorporation can ratify an act entered intoon behalf of a corporation, if they areauthorized to approve such an act on be-half of the company. BOWSTEAD & REYN-

OLDS at 2–078; see also Reuter v. ElectricTelegraph Co., [1856] 119 E.R. 892, 896.‘‘It is well established at common law that,unless a company’s constitution otherwiseprovides, a board of directors can, within areasonable time, ratify the acts of a di-rector or directors who, when they acted,had no authority to bind the company.’’Eastford Ltd. v. Gillespie, [2010] C.S.O.H.132, 2010 WL 3766016. Thus, the Court ofSession held that a resolution of the di-rectors of a family company could ratifythe unauthorized initiation of suit againstone of the directors for his breach of fidu-ciary duty to the company. Id. Similarly,


the Court of Chancery upheld a board ofdirectors’ ratification of an unauthorizedallocation of shares by several directorsacting without board approval. In re Por-tuguese Consolidated Copper Mines Ltd.,[1890] L.R. 45 Ch. D. 16, 27.

Tyco argues that a dishonest breach offiduciary duty is incapable of ratificationunder English law, whether by the di-rectors or the shareholders. Tyco reliesprincipally on a statement from an opinionof the Chancery Division providing that‘‘[a] breach of duty which is dishonest andinvolves misappropriation of property froma company cannot be ratified.’’ Shaker v.Al–Bedrawi, 2001 WL 825485, at ¶ 143(Chancery Div., July 26, 2001). But theShaker court went on to note in the nextsentence that ‘‘[w]here the act consists ofan application of a company’s property in away that might have been intra vires ifdone properly, there may be ratificationprovided that there is no risk of prejudiceto creditors.’’ Id. This is precisely thesituation at issue here: under Tyco’s Bye–Laws, the payment to Walsh could havebeen approved by the directors if it hadbeen properly disclosed prior to the con-summation of the CIT transaction.

Moreover, the facts of Shaker could notbe more different than those at issue here.In Shaker, three Saudi Arabian business-men formed a company for the purposes ofoperating an Arab television and radio sta-tion in the United States. The plaintiffssupplied the capital for the business andtook a 70% stake, while the defendantBedrawi managed and controlled the busi-ness. Plaintiffs principally alleged thatBedrawi made a ‘‘secret profit’’ from thesale of part of the business by diverting $6million in proceeds from the sale for hisown personal use, without disclosing thefull amount of the sale proceeds to plain-

tiffs. Id. at ¶ 12. Walsh’s failure to timelydisclose to the board a payment that wasnegotiated by the CEO and approved bythe CFO of Tyco and that could otherwisehave been properly authorized by theboard does not begin to rise to the level ofdeceitful, intentional misappropriation ofcompany property alleged in Shaker.

Tyco further argues that Bermuda lawdoes not permit the board of directors toratify a fellow director’s breach of fiducia-ry duty, contending that ratification mustinstead be effected by a majority of share-holders. Where a director takes actionthat is beyond the power of the directorsand which would ordinarily require theapproval of the shareholders, such abreach of duty cannot be cured by ratifica-tion of the directors alone. But where, ashere, the company’s by-laws permit thedirectors to approve a grant of specialcompensation to a director, a failure tosecure board approval in advance of pay-ing such special compensation may becured by the board’s later ratification.Applying Bermuda Law to Walsh’s Ratifi-cation Defense

In 2001, when Tyco paid Walsh and hisdesignated charity $20 million in connec-tion with the acquisition of CIT, Tyco’sBye–Laws permitted its board ‘‘to grantspecial remuneration’’ to a director who‘‘perform[s] any special or extra services’’for Tyco.13 No later than the January 16,2002 board huddle, Tyco’s directors pos-sessed ‘‘full knowledge’’ of the relevantfacts—the circumstances of the paymentto Walsh and the amount of the payment.Fully informed as to the relevant facts, theboard members presented Walsh with achoice: he could return the payment, or hecould keep the money and leave the board.Walsh chose the latter course of action.For all he knew when he left the January

13. The Bye–Laws also permitted directors toreceive remuneration for professional services

performed for the company.


16 huddle, the board had allowed him tokeep the money on the condition that heresign as director. Indeed, the board didnot take any action after Walsh left thehuddle other than refusing to permitWalsh to be renominated to serve on theboard at the upcoming shareholders meet-ing. No mention whatsoever of the pay-ment was made at the official board meet-ing held on January 20, just a few daysafter the board huddle at which the pay-ment was discussed with both Walsh andKozlowski.

Further, Tyco’s proxy statement disclos-ing the Walsh payment, filed promptly af-ter the board learned of the payment at itsJanuary 16 huddle, contains no statementthat the board disapproved of the paymentor was seeking its return. Nor does itreveal that the payment was only reportedto the board after it had already beenmade. Rather, the only reasonable read-ing of the disclosure is that both the com-pany and the board found the payment tobe appropriate under the circumstances:the proxy statement reports that Walshwas ‘‘instrumental in bringing about theacquisition’’ of CIT and that the $20 mil-lion payment was made in return ‘‘[f]or hisservices’’ in the transaction. If the boardhad any reservations about the legality orpropriety of the payment, then it wouldhave been expected to disclose those reser-vations in the proxy statement, for in-stance, by indicating that it had begun aninvestigation of the payment and the ap-propriate course of action to be taken torecover it. In addition, the discussion ofthe Walsh payment is buried on page 19 ofthe proxy, in the fourth paragraph of asection entitled ‘‘Related Party Transac-tions.’’ This is hardly the kind of treat-ment that one would expect if the boardwere disavowing or even questioning thepayment. Tyco’s statements to the presson January 29, the day following the filingof its proxy, convey similar approbation.Tyco also reviewed Walsh’s press state-

ment prior to its release; the statementcontained no mention of any action by thecompany to seek return of the paymentand referred additional inquiries to thecompany.

Berman’s statements in February 2002in defense of the wording of the proxystatement confirm that the board implicitlyratified the payment. Berman told Bel-nick that he was trying to ‘‘steer a middlecourse’’ in which the ‘‘the Board justdoesn’t ratify, doesn’t not ratify.’’ In oth-er words, the board’s press releases andSEC filings would suggest to the publicthat the board approved of the payment,but the board would not pass a resolutionexpressly confirming the payment. This isthe very definition of implied ratification:the board’s actions suggested its approvalof the Walsh payment without expresslyconfirming it.

It was not until April 29, 2002, thatTyco’s Corporate Governance Committeeresolved to explore recovery of the pay-ment from Walsh, and even then it was farfrom clear that Tyco would choose to sueWalsh in the event he continued to resistrepayment. Boies Schiller was retained toinvestigate the Walsh payment in May,and suit was only initiated against Walshon June 17, after Kozlowski had been in-dicted and had left the company.

To capture the fair inferences to be tak-en from Tyco’s public statements, it isuseful to consider what the board wouldhave done had it determined at the boardhuddle to pursue recovery of the money.Viewed from that perspective, the recordis devoid of the type of action by Tyco’sboard that one would expect if the boardhad not ratified the payment to Walsh.Following the January 16 huddle, Tyco’sboard did not issue a written statementdemanding that Walsh return the paymentor pass a resolution to that effect. Nordid the board make clear in its January 28,2002 proxy statement that it disapproved


of the payment to Walsh or that it wastaking action to recover the payment fromWalsh. Further, Tyco did not retain coun-sel to investigate the Walsh payment untilMay 2002, months after the disclosure ofthe payment on January 16.

Tyco argues that the board lacked ‘‘fullknowledge’’ of the material facts surround-ing the Walsh payment in January 2002,and that this lack of knowledge motivatedthe board’s decision to retain Boies Schil-ler in May. The only undisclosed ‘‘fact’’ towhich Tyco points is that Tyco’s Form S–4,filed on March 29, 2001, had failed toreport the Tyco payment to Walsh andfalsely stated that Tyco had not paid anytype of finder’s fee in connection with theCIT acquisition. Of course, had they re-flected on this fact, the directors wouldhave understood at the January 16, 2002board huddle that the company had notpublicly reported the payment to Walsh inits SEC filings related to the CIT acquisi-tion. But ratification does not require thatthe directors have ‘‘full knowledge’’ of thelegal consequences of an act; rather, itrequires that the directors be fully in-formed as to the facts at issue, as theyclearly were. None of the directors dis-pute that they were informed at the Janu-ary 16 huddle that Walsh was paid a $20million finder’s fee in connection with theCIT acquisition and that they had not beenadvised of this payment at the time theyapproved the CIT acquisition.14 In anyevent, one of the board members, Berman,was exquisitely aware of the disclosures inthe Form S–4 filed in connection with theCIT transaction, and wanted to avoid flag-ging for the public any potential liabilitythat the company might have from itsomission in that filing of a description ofthe payments to Walsh.

Tyco also asserts that its board lackedthe ‘‘clear intent’’ necessary to find ratifi-cation of the Walsh payment. Tyco notesthat its former directors testified in theirdepositions that they did not ratify theWalsh payment at the January 16 session.These after-the-fact assertions are insuffi-cient to overcome the historical record thatin January 2002, with full knowledge of thepayment, the directors decided not to pur-sue recovery of the $20 million once Ko-zlowski advised them that he consideredthe issue a referendum on his managementof Tyco. The board’s public filings andfailure to take any action for months toforce return of the $20 million constitutean implied ratification of the payment toWalsh. Indeed, the action by the Corpo-rate Governance Committee in late April2002 to initiate an investigation is bestseen as a reaction to the firestorm ofnegative publicity that was descending onTyco over Kozlowski’s management gener-ally.

Tyco’s Claim of Inducing Breach of Fidu-ciary Duty

[4] In addition to arguing that Walshbreached his fiduciary duty to the compa-ny, Tyco also claims that Walsh inducedKozlowski and Swartz’s breaches of fidu-ciary duty. Tyco asserts that Kozlowskiand Swartz breached their duties as fidu-ciaries by authorizing and concealing thepayment to Walsh, and that Walsh ‘‘know-ingly participated’’ in the breach by agree-ing not to disclose the payment to theboard. English law recognizes the tort ofinducing a breach of fiduciary duty, see,e.g., Derby & Co. Ltd. v. Weldon, [1989] 1W.L.R. 1244, 1255, but Walsh respondsthat Bermuda law does not.15

14. It is generally accepted that ratification,once accomplished, cannot be revoked. See,e.g., BOWSTEAD & REYNOLDS at 2–097.

15. Tyco argues that New York law, ratherthan Bermuda law, applies to its claim thatWalsh induced Kozlowski and Swartz’sbreaches of duty. Tyco relies heavily on thisCourt’s decision in Cromer Finance Ltd., 137


It is unnecessary to decide if Bermudalaw has departed from its customaryadherence to English law since the board’simplied ratification of the payment toWalsh also governs any claim that Walshaided and abetted Kozlowski and Swartz intheir breaches of duty. Regardless ofwhether Kozlowski and Swartz breachedtheir duties to the board by authorizingand failing to disclose the payment toWalsh, the board retroactively validatedthe Walsh payment due its failure to takeaction and issuance of approving publicstatements after learning of the paymentat its January 16 session.

Conversion

[5] Tyco also asserts a claim of conver-sion against Walsh for wrongfully obtain-ing the $20 million payment and divertingthose funds to his own use. Bermuda lawapplies to Tyco’s conversion claim for thereasons outlined supra, namely that a Ber-muda corporation is seeking recovery ofthe money and New York lacks a compel-ling interest in the application of its law toTyco’s claims. Further, the parties havenot shown any divergence between theBermuda and New York law of conversion.

Under English law, conversion is ‘‘anyintentional dealing with another’s goods orany act of dominion, inconsistent with therights of the true owner, whether or notthe converter knows of those rights.’’ Ku-wait Airways Corp. v. Iraqi Airways Co.,

[2002] 2 A.C. 883, 1071. Thus, the essenceof the tort is the deprivation of the owner’suse and possession of the property.

Because Tyco’s board ratified the pay-ment to Walsh, the $20 million cannot beconsidered Tyco’s property for purposes ofthe conversion analysis. Ratification byits nature creates authority which relatesback to the time of the act ratified. Thus,because Tyco’s board ratified the paymentto Walsh following its January 16 session,Walsh possessed the funds on valid author-ity from the board.

Tyco’s Equitable Claims

[6] Tyco asserts equitable claimsagainst Walsh for restitution, unjust en-richment, and constructive trust and seeksrecovery of interest on the $20 millionpayment to Walsh. These claims also faildue to the board’s ratification of the pay-ment to Walsh. Bermuda law also gov-erns Tyco’s equitable claims, since underthe interest analysis performed supra,Bermuda’s interest in applying its law isgreater than that of New York.

The basis of Tyco’s equitable claims isthat ‘‘where an agent holds money whichbelongs in law or equity to his principal,any interest earned in respect of that mon-ey belongs to the principal, and the agentmust account to him for it.’’ BOWSTEAD &

REYNOLDS at 6–100. Tyco argues thatWalsh wrongfully obtained the $20 millionpayment; it follows that any interest

F.Supp.2d 452, for the proposition that theinternal affairs analysis does not apply to itsclaim that Walsh induced Kozlowski andSwartz’s breach of fiduciary duty. In Cromer,investors in an off-shore investment fundbrought suit against the fund’s Bermuda-based auditors for aiding and abetting bothbreach of fiduciary duty and common lawfraud, among other causes of action. ThisCourt held that New York law, rather than thelaw of the state of incorporation, Bermuda,governed the investors’ aiding and abettingclaims because the fraud at issue was ‘‘creat-ed and perpetuated’’ in New York. Id. at 492.

The fund in Cromer maintained ‘‘no offices,employees or operations of its own’’ in Ber-muda; rather, the fund’s assets were held incustody in New York and all investment deci-sions were made in New York from the officesof the fund’s investment manager. Id. at 461.Thus, Cromer is readily distinguishable fromthe case at hand: while the Cromer fundmaintained the most minimal of contacts withits state of incorporation, the pivotal boardmeeting in this case took place in Bermuda,Tyco’s state of incorporation, and contactswith the state of New York are insignificant.


earned on the $20 million during the peri-od in which Walsh was in possession of thepayment would also belong to Tyco. Tyco’sequitable claims fail for the same reason asits claim of conversion, namely, that be-cause ratification supplies the missing au-thority for the act of an agent, Walshvalidly possessed the $20 million duringthe period between his receipt of the fundsin July 2001 and his return of the paymenton December 17, 2002.

Moreover, Tyco’s resort to equitableprinciples is particularly unwarrantedhere. Tyco chose to pay Walsh and, whenit learned of the payment, Tyco’s boardmade a choice to acquiesce in that decision.To the extent the trial evidence illuminatedthe context in which those two choiceswere made, the reasons behind the choiceshave been outlined above. In the case ofthe board, it made a decision on January16, 2002 not to compel Walsh to repayeither the $10 million he had received orthe entire $20 million that Tyco had paid,and not to confront Kozlowski’s leadershipand decision-making authority. Theboard’s complicity at that time underminesits resort to equity once circumstanceshave changed and it has had occasion toquestion the wisdom of its earlier decision-making. The board did not anticipate thepublic outcry over the payment to Walshor Kozlowski’s disgrace. But, its reconsid-eration of the choices it first made doesnot suggest that a court sitting in equitymay or should ignore the evidence of thosestarkly different choices, choices madewhen Kozlowski was still in charge andTyco’s board valued him.Damages Generally

Having failed to prevail on its claims,Tyco is not entitled to any damages orrelief. Tyco seeks consequential and puni-tive damages on its claims of breach offiduciary duty, inducing breach of fiduciaryduty, and conversion, and it seeks interestalone on its equitable claims of restitution,

unjust enrichment, and constructive trust.Because the parties have litigated the is-sue of damages extensively, the remainderof this Opinion contains the rulings thatwould have been made on the damageissues had Tyco prevailed on any of itsclaims.

[7] Tyco would not be entitled to puni-tive damages under Bermuda law even ifthe board had not implicitly ratified thepayment to Walsh. As a general rule, theEnglish courts do not award exemplary orpunitive damages in civil cases. SeeRookes v. Barnard, [1964] A.C. 1129, 1226;see also MCGREGOR ON DAMAGES 11–003(17th ed. 2003). There are exceptions tothe general ban on punitive damages forlimited categories of cases, none of whichare implicated here. MCGREGOR at 11–017to 11–030.

[8] Further, had there been no ratifi-cation of the payment to Walsh, Tycowould still not be entitled to consequentialdamages resulting from the Franklin liti-gation. Tyco claims that because theFranklin plaintiffs sold their Tyco stockbefore the allegations against Kozlowskicame to light, at a time when only thepayment to Walsh was known, the costsassociated with defending this opt-out suitare directly attributable to Walsh’s breachof fiduciary duty. This assertion rests onthe application of the doctrine of loss cau-sation to the damages sought in theFranklin litigation. See, e.g., In re Omni-com Group, Inc. Sec. Litig., 597 F.3d 501,509–10 (2d Cir.2010). Tyco has failed toshow, however, that the disclosure of theWalsh payment caused the filing of theFranklin litigation.

The Franklin lawsuit was one of sever-al opt-out suits filed after the settlementof the consolidated securities litigationagainst Tyco. Like the consolidated com-plaint, the Franklin complaint assertedall manner of alleged misconduct by


Tyco’s board, with the payment to Walshas only one among a slew of other allegedbreaches of fiduciary duty by the board.Tyco has not supported its claim for reim-bursement of its attorneys fees incurredin defending the Franklin lawsuit with anexpert report or any persuasive analysisexplaining why the filing of the Franklinsuit some six years after the disclosure ofthe payment to Walsh was caused by thatdisclosure as opposed to the general fren-zy of litigation that followed the indict-ment of Kozlowski, and a desire by theFranklin plaintiffs and their attorneys toreceive a settlement with Tyco on morefavorable terms than the class. WhileTyco contends that the Franklin plaintiffswere motivated to opt out of the consoli-dated class action because of the compar-ative strength of their § 11 claim, that as-sertion, even if it had been proven, wouldnot substantially assist Tyco. The Frank-lin complaint identifies a host of mislead-ing disclosures and omissions in the FormS–4 that forms the basis of plaintiff’s § 11claim, including statements in Tyco’sForms 10–K and 10–Q that are incorpo-rated by reference in the Form S–4.16

Thus, the Walsh payment is merely oneof the omissions cited by plaintiff. Clear-ly the cost of defending the Franklin law-suit cannot be attributed to Walsh alone.

[9] Tyco also claims interest on the $20million payment during the period betweenWalsh’s receipt of the payment in July2001 and his return of the payment onDecember 17, 2002. Tyco further seeksthe interest accumulated on that interestbetween December 17, 2002 and the dateof trial. The Bermuda statutory rate of7% applies to Tyco’s claim for interest onthe Walsh payment. Further, since thedecision of whether to award interest is

discretionary under Bermuda law, see, e.g.,BskyB Ltd. v. HP Enters. Servs. Ltd.,[2010] E.W.C.H. 862, 2010 WL 2569123, ifthis Court had found that Tyco had pre-vailed on its claims it would have awardedTyco interest at the rate of 7% for only theperiod before Walsh repaid the $20 million,and not the interest on interest for theeight year period following 2002.

Attorneys’ Fees

Tyco also seeks an award of attorneys’fees in the event that it prevails on itsclaims. Walsh argues that New York lawapplies to Tyco’s claim for attorney’s fees,and that under New York law each partybears his own costs of litigation.

[10] Following English practice, Ber-muda law customarily awards attorneys’fees to the prevailing party, although thecourt retains ‘‘wide discretion’’ in deter-mining whether an award of fees is appro-priate under the circumstances of eachcase. See In re Tyson, 433 B.R. 68, 96 n.50 (S.D.N.Y.2010). New York choice-of-law analysis would treat the Bermuda at-torneys’ fees rule as substantive, ratherthan procedural, and thus New York wouldapply the Bermuda rule here since Bermu-da law governs Tyco’s claims. Id. at 97.Thus, if Tyco had prevailed it would beentitled to an award of attorneys’ feesunder Bermuda law, subject to the court’sdiscretion.

Conclusion

Following a bench trial on October 12–13, 2010, Tyco’s claims for restitution,breach of fiduciary duty, conversion, un-just enrichment, constructive trust, and in-ducing breach of fiduciary duty are denied.

16. Indeed, before settling the Franklin litiga-tion, Tyco moved to dismiss that portion ofthe § 11 claim premised on the Walsh pay-ment because the plaintiff had not and could

not allege that there was any agreement be-tween Walsh and Kozlowski to pay Walshuntil after the Tyco merger with CIT closed.


The Clerk of Court shall enter judgmentfor Walsh and close the case.

SO ORDERED.

,

EQUAL EMPLOYMENTOPPORTUNITY COMMISSION,

Plaintiff,

v.

BLOOMBERG L.P., Defendant.

Jill Patricot, Tanys Lancaster, JanetLoures, Monica Prestia, Marina Kush-nir and Maria Mandalakis, Plaintiffs–Intervenors,

v.

Bloomberg L.P., Defendant.

No. 07 Civ. 8383 (LAP).

United States District Court,S.D. New York.

Oct. 25, 2010.

Opinion Clarifying Prior Opinion onReconsideration Dec. 2, 2010.

Background: Equal Employment Oppor-tunity Commission (EEOC) filed actionagainst employer after several current andformer employees had filed charges withthe EEOC alleging sex/pregnancy discrim-ination and retaliation in violation of TitleVII of the Civil Rights Act. Employer filedtwo motions for summary judgment, onebased on EEOC’s failure to conciliate, andone based on statute of limitations.

Holdings: The District Court, Loretta A.Preska, Chief Judge, held that:

(1) employer had sufficient notice that itwas facing class-type claims to engagein conciliation discussions;

(2) EEOC failed to meet its duty to con-ciliate retaliation claims, and sincefurther attempts at conciliation of the

retaliation claims would be futile,sanction of dismissal was warranted;

(3) 300–day charge-filing period applied in‘‘pattern or practice’’ case involving al-legations of discrete discriminatoryacts;

(4) continuing violation doctrine had noapplication in action based on discreteacts; and, on EEOC’s motion for recon-sideration;

(5) under Lilly Ledbetter Act, EEOCcould assert some claims based oncompensation decisions that took placebefore date 300 days prior to filing ofemployee’s first discrimination charge.

Order accordingly.

1. Civil Rights O1516Under Title VII, notice of the particu-

lars of Equal Employment OpportunityCommission (EEOC) investigation is notrequired, and the scope of the EEOC’sinitial investigation does not limit thescope of the lawsuit alleging Title VII vio-lations it may later bring. Civil RightsAct of 1964, § 706(b), 42 U.S.C.A.§ 2000e–5(b).

2. Civil Rights O1516Filing a classwide Title VII lawsuit

was within the scope of Equal Employ-ment Opportunity Commission’s (EEOC)sex/pregnancy discrimination investigation;charging parties’ statements that othershad been treated in the same way led theEEOC to investigate other similarly situat-ed female employees. Civil Rights Act of1964, § 701 et seq., 42 U.S.C.A. § 2000e etseq.

3. Civil Rights O1515As part of attempting conciliation,

Equal Employment Opportunity Commis-sion (EEOC) has to provide sufficient no-tice to the employer of the nature of TitleVII charges against it so as to set the

606 751 federal supplement, 2d series

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