Beverage Marketing Usa, Inc. v. South Beach Beverage Co., Inc.

• Decision Date: 11 July 2005
• Docket Number: 2004-05847.
• Citation: Beverage Marketing Usa, Inc. v. South Beach Beverage Co., Inc., 20 AD3d 439, 799 N.Y.S.2d 242, 2005 NY Slip Op 5881, 2005 WL 1635117 (N.Y. App. Div. 2005)
• Parties: BEVERAGE MARKETING USA, INC., Plaintiff, and HORNELL BREWING CO., INC., Appellant, v. SOUTH BEACH BEVERAGE COMPANY, INC., et al., Respondents.
• Court: New York Supreme Court — Appellate Division

20 A.D.3d 439

799 N.Y.S.2d 242

2005 NY Slip Op 05881

BEVERAGE MARKETING USA, INC., Plaintiff, and HORNELL BREWING CO., INC., Appellant, v. SOUTH BEACH BEVERAGE COMPANY, INC., et al., Respondents.

2004-05847.

Appellate Division of the Supreme Court of the State of New York, Second Department.

July 11, 2005.

In an action, inter alia, to recover damages for misappropriation of trade secrets, the plaintiff Hornell Brewing Co., Inc., appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Austin, J.), entered April 7, 2004, as denied that branch of the plaintiffs' motion which was for leave to amend the complaint to assert a new cause of action to recover damages for unfair competition.

Ordered that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the plaintiffs' motion which was for leave to amend the complaint to assert a new cause of action to recover damages for unfair competition is granted.

After the Supreme Court, inter alia, granted that branch of the defendants' motion which was pursuant to CPLR 3211 (a) (5) to dismiss the cause of action to recover damages for unfair competition, the plaintiffs moved, among other things, for leave to amend the complaint to assert a new cause of action to recover damages for unfair competition under a new theory. The Supreme Court denied that branch of the plaintiffs' motion, finding that the proposed amendment was without merit because the plaintiffs were collaterally estopped by a prior federal action from establishing the likelihood of confusion element of an unfair competition claim. We disagree with the Supreme Court's conclusion that likelihood of confusion is an essential element of the proposed amended unfair competition claim, and thus reverse.

A party asserting a claim for unfair competition predicated upon trademark infringement or dilution in violation of General Business Law §§ 360-k and 360-l must show that the defendant's use of the trademark is likely to cause confusion or mistake about the source of the allegedly infringing product (see Allied Maintenance Corp. v Allied Mech. Trades, 42 NY2d 538 [1977]). Here, however, the plaintiffs' proposed amended unfair competition claim is not grounded on trademark-related theories. Rather, the plaintiffs' proposed amended claim is based upon the alleged bad faith misappropriation of a commercial advantage belonging to another "by exploitation of proprietary information or trade secrets" (Eagle Comtronics v Pico Prods., 256 AD2d 1202, 1203 [1998]). Under this theory, the allegations that the defendants exploited proprietary information and trade secrets acquired by the defendant John Bello during his employment as a vice president of the plaintiff Hornell Brewing Co., Inc., are sufficient to state a cause of action for unfair competition (see Bender Ins. Agency v Treiber Ins. Agency, 283 AD2d 448 [2001]; CBS Corp. v Dumsday, 268 AD2d 350 [2000]; Laro Maintenance Corp. v Culkin, 267 AD2d 431 [1999]; Montrallo v Fritz, 176 AD2d 1215 [1991]). Accordingly, the proposed amended unfair competition claim is not patently without merit. Moreover, since the proposed amendment merely seeks to add a new theory of recovery, without alleging new or different transactions, the defendants would not be surprised or prejudiced by the amendment (see CPLR 3025 [b]; ...