Innovative Networks v. Satellite Airlines, 92 Civ. 2408 (SWK).

• Decision Date: 04 January 1995
• Docket Number: No. 92 Civ. 2408 (SWK).,92 Civ. 2408 (SWK).
• Citation: 871 F. Supp. 709
• Parties: INNOVATIVE NETWORKS, INC., Plaintiff, v. SATELLITE AIRLINES TICKETING CENTERS, INC., Al Young, William Young and Bernard Barton, Jr., Defendants.
• Court: U.S. District Court — Southern District of New York

871 F. Supp. 709

INNOVATIVE NETWORKS, INC., Plaintiff, v. SATELLITE AIRLINES TICKETING CENTERS, INC., Al Young, William Young and Bernard Barton, Jr., Defendants.

No. 92 Civ. 2408 (SWK).

United States District Court, S.D. New York.

January 4, 1995.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

W. James MacNaughton, Woodbridge, N.J., for plaintiff.

Meyers Tersigni Lurie Feldman & Gray by Anthony L. Tersigni, Richard N. Gray, New York City, for defendants Satellite Airlines Ticketing Centers, Inc., Al Young and William Young.

MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

In this action for copyright and trade dress infringement, tortious interference with contract and unfair competition, defendants Satellite Airlines Ticketing Centers, Inc.,¹ Al Young and William Young (collectively, the "Satellite Defendants") move, pursuant to Federal Rules of Civil Procedure 12(c) and 56, for (1) judgment on the pleadings dismissing Counts III through VI of the Complaint;² and (2) summary judgment dismissing Count II of the Complaint.³ Plaintiff Innovative Networks, Inc. ("INI") opposes the Satellite Defendants' motion and cross-moves for partial summary judgment on liability as to Counts I, II, III and V of the Complaint. For the reasons set forth below, the parties' motions are granted in part and denied in part.

BACKGROUND⁴

I. Barton's Employment With INI

From 1989 until 1991, INI was engaged in the business of designing, constructing and leasing airline business centers (the "INI Centers").⁵ In February 1991, INI opened an INI Center in Manhattan (the "INI New York Center") and, in August 1991, INI, through a wholly-owned subsidiary, opened an INI Center in San Francisco, California (the "INI San Francisco Center"). Leonard, David and Steven Kleiman were directors and shareholders of INI during the relevant time period.

INI's largest competitor consisted of a group of companies and proprietorships known as the Satellite Companies, owned and operated by defendant Al Young. Defendant William Young, Al Young's son, works for the Satellite Companies. The Satellite Companies currently operate sixteen airline business centers in six states.

From August 1989 until July 1991, defendant Barton was an officer, director and shareholder of INI. Barton was responsible for procuring occupants for the INI Centers, negotiating leases with landlords and designing the INI Centers. On August 14, 1989, INI entered into an employment contract (the "Employment Contract") with Barton. Paragraph four of the Employment Contract provided, in relevant part, that Barton

acknowledges and agrees that all of the business leads developed during the course of employment ... shall be the property of the Employer and all of the foregoing is designated and agreed to be "Privileged Information." In the event that employment is terminated for any reason, or should this Employment Agreement not be renewed upon the expiration of its stated term, Barton agrees that he shall not directly or indirectly utilize any of the Privileged Information and will not directly or indirectly engage in any similar or competing business in the continental United States for a period of 12 months from the date of termination of employment.

See the Employment Contract, annexed to the Tersigni Aff. as Exh. "4," at ¶ 4. That same day, INI also entered into a shareholder's agreement with Barton (the "Shareholder's Agreement"). Paragraph 3.7 of the Shareholder's Agreement provided that:

In the event that the Employment Agreement ... is ... not extended, then all of Barton's ... shares shall be deemed offered to the Corporation ... which offer shall be deemed immediately accepted by the Corporation as of the date that the Corporation delivers written notice of its intention not to extend the Employment Agreement or Barton ... delivers written notice of his refusal to accept an extension offer. In such event, the terminated employee shall have the option to defer the purchase of his shares by notice given to the Corporation and the other Shareholders within 10 days from the termination date of the Employment Contract and the following shall occur: ... (e) The term of the restrictive covenant contained in Paragraph 4 of the Employment Agreement shall be extended until one year after the date of purchase of the shares.

See the Shareholder's Agreement, annexed to the Exhibits to Plaintiff's Statement of Material Facts Not in Dispute (the "Exhibits") as Exh. "2," at ¶ 3.7.

The Employment Contract expired, by its terms, on January 31, 1990. Notwithstanding the expiration of the Employment Contract, however, Barton continued to work at INI until July 24, 1991, when he left the company.

In 1990, the Youngs, the Kleimans and Barton met to discuss a possible joint venture agreement between INI and the Satellite Companies. According to Al Young:

During the course of this meeting, and at one or more follow up meetings with the Kleimans and/or Barton, plaintiff's representatives, in the context of a potential business combination, discussed their plans for new locations and generally their concepts of how the business should be operated.

See the Young Aff. at ¶ 9. Despite this meeting, the joint venture never was consummated.

In the beginning of 1991, INI developed plans for an INI Center in Orlando, Florida (the "INI Orlando Center"). As part of this development, INI negotiated with JMB Properties Company ("JMB"), the managing agent for the owner of the building, on all of the material terms of the lease for the INI Orlando Center. INI also developed a set of plans for the construction of the INI Orlando Center, including a floor plan, see blueprint for the construction of the INI Orlando Center, annexed to the Complaint as Exh. "A" (the "INI Orlando Floor Plan"),⁶ and designs for counter facilities, see blueprints, designs and drawings for the construction of INI's 32mm modular work stations, annexed to the Complaint as Exh. "B" (the "INI Work Station Designs"). In addition, INI solicited several airlines, including United Airlines, US Air and Continental Airlines, to occupy the INI Orlando Center and subsequently received a verbal commitment of occupancy from United Airlines.

In July 1991, Barton left employment with INI.⁷ At the time of his departure, INI contends that Barton took with him copies of numerous documents belonging to INI, including: (1) the INI Orlando Floor Plan; (2) the INI Work Station Designs; (3) the proposed lease between INI and JMB for the INI Orlando Center (the "Draft Lease Agreement"); (4) INI's standard license agreement (the "Standard License Agreement"); (5) INI contract proposals with United Airlines, US Air, Continental Airlines and other companies (the "Contract Proposals"); and (6) a rolodex with the names, addresses, and telephone numbers of INI's contacts (the "Rolodex").⁸ After Barton's departure, INI continued to own and operate its airline business centers in New York and San Francisco until early 1992.

II. Barton's Employment With Satellite

On August 1, 1991, Barton entered into a consulting agreement (the "Consulting Agreement") with Port Aviation Centers, Inc. ("Port Aviation"), a company owned by the Satellite Companies. The Consulting Agreement provided that Barton would be paid $15,000 for each location that Port Aviation successfully developed. See Consulting Agreement, annexed to the Exhibits as Exh. "29," at ¶ 4. Barton represented that his execution of the Consulting Agreement and his performance thereunder would not constitute a violation or breach of any other agreement to which he was a party. Id. at ¶ 7. Barton also agreed to indemnify Port Aviation against all claims resulting from a breach of his representation.

After Barton commenced employment with Port Aviation, Port Aviation developed plans to implement an airline business center at the same site in Orlando that INI was planning to use for the INI Orlando Center (the "Satellite Orlando Center"). According to INI, Barton negotiated a lease with JMB for the development of the Satellite Orlando Center. INI contends that Barton also placed United Airlines and US Air in the Satellite Orlando Center, using the Standard License Agreement to draft final lease agreements between the Satellite Companies and the airlines. In addition, the Satellite Companies placed a "Satellite" sticker over the INI name on the INI Orlando Floor Plan and distributed copies of the Plan to numerous airlines.⁹ Without revealing his change of employer, Barton also obtained from INI's architect a complete set of blueprints used to construct the INI New York Center (the "INI New York Blueprints") for use in developing the Satellite Orlando Center. The Satellite Orlando Center was opened in November 1991.

The next month, INI learned that the Satellite Orlando Center had been completed utilizing Barton's services and expertise.¹⁰ As a result, INI sent a letter to the Youngs demanding that the Youngs cease using Barton's services in violation of his contract with INI. The Satellite Defendants responded that INI's allegations were "without foundation." Subsequently, INI obtained a copyright registration for the INI Orlando Floor Plan and the INI Work Station Designs.

III. The Complaint

On March 30, 1992, INI commenced this action for copyright and trade dress infringement (Counts I and II), tortious interference with contract (Count III), breach of contract (Count IV), unfair competition and misappropriation (Count V) and conspiracy and punitive damages (Count VI). Subsequently, on May 4, 1992, the Satellite Defendants answered the Complaint and asserted a cross-claim for indemnity and/or contribution against defendant Barton.

Barton has neither appeared in this action nor answered the Complaint. In March 1993, Barton filed a voluntary Chapter Seven bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York. The...