First Mfg. Co. v. Young
| Decision Date | 03 November 2014 |
| Docket Number | No. 067961/2014.,067961/2014. |
| Parties | FIRST MANUFACTURING CO., INC., Plaintiff v. Steven YOUNG, Laura Birke, and Shaf International, Defendants. |
| Court | New York Supreme Court |
Meyer, Suozzi, English et al., Garden City, for Plaintiff.
Cohn, Lifland, Perlman et al., Saddle Brook, NJ, for Defendants.
ORDERED that this motion (No.001) by the plaintiff for an order enjoining and restraining the defendants, their agents and employees, from divulging, disclosing or reproducing to others any confidential information revealed, obtained or developed during the course of the individual defendants' former employment with the plaintiff and restraints against the use of the plaintiff's confidential information and further restraining the defendants from soliciting the plaintiff's customers or employees and an order directing the defendants to identify all persons and entities to whom the plaintiff's confidential information was divulged or otherwise shared, is considered under CPLR 6311 and is granted, conditionally to the extent set forth below.
The plaintiff is a wholesale provider of leather goods and apparel designed for the motorcycle industry, including, jackets, vests, gloves, face masks and helmets which it manufactures and sells under its own labels to small and medium size retailers in the United States and Canada. Defendants Young and Birke are former employees of the plaintiff who are now employed by defendant, Shaf International, a New Jersey corporation that competes directly with the plaintiff. The plaintiff charges defendants Young and Birke with misappropriating proprietary confidential information and trade secrets while in the employ of the plaintiff and the subsequent divulgement and use thereof by them and defendant Shaf International, who now employs the individual defendants. Damages, together with permanent injunctive relief, are demanded under tort theories sounding in, among others, breaches of fiduciary duties on the part of the individual defendants, the aiding and abetting of those breaches by defendant Shaf and the misappropriation of trade secrets and acts of unfair competition on the part of all defendants.
By the instant motion (# 001), the plaintiff seeks the preliminary injunctive relief outlined above. The motion is collectively opposed by the defendants who appear herein by counsel whose sole office address is listed as one in New Jersey, the home state of defendant Shaf. Reply papers from the plaintiff were received by the court in which no objection to the appearance of the defendants by out-of-state counsel having no apparent office presence in New York was interposed. Upon consideration of the parties' submission, the court grants the motion, conditionally, for the reasons stated below.
That employees owe fiduciary duties, including duties of loyalty and good faith, to their employer in the performance of their duties is well established (see Lamdin v. Broadway Surface Adv. Corp., 272 N.Y. 133, 5 N.E.2d 66 [1936] ; Qosina Corp. v. C & N Packaging, Inc ., 96 AD3d 1032, 948 N.Y.S.2d 308 [2d Dept 2012] ; 30 FPS Prod., Inc. v. Livolsi, 68 AD3d 1101, 891 N.Y.S.2d 162 [2d Dept 2009] ; American Map Corp. v. Stone, 264 A.D.2d 492, 492–493, 694 N.Y.S.2d 704 [2d Dept 1999] ). Actionable breaches of such duties usually result in a personal gain to the employee and losses to the employer and are generally premised upon conduct by which profits, business opportunities, the raiding of employees and other assets including confidential and proprietary information of the employer are lost or diverted (see Western Elec. Co. v. Brenner, 41 N.Y.2d 291, 392 N.Y.S.2d 409 [1977] ; Qosina Corp. v. C & N Packaging, Inc., 96 AD3d 1032, supra; American Map Corp. v. Stone, 264 A.D.2d 492, supra; Gomez v. Bicknell, 302 A.D.2d 107, 756 N.Y.S.2d 209 [2d Dept.2002] ; W. Bruno Co. v. Friedberg, 21 A.D.2d 336, 250 N.Y.S.2d 187 [1st Dept 1964] ). Liability for such conduct may arise under the long standing rule that the fiduciary status of an employee imposes a duty upon such employee to refrain from using confidential knowledge acquired during his or her employment in competition with the employer (see Byrne v. Barrett, 268 N.Y.199, 197 NE 217 [1935] ), thereby precluding an employee who gained knowledge of a secret from availing themselves of it for their private advantage against their employer (see Kaumagraph Co. v. Stampagraph Co., 235 N.Y. 1, 138 NE 485 [1923] ).
Although an employee owes fiduciary duties of good faith and loyalty to an employer, the employee may incorporate a business prior to leaving the employer without breaching any fiduciary duty (see Island Sports Physical Therapy v. Burns, 84 A.D.2d 878, 923 N.Y.S.2d 156 [2d Dept 2011]; Schneider Leasing Plus v. Stallone, 172 A.D.2d 739, 569 N.Y.S.2d 129 [2d Dept 1991] ). The employee may not, however, solicit his or her employer's customers or otherwise compete during the course of his or her employment by the use of the employer's time, facilities or proprietary information (see 30 FPS Prods. Inc. v. Livolsi, 68 AD3d at 1102, supra; Schneider Leasing Plus v. Stallone, 172 A.D.2d 739, supra; cf., A & Z Scientific Corp. v. Latmoire, 265 A.D.2d 355, 696 N.Y.S.2d 495 [2d Dept 1999] ). Where it is shown that trade secrets or other proprietary or confidential material belonging to the employer were used or there was other wrongful conduct by the employee, including the use of fraudulent methods or the engagement in a physical taking or copying of the employer's documents, lists or files, such conduct is actionable in tort (see Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 386 N.Y.S.2d 667 [1976] ; Island Sports Physical Therapy v. Kane, 84 AD3d 879, supra ). In such cases, it is the employee's misuse of the employer's resources to compete with the employer that is actionable as a breach of fiduciary duty (see Cerciello v. Admiral Ins. Brokerage Corp., 90 AD3d 967, 936 N.Y.S.2d 224 [2d Dept 2011] ; 30 FPS Prod., Inc. v. Livolsi, 68 AD3d 1101, supra; Computer Task Group, Inc. v. Professional Support, Inc., 88 A.D.2d 768, 451 N.Y.S.2d 502 [4th Dept 1982] ).
Once the employment is terminated, the relationship between a former employee and employer is not fiduciary in nature (see City Store Gates MFG, Corp. v. Empire Rolling Gages Corp., 113 AD3d 718, 979 N.Y.S.2d 606 [2d Dept 2014] ; FAB Indus. v. BNY Fin. Corp., 252 A.D.2d 367, 675 N.Y.S.2d 77 [1st Dept 1998] ). The former employee is free to solicit customers or to otherwise compete with his or her former employer where remembered information as to specific needs and business habits of particular customers is not confidential or otherwise proprietary in nature (see Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, supra; Island Sports Physical Therapy v. Burns, 84 A.D.2d 878, supra; Pearlgreen Corp v. Yau Chi Chu, 8 AD3d 460, 778 N.Y.S.2d 516 [2d Dept 2004] ; Falco v. Parry, 6 AD3d 1138, 775 N.Y.S.2d 675 [2d Dept 2004] ). However, a former employee is not entitled to solicit customers by fraudulent means, the use of trade secrets or confidential information, even in the absence of a restrictive covenant (see Support Systems Associates, Inc. v. Tavolacci, 135 A.D.2d 704, 522 N.Y.S.2d 604 [2d Dept 1987] ).
Wrongful misappropriations of trade secrets or other confidential or proprietary information by former employees or others having no employment relationship with the plaintiff may be actionable as common law unfair competition claims (see Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 328 N.Y.S.2d 423 [1972] ; Town & Country House & Home Service, Inc. v. Newbery, 3 N.Y.2d 554, 170 N.Y.S.2d 328 [1958] ; Ingenuit, Ltd. v. Harriff, 33 AD3d 589, 822 N.Y.S.2d 301 [2d Dept 2006] ; Zurich Depository Corp. v. Gilenson, 121 A.D.2d 443, 503 N.Y.S.2d 415 [2d Dept 1986] ). Such claims are rooted in the bad faith misappropriation of the plaintiff's property, or its labors and expenditures or a commercial advantage belonging to the plaintiff such as its good will and generally concern the taking and use of such property right or commercial advantage to compete against the plaintiff (see ITC Ltd. v. Punchgini, Inc., 9 NY3d 467, 476–478, 850 N.Y.S.2d 366 [2007] ). The bad faith misappropriation of a property or a commercial advantage belonging to the plaintiff by the infringement or dilution of a trademark or trade name or by the exploitation of proprietary information and/or trade secrets are both actionable as common law unfair competition claims (see Out of Box Promotions, LLC v. Koschitzki, 55 AD3d 575, 866 N.Y.S.2d 677 [2d Dept 2008] ; Beverage Marketing USA, Inc. v. South Beach Beverage Co., Inc., 20 AD3d 439, 799 N.Y.S.2d 242 [2d Dept 2005] ; Eagle Comtronics, Inc. v. Pico Prods., Inc., 256 A.D.2d 1202, 682 N.Y.S.2d 505 [4th Dept 1998] ).
To succeed on a claim for the misappropriation of trade secrets under New York law, a party must demonstrate: (1) that it possessed a trade secret, and (2) that the defendants used that trade secret in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means (see Faiveley Transport Malmo AB v. Wabtec Corp., 559 F3d 110 [CA 2 2009] ; North Atl. Instruments, Inc. v. Haber, 188 F3d 38 [CA 2 1999] ). Traditionally defined as relating to technical matters in the production of goods, trade secrets now encompass non-technical aspects of a business including, customer lists, price codes economic studies, costs reports, customer tracking and marketing strategies (see 1 Trade Secrets § 3:3; 2 Trade Secrets Law § 50:7). In New York, a trade secret is defined as any formula, pattern, device or compilation of information which is used in one's business and which gives the owner an opportunity to obtain an advantage over competitors who do not know or use it (see Ashland Mgt. Inc. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912 [1993] ; see also Restatement of Torts § 757, comment [b] ). An essential...
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