Opinion
No. 22956/2013.
07-07-2014
NYWC, INC., Plaintiff, v. PRO BEAUTY CONCEPTS, INC., Bilyana Bozhinova and Tsevetan Ivanov, Defendants.
Opinion
Plaintiff commenced this action against the defendants by filing a summons and complaint seeking injunctive relief and money damages for misappropriation of confidential information and trade secrets, breach of duty of loyalty, aiding and abetting a breach of duty of loyalty, intentional interference with actual and prospective economic advantages; conversion, and unfair competition.
According to the complaint, the plaintiff, NYWC, Inc. is a “virtual company” which conducts its business on eBay and Amazon as a merchant of health, beauty, and electronic products. Nikolay K. Volper is the President of NYWC. In 2008, Volper hired defendant, Bilyana Bozhinova, as an assistant. The complaint alleges that for four years Bozhinova managed all aspects of NYWC's inventory including purchasing inventory, managing inventory and handling customer inquiries. The complaint states that Bozhinova was entrusted with all of the plaintiff's proprietary and confidential information including the business model, ordering, stocking, and shipping of inventory, client and distributor contact information, website passwords and eBay and Amazon account information. The plaintiff alleges that in July 2011, while Bozhinova was still working as an employee of NYWC, she founded and became Chief Executive Officer of Pro Beauty Concepts, Inc., a company she is alleged to have formed with defendant Tsevetan Ivanov to compete directly with NYWC. The plaintiff alleges that defendants launched a merchant account on eBay and Amazon selling health and beauty products. The plaintiff alleges that the products sold by defendants were stolen directly from the plaintiff's inventory or obtained through illegal use of NYWC's confidential client and distributor lists.
The complaint also alleges that in December 2011, Bozhinova terminated her employment with NYWC and continued to operate Pro Beauty. The complaint alleges that in forming Pro Beauty, Bozhinova applied and implemented information acquired through her employment with NYWC including NYWC's business model and structure, product information, distributor contact information, and client information. The complaint also alleges that the defendants misappropriated products and inventory from NYWC.
Based upon the above allegations, the plaintiff seeks to enjoin the defendants from using plaintiff's confidential client and distributor information and cosmetic products which were allegedly taken. Plaintiff alleges that absent injunctive relief, the defendants will continue to use NYWC's confidential information and trade secrets, a violation of the fiduciary duty of loyalty. Counsel also seeks monetary damages for misappropriation of confidential information, conversion and unfair competition.Defendants now move for an order dismissing the complaint on the ground that the complaint fails to state a cause of action. In support of the motion the defendants submit an affirmation from defendant Bilyana Bozhinova dated January 14, 2014. She states that she is the Chief Executive Officer and founder of Pro Beauty Concepts, Inc., an online beauty and supplement vendor. She began working for Nikolay Volper at NYWC, Inc. in April 2008. The primary business of NYWC was selling beauty products on eBay. She was taught the basics of how to work on eBay and Amazon. She states she never signed a contract or a non-compete agreement and worked part-time for the company as an independent contractor. Her hours were not set and depended on the volume of the orders although she states they only gave her one day off per week. She also attended school at Berkeley College. Her job responsibilities included responding to customers, printing orders from PayPal, locating products on the shelf for packing, unpacking deliveries, managing returns, and handling phone calls. She states that she was paid in cash. She left in December 2011 because she did not have enough time for her school work.
In September 2011 two months prior to leaving NYWC, she started her own business, Pro Beauty Concepts, with two other individuals, Tsvetan Ivanov and Daniela Hensley. She states that she never took any information from the plaintiff's office nor did she take any items. She states that all the information regarding vendors and companies that plaintiff deals with is public and can be found on line. She states that there was no customer or client list, and the clients are online customers from all over the world. She states that she began operation of her own business in November 2011 and conducted all of its sales, shipping and customer service on her own time and did not use NYWC time or resources to further her business efforts. She asserts that at no time did Pro Beauty or any of the other defendants actually solicit customers either of plaintiff or otherwise. The defendant asserts that the eBay and Amazon models are based upon the customer finding a seller based upon ratings and price. She states that under this model the sellers do not solicit buyers.
Defendants' counsel claims that the complaint fails to state a cause of action based upon a lack of specificity in the complaint. In this regard counsel claims that the complaint does not state the businesses plaintiff trades under, the merchandise that was allegedly stolen by defendants, how defendants misappropriated and used trade secrets, how the defendant breached her duty of loyalty and what damages the plaintiff sustained. It is asserted that the complaint does not state what customers or how many customers were lost as a result of the defendants' actions.
With respect to the second cause of action for misappropriation of confidential information and trade secrets, counsel contends that the complaint fails to state a cause of action as the defendant did not have an employment contract restricting competition with her former employee and plaintiff had no trades secretes to misappropriate. Counsel also contends that all of the purchaser's were buyers from ebay or Amazon and could not be solicited and there was therefore no protectable list (citing Ashland Mgt. Inc. v. Altair Invs. NA, LLC, 59 AD3d 97 [1st Dept.2008] ).
With respect to the cause of action for breach of duty of loyalty against Bozhinova, counsel claims that although Bozhinova commenced her business before leaving her employ she did not make improper use of the employer's time. She states her business was done on her own time, on her own premises, and with her own resources. In addition it is claimed that the complaint fails to establish any proprietary secrets that the defendant could have improperly used.
With respect to the cause of action for aiding and abetting a breach of loyalty asserted against Pro beauty and Ivanov, counsel claims that there is no assertion in the complaint that the defendants had actual knowledge of any breach of duty by Bozhinova.
With respect to the claim of intentional interference with actual and prospective economic advantage, defendant asserts that there was no showing in the complaint that the plaintiff would have consummated a particular contract but for defendants interference (citing Maas v. Cornell Univ., 245 A.D.2d 728 [3d Dept.1997] ). Defendant claims that the complaint does not allege that defendant had a relationship with a specified third-party which prevented plaintiff from entering into a business relationship.
With respect to the cause of action for conversion, the defendants state that the complaint only states that the defendants converted “health and beauty products” without identifying any specific products that were stolen. Counsel claims the cause of action for unfair competition based upon misappropriation of trade secrets is duplicative of the second cause of action for misappropriation of trade secrets.
In opposition, plaintiff's counsel states that Bozhinova was hired in April 2008 as an administrative assistant whose duties were to include managing NYWC's administrative tasks and was treated as an ordinary employee. Plaintiff claims that defendant was entrusted NYWC proprietary information including NYWC's proprietary model, ordering, stocking, and shipping of inventory, client and distributor contact information and website passwords. Plaintiff asserts that the products sold by the defendant as Pro Beauty were stolen directly from NYWC's inventory prior to the defendant resigning and obtained through illegal use of NYWC's confidential client and distributor lists which constitute trade secrets. Plaintiff asserts that to form Pro Beauty, the defendants' applied and implemented information acquired through her employment and training including NYWC's business model and structure, distributor contact information and client contact information.
It is well settled that in considering a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211[a][7] ), the pleadings must be liberally construed. The sole criterion is whether, from the complaint's four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law (Leon v. Martinez, 84 N.Y.2d 83 [1994];Guggenheimer v. Ginzburg, 43 N.Y.2d 268 [1977];Rochdale Vil. v. Zimmerman, 2 AD3d 827 [2d Dept.2003] ). The facts pleaded are to be presumed to be true and are to be accorded every favorable inference, although bare legal conclusions as well as factual claims flatly contradicted by the record are not entitled to any such consideration (see Morone v. Morone, 50 N.Y.2d 481 [1980];Gertler v. Goodgold, 107 A.D.2d 481 [1st Dept.1985], affirmed 66 N.Y.2d 946, [1985] ). The Court's role is limited to determining whether the pleading states a cause of action, not whether there is evidentiary support to establish a meritorious cause of action (see EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11[2005];Guggenheimer v. Ginzburg, 43 N.Y.2d 268 [1977];Sokol v. Leader, 74 AD3d 1180 [2d Dept.2010] ). When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one (Guggenheimer v. Ginzburg, supra at 275).
Misappropriation of Confidential Information and Trade Secrets
Here the complaint alleges that NYWC's confidential and proprietary business information constitute trade secrets and that defendants, who owed a duty not to disclose the trade secrets, used same to advance the defendants own economic interests. Whether a plaintiff's customer list constitutes a trade secret or is readily ascertainable from public sources is an issue of fact (Suburban Graphics Supply Corp. v. Nagle, 5 AD3d 663 [2d Dept 2004] ). To establish misappropriation of trade secrets, plaintiffs must allege that it possessed a trade secret and that defendants are using such trade secret in breach a duty of loyalty or as a result of discovery by improper means (see 1–800 Postcards, Inc. v. AD Die Cutting & Finishing Inc., 28 Misc.3d 1216[A][Sup. Ct. N.Y. Co.2010] ; also see The Jones Group Inc. v. Zamarra, 2014 N.Y. Slip Op 31448(U) § Sup.Ct. N.Y. Co.2014] ). Here, plaintiff sufficiently alleges that plaintiff provided confidential information and trade secrets to the defendants and that the defendants breached plaintiff's confidence in misusing that information (see Petnet Direct, LLC v. Petflow, Inc., 2013 N.Y. Slip Op 33128(U)[Sup. Ct. N.Y. Co.2013] ). This Court finds therefore, that the complaint sufficiently states a cause of action for misappropriation of trade secrets. Therefore, that branch of defendants' motion which seeks to dismiss the second cause of action is denied.
Breach of Duty of Loyalty
Plaintiff claims that Bozhinova's duty of loyalty prohibited her from competing with NYWC or assisting a competing business during the course of her employment with NYWC. In this regard it is alleged that defendant stole NYWC's inventory, taking contacts and taking confidential information. The allegations raised in plaintiff's pleadings and submissions in opposition are sufficient to constitute a cause of action for breach of duty of loyalty-as to whether defendant was promoting her own business while still employed by plaintiff, and whether she was using plaintiff's time and resources (see Wallack Freight Lines, Inc. v. Next Day Express, Inc., 273 A.D.2d 462 [2nd Dept.2000] ). It is well established that an employee is prohibited from acting in any manner inconsistent with his or her employment and must exercise good faith and loyalty in performing his or duties ... and may not use his or her principal's time, facilities, or proprietary secrets to build a competing business” (Mega Group Inc. v. Halton, 290 A.D.2d 673[3d Dept.2002] ). Although the defendant asserts that she opened her own business on her own time, on her own premises and with her own resources, these factual allegations go to the merits of the claims, but do not establish that plaintiffs have failed to plead a cause of action at all. Therefore the motion to dismiss the third cause of action is denied.
Aiding and Abetting a Breach of Duty of Loyalty against Pro Beauty and Ivanov
A cause of action for aiding and abetting a breach of fiduciary duty requires a prima facie showing of 1)a fiduciary duty owed to plaintiff by another, 2)a breach of that duty, and 3)defendant's substantial assistance in effecting the breach, and 4)resulting damages (see AHA Sales, Inc. v. Creative Bath Products, Inc., 58 AD3d 6 [2d Dept.2008] ; Ito v. Suzuki, 57 AD3d 205 (1st Dept.2008]; Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1 [1st Dept.2008] ; Kaufman v. Cohen, 307 A.D.2d 113 [1st Dept.2003] ). Here, the complaint has sufficiently particularized how Ivanov and Pro Beauty are alleged to have assisted Bozhinova's alleged breach of loyalty Accordingly, the motion to dismiss the fourth cause of action for failure to state a cause of action is denied.
Intentional Interference with Actual and Prospective Economic Advantage
Plaintiff claims that Bozhinova knew about NYWC's business relationships, and prior to leaving the plaintiff's business misappropriated confidential and proprietary information including confidential client and distributor information and directly or indirectly and maliciously attempted to seduce NYWC's clients and attempted to induce them to sever their relationship with the plaintiff. The courts have held that an essential element of this tort is that the complaining party would have entered into an economic relationship but for the interference of a third party (see Brown v. Bethlehem Terrace Associates, 136 A.D.2d 222 [3rd Dept.1988] ; Susskind v. Ipco Hosp. Supply Corp., 49 A.D.2d 915 [2d Dept.1975] ). Here the complaint fails to allege that the plaintiff would have entered into a contractual relationship but for the interference or wrongful acts of the defendant (see Vigoda v. DCA Prods. Plus, 293 A.D.2d 265 [2002];Chemfab Corp. v. Integrated Liner Techs., 263 A.D.2d 788 [3d Dept.1999] ; American Preferred Prescription, Inc. v. Health Mgmt., 252 A.D.2d 414 [1st Dept.1998] ; Maas v. Cornell Univ., 245 A.D.2d 728 [3rd Dept.1997] ; Newsday Inc. v. Fantastic Mind, 237 A.D.2d 497 [2d Dept.1997]. Therefore, the sixth cause of action is dismissed for failure to state a cause of action.
Conversion
To establish a cause of action in conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendants exercised an unauthorized dominion over the thing in question to the exclusion of the plaintiff's rights (see Palermo v. Taccone, 79 AD3d 1616 [4th Dept.2010] ). Here, the plaintiff sufficiently alleges a cause of action for conversion based upon the allegation that the defendants converted NYWC's health and beauty products that were stored in the NYWC inventory to their own use. Therefore, the motion to dismiss the seventh cause of action is denied.
Unfair Competition
As this cause of action is based upon Ms. Bozhinova's alleged misappropriation of NYWC's trade secrets, this cause of action is dismissed as duplicative of the cause for misappropriation of confidential information (see Fada Intl. Corp. v. Cheung, 57 AD3d 406[1st Dept.2008] ; Eagle Comtronics, Inc. v. Pico Prods., Inc., 256 A.D.2d 1202 [4th Dept.1998] ).
Permanent Injunction
Although this court found by decision and order dated March 25, 2014, that the plaintiff did not establish its entitlement to a preliminary injunction, should the plaintiff eventually prevail on the merits of the instant complaint, there is a likelihood that plaintiff would be entitled to a permanent injunction. Therefore, the motion to dismiss the first cause of action is denied.
Accordingly, for all of the above stated reasons, the defendants' motion for an order dismissing the plaintiff's complaint for failure to state a cause of action and for lack of specificity of the pleadings is denied except for the causes of action for intentional interference with economic advantage and unfair competition which are dismissed as set forth above.