Cont'l Indus. Grp., Inc. v. Ustuntas

• Decision Date: 22 December 2022
• Docket Number: 16671-, 16671A,Index No. 653215/12,Case Nos. 2022-02163, 2022-02178
• Citation: 211 A.D.3d 601,181 N.Y.S.3d 527
• Parties: CONTINENTAL INDUSTRIES GROUP, INC., Plaintiff–Respondent–Appellant, v. Hakan USTUNTAS et al., Defendants–Appellants–Respondents.
• Court: New York Supreme Court — Appellate Division

211 A.D.3d 601

181 N.Y.S.3d 527

CONTINENTAL INDUSTRIES GROUP, INC., Plaintiff–Respondent–Appellant,

v.Hakan USTUNTAS et al., Defendants–Appellants–Respondents.

16671-, 16671A

Index No. 653215/12

Case Nos. 2022-02163, 2022-02178

Supreme Court, Appellate Division, First Department, New York.

Entered December 22, 2022

Dunning Rievman & MacDonald LLP, New York (Petek Gunay Balatsas of counsel), for appellants-respondents.

Lazare Potter Giacovas & Moyle LLP, New York (Michael Terrance Conway of counsel), for respondent-appellant.

Kern, J.P., Scarpulla, Rodriguez, Pitt–Burke, Higgitt, JJ.

Order, Supreme Court, New York County (Andrea Masley, J.), entered on or about December 31, 2020, which, insofar as appealed from as limited by the briefs, granted defendants’ motion for summary judgment dismissing the claims for a permanent injunction, tortious interference with prospective economic advantage, and unjust enrichment, and denied the motion as to the claims for breach of fiduciary duty, misappropriation of trade secrets, misappropriation of confidential and proprietary information, and unfair competition, unanimously modified, on the law, to grant the motion as to the unfair competition claim, grant the motion as to the breach of fiduciary duty claim insofar as it was based on Ustuntas's post-employment activity, and otherwise affirmed, without costs. Order, same court and Justice, entered on or about April 4, 2022, which granted defendants’ motion for summary judgment dismissing the claim for aiding and abetting breach of fiduciary duty, unanimously affirmed, without costs.

With regard to the breach of fiduciary duty claim, there are questions of fact as to whether a special employment relationship existed between plaintiff and defendant Hakan Ustuntas (see Stampone v. Consolidated Edison, Inc., 100 A.D.3d 573, 954 N.Y.S.2d 450 [1st Dept. 2012] ), sufficient to impute a fiduciary duty owed to plaintiff for actions taken during his employment (see e.g. Duane Jones Co. v. Burke, 306 N.Y. 172, 187–189, 117 N.E.2d 237 [1954] ; CBS Corp. v. Dumsday, 268 A.D.2d 350, 353, 702 N.Y.S.2d 248 [1st Dept. 2000] ).

There are also questions of fact as to whether Ustuntas breached that duty by deleting emails from plaintiff's server after forwarding them to his personal address, even after being told not to do so (see Maritime Fish Prods., Inc. v. World–Wide Fish Prods., Inc., 100 A.D.2d 81, 89, 474 N.Y.S.2d 281 [1st Dept. 1984], appeal dismissed 63 N.Y.2d 675 [1984] ). However, to the extent this cause of action is based on Ustuntas's post-employment contacting of plaintiff's customers and suppliers, it should have been dismissed (see Catalogue Serv. of Westchester v. Wise, 63 A.D.2d 895, 895, 405 N.Y.S.2d 723 [1st Dept. 1978] ). There is no evidence that Ustuntas solicited plaintiff's customers or suppliers on behalf of defendants Plasmar Plastik ve Kimya San. Tic. A.S. or Marchem International Trading LLP before he retired on March 31, 2008.

The court correctly dismissed plaintiff's claim that Plasmar and Marchem aided and abetted Ustuntas's breaches of fiduciary duty. The complaint fails to allege an essential element of the claim, namely, that Plasmar and Marchem had actual knowledge of Ustuntas's breach (see e.g. Kaufman v. Cohen, 307 A.D.2d 113, 125, 760 N.Y.S.2d 157 [1st Dept. 2003] ). Plaintiff contends that knowledge should be imputed to Plasmar and Marchem because Plasmar is Ustuntas's alter ego and Marchem is the alter ego of, among others, Ustuntas. However, the complaint contains no factual allegations to back up these conclusory legal assertions.

Ustuntas's beneficial interest in these entities establishes, at most, their constructive knowledge of his breach of fiduciary duty, which is insufficient to support an aiding and abetting claim ( id. at 126, 760 N.Y.S.2d 157 ).

Questions of fact exist as to whether plaintiff's alleged trade secrets were, in fact, secret, as the parties submitted sharply conflicting evidence on this issue (see Ashland Mgt. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912, 624 N.E.2d 1007 [1993] ).

A claim for misappropriation of trade secrets is governed by a three-year statute of limitations (see CDx Labs., Inc. v. Zila, Inc., 162 A.D.3d 970, 971, 79 N.Y.S.3d 285 [2d Dept. 2018] ; Andrew Greenberg, Inc. v. Svane, Inc., 36 A.D.3d 1094, 1098, 830 N.Y.S.2d 358 [3d Dept. 2007] ). Similarly, the statute of limitations for misappropriation of confidential and proprietary business information is three years (see IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 141, 879 N.Y.S.2d 355, 907 N.E.2d 268 [2009] ). The claim accrues when the plaintiff first suffers damages (see id. ).

Ustuntas solicited one of plaintiff's suppliers in December 2008 and plaintiff became aware of this on June 30, 2009 but did not sue until September 13, 2012. However, defendants did not establish that plaintiff suffered damages in December 2008 or June 2009. For example, there is no evidence that this particular supplier switched from plaintiff to Plasmar.

Questions of fact also exist as to whether defendants committed independent and distinct acts in 2010 – 2012 that constituted misappropriation of trade secrets and fell within the three-year limitations period, thereby tolling the statute of limitations pursuant to the continuous wrong doctrine (see Henry v. Bank of Am., 147 A.D.3d 599, 601, 48 N.Y.S.3d 67 [1st Dept. 2017] ). Specifically, plaintiffs submitted purchase order summaries showing that in 2010 – 2012 plaintiff's former suppliers were using defendant as a distributor.

The unfair competition claim should have been dismissed as duplicative of the misappropriation of trade secrets claim (see Continental Indus. Group, Inc. v. Altunkilic, 788 Fed. Appx. 37, 43 [2d Cir.2019]; see also Fada Intl. Corp. v. Cheung, 57 A.D.3d 406, 870 N.Y.S.2d 23 [1st Dept. 2008], lv denied 12 N.Y.3d 706, 879 N.Y.S.2d 52, 906 N.E.2d 1086 [2009] ).

Further, the claim seeking a permanent injunction was properly dismissed. Even though defendants’ opening brief before the motion court did not specifically mention a permanent injunction, it made a general argument about plaintiff's claims for equitable relief. There is no indication in the record that defendants will misappropriate plaintiff's trade secrets in the future (see Exchange Bakery & Rest. v. Rifkin, 245 N.Y. 260, 264, 157 N.E. 130 [1927] ["Equity is to be invoked only to give protection for the future"]). Plaintiff itself recognized that it cannot enjoin defendants in perpetuity. Indeed, it asked the court to enjoin defendants from contacting its customers and suppliers for at least five years. This action was commenced more than 10 years ago.

We agree with the motion court that the statute of limitations for plaintiff's breach of fiduciary duty claim is six years, albeit for a different reason. Since we are affirming the dismissal of plaintiff's request for a permanent injunction, p...