Charles Ramsey Co. v. Fabtech-NY LLC

• Decision Date: 21 January 2020
• Docket Number: 1:18-CV-0546 (LEK/CFH)
• Citation: Charles Ramsey Co. v. Fabtech-NY LLC, 1:18-CV-0546 (LEK/CFH) (N.D. N.Y. Jan 21, 2020)
• Parties: CHARLES RAMSEY COMPANY, INC., et al., Plaintiffs, v. FABTECH-NY LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of New York

CHARLES RAMSEY COMPANY, INC., et al., Plaintiffs, v. FABTECH-NY LLC, et al., Defendants.

1:18-CV-0546 (LEK/CFH)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

January 21, 2020

MEMORANDUM-DECISION AND ORDER

I.INTRODUCTION

PlaintiffsCharles Ramsey Company, Inc.("Charles Ramsey" or, simply, "Ramsey") and Richard Trout(together, "Plaintiffs") have sued defendantsFabtech-NY LLC("Fabtech"), Vincent J. Hart, Jeremiah K. Hart(together, the "Harts"), John and Jane Does 1-10, and John Doe Corporation.Dkt. No. 36("Amended Complaint").In essence, this case concerns allegations by Charles Ramsey and owner Trout that the Harts, longstanding Ramsey employees, conspired with Fabtech to embezzle money from Ramsey, steal its trade secrets, and destroy its business.See Am. Compl.

Plaintiffs bring six claims under New York State tort law and allege violations of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836, et seq.Id.Fabtech and the Harts have separately moved to dismiss the Amended Complaint under Federal Rule of Civil Procedure ("FRCP")12(b)(6) for failure to state a claim upon which relief can be granted and, against Trout, under FRCP 12(b)(1) for lack of standing.Dkt. Nos. 26("Fabtech MTD"); 31 ("Hart MTD"); 33 ("Fabtech Letter" clarifying the status of their MTD arguments).Plaintiffs oppose these motions.Dkt. Nos. 39("Opposition to Hart MTD"); 40 ("Opposition to Fabtech MTD").In turn, Fabtech and the Harts have filed replies.Dkt. Nos. 41("Fabtech Reply"); 42 ("Hart Reply").

For the following reasons the Court grants in part and denies in part the motions to dismiss.

II.BACKGROUND

A.Factual Background

At this stage, "[t]he Court draws all facts, which are assumed to be true, from the Complaint."Maddison v. Comfort Sys. USA (Syracuse), Inc., No. 17-CV-359, 2019 WL 4805328, at *1(N.D.N.Y.Sept. 30, 2019)(Kahn, J.)(citingBryant v. N.Y. State Educ. Dep't, 692 F.3d 202, 210(2d Cir.2012)).Additionally, "[f]or purposes of a motion to dismiss, . . . a complaint . . . include[s] any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference . . . and documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the suit."Sprole v. Underwood, No. 18-CV-1185, 2019 WL 4736241, at *3(N.D.N.Y.Sept. 27, 2019)(Kahn, J.)(citingRothman v. Gregor, 220 F.3d 81, 88-89(2d Cir.2000)).

1.The Business and the Purchase

Charles Ramsey was founded in the Bronx, New York, in 1895. Am. Compl. ¶ 19.The company manufactured specialized hardware and components for pianos, which, until 2017, it supplied to piano manufacturers such as Steinway and Schaff.Id.¶¶ 17, 68, 158.Much later, in the 2010s, Ramsey diversified its business by beginning to polish "hose and cable reels" for a company called Hannay Reels, which supplied "the firefighting and oil and gas industries."Id.¶¶ 64-65.At the time of suit, Charles Ramsey was incorporated in Delaware and had its manufacturing facility in Kingston, NY.Id.¶¶ 20, 158.

In 1993, Trout bought Charles Ramsey with two fellow investors.Id.¶ 22.Trout is an entrepreneur who lives in Pennsylvania and has run Charles Ramsey from his offices Swedesboro, New Jersey.Id.¶¶ 1, 2, 33.In 1995, Trout bought out his co-investors and became the sole owner of Charles Ramsey.Id.¶ 31.

When Trout and his co-owners bought Charles Ramsey in 1993, the company's manager was a man named Vincent Hart.Id.¶ 26.Vincent's son, Jeremiah, also worked for Charles Ramsey, as a "manufacturing employee."Id.¶ 27.¹Vincent "made it clear to the three new co-owners that he served essential management functions and would be the key point of contact for the absentee owners, none of whom lived in or near Kingston, New York."Id.¶ 26.

2.The Assets

When Trout bought Charles Ramsey in 1993, one of his co-investors "prepared an asset book . . . in which each asset of Charles Ramsey was individually listed."Id.¶ 29.The asset book showed that "the lathes, drills, presses and other machinery acquired in the purchase of Charles Ramsey were aging and had little value, but the tooling and patterns owned by Charles Ramsey were extremely valuable to the company."Id.¶ 30.Trout "confirmed" this himself later on "through his review of the Asset Book and the facility and machinery owned by Charles Ramsey."Id.

Steinway and Schaff would later claim ownership of the valuable tooling and patterns.Steinway's claim stemmed from a 2001 fax purportedly sent to Steinway by Vincent "setting forth 'a list of pattern and tooling owned by Steinway currently being used by Charles Ramsey Co. with Steinways [sic] permission."Id.¶ 49;Am. Compl., Ex. 1.But, in fact, the equipment listed in Vincent's 2001 letter was owned by Charles Ramsey and listed in the Asset Book.Am.Compl. ¶¶ 50-53.Additionally, Vincent "lacked the authority to determine or confirm ownership of the tooling at Charles Ramsey."Id.¶ 54.The source of Schaff's claim to various elements of Charles Ramsey tooling was a June 20, 2011 letter from Schaff's president to Trout, purporting to memorialize an agreement under which Schaff would provide Charles Ramsey certain "tools and dies" in exchange for Charles Ramsey using that equipment to produce parts for Schaff.Id., Ex. 9.This letter stated that Schaff would retain ownership of the tools and dies in question and appears to be signed by Trout on behalf of Charles Ramsey.Id.

Besides the physical assets listed in the asset book, Charles Ramsey came to have another valuable asset:

Between 1993 and 2017, Trout spearheaded the development of a variety of novel processes and methods of application and employment of existing, altered and new tooling . . . in the service of Ramsey's customers.These [m]ethods include, but are not limited to, certain jig creation and replication developed by Trout and applied at the Charles Ramsey manufacturing facility . . . which achieved cost savings, efficiency and quality improvements in the disc polishing process for Hannay.Another example of the [m]ethods developed by Trout and utilized at the Charles Ramsey manufacturing facility . . . under his ownership was the development of a jig to create a leg plate which represented eighteen percent of the sales that Charles Ramsey made to Steinway.

Id.¶¶ 148-50.

Because the methods "provided Charles Ramsey with the economic edge necessary to maintain its business," Trout repeatedly told Charles Ramsey's employees that the methods were "sensitive information."Id.¶¶ 153-54.The Harts were familiar with the methods and knew that they were "sensitive."Id.¶151.

3.Crisis and Recovery

During the initial period of Trout's solo ownership, Charles Ramsey prospered."In 2000, . . . sales peaked at $1,700,000, with annual profits of almost $500,000."Id.¶ 38.Starting in 2001, however, business went into a decline.One of Charles Ramsey's major clients began tooffshore all its manufacturing, id.¶ 41, and the September 11, 2001 attacks "ushered in an industry-wide recession from which the music industry has not recovered to this day,"id.¶¶ 42-43.Because of that recession, "Charles Ramsey terminated its office manager/bookkeeper," and laid off nine of the fourteen employees who worked for the company when Trout became sole owner.Id.¶¶ 32, 44, 45.

In an effort to preserve Charles Ramsey's business, between 2006 and 2009"Trout invested $580,000 into Charles Ramsey."Id.¶ 55.In addition, Trout sought to diversify Charles Ramsey's customer base, eventually "enter[ing] into a business relationship with" Hannay Reels.Id. at 64.Hannay, along with Steinway and Schaff, became one of Charles Ramsey's most important customers.Id.¶ 68.Trout's efforts apparently paid off, as Charles Ramsey experienced "a slow but steady recovery" between 2010 and 2016. Id.¶ 57.

4.Ramsey has a Hart-to-Hart Succession

Around 2010, "Vincent Hart transitioned into a part-time position due to his advanced age," and Jeremiah took over his father's role as "Vice President of Operations."Id.¶ 58.This transition led to complications.

First, while "Charles Ramsey's workload only justified the employment of a single operations manager," Jeremiah "required his father's assistance in order to manage the company's day-to-day operations."Id.¶ 60.Vincent had threatened Trout that if he"was not given a part-time position and salary, he would instruct his son Jeremiah Hart to quit," which was problematic because the Harts "intentionally failed and refused to teach any other employees to perform the tasks for which they were responsible at Charles Ramsey, thereby assuring their long-term necessity to Charles Ramsey."Id.These circumstances compelled Trout to hire Vincent part time, "even though Charles Ramsey's decline in sales between 2006 and 2009 did not support this salary or justify his employment beyond one day per week at most."Id.¶ 61.

Second, "Jeremiah Hart inserted himself in the pricing negotiations with Steinway," which previously Trout had handled by himself, on an annual basis.Id.¶ 59.Jeremiah would negotiate pricing with Steinway for "each contract individually,""without notifying or seeking approval from Trout."Id.

Third, Jeremiah "was chronically absent from Charles Ramsey, and at one time even operated a house-shingling business during the workday while simultaneously collecting a salary from Charles Ramsey."Id.¶ 63, 264.

Fourth, Jeremiah "sold Charles Ramsey's excess metal as scrap" and kept the money for himself.Id.¶ 264.

And fifth, in an effort to secure his annual performance bonus, Jeremiah "terminated the existing practice of sending regular financial statements and receipts to Trout's New Jersey office," and instead "began to knowingly and intentionally misrepresent Charles Ramsey's earnings to Trout."Id.

5.The Relationship with Fabtech

In January 2014, the Harts—on behalf of Charles Ramsey—began contracting...