| Tri-Star Light. Corp. v Goldstein |
| 2017 NY Slip Op 05261 [151 AD3d 1102] |
| June 28, 2017 |
| Appellate Division, Second Department |
[*1]
| Tri-Star Lighting Corp., Appellant, v Evan Goldstein etal., Respondents. |
Certilman Balin Adler & Hyman, LLP, East Meadow, NY (Douglas E. Rowe andElizabeth E. Schlissel of counsel), for appellant.
Barket Marion Epstein & Kearon, LLP, Garden City, NY (Donna Aldea and AlexanderKlein of counsel), for respondents.
In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals from(1) an order of the Supreme Court, Queens County (Kitzes, J.), entered January 28, 2015, whichdenied its motion pursuant to CPLR 6301 to preliminarily enjoin the defendant Evan Goldsteinfrom violating a noncompetition clause in its alleged employment agreement with him, and (2)an order of the same court entered May 14, 2015, which denied its motion for leave to reargue itsmotion pursuant to CPLR 6301 for a preliminary injunction, granted the defendants' cross motionpursuant to CPLR 3211 (a) to dismiss the second, third, fourth, sixth, and seventh causes ofaction asserted in the complaint, and, sua sponte, directed the dismissal of the first and fifthcauses of action.
Ordered that the appeal from the order entered January 28, 2015, is dismissed as academic,without costs or disbursements; and it is further,
Ordered that the appeal from so much of the order entered May 14, 2015, as denied theplaintiff's motion for leave to reargue is dismissed, without costs or disbursements, as no appeallies from an order denying reargument; and it is further,
Ordered that on the Court's own motion, the notice of appeal from the order entered May 14,2015, is deemed to also be an application for leave to appeal from so much of that order as, suasponte, directed the dismissal of the first and fifth causes of action in the complaint, and leave toappeal is granted (see CPLR 5701 [c]); and it is further,
Ordered that the order entered May 14, 2015, is modified, on the law, by deleting theprovision thereof which, sua sponte, directed the dismissal of the first and fifth causes of action;as so modified, the order entered May 14, 2015, is affirmed insofar as reviewed, without costs ordisbursements.
[*2] The plaintiff is a wholesale lightingdistributor located in Woodside, Queens. In December 2014, the plaintiff commenced this actionagainst the defendant Evan Goldstein, a former employee, and the defendant ContinentalLighting Corp. (hereinafter Continental), a competitor of the plaintiff, alleging, inter alia, thatGoldstein breached provisions of an employment agreement entered into between the plaintiffand Goldstein by accepting a position with Continental within nine months after the terminationof his employment with the plaintiff, and by making use of the plaintiff's customer lists duringhis new employment to unfairly compete against it. The complaint set forth causes of action torecover damages for (1) breach of contract against Goldstein, (2) tortious interference withcontract against Continental, (3) misappropriation of trade secrets against both defendants, (4)tortious interference with business relations against both defendants, (5) breach of fiduciary dutyagainst Goldstein, and (6) aiding and abetting breach of fiduciary duty against Continental. Theseventh cause of action sought a permanent injunction.
The plaintiff moved to preliminarily enjoin Goldstein from continuing his employment withContinental and from contacting the plaintiff's customers. By order entered January 28, 2015, theSupreme Court denied the plaintiff's motion for a preliminary injunction. Thereafter, the plaintiffmoved for leave to reargue its motion for a preliminary injunction. The defendants opposed themotion and cross-moved pursuant to CPLR 3211 (a) (1) and (7) to dismiss the second, third,fourth, sixth, and seventh causes of action. By order entered May 14, 2015, the court denied theplaintiff's motion for leave to reargue its motion for a preliminary injunction, granted thedefendants' cross motion, and, sua sponte, directed the dismissal of the first and fifth causes ofaction.
The appeal from the order denying the plaintiff's motion for a preliminary injunction hasbeen rendered academic. By its own terms, the competition restrictions contained in the allegedemployment agreement expired nine months following Goldstein's termination of employmentwith the plaintiff, or on or about July 14, 2015. Accordingly, the plaintiff's appeal from that ordermust be dismissed as academic (seePescatore v Dune Alpin Farm Prop. Owners Assn., Inc., 120 AD3d 785, 785 [2014]; Aniqa Halal Live Poultry Corp. vMontague-Lee Ltd. Partnership, 110 AD3d 934, 934 [2013]).
"In considering a motion to dismiss pursuant to CPLR 3211 (a) (7), the facts pleaded arepresumed to be true, and the court must afford those allegations every favorable inference anddetermine only whether the facts as alleged fit within any cognizable legal theory" (Sitar v Sitar, 50 AD3d 667, 669[2008]; see Leon v Martinez, 84 NY2d 83, 87-88 [1994]). "[T]he sole criterion is whetherthe pleading states a cause of action, and if from its four corners factual allegations are discernedwhich taken together manifest any cause of action cognizable at law a motion for dismissal willfail" (Morad v Morad, 27 AD3d626, 626-627 [2006] [internal quotation marks omitted]; see Leon v Martinez, 84NY2d at 87-88). "Whether a plaintiff can ultimately establish [his or her] allegations is not partof the calculus" (EBC I, Inc. v Goldman,Sachs & Co., 5 NY3d 11, 19 [2005]).
Applying those principles here, the complaint adequately pleaded the first cause of action,which sought to recover damages for breach of contract against Goldstein. "The essentialelements for pleading a cause of action to recover damages for beach of contract are the existenceof a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his orher contractual obligations, and damages resulting from the breach" (Dee v Rakower, 112 AD3d 204,208-209 [2013]; see 143 Bergen St.,LLC v Ruderman, 144 AD3d 1002, 1003 [2016]; Hampshire Props. v BTA Bldg. & Developing, Inc., 122 AD3d573, 573 [2014]). Here, the complaint alleged the existence of an employment agreementbetween the plaintiff and Goldstein, the plaintiff's performance of its obligations under theagreement, Goldstein's breach of the agreement, and damages resulting therefrom. Thedetermination of the Supreme Court that the contract was unenforceable may involve triableissues of fact which should be resolved upon a formal motion with adequate notice to theplaintiff of the court's intention to summarily resolve the issue (see Loft Rest. Assoc. vMcDonagh, 187 AD2d 643, 644 [1992]; see generally BDO Seidman v Hirshberg, 93NY2d 382 [1999]). Accordingly, the court should not have, sua sponte, directed the dismissal ofthe first cause of action.
Similarly, the Supreme Court should not have, sua sponte, directed the dismissal of the fifthcause of action, which sought to recover damages for breach of fiduciary duty against [*3]Goldstein, for failure to state a cause of action, in the absence ofnotice to the parties and an application by the defendants for such relief (see During v City of New Rochelle,N.Y., 55 AD3d 533 [2008]; Jacobs v Mostow, 23 AD3d 623, 624 [2005]).
The Supreme Court properly granted that branch of the defendants' cross motion which wasto dismiss the second cause of action, which sought to recover damages for tortious interferencewith contract against Continental. "The elements of a cause of action alleging tortiousinterference with contract are: (1) the existence of a valid contract between the plaintiff and athird party, (2) the defendant's knowledge of that contract, (3) the defendant's intentionalprocurement of a third-party's breach of that contract without justification, and (4) damages" (Nagan Constr., Inc. v Monsignor McClancyMem. High Sch., 117 AD3d 1005, 1006 [2014]). Here, the complaint does not allegethat Continental took action intended to procure Goldstein's alleged breach of an employmentagreement between the plaintiff and Goldstein (see Twin City Fire Ins. Co. v Arch Ins. Group, Inc., 143 AD3d 533[2016]; Cantor Fitzgerald Assoc. v Tradition N. Am., 299 AD2d 204 [2002]).
The Supreme Court properly granted that branch of the defendants' cross motion which wasto dismiss the third cause of action, which sought to recover damages for misappropriation oftrade secrets against the defendants. The elements of a cause of action to recover damages formisappropriation of trade secrets are: (1) possession of a trade secret; and (2) use of that tradesecret by the defendant "in breach of an agreement, confidential relationship or duty, or as aresult of discovery by improper means" (Schroeder v Pinterest Inc., 133 AD3d 12, 27 [2015] [internalquotation marks omitted]). "An essential prerequisite to legal protection against themisappropriation of a trade secret is the element of secrecy" (Atmospherics, Ltd. vHansen, 269 AD2d 343, 343 [2000]; see Leo Silfen, Inc. v Cream, 29 NY2d 387, 392[1972]). "Generally, where the customers are readily ascertainable outside the employer'sbusiness as prospective users or consumers of the employer's services or products, trade secretprotection will not attach and courts will not enjoin the employee from soliciting his employer'scustomers" (Leo Silfen, Inc. v Cream, 29 NY2d at 392). Here, the complaint stated that"other companies provide similar services." Although the plaintiff described its customer lists,prices, and profit margins as "distinctive," the complaint contains no allegations that the plaintiffemployed measures to keep its customer lists and pricing information confidential, or that thisinformation was not generally known outside of its business, so as to actually render its customerinformation a trade secret (see Precision Concepts v Bonsanti, 172 AD2d 737, 738[1991]).
The Supreme Court properly granted that branch of the defendants' cross motion which wasto dismiss the fourth cause of action asserted against the defendants, which sought to recoverdamages for tortious interference with business relations. To set forth a cause of action soundingin tortious interference with business relations, a plaintiff is required to plead " 'that thedefendant interfered with the plaintiff's business relationships either with the sole purpose ofharming the plaintiff or by means that were unlawful or improper' " (Qosina Corp. v C & N Packaging,Inc., 96 AD3d 1032, 1034 [2012], quoting Nassau Diagnostic Imaging &Radiation Oncology Assoc. v Winthrop-University Hosp., 197 AD2d 563, 563-564 [1993]).An allegation that the defendant "was motivated solely by malice or intended to inflict injury byunlawful means" is required (KennethH. Brown & Co., Inc. v Dutchess Works One-Stop Empl. & Training Ctr., Inc., 73AD3d 984, 985 [2010]; see Alexander & Alexander of N.Y. v Fritzen, 68 NY2d968, 969 [1986]). Here, the complaint alleged that the defendants were aware of the relationshipbetween the plaintiff and its customers, and that, with Goldstein's assistance, Continentaldiverted sales from the plaintiff to itself and caused the plaintiff's customers to terminate theirrelationship with the plaintiff. However, the complaint did not allege that the defendants weremotivated by malice or otherwise intended to inflict injury upon the plaintiff by unlawful means.Actions intended to solicit business, which are motivated by economic self-interest, cannot becharacterized as malicious (see Nassau Diagnostic Imaging & Radiation OncologyAssoc. v Winthrop-University Hosp., 197 AD2d at 564).
The Supreme Court properly granted that branch of the defendants' cross motion which wasto dismiss the sixth cause of action, which sought to recover damages against Continental foraiding and abetting Goldstein's alleged breach of fiduciary duty. "A claim for aiding and abettinga breach of fiduciary duty requires: (1) a breach by a fiduciary of obligations to another, (2) thatthe [*4]defendant knowingly induced or participated in thebreach, and (3) that [the] plaintiff suffered damage as a result of the breach" (Kaufman vCohen, 307 AD2d 113, 125 [2003]; see Baron v Galasso, 83 AD3d 626, 629 [2011]). The secondelement of knowing inducement or participation is met only if the defendant had "actualknowledge of the breach of duty" and rendered "substantial assistance" to the primary violator(Kaufman v Cohen, 307 AD2d at 125-126). The complaint failed to allege facts fromwhich it could be inferred that Continental participated in any such conduct.
The Supreme Court properly granted that branch of the defendants' motion which was todismiss the seventh cause of action, which sought a permanent injunction. As previously noted,by its own terms, the competition restrictions contained in the employment agreement expirednine months following Goldstein's termination of his employment with the plaintiff, or on orabout July 14, 2015. Given that the nine-month period has expired, and in light of ourdeterminations with respect to the second through sixth causes of action, the complaint failed toallege a basis for injunctive relief (seeMatter of Long Is. Power Auth. Hurricane Sandy Litig., 134 AD3d 1119, 1120[2015]).
The parties' remaining contentions either are without merit or need not be reached in light ofour determination. Eng, P.J., Hall, Roman and Hinds-Radix, JJ., concur.