“Knowing” And “Intentional” Defalcation Yields Goliath Punitive Damages Award

This week, drawing inspiration from Peter Mahler’s annual Summer Shorts series of articles, we’ll feature a relatively pithy summary of an impressive post-trial decision from one of the finest judges sitting in our state capital, Albany County Commercial Division Justice Richard Platkin.

Darwish Auto Group, LLC v TD Bank, N.A., made two prior appearances on the blog.

First, Peter Mahler wrote about an injunction decision from Justice Platkin denying a motion by Walid Darwish (“Darwish”), the namesake sole equity owner of a corporation and limited liability company. Darwish’s entities owned ten upstate New York car dealerships. Darwish sought to restore his managerial rights after his removal, mere months after buying the businesses, from the companies’ three-member board of directors and management committee, by the majority non-owner managers appointed by lenders who financed Darwish’s acquisition of the dealerships with a $62 million loan. The impetus for Darwish’s removal was his co-managers’ discovery of financial improprieties by Darwish further detailed below.

Second, Peter Sluka wrote about a summary judgment decision from Justice Platkin granting summary judgment against Darwish and in favor of the two businesses on whose behalf the lender-appointed managers commenced suit directly. The Court declared Darwish powerless to manage or control the businesses after his ouster, and granted summary judgment against him on liability for breach of fiduciary duty, reserving the issue of damages for trial.

Darwish appealed both losses. In a pair of decisions available here and here, the Appellate Division – Third Department affirmed both of Justice Platkin’s opinions with only slight modification of the injunction decision’s undertaking provision.

After multiple heavy losses like these, a rational defendant might conclude that the risk of trial is just too intolerable to continue. For whatever reason, Darwish chose otherwise, rolling high-stakes dice in a bench trial before Justice Platkin from October to December 2025. The outcome was a bloodbath.

Of course, an essential part of any trial is witness credibility. The Court concluded that Darwish had none. “In light of Darwish’s persistently false testimony at trial and in pretrial proceedings regarding highly consequential matters,” Justice Platkin wrote, “the Court rejects his testimony entirely under the doctrine of falsus in uno.”

On the breach of fiduciary duty claim, the Court ruled that Darwish breached his duties to his companies by “converting” from them $4.7 million in dealer advances from Ford. “But Darwish’s defalcation of the advances was not an isolated act of self-dealing,” the Court wrote, but “just one episode in a long course of disloyal conduct” the Court lambasted as a “persistent breach of fiduciary duty.” The damages award was mammoth: $4.7 million for the converted cash advances and a stunning $16.2 million in lost future profits.

 Commercial courts occasionally award punitive damages in business divorce cases, as we wrote in our articles on O’Mahony v Whiston and Hall v Middleton. Both happened to be decisions from New York County Commercial Division Justice Jennifer G. Schecter. Both were affirmed on appeal (you can read the appellate opinions here and here). The punitive damages award in O’Mahony was modest: $100,000 per defendant. The punitive damages award in Hall was more substantial: $1,000,000.

In Darwish, the Court awarded punitive damages on an entirely different scale. Justice Platkin saved his harshest words for the punitive damages section of the decision, employing colorful language like:

• “egregious misconduct”

• “morally reprehensible”

• “conscious disregard of the interests of others”

• “aggravating” and “outrageous” behavior

• “precisely the type of willful and wanton misconduct warranting the assessment of punitive damages”

• “defalcation” that was “intentional and knowing”

• conduct undertaken with “full knowledge of the improper nature of his conduct, rather than out of inadvertence, negligence or mistake”

In withering language, the Court concluded:

In fact, the Court finds Darwish’s entire course of conduct in relation to the companies and dealerships — from his repudiation of the governance and ownership structure he assented to . . . through his diversion of almost $5 million in dealership advances, to his post-termination efforts to sabotage the dealerships — was willful and egregious. Darwish did not have the best interests of the companies or dealerships at heart, only his own personal and pecuniary interests. Darwish refused to recognize the authority of the governing bodies and saw no distinction between the companies and himself. He viewed the companies and dealerships as mere extensions of his own pocketbook and essentially admitted to ignoring [his] agreements based on fanciful arguments that the agreements were never effective. The evidence at trial clearly and convincingly establishes that Darwish acted in bad faith and with conscious and deliberate disregard for the rights of the companies, the dealerships and their employees. . . . Darwish did not merely breach his duty to plaintiffs; he deceived plaintiffs and the Court as to his actions, and he used that deception to buy the time and cover he needed to place the balance of the advances beyond ready recovery.And the injury to the companies was the intended object of Darwish’s deception, and he accomplished it willfully, maliciously, and without just cause or excuse.

Based upon these fact findings, the Court threw the book at Darwish, imposing against him a goliath $7.6 million punitive damages award, exactly double the amount Darwish took in dealer advances after signing an affirmation swearing that the advances “have not been misappropriated. They remain in a proper account to pay back the advance.”

Altogether, inclusive of compensatory and punitive damages, Darwish now faces an imminent money judgment exceeding $30 million, plus prejudgment interest.

After a crucial Allied victory over Axis forces, Winston Churchill famously said, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Post-trial decisions are kind of like that. Less than two weeks after Justice Platkin issued his scholarly decision, Darwish moved to set it aside. This is hardly the end.