United States District Court, S.D. New York
For Plaintiff: John A. Boyle, Esq., Kevin H. Marino, Esq., Marino Tortorella, P.C., Chatham, NJ.
For Defendant: Joshua H. Epstein, Esq., Amanda Lee Van Hoose, Esq., Sorinrand LLP, New York, NY.
OPINION AND ORDER
Shira A. Scheindlin, U.S.D.J.
Morgan Stanley brings this action against Joseph F. " Chip" Skowron III seeking compensatory and punitive damages, disgorgement, reimbursement, contribution, and attorneys' fees in connection with Skowron's acts of insider trading while employed at Morgan Stanley. The Complaint asserts five causes of action: Faithless Servant, Breach of Fiduciary Duty, Fraud, Breach of Contract, and Contribution. On May 3,2013, Skowron moved to dismiss the fraud, contribution, and part of the breach of fiduciary duty claims. I granted Skowron's motion with respect to the contribution and fiduciary duty claims, but denied the motion with respect to the fraud claim.
Morgan Stanley now moves for partial summary judgement on its faithless servant claim, which seeks disgorgement of Skowron's salary from April 2007 through November 2010. For the following reasons, Morgan Stanley's motion is GRANTED.
In December 2006, Morgan Stanley acquired a hedge-fund management company called FrontPoint Partners LLC (" FrontPoint" ). Skowron was employed as a co-portfolio
manager at FrontPoint at the time of the acquisition. By letter dated October 31, 2006 (the " Offer Letter" ), Morgan Stanley offered Skowron a position as Managing Director and Senior Portfolio Manager. The Offer Letter states that Skowron will receive an annual base salary of $1.5 million, plus Management Fees and Incentive Fees to be calculated based on the overall size and performance of the investment funds managed by Skowron and his co-portfolio managers.
The Offer Letter was accompanied by Morgan Stanley's standard sign-on agreement (the " Sign-on Agreement" ), which was made " a material part of the Firm's offer of employment."  The Sign-on Agreement contains a choice-of-law provision that states: " This Agreement shall be governed by the laws of the State of New York without regard to any conflicts or choice of law principles." 
Both the Offer Letter and the Sign-on Agreement require Skowron to comply with Morgan Stanley's Code of Conduct. The Code of Conduct prohibits insider trading and requires employees to safeguard confidential information and cooperate fully with governmental and internal investigations. The Code of Conduct also requires employees to promptly notify Morgan Stanley if they may have violated the law or the firm's policies.
Between April 12, 2007 and December 1, 2010, Morgan Stanley paid Skowron $31,067,356.76 in compensation. On August 15, 2011, Skowron pled guilty to conspiracy to commit insider trading from at least April 2007 through November 2010. In his plea colloquy, Skowron admitted to selling stocks held by Morgan Stanley's portfolios on the basis of material non-public information, and then lying to the SEC under oath regarding his receipt of such information. The above actions took place during his tenure as a Morgan Stanley employee.
At the sentencing hearing, Judge Denise Cote sentenced Skowron to five years in prison and awarded Morgan Stanley restitution of twenty percent of Skowron's compensation during the period of the conspiracy. Morgan Stanley then brought this civil case against Skowron seeking forfeiture of the ...