Levin v. Fidelco Guide Dog Foundation Inc.
When ruling whether a transaction is fair, courts may consider whether: 1.) the fiduciary disclosed all the pertinent information; 2.) consideration was adequate; 3.) the principal received competent, independent advice; and 4.) both parties were sophisticated and equally powerful. The plaintiff, Nancy Levin, worked for Fidelco Guide Dog Foundation Inc. as a volunteer who raised puppies for the blind and eventually became executive vice president and a member of the board of directors. In 2006, Executive Director George Salpietro contacted an attorney, Michael Levin (Nancys husband), to discuss written employment contracts for Salpietro and Nancy Levin. Salpietro and Michael Levin hired the law firm of Reid & Reige to represent Fidelco. Allegedly, Fidelco agreed to pay Nancy Levins wages between 2006 and 2010, and it actually paid her wages until October 2009. Nancy Levin sued Fidelco, alleging it breached the written employment contract. The court rejected Nancy Levins argument that she did not owe a fiduciary duty to Fidelco, because she was not a member of the board of directors when she signed the employment contract. Nancy Levin continued to work as an officer. The court found that Nancy Levin owed a fiduciary duty to Fidelco. Nancy Levin claimed that she negotiated with Salpietro, and that there was no self-dealing. There was no evidence that employment contracts resulted from negotiations between Salpietro and the board of directors. If self-dealing is defined as participation in a transaction that benefits oneself instead of another who is owed a fiduciary duty, then Executive Director Salpietro and Executive Vice President Nancy Levin both engaged in self-dealing. Nancy Levins employment remained the same, except that she reduced the number of hours worked and continued to receive the same amount of pay. Nancy Levin failed to establish consideration was adequate or that a separate, deferred compensation contract was reasonable. Fidelcos expert testified that similar nonprofit organizations did not provide as much deferred compensation to executive vice presidents. The court was not persuaded that Fidelco received competent, independent advice, when Fidelco approved the contracts, which did not result from arms-length negotiations, and it granted judgment to Fidelco.