UAB, Inc. v. Ethos Auto Body, LLC

• Decision Date: 09 March 2021
• Docket Number: Index 70850/2018
• Parties: UAB, INC. d/b/a ULTIMATE AUTO BODY, INC., Plaintiffs, v. ETHOS AUTO BODY, LLC, MATTHEW BEOBIDE, AND DAN ZIMDAHL, Defendants, MATTHEW BEOBIDE, Plaintiff, v. G&M AUTOMOTIVE ENTERPRISES, INC., Defendant.
• Court: New York Supreme Court

2021 NY Slip Op 32037(U)

UAB, INC. d/b/a ULTIMATE AUTO BODY, INC., Plaintiffs,
v.
ETHOS AUTO BODY, LLC, MATTHEW BEOBIDE, AND DAN ZIMDAHL, Defendants,

MATTHEW BEOBIDE, Plaintiff,
v.
G&M AUTOMOTIVE ENTERPRISES, INC., Defendant.

Index No. 70850/2018

Supreme Court, Westchester County

March 9, 2021

Unpblished Opinioin

Return Date: 1/27/21

Mot. Seq. No. 3

DORF & NELSON LLP BY: JONATHAN B. NELSON ESQ. ATTORNEYS FOR DEFENDANTS

THE DEIORIO LAW ORO P PLLC BY: PATRICK V. DELORIO ESQ., ATTORNEYS FOR PLAINTIFF 800 WESTCHESTER A VENUE

DECISION AND ORDER

HON. GRETCHEN WALSH, J.S.C.

The following e-filed documents, listed in NYSCEF under document numbers 124-128, 132-137 were read on this motion by Defendants Ethos Auto Body, LLC ("Ethos"), Matthew Beobide ("Matthew"), and Dan Zimdahl ("Dan") (collectively "Defendants") made pursuant to CPLR 3211(a)(7) and CPLR 3016(b) to dismiss the Second Amended Complaint ("SAC") filed by Plaintiff UAB, Inc., d/b/a Ultimate Auto Body, Inc. ("UAB" or "Plaintiff). Upon the foregoing papers, the motion is granted only to the extent that the claim against Ethos for breach of fiduciary duty is dismissed, but in all other respect, the motion is denied as is Plaintiffs request for an award of sanctions.

FACTUAL AND PROCEDURAL BACKGROUND

The Plaintiff initiated this action alleging breach of fiduciary duty and unfair competition against Defendants by filing a Summons & Complaint and an Order to Show Cause seeking preliminary injunctive relief on December 18, 2018.^[1] The parties entered into a stipulated temporary restraining order thereby obviating the need for the Court to decide the motion. On January 23, 2019, Defendants filed an Answer with Counterclaims. On April 15, 2019, Plaintiff amended its Complaint and on June 7, 2019, Defendants filed their Answer and Counterclaims responding to the First Amended Complaint. The parties requested that the Court hold a settlement conference, and at the conference, an agreement in principle (with the understanding it was not binding until reduced to a writing) was reached whereby Matthew and Dan were going to buy UAB's Bedford Hills location from Gregory Beobide ("Gregory") (UAB's owner). On December 4, 2019, the parties signed a stipulation of discontinuance without prejudice believing that the settlement would be finalized. On November 13, 2020, the Court received a letter from Plaintiffs counsel, which informed the Court that the parties spent a tremendous amount of time and effort in coming to a deal in which Plaintiff would sell UAB's Bedford Hills location to Defendants, but Defendants reneged and. as a result. Plaintiff was seeking to reinstate the action. On December 21, 2020, the Court reinstated the action and held a preliminary conference at which it signed a Preliminary Conference Order setting a trial readiness date of June 16, 2021. With leave of Court, Plaintiff filed the SAC on December 23, 2020 and at a Rule 24 pre-motion conference, Defendants were granted leave to make a motion to dismiss, but were advised discovery would not be stayed pending the resolution of that motion. This motion ensued.

THE SAC'S ALLEGATIONS

The First Cause of Action is against all Defendants for misappropriation of confidential/proprietary/trade secret information. The Second Cause of Action is against all Defendants for unfair competition based on their alleged misappropriation of confidential/proprietary /trade secret information. The Third Cause of Action is against Ethos and Matthew for breach of fiduciary duty. The Fourth Cause of action is against Ethos and Dan for aiding and abetting Matthew's alleged breach of fiduciary duty and his alleged misappropriation of, inter alia, Plaintiffs proprietary customer list.

Plaintiff alleges that it has been in the auto body industry since 1977 and in the last forty-one years expended significant time and resources to developing and creating its customer base through marketing strategies (SAC at ¶¶ 33-34). Plaintiff contends that Matthew use to work at UAB, but abandoned his position to open Ethos, a competing auto repair shop, in 2018 (id at ¶ 39). Plaintiff contends that Matthew "fraudulently insinuated that Ethos was 'a new location' for [UAB] by posting" online that "I wanted to let everyone know that although I am still a Co-Owner of [UAB], I have decided to open a new location in Bedford Hills on Route 117...." (id). Plaintiff alleges that Matthew, while employed^[2] by Plaintiff, took its customer and employee lists for UAB's Bedford Hills location, where Matthew was Manager, and used the customer list to solicit "hundreds, if not thousands of [UAB's] customers through email blasts telling them to bring their business to his new location" (id. At ¶¶ 41-42). In addition, it is alleged that Matthew contacted at least four UAB employees, three of whom left UAB for Ethos (id. at ¶¶ 43-44). Matthew also allegedly stole company "photographs, OEM certification plaques, the actual certifications and the equipment required for the certifications, the Company website domain, Yelp, Google and Facebook pages, and the car dealership contacts" (id. at ¶ 45). The photographs were originals, commissioned and paid for by UAB for its marketing plan, and were allegedly misappropriated from downloaded of a database owned by Plaintiff (id. at ¶ 46). Plaintiff alleges that Matthew contacted Plaintiffs OEM Certification company and "fraudulently misrepresented that Gregory . . . was also an owner of [Ethos] in order to transfer [UAB's]" certifications without additional work or costs, and Matthew physically removed the OEM certification plaques and required certification equipment from UAB prior to leaving its employment (id. at ¶ 47). Plaintiff alleges Matthew also "hijacked Plaintiffs website domain" and replaced it with a "ghost website" which did not contain any contact information for UAB (id. at ¶ 48). Matthew also allegedly removed Plaintiffs administration access to its Facebook, Google, and Yelp pages (id. at ¶ 49).

Plaintiff alleges Dan worked as a manager at G&M^[3] in Mount Vernon until 2018 (id. at ¶ 51). Plaintiff alleges that Dan "knowingly aided and abetted" Matthew while working at G&M by assisting in the misappropriation of customer lists, employee information, photographs, certifications, and website domains (id. At ¶ 53).

Plaintiff contends its customer lists, employee lists, photographs, certifications, and company domains are confidential and proprietary information amounting to trade secrets (id. at ¶ ¶ 64-68). Plaintiff contends that Matthew misappropriated the information when he solicited UAB employees to leave for Ethos, and when he took "proprietary equipment and certification plaques from UAB" (id. At ¶ ¶ 67, 69). Plaintiff alleges Dan aided and abetted the misappropriation, that he knew Matthew owed UAB a duty of good faith and loyalty, and he assisted in the breaches by soliciting customers using email blasts (id. at ¶ 68). Plaintiff alleges that it has suffered damages, including lost revenue, lost opportunities, loss of valuable employees, confusion and loss of customer base, and damage to UAB's brand, reputation, and goodwill (id. at ¶ 70).

Plaintiff contends that Defendants' misappropriation rose to the level of unfair competition based on the confusion caused to UAB's customer base who were led to believe Ethos was just a new location for UAB, as well as the time and money savings to Defendants since they did not have to expend resources to (1) "establish their new business through advertising and other marketing tools in order to develop a customer base;" (2) hire and train new employees; and (3) create content for their website and Internet pages (id. at ¶ 81).

Plaintiff alleges Matthew breached his fiduciary duty by misappropriating the confidential information described above, by acting in secret and with Dan to open a competing auto repair shop using the misappropriated information, and by poaching UAB employees (id. at ¶¶ 85-86, 89). Plaintiff contends Dan aided and abetted Matthew by assisting in the misappropriation of confidential information, by redirecting and soliciting clients to Ethos, and by taking part in opening, owning and operating Ethos (id. at ¶¶ 90-98).

THE PARTIES' CONTENTIONS

A. Defendants' Contentions in Support

In support of their motion, Defendants submit: (1) an affirmation of Jonathan Nelson Esq. dated December 30, 2020, the purpose of which is to submit a copy of the SAC; and (2) a memorandum of law in support.

In their memorandum of law, Defendants contend that Plaintiff has failed to establish entitlement to injunctive relief because Plaintiff has failed to demonstrate "the restriction 'is no greater than is required for the protection of the legitimate interest of the employer'" and the absence of overreaching (Defs' Mem. at 2-3).

Defendants contend that the First Cause of Action for "misappropriation of confidential or proprietary information or trade secrets" against Ethos and Dan should be dismissed because Dan worked for an entity called G&M (id. at 5-6). Defendants argue that since Dan worked for G&M, he could not have had access to, or knowledge of, trade secrets from UAB (id. at 6). Defendants argue that Plaintiff "does not explain or particularize how [Ethos] or [Dan] would have access to Plaintiffs information while [Dan] was working at [G&M]" (id). Defendant argues the pleadings "run afoul" of Gael v Ramachandran (111 A.D.3d 783, 792 [2d Dept 2013]), because Plaintiff "alleges the cause of action against [Matthew] and simply combines that with conclusory allegations that [Dan] had knowledge" (id.).

Defendants contend the Second Cause of Action for unfair competition based on the alleged misappropriation must be dismissed because Plaintiff fails to specify which Defendant did what in violation of the specificity requirements of a fraud cause of action under CPLR 3016 (id....