Opinion
Index No. 655147/2023
02-29-2024
Quest Partners LLC, Plaintiff, v. Brian Brugman, Defendant.
DLA Piper LLP (US), New York, NY (Daniel Turinsky of counsel), for plaintiff. Seward & Kissel LLP, New York, NY (David Baron and Carmella R. O'Hanlon of counsel), for defendant.
Unpublished Opinion
DLA Piper LLP (US), New York, NY (Daniel Turinsky of counsel), for plaintiff.
Seward & Kissel LLP, New York, NY (David Baron and Carmella R. O'Hanlon of counsel), for defendant.
Gerald Lebovits, J.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 16, 17, 18, 19 were read on this motion to DISMISS.
In this action for breach of a confidentiality agreement and misappropriation of trade secrets, defendant, Brian Brugman, moves to dismiss the complaint filed by plaintiff, Quest Partners LLC. The motion is granted in part and denied in part.
BACKGROUND
On June 1, 2021, Brugman became a member of Quest and served as its director of research. Brugman and Quest executed a member services agreement dated June 1, 2021. After that, Brugman also signed multiple documents to safeguard Quest's confidential information, including Trade Secrets Policy and Procedural Guidelines. (NYSCEF No. 17 at 2.)
On August 15, 2022, Quest fired Brugman as director of research and, on December 31, 2022, terminated his membership in the LLC. Brugman entered into a separation agreement with Quest to reaffirm that he "has not and in the future will not use or disclose to any third party any Confidential Information, unless compelled to do so by law and after notice to the Company." (NYSCEF No. 18 at 5.)
In March 2023, an industry trade publication wrote that Brugman planned in the future to launch a systematic macro hedge fund called "Endurance Macro." (NYSCEF No. 17 at 4.) Quest alleges that in September 2023, it saw a "solicitation for Brugman's fund... using terms that closely resemble Quest's strategies"-in particular, "a proprietary capital strategy designed and launched during Brugman's tenure with the Company." (Id.)
Quest brought this action in October 2023. Quest alleges that Brugman misappropriated confidential, proprietary, and trade-secret information. According to Quest, it concluded that Brugman had misappropriated information based on several factors: (i) The solicitations for Brugman's fund used terms closely resembling Quest's short-term trading strategies, which require the use of techniques unique to Quest; (ii) Brugman had access to its confidential information, including trading strategies, as director of research; and (iii) Brugman lacked experience in short-term trading strategies and lacked the capacity to develop such strategies on his own. Quest alleges that given the significant time, effort, and technical ability required to develop the trading strategies at issue, it would have been impossible for Brugman to have done so without using Quest's confidential, proprietary, and trade secret information. (See NYSCEF No. 18 at 4, 5.)
Quest's complaint asserts six causes of action. The first and third causes of action both sound in misappropriation of proprietary information and trade secrets; the second cause of action is for breach of contract; the fourth cause of action is for breach of fiduciary duty; the fifth cause of action is for conversion; and the sixth cause of action is for unfair competition.
Brugman now moves to dismiss Quest's complaint under CPLR 3211 (a) (1) and (a) (7). (See NYSCEF No. 16.)
DISCUSSION
I. Whether Quest's Complaint Sufficiently Describes the Trade Secrets at Issue
Brugman argues that the entire complaint should be dismissed for failure to state a cause of action, on the ground that Quest has not sufficiently described the trade secrets and confidential information at issue. He contends that Quest describes the alleged trade secrets and confidential information only as its proprietary trading strategies. This description, Brugman says, is insufficient, because Quest has multiple trading strategies; and its complaint does not provide details about which models, analysis, research, or systems Brugman allegedly misappropriated. This court is not persuaded by Brugman's argument.
It is not necessary for a complaint to provide significant detail of what confidential information is at issue. (See Archemy, Inc. v. Wiener, 2023 NY Slip Op 31212[U], at *2 (Sup Ct, NY County 2023, Bluth, J.). Quest need only state a cognizable cause of action to defeat a motion to dismiss. For that purpose, general descriptions in the complaint of what trade secrets or confidential information are at issue are sufficient. Details about the information allegedly at issue can instead be brought out through a bill of particulars or other discovery devices.
II. Whether it is Untenable for Quest To Premise its Complaint on an Inference that Brugman Misappropriated Quest's Confidential Information
Brugman also argues that the entire complaint should be dismissed because it is based on the inference that he misappropriated Quest's information-an inference, he claims, that is disproven by documentary evidence under CPLR 3211 (a) (1). In particular, Brugman contends that the terms used in the solicitations for Brugman's fund at issue (which Quest alleges show misappropriation) can be found in multiple public sources, including Quest's online brochure and websites.
In assessing a motion under CPLR 3211 (a) (1), the motion may be granted "only where the documentary evidence utterly refutes [the non-moving party's] factual allegations, conclusively establishing a defense as a matter of law." (Goshen v Mutual Life Ins. Co. of New York, 98 N.Y.2d 314, 326 [2002].) Here, Quest's allegation is not that the terms used in Brugman's solicitation, or the basic trading strategies described by those terms, are confidential or trade secrets. Rather, Quest contends, the only way Brugman, in particular, would be in a position to deploy those strategies is through having misappropriated Quest's information. (See NYSCEF No. 2 at ¶ 35.) The public information to which Brugman points does not conclusively disprove this allegation.
III. Whether Quest's Misappropriation, Fiduciary Duty, and Unfair-Competition Causes of Action Should Be Dismissed as Duplicative
Brugman also argues that Quest's third, fourth, and sixth causes of action (for misappropriation, breach of fiduciary duty, and unfair competition) should be dismissed as duplicative of Quest's breach of contract claim. This court agrees. The misappropriation and unfair-competition claims are "entirely based on alleged conduct that is proscribed by" contract and hence they are duplicative of plaintiff's contract claim." (Linkable Networks, Inc. v Mastercard Inc., 184 A.D.3d 418, 419 [1st Dept 2020].) Similarly, the breach-of-fiduciary-duty claim is based on the same allegations as the contract claim; and the complaint does not allege that the harm suffered by Quest differs in form or extent between the two claims. (See Chowaiki & Co. Fine Art Ltd. v Lacher, 115 A.D.3d 600, 600 [1st Dept 2014] [dismissing plaintiffs' claim for breach of fiduciary duty as duplicative of the breach-of-contract claim].)
Quest argues that these claims are not duplicative. According to Quest, they implicate obligations owed by Brugman to Quest that would exist even absent the contractual provisions on which Quest's breach-of-contract claim relies. This argument, though, shows only that Quest could maintain these claims absent applicable contractual language. (See Advance Biofactures Corp. v Greenberg, 103 A.D.2d 834, 836 [2d Dept 1984), citing Byrne v Barrett, 268 NY 199, 206-207 [1935] [discussing this point].) Here, though, where Brugman's alleged conduct is governed by the terms of his agreements with Quest, the third, fourth, and sixth claims are duplicative.
Given the court's conclusion that the third cause of action, for misappropriation of trade secrets, is subject to dismissal as duplicative, the court also dismisses the first cause of action, which sounds in misappropriation as well.
IV. Whether Quest's Conversion Claim Should Be Dismissed for Failure to State a Cause of Action
Brugman contends that Quest's fifth cause of action, for conversion, should be dismissed "because Quest has not alleged that it was deprived of its ability to use any property from Brugman's alleged misappropriation," as the tort of conversion requires. (NYSCEF No. 17 at 17.) This court agrees with Brugman.
In opposing this branch of Brugman's motion, Quest argues that "intangible property, such as electronically stored information or intellectual property," may be the subject of a conversion claim "regardless of whether a defendant's possession of such property excluded plaintiff from access." (NYSCEF No. 18 at 16.) Quest relies for this argument on the Court of Appeals's decision in Thyroff v Nationwide Mut. Ins. Co. (8 N.Y.3d 283 [2007]). But Thyroff does not reach that far. In that decision-answering a certified question from the U.S. Court of Appeals for the Second Circuit-the Court held only that a claim for the conversion of electronic data is (now) cognizable under New York law. (See 8 N.Y.3d at 285-286, 291-293). Thyroff did not purport to eliminate the exclusion-of-owner's-rights element of conversion for claims based on electronic data. Nor would it have made sense for the Court to do so, given that plaintiff there had alleged that defendant's acts deprived him of access to the electronic records at issue.
The court therefore concludes that Quest was still required to have alleged that Brugman interfered with its ownership, control, or access to its electronic data and records-and that the absence of that allegation renders Quest's conversion claim subject to dismissal. (See MLB dvanced Media v Big League Analysis, LLC, 2017 NY Slip Op 32617[U], at *2-4 [Sup Ct, NY County 2017, Kornreich, J.]; Jones Group Inc v Zamarra, 2014 NY Slip Op 31448[U], at *9-10 [Sup Ct, NY County 2014, Bransten, J.].)
Accordingly, it is
ORDERED that Brugman's CPLR 3211 motion to dismiss is denied as to Quest's second cause of action and granted as to Quest's first, third, fourth, fifth, and sixth causes of action; and it is further
ORDERED that Brugman shall serve and file an answer, limited to Quest's second cause of action, within 20 days of entry of this order; and it is further
ORDERED that the parties shall appear before this court for a telephonic preliminary conference on April 12, 2024.