Shamrock Power Sales, LLC v. John Scherer, Patrice Tilearcio, Scherer Util. Sales, LLC, 12-CV-8959 (KMK)
| Decision Date | 30 September 2015 |
| Docket Number | No. 12-CV-8959 (KMK),12-CV-8959 (KMK) |
| Parties | SHAMROCK POWER SALES, LLC, Plaintiff/Counterclaim Defendant, v. JOHN SCHERER, PATRICE TILEARCIO, SCHERER UTILITY SALES, LLC, and STORM KING POWER SALES, LLC, Defendants. JOHN SCHERER, Counterclaim Plaintiff, v. SHAMROCK POWER SALES, LLC, Counterclaim Defendant. |
| Court | U.S. District Court — Southern District of New York |
Appearances:
Kelly Burns Gallagher, Esq.
Pamela Jane Moore, Esq.
McCarter & English, LLP
Hartford, CT
Power Sales, LLC
Kenneth S. Rones, Esq.
The Law Firm of William G. Sayegh, P.C.
Carmel, NY
Utility Sales, LLC, and Storm King Power Sales, LLCKENNETH M. KARAS, District Judge:
Shamrock Power Sales, LLC ("Plaintiff" or "Shamrock") brings this Action against Defendants John Scherer ("Scherer"), Patrice Tilearcio ("Tilearcio"), Scherer Utility Sales, LLC, ("Scherer Utility") and Storm King Power Sales, LLC ("Storm King") (collectively "Defendants"), alleging fourteen causes of action arising out of Scherer's employment with Shamrock and Scherer's founding of his own companies, Scherer Utility Sales and Storm King Power Sales, for which he and his wife, Tilearcio, have worked. Before the Court is Plaintiff's Motion for Partial Summary Judgment. (Dkt. No. 69.) Specifically, Plaintiff moves for summary judgment on five of its claims: Count III (breach of fiduciary duty), Count V (misappropriation of trade secrets), Count X (fraud in the inducement), Count XI (faithless servant), and Count XIV (unjust enrichment). Related to its Summary Judgment Motion, Plaintiff also moves to strike many documents submitted by Defendants in opposition to the Motion for Partial Summary Judgment. (Dkt. No. 82.) For the following reasons, Plaintiff's Motion to Strike is granted in part, and Plaintiff's Motion for Partial Summary Judgment is granted.
This case arises out of the breakdown in the employment relationship between Scherer and Shamrock, Scherer's formation of his own companies that competed with Shamrock, Scherer's receipt of an advance of a bonus, which he deposited the day before quitting, and Scherer's use of certain information in connection with his new companies. The key issues in contention are whether Scherer began competing against Shamrock while still employed by the latter, whether Shamrock's policy requires the return of the advance of the bonus, and whetherthe information Scherer is using in his new companies is proprietary information belonging to Shamrock.
Shamrock is a company "that sells high voltage power equipment and serves as the exclusive representative for manufacturers of high voltage products." (Decl. of Elizabeth Mott Smith in Supp. of Mot. for Partial Summ. J. ("Smith Decl.") App. (Statement of Undisputed Material Facts in Supp. of Pl. Shamrock Power Sales, LLC's Partial Mot. for Summ. J. ("Pl.'s 56.1")) ¶ 1 (Dkt. No. 71); Statement of Disputed Material Facts in Opp'n to Pl.'s Mot. for Partial Summ. J. ( ) ¶ 1 (Dkt. No. 78); see also Tr. of Prelim. Andrew McMahon ("McMahon") is Shamrock's president. (Pl.'s 56.1 ¶ 19; Defs.' 56.1 ¶ 19.) Shamrock has approximately nine employees, including three full-time and one part-time outside sales representatives. (Pl.'s 56.1 ¶ 2; Defs.' 56.1 ¶ 2; PI Tr. 110-11.)
Scherer and Tilearcio are both residents of Cold Spring, New York, and are married to each other. (Pl.'s 56.1 ¶¶ 3-4; Defs.' 56.1 ¶¶ 3-4.) Scherer Utility is a New York Limited Liability Company with a principal place of business in Cold Spring, New York. (Pl.'s 56.1 ¶ 5; Defs.' 56.1 ¶ 5.) Both Scherer and Tilearcio are "member[s] and employee[s] of Scherer Utility." (Pl.'s 56.1 ¶¶ 6-7; Defs.' 56.1 ¶¶ 6-7.) On or about January 3, 2013, with the knowledge and consent of Tilearcio, Scherer created a new entity, Storm King, and transferred assets from Scherer Utility to Storm King. (Pl.'s 56.1 ¶ 8; Defs.' 56.1 ¶ 8.) Scherer is a member and employee of Storm King, and Tilearcio is an employee of Storm King. (Pl.'s 56.1 ¶¶ 9-10; Defs.' 56.1 ¶¶ 9-10.)
Shamrock is the exclusive sale representative for certain manufacturers of high voltage power equipment; these manufacturers are Shamrock's clients. (Pl.'s 56.1 ¶ 11; Defs.' 56.1 ¶ 11.) Shamrock sells its clients' products to end users such as utility companies; these end users are Shamrock's customers. (Pl.'s 56.1 ¶ 12; Defs.' 56.1 ¶ 12.) Shamrock's customers include Con Edison, Long Island Power Authority, Orange and Rockland Utilities, Central Hudson Gas and Electric, National Grid, Public Service Gas and Electric, New York Power Authority, Long Island Railroad, New Jersey Transit, Metro North Railroad, Wesco, and Graybar. (Pl.'s 56.1 ¶ 12; Defs.' 56.1 ¶ 12.) Many of Shamrock's relationships with its clients, the manufacturers, are governed by contracts with confidentiality provisions that permit Shamrock to serve as the clients' exclusive sales representative in certain geographic areas. (Pl.'s 56.1 ¶ 13; Defs.' 56.1 ¶ 13.) Shamrock has developed long-term relationships with most of its clients and has served as their exclusive representative in New England and along the east coast for a number of years. (Pl.'s 56.1 ¶ 14; Defs.' 56.1 ¶ 14.)
In 2004, Shamrock hired Scherer as an outside sales representative, which meant that his responsibilities would be to sell Shamrock's clients' products to Shamrock's customers and potential customers. (Pl.'s 56.1 ¶ 21; Defs.' 56.1 ¶ 21.) Furthermore, Shamrock paid Scherer to meet with its customers, and the hundreds of meetings he had with Shamrock's customers were "in his capacity as a Shamrock Power sales representative;" indeed, part of Scherer's job was to establish relationships with customers and clients on Shamrock's behalf, and Scherer was compensated for doing so. (See Pl.'s 56.1 ¶ 28; PI Tr. 120-21 (Scherer Testimony) ( ).)1 Scherer was assigned to the sales territory of the metropolitan New York City and New Jersey region. (Pl.'s 56.1 ¶ 22; Defs.' 56.1 ¶ 22.) Shamrock's customers in that region include Con Edison, Central Hudson Gas and Electric, National Grid, Long Island Power Authority, Orange and Rockland Utilities, Public Service Electric & Gas, New York Power Authority, Long Island Railroad, New Jersey Transit, and Metro North Railroad. (Pl.'s 56.1 ¶ 23; Defs.' 56.1 ¶ 23.) Scherer had no customer contacts in his assigned sales territory when he started with Shamrock. (Pl.'s 56.1 ¶ 24; Defs.' 56.1 ¶ 24.) Because Scherer had no prior sales experience in the industry or the region, Shamrock devoted approximately six months to one year to having Scherer travel with Andrew McMahon, Sr. ("McMahon Sr.") to introduce him to customer and client contacts. 2 McMahon Sr. "essentially showed Scherer the ropes and taught him the territory atShamrock Power." (Pl.'s 56.1 ¶ 26; PI Tr. 126-27.)3 In his role as a sales representative, "Scherer held a position of trust and confidence at Shamrock Power." (Pl.'s 56.1 ¶ 29; Defs.' 56.1 ¶ 29.)
In order for Scherer to complete his duties, Shamrock provided him information regarding Shamrock's industry contacts, its client contacts, pricing lists, commission schedules, actual and potential customer contacts, contracts, and order history. (Pl.'s 56.1 ¶ 27; Answer ¶ 9 (); PI Tr. 60-62, 90-91.)4 Plaintiff contends that in Shamrock's industry, for security purposes, the identities,location, and contact information for the purchasing engineers at its customers' and potential customers' sites are not widely known and, therefore, an individual seeking to sell high voltage power equipment cannot simply make a cold call. (Pl.'s 56.1 ¶ 15; PI Tr. 54-56.) In particular, Plaintiff notes that the identities and locations of Shamrock's engineering contacts at customers such as Con Edison, Central Hudson Gas & Electric, Orange and Rockland, and others were confidential trade secrets and not publicly disseminated. (Pl.'s 56.1 ¶ 67; see also PI Tr. 69-70 ().) Plaintiff also proffers that it has "devoted significant time, effort, and money to establishing relationships with its Customer Contacts over a number of years, and to maintaining the confidentiality of the contact information for its Customer Contacts and the purchasing needs and preferences of its Customers." (Pl.'s 56.1 ¶ 16; see also PI Tr. 40, 48-49, 53-54, 55, 58, 61-63, 85.) Shamrock takes "reasonable measures to protect that information from dissemination," including keeping the information in a locked building and on a password-protected computer system, and sharing it with sales representatives only on a need-to-know basis. (Pl.'s 56.1 ¶ 17; PI Tr. 109-10.) Shamrock also has an employee handbook emphasizing the need to keep this information confidential. (Pl.'s 56.1 ¶ 18; PI Tr. 67-70; Smith Decl. Ex. J (Handbook), at 1, 4,10, 13, 20.)5 Moreover, McMahon frequently reminded Shamrock employees of the need to maintain the confidentiality of client and customer...
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