Ocean Side Institutional Indus., Inc. v. Superior Laundry, 2007 NY Slip Op 50822(U) (N.Y. Sup. Ct. 3/29/2007), 14024-06.
| Decision Date | 29 March 2007 |
| Docket Number | 14024-06. |
| Citation | 2007 NY Slip Op 50822 |
| Parties | OCEAN SIDE INSTITUTIONAL INDUSTRIES, INC., Plaintiff, v. SUPERIOR LAUNDRY, Defendant. |
| Court | New York Supreme Court |
COUNSEL FOR DEFENDANT, Novak, Juhase & Stern, LLP, Cedarhurst, New York.
Defendant Superior Laundry ("Superior") moves for summary judgment dismissing this action. Plaintiff Ocean Side Institutional Industries, Inc. ("Ocean Side") cross-moves for summary judgment dismissing the Superior's counterclaim.
Ocean Side is an institutional supplier of linen rental, laundry service and uniform rental service. Superior is in the same business.
Ocean Side had written contracts to provide linen service to Rockaway Care Center ("Rockaway"), Hempstead Park Nursing Home ("Hempstead") and Resort Nursing Home ("Resort"). Ocean Side alleges Superior solicited the linen service from these nursing homes. As a result of Superior's actions, these nursing homes terminated Ocean Side as their linen service supplier and then began to use Superior as their supplier.
Ocean Side further alleges Superior is soliciting business from two other customers with whom Ocean Side has a written contract. Ocean Side seeks to enjoin Superior from soliciting business from these customers as well as money damages for tortious interference with contract and unfair competition resulting from Rockaway, Hempstead and Resort terminating their contracts with Ocean Side.
Superior has counterclaimed for prima facie tort. Superior alleges that Ocean Side brought this action in bad faith solely for the purpose of forcing a competitor out of business. Superior concedes it competes with Ocean Side. Superior asserts Ocean Side's actions are an effort to drive a small competitor out of business.
Superior has an absolute right to compete with Ocean Side. However, Superior does not have a right to tortiously interfere with Ocean Side's existing contractual relationships.
Tortious interference with contract involves an existing contract between Plaintiff and a third party, Defendant's knowledge of the contract, Defendant intentionally procuring the breach of that contract and damages. Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413 (1996); Kronos, Inc. v. AVX Corp., 81 NY2d 90 (1993); and Bernberg v. Health Management Systems, Inc., 303 AD2d 348 (2nd Dept. 2003).
Ocean Side had an existing contract with Rockaway, Hempstead and Resort when these nursing homes terminated Ocean Side and switched their linen service to Superior. These contracts were breached in July 2006.
The contract with Rockaway ran through November or December 2008. This contract automatically renewed for a two-year period unless either party gave notice to the other of its intent to terminate not less than sixty days prior to the termination of the initial term.
Ocean Side's contract with Hempstead ran for a period of three years commencing on December 1, 1999. The contract automatically renewed at the end of the initial term for additional terms of two years unless either party gave the other notice of their intention not to renew at least sixty days prior to end of the initial term or any renewal thereof. Based upon this provision, Ocean Side's contract with Hempstead ran at least through November 30, 2006.1
The agreement with Resort was terminable on thirty days written notice. The record does not indicate whether Resort properly terminated its agreement with Ocean Side before it began receiving linen service from Superior.
To succeed on a cause of action for tortious interference with contract, Plaintiff must prove Defendant had knowledge of the contract between Plaintiff and the third party. Fusco v. Fusco, 36 AD3d 589 (2nd Dept. 2007); and Beecher v. Feldstein, 8 AD3d 597 (2nd Dept. 2004). See also, Burns Jackson Miller Summit & Spitzer v. Lindner, 88 AD2d 50 (1st Dept. 1982), aff'd. 59 NY2d 314 (1983); and A A Tube Testing Co. v. Sohne, 20 AD2d 639 (2nd Dept. 1964). To be liable, the Defendant does not have to know the actual terms of the contract. Gold Medal Farms, Inc. v. Rutland Count Co-op Creamery, Inc., 9 AD2d 179 (3rd Dept. 1959): and 4A N.Y.Prac., Com. Litig. in New York State Courts § 80:47 (2d ed.).
Superior denies having knowledge of the contracts Rockaway, Hempstead and/or Resort had with Ocean Side. Ocean Side asserts Superior must have known of the contract since all of the linens and linen carts supplied by Ocean Side bore its logo. Additionally, tractor-trailers bearing the Ocean Side logo made deliveries to these nursing homes six days a week. Ocean Side asserts that any representative of Superior who went to these nursing homes to solicit laundry business would have to have seen the linens and/or linen carts bearing the Ocean Side logo.
Ocean Side further asserts that when a commercial laundry solicits business from new customers it attempts to learn when the contract with the current supplier expires. Ocean Side alleges that a commercial laundry will generally refuse to do business with a customer unless and until it is certain the contract with the prior supplier has been properly terminated.
Ocean Side's attorney sent an overnight letter to Superior dated July 24, 2006 indicating that Ocean Side had a contract with Rockaway, Hempstead, Resort and other nursing homes. This letter indicated that Ocean Side would consider Superior's interference with these contracts as actionable. The letter further indicated Ocean Side would take all appropriate action to protect its contractual relationship with its customers. Thus, on July 25, 2006, Superior knew Ocean Side had contracts with Rockaway, Hempstead and Resort.
Superior is supplying linen service to Rockaway. Rockaway advised Ocean Side it would cancel Superior as its linen provider if Ocean Side met Superior's price.
The function of the court in deciding a motion for summary judgment is to determine if triable issues of fact exist. Matter of Suffolk County Dept. of Social Services v. James M., 83 NY2d 178 (1994); and Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 (1957). A motion for summary judgment should be denied if the court has any doubt as to the existence of a triable issue of fact. Freese v. Schwartz, 203 AD2d 513 (2nd Dept., 1994); and Miceli v. Purex Corp., 84 AD2d 562 (2nd Dept., 1984).
When deciding a motion for summary judgment, the court must view the evidence in a light most favorable to the non-moving party and must give the non-moving party the benefit of all reasonable inferences which can be drawn from the evidence. Negri v. Stop & Shop, Inc., 65 NY2d 625 (1985); and Louniakov v. M.R.O.D. Realty Corp., 282 AD2d 657 (2nd Dept., 2001).
This action is in its early stages. A preliminary conference has only recently been held. Depositions have not yet been conducted.
Ocean Side has established the existence of a contract between itself and third parties. Superior concedes it solicited business from Rockaway, Hempstead and Resort. Each of these nursing homes terminated their contracts with Ocean Side. This caused Ocean Side to be damaged.
Superior's motion is premised on its assertion that it did not know that these nursing homes had a contract with Ocean Side.
Giving Ocean Side the benefit of all favorable inferences, the Court finds that questions of fact exist regarding whether Superior had knowledge of Ocean Side's contracts with Rockaway, Hempstead and Resort and when it obtained that knowledge.
Since questions of fact exist regarding Superior's knowledge of the contracts, Superior's motion for summary judgment dismissing the cause of action for tortious interference with contract must be denied.
Unjust enrichment involves a claim by Plaintiff that it performed services on behalf of the Defendant at the request or behest of the Defendant resulting in the Defendant receiving an unjust benefit. See, Clark v. Daby, 300 AD2d 732 (3rd Dept. 2002); and Prestige Caterers v. Kaufman, 290 AD2d 295 (1st Dept. 2002).
Ocean Side has failed to establish any of the elements of this cause of action.
Therefore, summary judgment dismissing this cause of action should be granted.
New York recognizes seven bases for a claim of unfair competition. They fall into the following categories: (1) monopoly; (2) restraint of trade; (3) trade secrets; (4) trademark or trade name infringement; (5) palming off; (6) misappropriation; and (7) false labeling or advertising. See, 2 NY PJI 3d 3:58, at 525 (2007).
Ocean Side's complaint does not allege what practice or activity of Superior constitutes unfair competition. The complaint generally alleges that Superior's solicitation of business from Ocean Side's customers constitutes unfair competition.
Such allegations clearly do not support a cause of action for monopoly, restraint of trade, trademark or trade name infringement or false labeling or advertising.
Trade secrets are a formula, pattern, device or compilation of information which gives the possessor of the information an advantage over a competitor who does not possess the information. Ashland Management Inc. v. Janien, 82 NY2d 395 (1993); Beverage Marketing USA, Inc. v. South Beach Beverage Co., Inc., 20 AD3d 439 (2nd Dept. 2005); and Eagle Comtronics, Inc. v. Pico, Inc., 89 AD2d 803, (4th Dept. 1982).
Ocean Side's customer list cannot be considered a trade secret. A customer list will be treated as a trade secret where the names and addresses of the customer are not known in the trade or can be obtained only through extraordinary effort. Stanley Tulchin Assoc., Inc. v. Vignola, 186 AD2d 183 (2nd Dept. 1992); and Greenwich Mills Co. Inc. v. Barrie House Coffee Co., 91 AD2d 398 (2nd Dept. 1983). This is especially true where the customers' patronage has been secured through years of...
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