Opinion
03-CV-6082T.
February 2, 2005
DECISION and ORDER
INTRODUCTION
Plaintiff Konecranes, Inc., ("Konecranes"), as a successor in interest to Shepard Niles, Inc., (a now defunct company that formerly manufactured industrial cranes), brings this action against Cranetech, Inc. ("Cranetech"), and former Shepard Niles' employees Michael Hoyt, ("Hoyt") Ronald Cervoni, ("Cervoni") Lester Sills, ("Sills") Carlton Edger, Jr., ("Edger") and Timothy Donnell ("Donnell") claiming that the defendants, or some of them: misappropriated trade secrets and/or confidential, proprietary information; breached a contract; breached an implied covenant of good faith and fair dealing; breached a fiduciary duty; tortiously interfered with a contract; engaged in unfair competition; defamed the plaintiff; and tortiously interfered with a prospective advantage. Specifically, plaintiff alleges that upon the dissolution of Shepard Niles, Inc., Cervoni, Sills, Edger and Donnell, all of whom were subsequently hired by Cranetech, misappropriated Shepard Niles' trade secrets relating to its designs and specifications for the manufacture of cranes and parts, in addition to confidential business information. Konecranes, which purchased certain assets of Shepard Niles, claims that Cervoni, Sills, Edger and Donnell employees acted at the request of Hoyt, another former Shepard Niles employee who years earlier left the company to form Cranetech, a supplier of parts for industrial cranes.
By motion dated May 28, 2004, defendants move for partial summary judgment dismissing Counts Three and Six of the Complaint. Defendants contend that plaintiff's third cause of action, seeking damages for an alleged breach of the implied covenant of good faith and fair dealing, is duplicative of plaintiff's cause of action for breach of contract, in that both counts are based on the same nucleus of operative facts. Specifically, defendants claim that plaintiff's allegations that the defendants breached non-disclosure agreements also underlie plaintiff's allegations that the defendants violated the implied covenant of good faith and fair dealing. Defendants seek dismissal of plaintiff's sixth cause of action for replevin on grounds that the defendants have voluntarily satisfied plaintiff's request for relief under that count: to wit, the return of documents taken from Shepard Niles by the defendants.
Plaintiff opposes defendants' motion on grounds that there are questions of material fact in dispute, and therefore, summary judgment is inappropriate. Plaintiff argues that its cause of action for breach of the implied covenant of good faith and fair dealing is alternative to and independent of the claims for breach of contract. With respect to the document claims, plaintiff alleges that there are material facts in dispute regarding whether or not the defendants have returned all of the documents taken from Shepard Niles.
For the reasons set forth below, I deny defendant's motion for partial summary judgment. I find that plaintiff's cause of action for breach of the implied covenant of good faith and fair dealing is sufficiently distinct from plaintiff's cause of action for breach of contract, and therefore is not duplicative. I deny defendants' motion to dismiss plaintiff's sixth cause of action on grounds that there are material facts in dispute with respect to the return of documents by the defendants.
BACKGROUND
In January 2002, Shepard Niles Inc., filed for bankruptcy. The Bankruptcy Court accepted competitive bids for Shepard Niles' assets, and on March 28, 2002, the Bankruptcy Court approved a $5,900,000 offer tendered by plaintiff Konecranes. According to Konecranes, as a result of its purchase, it succeeded to the rights and interests of Shepard Niles with respect to its hoist business, including all rights to the Shepard Niles trademark, service and parts business, and all related enterprises.
The Complaint alleges that sometime prior to the discontinuance of operations by Shepard Niles, Inc., defendant Hoyt approached defendants Cervoni, Sills, Edger, and Donnell, and asked them to work for Cranetech. Plaintiff alleges that Hoyt also asked those defendants to obtain and bring to Cranetech Shepard Niles' customer information, as well as Shepard Niles' technical drawings, plans, and designs. According to the plaintiff, defendant Cervoni requested access to such information, and may have copied and taken that information. Plaintiff also contends that Cervoni was seen removing boxes of documents from Shepard Niles. Plaintiff alleges that the defendants actions violated a non-disclosure agreement entered into by Shepard Niles and the defendants, which agreement prohibited defendants from disclosing Shepard Niles' proprietary information. Plaintiff also alleges that by taking and using or exploiting the wrongfully obtained confidential information, the defendants violated their implied covenants of good faith and fair dealing. Finally, in addition to other forms of relief, plaintiff seeks the return of any wrongfully obtained documents.
DISCUSSION
I. Summary Judgment Standard
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." When considering a motion for summary judgment, all inferences and ambiguities must be resolved in favor of the party against whom summary judgment is sought. R.B. Ventures, Ltd. v. Shane, 112 F.3d 54 (2nd Cir. 1997). If, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party, a grant of summary judgment is appropriate. Annis v. County of Westchester, 136 F.3d 239, 247 (2nd Cir. 1998).
II. Breach of the Implied Covenant of Good Faith and FairDealing.
Defendants move to dismiss plaintiff's cause of action for breach of the implied covenant of good faith and fair dealing on grounds that it is duplicative of plaintiff's cause of action for breach of contract. In support of this argument, defendants contend that the cause of action for the breach of the implied covenant is based on the same factual predicate as the cause of action for breach of contract: specifically, that defendants wrongfully removed and/or disclosed confidential and proprietary documents or information obtained from Shepard Niles.
The Complaint contains two paragraphs setting forth the factual basis for the breach of contract and breach of the implied covenant of good faith claims. Paragraph 31 of the Complaint alleges that "defendants Cervoni, Sills, Edger and Donnell removed from the Shepard Niles' facility Shepard Niles' trade secret, confidential and proprietary information, including customer lists, sales data, drawings, microfiche and other engineering data." Paragraph 32 contends that defendants Cervoni, Sills, Edger and Donnell brought the misappropriated material to Cranetech where they "exploited this information for their own benefit and for the benefit of . . . Cranetech."
Based on that factual predicate, plaintiff, in Count Two of the Complaint, contends that the defendants, by misappropriating Shepard Niles' documents and information, breached their confidentiality agreements. Specifically, plaintiff alleges that:
Pursuant to their Confidentiality Agreements, defendants Cervoni, Sills, Edger and Donnell, agreed not to disclose, either during or subsequent to their employment with Shepard Niles, in any manner whatsoever, any proprietary information obtained during their employment by the company, nor display for any purpose any drawings, letter, report or other form of proprietary information or any copies or reproductions thereof.
Complaint at ¶ 45. Plaintiff further alleges that "[b]y disclosing and/or utilizing Shepard Niles' trade secrets and proprietary and/or confidential information, defendants Cervoni, Sills, Edger and Donnell breached their confidentiality agreements." Complaint at ¶ 46.
With respect to its claim for breach of the implied covenant of good faith, plaintiff alleges in Count Three of the Complaint that "[the] defendants materially breached their respective covenants of good faith and fair dealing by, among other things, misappropriating Shepard Niles' confidential and proprietary engineering and sales information and exploiting said information for the benefit of Cranetech. . . ." Complaint at ¶ 50.
There is a material difference between the allegations supporting plaintiff's claims for breach of contract and breach of the implied covenant of good faith. Plaintiff's breach of contract claim alleges that the defendants improperly disclosed (as opposed to misappropriated) confidential information. Plaintiff's breach of the implied covenant of good faith claim, however, alleges that the defendant misappropriated (as opposed to disclosed) confidential information. This distinction is material because it is possible that even if the defendants did not disclose the misappropriated material, (as required to establish a claim for breach of contract), the mere taking of materials could state a claim for the breach of the implied covenant of good faith and fair dealing.
A plaintiff may state a claim for the breach of an implied covenant of good faith where the defendant engages in conduct that while technically not constituting a breach of contract, nevertheless deprives the plaintiff of the benefit of its bargain. Sauer v. Xerox Corp., 95 F.Supp.2d 125 (W.D.N.Y. 2000) (Larimer, C.J.). In the instant case, the confidentiality agreement between the defendants and the plaintiff prohibited defendants only from disclosing information: it did not specifically prohibit defendants from taking information from the facility. Accordingly, a reasonable finder of fact could determine that while the mere taking of documents did not violate the confidentiality agreement, that act violated the spirit of the agreement, and therefore violated an implied covenant of good faith and fair dealing. I therefore find that plaintiff's cause of action for breach of the implied covenant of good faith is distinct from its claims of breach of contract, and deny defendants' motion to dismiss plaintiff's third cause of action.
III. Replevin
Defendant moves to dismiss plaintiff's sixth cause of action seeking return of documents taken by the defendants from Shepard Niles on grounds that defendants have returned all materials taken. In support of this contention, defendants submit several unsworn declarations in which they state that they returned any documents they took from Shepard Niles. See e.g. Declaration of Ronald Cervoni dated May 12, 2004 at ¶ 7.
Based on the entirety of the record, however, I find that there is a question of fact as to whether or not all documents have been returned. Plaintiff submits sworn affidavits from former Shepard Niles' employees stating that several boxes of materials were removed from the company by the defendants, and that the defendants took more documents than were returned. Affidavit of Debra Pound dated June 28, 2004 at ¶ 5. Because there is a dispute as to whether or not all documents were returned by the defendants, I deny defendants' motion to dismiss plaintiff's sixth cause of action.
In doing so, I note an extensive history of reported negotiations between the parties to resolve their dispute. In fact, it had been reported to the court that the case had been resolved — but the parties just can't seem to bring it to a conclusion. The matter will be referred to a Magistrate Judge, which hopefully will assist the parties to bring the matter to a conclusion.
CONCLUSION
For the reasons set forth above, defendants' motion for partial summary judgment is denied.ALL OF THE ABOVE IS SO ORDERED.