Opinion
No. 6239/11.
12-19-2014
KNIT KNIT LLC, Plaintiff, v. UNITRADE ENTERPRISES, INC., Leonid Krepker and Arnold Halpern, Defendants.
Bruce Reznick, Esq., Brooklyn, Attorneys for Plaintiff. Arthur Morrison, Esq., Hawthorne, Attorney for Defendants Unitrade and Leonid Krepker. Arnold Halpern Brooklyn, Pro Se Defendant.
Bruce Reznick, Esq., Brooklyn, Attorneys for Plaintiff.
Arthur Morrison, Esq., Hawthorne, Attorney for Defendants Unitrade and Leonid Krepker.
Arnold Halpern Brooklyn, Pro Se Defendant.
Opinion
CAROLYN E. DEMAREST, J.
The following papers numbered 1 to 12 read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed 1–39–11
Opposing Affidavits (Affirmations) 4–812
Reply Affidavits (Affirmations)
Affidavit (Affirmation)
Other Papers
Upon the foregoing papers, defendants Unitrade Enterprises, Inc. (Unitrade) and Leonid Krepker (Krepker) (collectively, the Unitrade defendants) move, in sequence No.10, for an order, pursuant to CPLR 3212, granting summary judgment dismissing the complaint of Knit Knit LLC (plaintiff) as against them. Defendant pro se Arnold Halpern (Halpern) moves, in sequence # 11, for an order granting summary judgment dismissing plaintiff's complaint.
Background And Allegations
( 1 )
Plaintiff is a limited liability company that was engaged in purchase, importation and wholesale distribution of “off-price” apparel. Plaintiff was, at all times relevant herein, operated by its sole member, Anthony Russo (Russo). Plaintiff retained Halpern in 2005 to assist in buying and selling clothing, and he traveled with Russo to apparel factories to provide purchasing recommendations. Plaintiff paid Halpern via a system of commissions based on the merchandise he assisted in purchasing. Russo and Halpern traveled to, among other places, Guatemala, where they dealt with a broker named Edgar Torres (Torres), who took them to factories and orchestrated the shipping of purchased merchandise. Halpern's work with plaintiff ended in July 2010.
Halpern, at his deposition, described off-price apparel as merchandise discounted because of defects or other irregularities.
Russo died on February 15, 2013.
Shortly thereafter, Unitrade retained Halpern to provide similar services, buying and selling apparel in return for a salary plus commissions. Unitrade, operated by its president, Krepker, was engaged in business similar to plaintiff's and had previously acquired merchandise from plaintiff. Among other purchases for Unitrade, Halpern organized at least one from Guatemalan factories via Torres.
( 2 )
Plaintiff commenced this action on March 18, 2011 and alleged causes of action seeking damages for misappropriation of trade secrets and injunctive relief against the Unitrade defendants and Halpern (collectively, defendants). On May 20, 2011, the Unitrade defendants moved, in sequence # 1, to dismiss the complaint pursuant to CPLR 3211(a)(1) and (a)(7). This court's June 29, 2011 order denied motion sequence # 1 and permitted plaintiff to serve an amended complaint.
The amended complaint, which plaintiff filed July 5, 2011, alleged that Halpern, as an employee of plaintiff, learned the names and addresses of plaintiff's Guatemalan broker and suppliers, as well as its customers. It contended that, when Halpern began work for Unitrade, he organized a merchandise purchase from plaintiff's Guatemalan broker and suppliers for slightly higher prices than plaintiff had previously paid and that, consequently, merchandise plaintiff had ordered was diverted to Unitrade. Plaintiff alleged, upon information and belief, that defendants had thus “usurped” 15 shipping containers of merchandise, causing plaintiff $450,000 in damages. Plaintiff asserted that defendants' conduct was producing irreparable damage and thus demanded an order enjoining defendants from further contact with plaintiff's customers or its Guatemalan broker and suppliers.
The Motions Decided Herein
The Unitrade Defendants' Motion
( 1 )
The Unitrade defendants now move, in sequence # 10, for an order, pursuant to CPLR
3212, granting summary judgment dismissing plaintiff's complaint as against them. They contend that plaintiff offers no evidence showing that it had any interest in merchandise that Unitrade received. The Unitrade defendants may bear no liability for Halpern's actions, they argue, as Unitrade had no contract or employment relationship with Halpern. They stress that they have had no knowledge of any trade secrets of plaintiff and that, despite three years of litigation and the completion of discovery, plaintiff has introduced no evidence to bolster its claims.
The Unitrade defendants submit an affidavit by Krepker, who asserts that plaintiff has submitted no proof that it placed any order of goods from Guatemala that Halpern could have diverted to Unitrade. Plaintiff ceased doing business, Krepker urges, after Russo's death in February, 2013. He stresses that plaintiff never employed either Unitrade or himself and that the Unitrade defendants had no access to trade secrets or plaintiff's customer information.
(2 )
Plaintiff, in opposition, first contends that the Unitrade defendants' motion constitutes an improper successive summary judgment motion, as they previously sought summary judgment in motion sequence # 1. It argues that the affirmation of the Unitrade defendants' attorney is insufficient to make a prima facie showing in support of summary judgment. It characterizes Krepker's affidavit as “replete with falsehoods,” because it denies that Unitrade employed Halpern or encouraged Halpern to obtain confidential information.
Plaintiff contends that Russo's heir may continue the LLC or act as its administrator or executor. Plaintiff explains that the only potential asset of Russo's estate “is the recovery in this action and if plaintiff corporation is successful the heir at law can then proceed to Surrogate's Court to obtain letters of administration since the recovery by the plaintiff corporation will inure to the benefit of Mr. Russo's estate and heir.” Plaintiff also stresses that Russo was alive when it commenced the action.
Plaintiff identifies Russo's daughter as his sole heir.
Halpern, plaintiff argues, must be considered to have been an employee of Unitrade, as both he and Krepker have stated that Unitrade paid him salary and commissions. Plaintiff contends that the Unitrade defendants “falsely claim they unilaterally learned the names of the [Guatemalan] factories from a catalogue,” but that “no one gets into those factories without a proper introduction from the broker, Mr. Torres.” Plaintiff urges that only the earlier affidavit from Torres, submitted by plaintiff, should be considered, and not the subsequent Torres affidavit submitted by Halpern. Defendants, plaintiff argues, fail to prove that plaintiff's transaction with Torres resulted in any paperwork.
Plaintiff supports its opposition with an affidavit from Joann Walsh (Walsh), who states that she has firsthand knowledge of plaintiff's operations. She alleges that Halpern “actually stole” containers for the Unitrade defendants “by sending Arnold Halpern to Guatemala and advising Edgar Torres that Anthony Russo no longer wanted the containers and that he and Mr. Krepker and Unitrade would pay Mr. Torres an additional ONE THOUSAND ($1,000.00) DOLLARS per container for his trouble.” Walsh states that Halpern admitted his plan to Russo on a telephone call and that she heard the entire telephone conversation. She asserts that Halpern did not know Torres until Russo introduced them.
Plaintiff also includes an affidavit by Russo, which it had previously submitted in opposition to motion sequence # 1. He acknowledged that Guatemalan suppliers are listed in an industry directory, but contended that Torres was never listed in any directory and that “plaintiff's supplier from whom defendants purchased goods is not listed in that directory and the names of plaintiff's suppliers was and is a trade secret'.” He asserted that Halpern knew Torres only because Russo had introduced them. Russo alleged that “Halpern offered Mr. Torres a higher commission than he received from Anthony Russo and a bonus of $1,000.00 on every container Arnold Halpern is able to purchase from the factories that supply Anthony Russo's businesses” and that “Halpern told Mr. Torres that Anthony Russo said it was all right for him to purchase goods from these factories if Anthony Russo was not purchasing the goods.” Russo then contended that Halpern diverted to Unitrade “fifteen (15) containers that were reserved for Anthony Russo.”
Plaintiff submits a notarized letter from Kathryn Del Calvo (Del Calvo), who states that she met Halpern as one of Russo's employees and did not give Torres's name to Halpern or introduce them.
Plaintiff additionally submits an affidavit from Torres dated June 27, 2011 (the June Torres Affidavit). Torres states that Russo introduced Halpern to him as plaintiff's employee and that Russo always accompanied Halpern in Guatemala “except on one occasion when he came alone and because he was alone, he could not purchase any goods.” Torres states that no one can contact him without proper introduction, that he is not listed in the Guatemala Apparel and Textile Industry Directory and that he reveals his factories to regular customers only. He alleges that “Halpern went to one of the factories and used my name as an introduction without my permission.” He further contends,
“Halpern diverted five container s(5) which were destined for Mr. Russo's corporation under the misrepresentation that Mr. Russo did not want the containers and Mr. Russo said it would be all right if Arnold Halpern took the container [sic]. Since Mr. Halpern was acting on behalf of Mr. Russo and his corporation he was charged an additional $1,000.00 per container.”
Torres continues by asserting that, had he known of the deception, Halpern could not have purchased any containers and that he knows that plaintiff's five containers were shipped to Unitrade.
Halpern's Motion
(1 )
Halpern moves, in sequence # 11, for an order, pursuant to CPLR 3212, granting summary judgment dismissing plaintiff's complaint. He characterizes plaintiff's claims as conclusory and urges that the action must be dismissed as Russo died and no party has been substituted, as plaintiff has produced no witness to substantiate its allegations and as plaintiff has submitted no evidence that raises factual questions. Halpern asserts that his work for plaintiff between 2005 and 2010 involved no trade secrets and that the contact information for Guatemalan factories is public information, known throughout the industry and published on the internet and in magazines. Plaintiff, Halpern urges, had no monopoly on brokers or factories and no exclusivity agreements.
Halpern acknowledges that, after leaving work for plaintiff, he established a similar relationship with Unitrade and used Torres to facilitate purchases on Unitrade's behalf. He contends, however, that these purchases had no relation to plaintiff and were of “fresh” merchandise, obtained by contacting factories. He urges that he neither stole trade secrets nor diverted any merchandise from plaintiff.
Halpern further argues that plaintiff has been inactive since Russo's death and has failed to produce an operating agreement, which Halpern has demanded, or to clarify who now controls plaintiff. Halpern characterizes Walsh's deposition testimony as “replete with responses constituting rank hearsay and hearsay within hearsay and unsubstantiated conclusions.” He concludes that plaintiff produces no witness with personal knowledge of the facts underlying the complaint and fails to raise any factual questions.
Halpern submits another affidavit of Torres, dated July 14, 2011 (the July Torres Affidavit). Here, Torres states, “On June 27, 2011, I reluctantly signed an Affidavit on this matter, under duress and under economic pressure from ANTHONY RUSSO and I deny each and every one of the allegations and statements contained therein.” He explains that he maintains non-exclusive service agreements with “few importers” in the United States and that he became acquainted with Halpern in 2007 when he sent Torres an e-mail saying that he received Torres's contact information from Del Calvo at a trade show. Torres recounts that Russo handled price negotiations, but relied on Halpern's knowledge of the trade in choosing merchandise. He asserts that Russo traveled alone to Guatemala in July 2010 “stating that he had to cut expenses and that HALPERN cost too much money in buying commissions from Guatemala, and that from now on he, RUSSO, will come alone to will [sic] not pay anything to HALPERN.” Torres states that Halpern later said that he lost over $10,000 in commissions because he was not included in Russo's July 2010 trip and that Torres then offered to assist Halpern. Torres explains that he took Halpern to several factories in September 2010, where Halpern bought apparel that was shipped to Unitrade. Torres states that Halpern “never diverted merchandise from someone else to his own use or to that of UNITRADE ENTERPRISES[;][h]e had only purchased merchandise that was available at that instant in time.” He further explains that “stock lot” merchandise is not held for potential purchasers until full payments are received. Torres asserts that plaintiff's business actually increased after Halpern left its service.
(2 )
Plaintiff, in opposition, stresses that Halpern admits his employment by Unitrade and that he used Torres to make purchases for that company. It contends that Russo authorized Halpern to deal with Torres solely as the agent of plaintiff or Russo and that “Halpern could not get into the front door of the factories to purchase any goods in Guatemala except with the confirmation and introduction by Mr. Russo and only on condition the [sic] goods were bought on behalf of Mr. Russo.” It again urges that Torres's contact information is not included in any trade publication and that Halpern fails to show he made any other purchases in Guatemala “except the one for the containers he and the other defendants ... stole' from plaintiff and Mr. Russo.” Plaintiff alleges that it is “more than likely” that Halpern improperly took plaintiff's operating agreement and thus knew that plaintiff would not be able to produce that document. It urges, in any case, that corporations are perpetual and that Russo's death is, thus, irrelevant. Plaintiff contends that the hearsay in Walsh's testimony may be used to oppose these summary judgment motions and that Halpern's affidavit itself raises questions of fact.
Discussion
( 1 )
A summary judgment movant must show prima facie entitlement to judgment as a matter of law by producing sufficient admissible evidence demonstrating the absence of any material factual issues (CPLR 3212[b] ; Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986] ). Failure to make such a showing requires denying the motion, regardless of the sufficiency of any opposition (Vega v. Restani Constr. Corp., 18 NY3d 499, 503 [2012] ). The opposing party overcomes the movant's showing only by introducing “evidentiary proof in admissible form sufficient to require a trial of material questions” (Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980] ).
Considering a summary judgment motion requires viewing the evidence in the light most favorable to the motion opponent (Vega, 18 NY3d at 503 ). Nevertheless, “mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” to defeat a summary judgment motion (Zuckerman, 49 N.Y.2d at 562 ). “The court's function on a motion for summary judgment is to determine whether material factual issues exist, not to resolve such issues” (Ruiz v. Griffin, 71 AD3d 1112, 1115 [2010] [internal quotation marks omitted] ).
CPLR 3212 requires that a summary judgment movant support the motion with an affidavit by a person with knowledge of the facts (CPLR 3212[b] ). Contrary to various contentions, each party supports its submissions herein with at least one affidavit by a person with firsthand knowledge of the facts underlying this case.
Plaintiff correctly asserts that successive summary judgment motions are typically not permitted (see Courthouse Corporate Ctr., LLC v. Schulman, 89 AD3d 672, 672 [2011] ; 2009 85th St. Corp. v. WHCS Real Estate Ltd. Partnership, 292 A.D.2d 520, 520 [2002] ). It errs, however, in arguing that the Unitrade defendants' motion, in sequence # 1, constituted a prior summary judgment motion, as that motion actually sought pre-answer dismissal pursuant to CPLR 3211.
( 2 )
Claims for unfair competition in New York fall into two categories: palming off and misappropriation (ITC Ltd. v. Punchgini, Inc., 9 NY3d 467, 476 [2007] ; Electrolux Corp. v. Val–Worth, Inc., 6 N.Y.2d 556, 567–568 [1959] ). “[T]he gravamen of a claim of unfair competition is the bad faith misappropriation of a commercial advantage belonging to another by infringement or dilution of a trademark or trade name or by exploitation of proprietary information or trade secrets” (Eagle Comtronics v. Pico Prods., 256 A.D.2d 1202, 1203 [1998], lv denied 688 N.Y.S.2d 372 [App.Div.1999] ; see also Out of Box Promotions, LLC v. Koschitzki, 55 AD3d 575, 578 [2008] ; Beverage Mktg. USA, Inc. v. South Beach Beverage Co., Inc., 20 AD3d 439, 440 [2005] ).
The Court of Appeals has explained that New York courts, in seeking to define trade secret, frequently turn to the Restatement (First) of Torts (Ashland Mgt. v. Janien, 82 N.Y.2d 395, 407 [1993], citing Restatement [First] of Torts § 757, Comment b; Matter of New York Tel. Co. v. Public Serv. Commn., 56 N.Y.2d 213, 219 n 3 [1982] ; see also Eastern Bus. Sys. v. Specialty Bus. Solutions, 292 A.D.2d 336, 338 [2002] ; Laro Maintenance Corp. v. Culkin, 267 A.D.2d 431, 432 [1999] ). Comment b of § 757 of the Restatement (First) of Torts defines a trade secret as “any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it,” and it specifically includes customer lists as potential trade secrets. The Court of Appeals also embraced using six factors suggested by the Restatement in determining whether certain information may be considered a trade secret:
“(1) the extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business; (3) the extent of measures taken by [the business] to guard the secrecy of the information; (4) the value of the information to [the business] and [its] competitors; (5) the amount of effort or money expended by [the business] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others' “ (Ashland Mgt., 82 N.Y.2d at 407 [alterations in original], quoting Restatement [First] of Torts § 757, Comment b; see also Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 124 [1998] ; U.S. Reins. Corp. v. Humphreys, 205 A.D.2d 187, 191–192 [1994] ).
Appellate case law illustrates that information may not be considered a trade secret if it was not properly developed and guarded as a secret (Ashland Mgt., 82 N.Y.2d at 407 ; Beverage Mktg. USA, Inc. v. South Beach Beverage Co., Inc., 58 AD3d 657, 658 [2009] [finding no trade secret where information “available in the marketplace”]; Mann v. Cooper Tire Co., 33 AD3d 24, 32 [2006], lv denied 7 NY3d 718 [2006], rearg. denied 8 NY3d 956 [2007] ; Starlight Limousine Serv. v. Cucinella, 275 A.D.2d 704, 705 [2000] [finding no trade secret as the “plaintiffs failed to take any measures to require the defendants to guard the secrecy of the customer list during the defendants' service with the plaintiffs, or to prevent the defendants from using the information contained in the customer list once they left the plaintiffs' service”] ).
A former employee may generally solicit a business's customers, so long as the employee is not bound by a non-compete agreement, does not solicit customers while still employed by the business and does not rely on customer information that was wrongfully obtained or which constitutes a trade secret (see Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 392 [1972] ; Island Sports Physical Therapy v. Kane, 84 AD3d 879, 880 [2011] ; Apa Sec., Inc. v. Apa, 37 AD3d 502, 503 [2007] ; Eastern Bus. Sys., 292 A.D.2d at 338 ). Although the Restatement specifically identifies customer lists as potential trade secrets, not every collection of customer information will receive such protection. Indeed, courts that have treated customer lists as trade secrets have generally focused on the great amount of time and money that the plaintiff spent assembling the customer list, the difficulty in ascertaining potential customers without the list or the efforts that the plaintiff took to guard it. (See Leo Silfen, Inc., 29 N.Y.2d at 392–393 ; Town & Country House & Home Serv. v. Newbery, 3 N.Y.2d 554, 559–560 [1958] ; Marcone APW, LLC v.. Servall Co., 85 AD3d 1693, 1695–1696 [2011] ; Starlight Limousine Serv., 275 A.D.2d at 705 ; Savannah Bank v. Savings Bank of Fingerlakes, 261 A.D.2d 917, 918 [1999] ; Metal & Salvage Assn. v. Siegel, 121 A.D.2d 200, 201–202 [1986].) New York courts have applied a similar standard when evaluating whether a business's suppliers may be treated as a trade secret, often also considering whether the plaintiff businesses had exclusive arrangements with those suppliers (see Matter of Three Dots v. Lonny's Wardrobe, 292 A.D.2d 309, 310 [2002] ; Howard Berger Co. v. Ye, 272 A.D.2d 445, 445 [2000] ; Metal & Salvage Assn., 121 A.D.2d at 201 ; SRM Beauty Corp. v. Sook Yin Loh, 30 Misc.3d 1222[A], 2011 N.Y. Slip Op 50163[U], *5 [Sup Ct, Queens County 2011]; Beverage Mktg. USA, Inc. v. South Beach Beverage Co., Inc., 15 Misc.3d 1124 [A], 2007 N.Y. Slip Op 50831[U], *8 [Sup Ct, Nassau County 2007], amended on rearg 2007 N.Y. Slip Op 33444[U] [Sup Ct, Nassau County 2007], affd 58 AD3d 657 ).
Here, plaintiff essentially alleges that Torres and associated Guatemalan factories constituted trade secrets, which Halpern misappropriated to the benefit of Unitrade and himself. Even construing the evidence in the light most favorable to plaintiff, however, Torres and the unidentified factories cannot be considered trade secrets when applying the factors enumerated by the Restatement and embraced by the Court of Appeals. Plaintiff makes no suggestion that Torres or the factories had promised to or did, in fact, sell exclusively to plaintiff or Russo and does not show that the suppliers from which Halpern bought for Unitrade were not otherwise publicly ascertainable. Furthermore, no evidence indicates that plaintiff or Russo undertook great effort in discovering factories, establishing a business relationship with Torres or keeping those contacts secret. Defendants thus make a prima facie showing that they misappropriated no trade secrets from plaintiff, and plaintiff fails to raise any factual issues that could support that claim. Accordingly, summary judgment must be granted to defendants dismissing plaintiff's claim for misappropriation of trade secrets.
Despite plaintiff's repeated assertions that defendants diverted or usurped merchandise that plaintiff had purportedly ordered or reserved, plaintiff submits no competent evidence that could support some cause of action based on such allegations. To the extent that the complaint could be read as claiming conversion, it still warrants dismissal, as plaintiff fails to identify any specific property purportedly converted or to submit evidence indicating a possessory right or interest in any merchandise that defendants received (see Colavito v. New York Organ Donor Network, Inc., 8 NY3d 43, 49–50 [2006] ). Similarly, plaintiff fails to introduce facts that could support a potential claim for tortious interference with business relations (see White Plains Coat & Apron Co., Inc. v. Cintas Corp., 8 NY3d 422, 425–426 [2007] ; Carvel Corp. v. Noonan, 3 NY3d 182, 189–192 [2004] ).
Injunctive relief, which plaintiff's second cause of action seeks, would require a basis in some sound legal theory and would, in any case, be pointless, as the evidence indicates that plaintiff no longer engages in the business that an injunction would serve to protect. Hence, summary judgment must be granted dismissing plaintiff's complaint. Accordingly, it is
ORDERED that the Unitrade defendants' motion, in sequence # 10, seeking summary judgment dismissing plaintiff's claims as against them is granted in its entirety; and it is further
ORDERED that Halpern's motion, in sequence # 11, seeking summary judgment dismissing plaintiff's complaint is granted in its entirety.
This constitutes the decision, order and judgment of the court.