Opinion
06 Civ. 15357 (GEL).
June 13, 2007
Stephen Wagner and Andrea J. Lawrence, Cohen Tauber Spievack Wagner LLP, New York, NY, for plaintiff.
Richard A. DePalma and Kathryn M. Ryan, Baker McKenzie LLP, New York, NY, for defendants.
OPINION AND ORDER
Plaintiff S.W.B. New England, Inc., ("SWB") brought this action against defendants R.A.B. Food Group, LLC, ("RAB"), Millbrook Distribution Services, Inc., ("Millbrook"), and Bruce Leeds, alleging, inter alia, that defendant Leeds breached his fiduciary duty to SWB. Leeds moves for summary judgment on plaintiff's claim, arguing that SWB has no factual or legal basis for its claim. Leeds's motion will be denied.
BACKGROUND
Only facts relevant to the current dispute are recited here.
On December 21, 2006, plaintiff, a distributor of kosher, ethnic, and specialty food products in the New England area, brought this action against defendant RAB, a manufacturer and distributor of such products, in connection with RAB's termination of a distributorship agreement between the parties. SWB's original complaint alleged claims for breach of contract, tortious interference with business relations, and unfair competition. (Compl. ¶¶ 74-88.) RAB was the only named defendant in the original complaint.
On the same day that the complaint was filed, SWB applied to the Court for a temporary restraining order and preliminary injunction to prevent RAB from terminating the distributorship agreement. (See Lawrence Decl. Ex. 1.) The Court denied SWB's request for a temporary restraining order, but held a hearing on plaintiff's request for a preliminary injunction. (Id.) Defendant Leeds, a former employee, officer, and director of SWB (Leeds Decl. ¶ 9; Ward Decl. ¶ 6), testified at the hearing on behalf of RAB. (Ward Decl. Exs. C, E; see Leeds Decl. ¶ 6.) Leeds is a current employee of Millbrook, which is a subsidiary of RAB. (Leeds Decl. ¶ 1; Bernstein Decl. ¶ 1.) After a two-day hearing held on January 4-5, 2007, the Court granted in part SWB's application for a preliminary injunction. (Lawrence Decl. Ex. 1, at 2.) Specifically, the Court ordered that RAB was enjoined from terminating SWB as a distributor of "Products" (as defined in the parties' distributorship agreement) until after April 10, 2007. (Id.)
It is disputed whether Leeds ever held or continues to hold stock in SWB or in SWB's parent corporation, MM Distribution, Inc. (Compare Ward Decl. ¶ 6 ("[Leeds] remains a 15% shareholder of SWB.") and Tr. 175, with Leeds Supp. Decl. ¶ 4 ("I am a 15% minority shareholder in MM Distribution, Inc. . . . which is the parent of SWB. I hold no shares in SWB whatsoever. . . .").)
On February 16, 2007, shortly after the preliminary injunction hearing, plaintiff filed an amended complaint adding Millbrook and Leeds as defendants. (Leeds Decl. ¶ 1.) Although the amended complaint includes eight claims for relief, Leeds is only named in the eighth and final claim. (Id.; see Am. Compl. ¶¶ 111-115.) Specifically, plaintiff alleges that Leeds breached his fiduciary duty to SWB "by disclosing to Millbrook and/or RAB, SWB's confidential information, including financial and marketing information" (Am. Compl. ¶¶ 113-14), and by disparaging SWB to The Stop Shop Supermarket Company ("Stop Shop"), one of SWB's customers, at the direction of Millbrook and RAB. (Id. ¶¶ 50, 55.)
On March 29, 2007, the Court set a discovery schedule, pursuant to which fact discovery would end on August 17, 2007. However, on March 19, 2007, prior to the setting of the discovery schedule, Leeds moved for summary judgment on the sole claim against him, notwithstanding that the parties had undertaken no discovery at that point other than the limited discovery necessary to the preliminary injunction hearing. (P. Br. 4.) In his motion for summary judgment, Leeds "categorically denies each and every allegation against him made in the Amended Complaint." (D. Br. 3 (emphasis in original); see Leeds Decl. ¶¶ 8-15.) Plaintiff filed its response on April 5, 2007; the motion was fully briefed on April 16, 2007.
DISCUSSION
Leeds argues that a genuine issue of fact does not exist because SWB has not come forth with evidence supporting its breach of fiduciary duty claim. Specifically, Leeds argues that the claim is based solely on plaintiff's "information and belief," and not on any evidence that supports "the necessary elements of breach or damages proximately caused by such breach." (D. Br. 5.) However, plaintiff argues principally that summary judgment is premature at this stage of the litigation, since it has not yet had a chance to conduct discovery. The Court agrees.
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court's responsibility is to determine if there is a genuine issue to be tried, and not to resolve disputed issues of fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The Court must draw all reasonable inferences and resolve all ambiguities in the nonmoving party's favor, and construe the facts in the light most favorable to the nonmoving party. Id. at 254-55.
However, summary judgment should be granted only "[i]f after discovery, the nonmoving party 'has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof.'" Berger v. United States, 87 F.3d 60, 65 (2d Cir. 1996), quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (alteration in original and emphasis added). "The nonmoving party must have 'had the opportunity to discover information that is essential to his opposition' to the motion for summary judgment." Trebor Sportswear Co. v. The Limited Stores. Inc., 865 F.2d 506, 511 (2d Cir. 1989), quoting Anderson, 477 U.S. at 250 n. 5. A genuine issue for trial exists if, based on the record as a whole, a reasonable jury could find in favor of the nonmoving party, id. at 248, and the absence of a complete record ordinarily precludes granting summary judgment. Thus, "[o]nly in the rarest of cases may summary judgment be granted against a plaintiff who has not been afforded the opportunity to conduct discovery." Hellstrom v. U.S. Dep't of Veterans Affairs, 201 F.3d 94, 97 (2d Cir. 2000), citing Sutera v. Schering Corp., 73 F.3d 13, 18 (2d Cir. 1995), Meloff v. N.Y. Life Ins. Co., 51 F.3d 372, 375 (2d Cir. 1995), and Jones v. Coughlin, 45 F.3d 677, 680 (2d Cir. 1995).
When a party moves prematurely for summary judgment before discovery has been completed, Rule 56 provides a "safety valve," in the form of Rule 56(f), to prevent the opposing party from being "railroaded." Johnson v. Arista Holding, Inc., No. 05 Civ. 9645, 2006 WL 3511894, at *4 (S.D.N.Y. Dec. 5, 2006), citingCelotex, 477 U.S. at 326. See Anderson, 477 U.S. at 250 n. 5 ("[Rule 56(f) requires that] summary judgment be refused where the nonmoving party has not had the opportunity to discover information that is essential to his opposition."). Rule 56(f) has often been invoked by courts in this district to forestall premature summary judgment. See Am. Home Assurance Co. v. ZIM JAMAICA, 418 F. Supp. 2d 537, 552 (S.D.N.Y. 2006) (employing Rule 56(f) to provide defendants with the opportunity to conduct discovery); Garraway v. Artuz, No. 01 Civ. 3126, 2002 WL 221584, at *7 (S.D.N.Y. Feb. 13, 2002) ("Because [plaintiff] has not been afforded a sufficient opportunity to conduct discovery, [defendant's] summary judgment motion is premature.").
To obtain relief under Rule 56(f), the nonmoving party must submit an affidavit explaining: "(1) what facts are sought and how they are to be obtained, (2) how those facts are reasonably expected to create a genuine issue of material fact, (3) what effort the affiant has made to obtain them, and (4) why the affiant was unsuccessful in those efforts." Hudson River Sloop Clearwater, Inc. v. Dep't of the Navy, 891 F.2d 414, 422 (2d Cir. 1989). See, e.g., Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994) (an affidavit requesting discovery on matters that are not "germane" to the plaintiff's claim is insufficient to satisfy Rule 56(f)).
Here, Leeds's motion for summary judgment was filed not only before discovery was completed, but before the case management plan was ordered and before any significant relevant discovery was conducted. The only evidence submitted to the Court in connection with this motion consists of the affidavits of Leeds and four employees of SWB, RAB, and Millbrook; plaintiff had no opportunity to conduct any depositions before Leeds filed his motion. See, e.g., Madeira v. United Talmudical Acad. of Kiryas Joel, 351 F. Supp. 2d 162, 167 (S.D.N.Y. 2004) (finding that summary judgment could not be granted based solely on the self-serving affidavit of an officer of defendant who had not been deposed). Courts have found motions for summary judgment to be premature on records far more developed than the one in this case. See Johnson, 2006 WL 3511894, at *4 (granting Rule 56(f) relief to plaintiff even though discovery had already completed because plaintiff had not had the opportunity to depose an expert witness).
Although limited discovery took place at the commencement of this litigation in connection with SWB's application for a preliminary injunction, that discovery — which was conducted over the span of less than two weeks — did not result in a fully, or even substantially, developed record in this case. Indeed, as Leeds was not a party to the litigation at the time of the preliminary injunction hearing, no discovery as to the claim asserted against him could have occurred at that time.
As required by Rule 56(f), plaintiff has filed an affidavit setting forth the discovery it seeks in support of its claim. (See Lawrence Decl. ¶¶ 14-15; Ward Decl. ¶¶ 10, 13.) Specifically, plaintiff seeks discovery from Stop Shop, including the deposition of Bob Dodge, the Category Manager of Ethnic Foods at Stop Shop, to ascertain whether Leeds did, in fact, disparage SWB to Stop Shop. (Id.) Plaintiff's intended discovery goes to the very heart of its claim that Leeds breached his fiduciary duty to SWB by disparaging it to its customers. Plaintiff indicates that it has tried and failed to secure an affidavit from Stop Shop (Ward Decl. ¶¶ 11-12), and Stop Shop confirmed that it would provide an affidavit to plaintiff only if it is served with a subpoena. (Id. ¶ 12.) This is the very purpose of third-party discovery: to provide parties with the opportunity to compel witnesses to provide information when they are unwilling to do so voluntarily. Thus, plaintiff should have the opportunity to pursue its claim against Leeds by issuing the necessary subpoenas, deposing relevant witnesses, and taking any other discovery necessary to support its claim; the Court will not cut off this opportunity through a premature grant of summary judgment. See Johnson, 2006 WL 3511894, at *4 (Rule 56 should be used for the "prompt dispos[al] of cases where the record shows that there is no genuine issue of material fact," and not for the "premature" decision of cases "on an incomplete record"). See, e.g., Riley v. Town of Bethlehem, 44 F. Supp. 2d 451, 459 (N.D.N.Y. 1999) ("Rule 56(f) . . . should generally be applied with a spirit of liberality. . . .") (internal quotation marks and citation omitted).
Even at this stage of the litigation, plaintiff has presented at least some evidence in support of its claim against Leeds. Although discovery had not even begun at the time Leeds filed his motion, plaintiff has submitted affidavits that call into question Leeds's sworn testimony, raising potential issues of fact. See E-Smart Techs., Inc. v. Corse, No. 03 Civ. 7060, 2004 WL 2093531, at *3 (S.D.N.Y. Sept. 17, 2004) (denying summary judgment in breach of fiduciary duty claim where there was "a genuine issue of fact . . . which [cannot be] disposed of simply by the submission of a self-serving affidavit").
For example, plaintiff has submitted the affidavit of Sharon Dowell to rebut Leeds's assertion that he never shared proprietary information with Millbrook or RAB. Dowell, an SWB employee who worked under Leeds during his tenure at SWB, swears that, prior to leaving SWB, Leeds requested that Dowell delete emails he had sent to Millbrook that were stored on his computer "in a certain manner so that they would be completely erased from his computer's hard drive." (Dowell Decl. ¶ 6.) Dowell also claims that, after Leeds left SWB, he requested that Dowell delete " all of the information contained on the hard drive of the computer that he used while employed by SWB." (Id. ¶ 7 (emphasis in original).) In addition, plaintiff has submitted the affidavit of Charles Ward, president of SWB, who swears that he had several conversations with Bob Dodge, during which Ward learned of Leeds's alleged disparagement of SWB to Stop Shop. (Ward Decl. ¶ 9.)
Whether or not this evidence would be admissible in its present form at trial, or would be sufficient to raise a genuine issue of material fact if it were all that remained at the close of discovery, it is sufficient to suggest that discovery could reasonably be expected to yield further evidence. Dowell's affidavit, at a minimum, suggests a good faith basis for plaintiff to depose Leeds concerning the nature of his communications with Millbrook while employed at SWB. Similarly, Leeds cannot simultaneously object to Ward's affidavit as unsubstantiated hearsay (D. Reply 3-6) and attempt to preclude plaintiff's ability to depose Dodge.
Leeds's argument that plaintiff has not "come forward with specific facts" in support of its claim, but instead relies upon "speculation [and] innuendo," is inapposite. (D. Reply 8.) The uncovering of "specific facts" is the goal of discovery — generally, a party is neither expected nor required to state the "specific facts" of its claims in its pleadings. See Elektra Entm't Group, Inc. v. Santangelo, No. 05 Civ. 2414, 2005 WL 3199841, at *3 (S.D.N.Y. Nov. 28, 2005) (to satisfy federal notice pleading under Fed.R.Civ.P. 8(a), "[p]laintiffs need only give notice of their claim, leaving 'factual details and evidentiary issues [to be] developed during discovery'") (emphasis added) (alteration in original), citingCapitol Records, Inc. v. Wings Digital Corp., 218 F. Supp. 2d 280, 284 (E.D.N.Y. 2002). Only after plaintiff is given the opportunity to pursue discovery must it then come forward with "specific facts" to survive a motion for summary judgment. Leeds has provided no reason why this is one of those "rare" cases in which plaintiff should not be afforded that opportunity.Hellstrom, 201 F.3d at 97.
Finally, Leeds attributes much significance to the fact that he was not added as a party to the litigation until after he testified on behalf of RAB at the preliminary injunction hearing. (See Leeds Decl. ¶ 7.) Leeds accuses SWB of adding him as a party in retaliation for his adverse testimony at the preliminary injunction hearing, which resulted in the entry of an injunction against RAB. (Id.) Plaintiff's claim against Leeds may ultimately prove without merit; the timing of its insertion of Leeds as a party into what is primarily a contractual dispute between plaintiff and RAB gives color to defendant's argument that this claim is asserted in bad faith to intimidate a witness. Plaintiff would do well to reconsider, after taking discovery, whether it makes sense to proceed with these claims. However, if the claim against Leeds lacks merit, that determination should only be made after the parties have had an opportunity to conduct discovery. Until such discovery is had, defendant's motion for summary judgment is premature.
Moreover, if discovery establishes that plaintiff's claim is so baseless that it could only be attributed to a retaliatory animus, Leeds will not be without recourse at that time. See Fed.R.Civ.P. 11; see, e.g., Savino v. Computer Credit, Inc., 164 F.3d 81, 88 (2d Cir. 1998) ("[T]he primary goal of Rule 11 sanctions is the deterrence of baseless filings and the curbing of abuses. . . .") (internal quotation marks and citation omitted).
CONCLUSION
For the foregoing reasons, defendant Leeds's motion for summary judgment is denied.SO ORDERED.