Stuart's, LLC v. Edelman

• Decision Date: 28 July 2021
• Docket Number: Index No. 12560/09,2018–12893
• Citation: 152 N.Y.S.3d 472,196 A.D.3d 711
• Parties: STUART'S, LLC, et al., respondents, v. Stuart EDELMAN, et al., defendants, Michael Hong, appellant.
• Court: New York Supreme Court — Appellate Division

196 A.D.3d 711

152 N.Y.S.3d 472

STUART'S, LLC, et al., respondents,

v. Stuart EDELMAN, et al., defendants,Michael Hong, appellant.

2018–12893

Index No. 12560/09

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

Argued—May 6, 2021

July 28, 2021

Law Offices of Rudy A. Dermesropian, LLC, New York, NY, for appellant.

REINALDO E. RIVERA, J.P., ROBERT J. MILLER, BETSY BARROS, VALERIE BRATHWAITE NELSON, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for tortious interference with contract, the defendant Michael Hong appeals from a judgment of the Supreme Court, Nassau County (Vito M. DeStefano, J.), entered August 22, 2018. The judgment, insofar appealed from, upon a decision of the same court dated April 9, 2018, made after a nonjury trial, is in favor of the plaintiff Stuart's, LLC, and against the defendant Michael Hong in the principal sum of $1,436,128.

ORDERED that the judgment is modified, on the law and the facts, (1) by deleting the provision thereof awarding the plaintiff Stuart's, LLC, the principal sum of $543,689 against the defendant Michael Hong as damages for tortious interference with business relations, and substituting therefor a provision dismissing that cause of action insofar as asserted by the plaintiff Stuart's, LLC, against the defendant Michael Hong, and (2) by deleting the provision thereof awarding the plaintiff Stuart's, LLC, the principal sum of $719,064 against the defendant Michael Hong as damages for unfair competition, and substituting therefor a provision dismissing that cause of action insofar as asserted by the plaintiff Stuart's, LLC, against the defendant Michael Hong; as so modified, the judgment is affirmed insofar as appealed from, without costs or disbursements.

This appeal arises from a dispute in connection with the alleged diversion of assets and business from one clothing and apparel distributor, the plaintiff Stuart's, LLC (hereinafter Stuart's), to another, the defendant Level 8 Apparel, LLC (hereinafter Level 8). Stuart's alleged, among other things, that the defendant Michael Hong was an employee of Stuart's until February 24, 2009, and was also a principal of Level 8, and that Hong, along with several other individual defendants, wrongfully diverted business and assets away from Stuart's to Level 8. Stuart's and its principal, Wayne Galvin, commenced this action against, among others, Hong. As relevant to this appeal, the tenth cause of action sought damages for tortious interference with contract, the twelfth cause of action sought damages for tortious interference with business relations, and the thirteenth cause of action sought damages for unfair competition.

Following a nonjury trial, in a decision dated April 9, 2018, the Supreme Court, inter alia, found that all of the defendants had (1) tortiously interfered with a contract between Stuart's and nonparty Tumi, Inc. (hereinafter Tumi), damaging Stuart's in the amount of $173,375; (2) tortiously interfered with Stuart's business relationship with nonparty Aeropostale, Inc. (hereinafter Aeropostale), damaging Stuart's in the amount of $543,689; and (3) engaged in unfair competition with Stuart's, damaging Stuart's in the amount of $719,064. The court entered a judgment on August 22, 2018, inter alia, in favor of Stuart's and against Hong in those principal amounts. Hong appeals.

In reviewing a determination made after a nonjury trial, the power of this Court "is as broad as that of the trial court and ... it may render the judgment it finds warranted by the facts, taking into account in a close case the fact that the trial judge had the advantage of seeing the witnesses" ( Northern Westchester Professional Park Assoc. v. Town of Bedford, 60 N.Y.2d 492, 499, 470 N.Y.S.2d 350, 458 N.E.2d 809 [citations and internal quotation marks omitted]).

To recover damages for tortious interference with contract, the plaintiff must prove the existence of a valid contract with a third party, the defendant's knowledge of that contract, the defendant's intentional and improper procurement of a breach of that contract, and damages (see 106 N. Broadway, LLC v. Lawrence, 189 A.D.3d 733, 740, 137 N.Y.S.3d 148 ; Rose v. Different Twist Pretzel, Inc., 186 A.D.3d 631, 632, 126 N.Y.S.3d 911 ; Ferrandino & Son, Inc. v. Wheaton Bldrs., Inc., LLC, 82 A.D.3d 1035, 1036, 920 N.Y.S.2d 123 ). Here, the facts adduced at trial warranted the Supreme Court's finding that Hong tortiously interfered with Stuart's contract with Tumi. Specifically, the trial record reflected: (1) the existence of a valid licensing agreement between Stuart's and Tumi; (2) Hong's knowledge and awareness of Stuart's licensing agreement with Tumi; (3) Hong's intentional procurement of Tumi's breach of that agreement without justification by Hong's actions in conspiring with several defendants to transfer the licensing agreement with Tumi from Stuart's to Level 8; and (4) damages as a direct result of the aforementioned conduct. To the extent that Hong relies upon his own trial testimony which was contradictory to evidence presented by the plaintiffs, the court found his testimony in this regard to be not credible. Based upon our review of the evidence and testimony, we find no basis to disturb the court's credibility determination (see generally Garcia v. Garcia, 187 A.D.3d 859, 863, 133 N.Y.S.3d 631 ; Moshell v. Alter, 186 A.D.3d 702, 703, 127 N.Y.S.3d 332 ).

"To prevail on a claim for tortious interference with business relations, a party must prove: (1) that it had a business relationship with a third party; (2) that the defendant knew of that relationship and intentionally interfered with it; (3) that the defendant acted solely out of malice or used improper or illegal means that amounted to a crime or independent tort; and (4) that the defendant's interference caused injury to the relationship with the third party" ( 106 N. Broadway, LLC v. Lawrence, 189 A.D.3d at 741, 137 N.Y.S.3d 148 ; see 684 E. 222nd Realty Co., LLC v. Sheehan, 185 A.D.3d 879, 879–880, 128 N.Y.S.3d 273 ). "While a cause of action for interference with prospective contract or business relationship is closely akin to one for tortious interference with contract, the former requires proof of more culpable conduct on the part of defendant" ( 106 N. Broadway, LLC v. Lawrence, 189 A.D.3d at 740, 137 N.Y.S.3d 148 ; see Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189–190, 785 N.Y.S.2d 359, 818 N.E.2d 1100 ). "This standard is met where the interference with prospective business...