Milso Industries Corp. v. Nazzaro et al
ORDER: MOTION for Summary Judgment (Doc No. 122 ) GRANTED in part and DENIED in part. It is so ordered. Signed by Judge Alvin W. Thompson on 8/30/2012. (Sykes, J.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
MILSO INDUSTRIES CORPORATION,
EDWARD C. NAZZARO, LIBERTY CASKET :
COMPANY, EDWARD LARKIN and
KIRK A. BOGGIA,
Civ. No. 3:08CV1026(AWT)
RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, Milso Industries Corporation ("Milso"),
brings this action against the defendants, Edward C. Nazzaro
("Nazzaro"), Liberty Casket Company ("Liberty"), Edward Larkin
("Larkin") and Kirk A. Boggia ("Boggia"), setting forth a claim
in the First Cause of Action for breach of contract against
Nazzaro and Larkin; a claim in the Second Cause of Action for
misappropriation of trade secrets under the Connecticut Uniform
Trade Secrets Act ("CUTSA"), Conn. Gen. Stat. § 35-50 et seq.,
against all the defendants; a claim in the Third Cause of Action
for breach of fiduciary duties, including the duty of loyalty,
against Nazzaro and Larkin; a claim in the Fourth Cause of Action
for aiding and abetting breach of fiduciary duty against Liberty
and Boggia; a claim in the Fifth Cause of Action for unjust
enrichment against all the defendants; a claim in the Sixth Cause
of Action for tortious interference with contractual relations
against Nazzaro, Liberty and Boggia; a claim in the Seventh Cause
of Action for interference with business expectancies against all
the defendants; a claim in the Eighth Cause of Action for unfair
competition under the Connecticut Unfair Trade Practices Act
("CUTPA"), Conn. Gen. Stat. § 42-110 et seq., against all the
defendants; a claim in the Ninth Cause of Action for conversion
against all the defendants; a claim in the Tenth Count for civil
conspiracy against all the defendants; a claim in the Eleventh
Cause of Action for false designation of origin in violation of
§ 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), against Liberty;
and a claim in the Twelfth Cause of Action for false advertising
in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
(See Second Am. & Supplemental Compl. (Doc. No.
Nazzaro and Liberty set forth two counterclaims, in the
First Counterclaim a request for a declaratory judgment, and in
the Second Counterclaim an unfair trade practices claim under
CUTPA, alleging "sham" litigation.
(See Answer & Affirmative
Defenses to Am. Compl. (Doc. No. 53).)
The plaintiff and the
defendants have each moved for summary judgment on all the
plaintiff's causes of action and both of the defendants'
counterclaims, except that the plaintiff has not moved for
summary judgment on the Third and Fourth Causes of Action as to
claims involving conduct of Larkin.
For the reasons set forth
below, both motions for summary judgment are being granted in
part and denied in part.
In 2005, The York Group, Inc. ("York"), a subsidiary of
Matthews International Corporation ("Matthews"), acquired Milso
Industries, Inc. ("Old Milso").
Old Milso was a Brooklyn-based,
family-owned company that for decades had been in the business of
manufacturing, marketing, selling and delivering caskets and
other funeral-related items to funeral homes.
Old Milso had a
well-established marketing, sales and distribution network and an
experienced sales team.
Old Milso was owned and operated by
several members of the Pontone family, including Scott Pontone,
Vice President of Operations ("Pontone").
Nazzaro and Larkin
served as sales representatives of Old Milso (and its
predecessors-in-interest), operating in Connecticut and in New
York and Midnight Acquisition Corporation acquired the
assets of Old Milso and certain related entities, pursuant to an
Asset Purchase Agreement dated May 28, 2005 (the "APA"), for $110
In connection with the acquisition, Midnight
Acquisition Corporation changed its name to "Milso Industries
Section 2.12 of the APA provided that the
purchased assets included certain "Assumed Contracts."
"Assumed Contracts" in Schedule 2.1.2A to the APA included
thirty-three employment agreements with Old Milso’s employees,
each of which contained confidentiality, non-solicitation and
non-compete provisions enforceable for 18 months after
termination of employment.
Old Milso had entered into these employment agreements in or
around March 2003.
Nazzaro and Larkin entered into their
employment agreements with Old Milso (the "Employment
Agreements") on March 11, 2003.
behalf of Old Milso.
Pontone signed the Agreements on
The Employment Agreements provide that they
are to be construed under New York law, contain merger clauses,
and are silent as to assignability.
The parties dispute the
intent of Old Milso, Nazzaro, and Larkin as to assignability at
the time they entered into the Employment Agreements.
On June 29, 2005, York sent a letter to Old Milso’s
employees (the "June 29th Letter") informing them of the imminent
acquisition, advising them that their employment would be
terminated upon the closing, and offering to re-hire them as
employees of the new company, Milso.
The letter read as follows:
As you know, we expect to complete a
combination of the Milso and York businesses
combination, which we believe will create
customers and employees.
We would like you to continue to work in the
Because of the way the
transaction has been structured, we intend to
accomplish this by having your existing
employment terminate at the closing of the
Milso and York transaction and then arrange
for you to be re-hired by the corporation that
is acquiring the Milso business and assets.
That corporation’s name (presently “Midnight
Acquisition Corporation”) will be Milso
This letter is our formal offer to re-hire you
in the way described above. If you accept our
offer, your cash compensation will be no less
than your current cash compensation. In
addition, the other terms of employment we are
offering are substantially similar in the
aggregate to the terms of your current
To accept this offer, please sign and return
this letter in the space provided below and
return it to us in the self-addressed stamped
By signing this letter and
accepting our offer of employment on the terms
described above, you agree to remain subject
to the terms and conditions set forth in the
At-Will Employment, Non-Disclosure and NonCompetition Agreement, a copy of which is
attached hereto, and that we shall be the
“Company” under the Agreement.
We look forward to your ongoing contributions
to the success of the combined Milso and York
Aff. Sara R. Simeonidis Supp. Defs.’ Mot. Summ. J. (Doc. No. 124)
("Simeonidis Aff."), Ex. 4.)
Neither Nazzaro nor Larkin signed the June 29th Letter.
However, after the closing pursuant to the APA, both worked for
Milso for substantially the same wages and benefits until 2008.
information: customer lists, customer contact information, customer
discounts offered to customers, distribution of casket sales and
price points and cost structures concerning Milso’s products.
targets, other companies and employees.
Milso also contends, and
the defendants dispute, that funeral home customers expressly
agreed that Milso’s costs and terms (including discounts) are
determined by reference to the yellow pages, trade publications or
Milso’s price list or by asking Milso’s customers.
conceived an idea for a new casket business.
At that time,
Boggia's only experience in the death care industry was working for
his father, a casket salesmen, in the 1970s and early 1980s, when
Boggia was a young man and had not yet graduated from college.
Immediately prior to February 2008, Boggia was a construction
Boggia in drafting a business plan,
which would be used in order to secure financing. The business plan
for the new business-–the Liberty Casket Company–-was finalized on
March 14, 2008. The business plan represented that Nazzaro was the
"Director of Sales and Business Development" of Liberty, which
would "use the market changing experience of Edward Nazzaro."
March 17, 2008, Boggia filed the papers to form Liberty as a
For a period of time, Liberty imported metal caskets from
China for sale to its customers.
These imported models were
indicated with a "C" on the Liberty price list.
It is undisputed
that Milso also sells foreign-manufactured metal caskets, which in
Milso’s case are made in Mexico.
Milso offers a study by Hal Poret
in which he concludes that casket consumers’ purchasing decisions
vary depending on whether the words “Made in China” are on the
catalog pages they review.
Milso contends that in March, April and early May 2008,
Nazzaro communicated and e-mailed about the new business, and used
his paid vacation time from Milso to visit suppliers to negotiate
agreements and place orders for caskets on behalf of Liberty.
contends that in May 2008, Nazzaro ordered a customized delivery
truck, negotiated warehouse space, ordered dollies, arranged for
invoicing software, and developed and priced the Liberty logo.
Liberty's logo is the Statue of Liberty wrapped in the American
flag, and both Liberty's logo and its promotional materials are
red, white and blue.
The defendants contend that Nazzaro provided
only minimal assistance and did so during his own time.
Nazzaro resigned from Milso on May 19, 2008 and became a
Liberty employee and salesperson.
Liberty announced its formation
on June 8, 2008 and sold its first caskets in the summer of 2008.
Nazzaro sold caskets on behalf of Liberty to many of his customers
from his time at Milso.
Nazzaro also created a price comparison
sheet that directly compared Milso products and Liberty products,
with prices and percent comparisons.
In July 2008, Milso filed this action against Nazzaro and
Liberty. Sometime thereafter, Boggia contacted Larkin to offer him
employment at Liberty.
Larkin resigned from Milso on October 7,
2008 and accepted employment with Liberty one week later.
then sold caskets on behalf of Liberty to many of his customers
from his time at Milso.
Milso amended the complaint and added
Boggia and Larkin as defendants.
A motion for summary judgment may not be granted unless the
court determines that there is no genuine issue of material fact to
be tried and that the facts as to which there is no such issue
warrant judgment for the moving party as a matter of law.
Civ. P. 56(c).
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986); Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223
(2d Cir. 1994).
When ruling on a motion for summary judgment, the
court may not try issues of fact, but must leave those issues to
See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986); Donahue v. Windsor Locks Bd. of Fire Comm’rs, 834
F.2d 54, 58 (2d Cir. 1987).
Thus, the trial court’s task is
"carefully limited to discerning whether there are any genuine
issues of material fact to be tried, not to deciding them.
duty, in short, is confined . . . to issue-finding; it does not
extend to issue-resolution."
Gallo, 22 F.3d at 1224.
Summary judgment is inappropriate only if the issue to be
Therefore, the mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly supported
motion for summary judgment.
An issue is "genuine . . . if the
evidence is such that a reasonable jury could return a verdict for
quotation marks omitted).
Anderson, 477 U.S. at 248.
A material fact is one that would
Only those facts that must be decided
in order to resolve a claim or defense will prevent summary
judgment from being granted.
prevent summary judgment.
Immaterial or minor facts will not
See Howard v. Gleason Corp., 901 F.2d
1154, 1159 (2d Cir. 1990).
When reviewing the evidence on a motion for summary judgment,
the court must "assess the record in the light most favorable to
the non-movant and . . . draw all reasonable inferences in its
Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.
2000) (quoting Delaware & Hudson Ry. Co. v. Consol. Rail Corp., 902
F.2d 174, 177 (2d Cir. 1990)). However, the inferences drawn in
favor of the nonmovant must be supported by the evidence.
speculation and conjecture" is insufficient to defeat a motion for
Stern v. Trs. of Columbia Univ., 131 F.3d 305,
315 (2d Cir. 1997) (quoting W. World Ins. Co. v. Stack Oil, Inc.,
922 F.2d 118, 121 (2d. Cir. 1990)).
Moreover, the "mere existence
position" will be insufficient; there must be evidence on which a
jury could "reasonably find" for the nonmovant. Anderson, 477 U.S.
Breach of Contract (First Cause of Action)
Milso claims in the First Cause of Action that Nazzaro and
Larkin breached the restrictive covenants in their Employment
Agreements with Old Milso--Nazzaro by helping to establish a rival
casket company, and both by soliciting Milso’s clients.
Agreements because (i) the employment of Nazzaro and Larkin was
terminated by the June 29th Letter, and they were re-hired by Milso
as at-will employees and the Employment Agreements have expired and
are unenforceable; and (ii) the restrictive covenants in the
Employment Agreements are in any event unreasonable and thus
reasonable and that Nazzaro and Larkin breached the Employment
Agreements, causing Milso to suffer damages.
The parties agree that the choice of law provision in the
Employment Agreements governs.
The Employment Agreements provide
that New York law will control any disputes arising out of the
The June 29th Letter Did Not Render the Employment
The defendants contend that because the June 29th Letter
terminated the employment of Nazzaro and Larkin and they never
counter-signed their letters, the Employment Agreements expired and
when they worked for Milso it was as at-will employees. Thus, they
argue, the restrictive covenants expired 18 months after June 29,
In support of this argument, the defendants rely on SIFCO
Indus., Inc. v. Advanced Plating Techs., Inc., 867 F. Supp. 155,
158-59 (S.D.N.Y. 1994).
In SIFCO, the plaintiff corporation had
recently acquired the assets of another corporation.
suit against terminated employees of the acquired business for
agreements with the acquired business.
As in this case, the
employment agreements were expressly assigned to the plaintiff upon
its purchase of the other corporation's assets.
court held that SIFCO could not enforce the non-compete provisions.
acquiring company cannot enforce covenants not to compete in the
employment agreements the acquired business had with its employees
In SIFCO the employees were terminated by a
letter from the business being acquired, not a letter from the
acquiring corporation, i.e. SIFCO, and SIFCO offered the defendants
consulting positions that expressly avoided creating an employment
relationship, but also conditioned the consulting arrangements on
modification of the terms of the confidentiality agreements that
had been in place between the defendants and the acquired business.
The court held that the agreements were not enforceable because the
plaintiff made no showing that "it made a firm offer to each
defendant of continued employment in a position comparable in
salary, benefits, responsibility, and location to the employee’s
Id. at 158.
Rather, the defendants "were
involuntarily terminated . . . and none of the actions taken by
Id. at 159.
Here, the June 29th Letter simultaneously terminated
and Larkin’s employment with Old Milso as of the date of the
closing and also offered each of Nazzaro and Larkin a position with
Milso with essentially the same salary and benefits.
stated that those who accepted the offer to be re-hired would
receive terms of employment that "are substantially similar in
aggregate to the terms of [their] current employment," including
(Simeonidis Aff., Ex. 4.)
These terms constitute
the "firm offer" of "continued employment in a position comparable
. . to the employee’s previous position" that was absent in SIFCO.
See SIFCO, 867 F. Supp. at 158.
The court in SIFCO echoed a concern voiced in Post v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 397 N.E.2d 358 (N.Y. 1979),
where the court held that an employer could not enforce a restraint
on an employee’s mobility after terminating his employment.
court in Post reasoned that "[a]n employer should not be permitted
to use offensively an anticompetition clause . . . to economically
cripple a former employee and simultaneously deny other potential
employers his services."
Id. at 361.
Thus, under New York law, a non-competition provision in an
employment agreement can be enforced after the employment agreement
is assigned, despite the termination of employment, if the employee
is given an offer of comparable continuous employment.
willingness to employ the party covenanting not to compete.").
The Assignability of the Employment Agreements
Depends on the Intent of the Parties to the
The parties disagree as to whether the Employment Agreements
were assignable from Old Milso to Milso despite the absence of an
express assignability clause.
In general, employment agreements containing non-competition
assignable under New York law.
See Eisner Computer Solutions, LLC
subsequent purchaser of the covenant not to compete is unnecessary.
A subsequent sale of the business will pass the covenant as an
incident of the goodwill of the business even though it is not
Aquavella v. Viola, No. 2002/06929, 2006 WL
3232167, *1 (N.Y. Sup. Sept. 25, 2006) (citing 6A N.Y. Jur. 2d
Assignments § 14 (March 2006 Update)).
If there is no express assignment, however, the assignability
of such an employment agreement depends on the intent of the
parties to that agreement. See Archer Worldwide, Inc. v. Mansbach,
734 N.Y.S.2d 869, 869 (2d Dept. 2001) (affirming the trial court’s
determination that an employment agreement was unenforceable on the
ground that "there was no evidence the parties intended the
agreement to be assignable when it was originally executed.");
Abalene Pest Control Serv., Inc. v. Powell, 187 N.Y.S.2d 381, 383
(2d Dept. 1959) ("Whether or not the covenants by appellant not to
compete with respondent's assignor after the termination of his
employment, were assignable, without his consent, depends on the
intention of the parties in entering into the agreement."); ENV
Servs., Inc. v. Alesia, No. 11777-04, 2005 WL 3240478, at *6 (N.Y.
Sup. Nov. 28, 2005) (granting summary judgment to defendants
because, inter alia, "[t]here is no evidence that the parties
intended the employment agreements to be assignable when they were
In this case, there is no assignability clause, so the
assignability of the Employment Agreements between Old Milso and
each of Nazzaro and Larkin depends on the intent of the parties.1
The parties dispute whether Larkin and Nazzaro negotiated that the
Employment Agreements would not be assignable, and each side has
provided evidence in support of its position.
Thus, there are
Milso contends that extrinsic evidence of intent is barred by New
York's parol evidence rule because (a) the Employment Agreements contain
merger clauses providing that the Employment Agreement supersedes "all prior
employment agreements addressing the terms, conditions, and issues contained
herein" (Simeonidis Aff., Ex. 1 - At-Will Employment Nondisclosure and NonCompetition Agreement, ¶ 18), (b) there are no references in the Employment
Agreements to a bar of assignability, and (c) the contracts themselves are
unambiguous and that prevents the defendants from inserting a provision that
would bar the assignment of the Employment Agreements. Milso properly cites
Wallace Steel, Inc. v. Ingersoll-Rand Co., 739 F.2d 112, 115 (2d Cir. 1984)
for the proposition that "[t]he parol evidence rule provides in substance
that, where the parties have reduced their agreement to writing, evidence of
prior or contemporaneous agreement may not be offered to contradict, vary, or
subtract from the terms of the writing." However, here the terms of the
writing do not address the question of assignability so evidence of intent as
to assignability does not contradict, vary, or subtract from the terms in the
writing. Therefore, in light of Archer, Abalene, and ENV Servs., the court
finds Milso's argument unpersuasive. In addition, Milso relies on language
from Special Prods. Mfg., Inc. v. Douglass, 553 N.Y.S.2d 506, 509 (3d Dept.
1990) (stating that "[b]ecause executory contracts, which do not involve
exceptional personal skills on the part of the assignor and which the assignee
can perform without adversely affecting the rights and interests of the
adverse party, are freely assignable absent a contractual, statutory or public
policy prohibition . . . . , a clear and unambiguous prohibition is essential
to effectively prevent assignment." (citations omitted)). However, in
Douglass, the court also stated that "[w]hen the original parties to an
agreement so intend, a covenant not to compete is freely assignable." Id.
genuine issues of material fact as to the parties' intent with
respect to assignability and Milso can not show that it is entitled
to summary judgment on the breach of contract claim.
Reasonableness of the Restrictive Covenants
reasonableness as demonstrated in a three-prong test[,] to wit: if
the covenant (1) is no greater than is required for the protection
of the legitimate interest of the employer; (2) does not impose
undue hardship on the employee; and (3) is not injurious to the
BDO Seidman v. Hirschberg, 93 N.Y.2d 382, 388-89, 690
N.Y.S.2d 854, 712 N.E.2d 1220 (1999)."
ENV Servs., 2005 WL
3240478, at *4. "The cognizable employer interests under the first
prong is limited to misappropriation of the employer's trade
competition by a former employee whose services are unique or
Id. (citations omitted).
The defendants contend that Milso cannot enforce the covenants
protectable interest in that it has no protectable trade secrets
and its customer and pricing information is not confidential.
evidence in support of its position so there are genuine issues of
material fact as to whether Milso has a legitimate protectable
interest and the restrictive covenants are reasonable.
the defendants cannot show that they are entitled to summary
judgment on the breach of contract claim.
Therefore, both motions
for summary judgment on the claim for breach of contract are being
Misappropriation of Trade Secrets under CUTSA (Second
Cause of Action)
Milso claims in its Second Cause of Action that all the
defendants misappropriated its trade secrets in violation of CUTSA.
"In the absence of clear consent or waiver by the principal, an
agent, during the term of the agency, is subject to a duty not to
compete with the principal concerning the subject matter of the
3 C.J.S., Agency, § 143; Restatement (Second), 2 Agency
Town & Country House & Homes Serv, Inc. v. Evans, 150
Conn. 314, 317 (1963).
"Upon termination of the agency, however,
and in the absence of a restrictive agreement, the agent can
properly compete with his principal in matters for which he had
been employed." Id. Even after the employment has ceased however,
"the employee remains subject to a duty not to use trade secrets,
or other confidential information which he has acquired in the
course of his employment, for his own benefit or that of a
competitor to the detriment of his former employer."
Co. v. Loika, 145 Conn. 509, 514 (1958).
The plaintiff argues that its customer lists and "business
misappropriated its trade secrets and damaged it.
argue that Milso's customer and pricing information are not trade
secrets, there is no proof that Nazzaro and Larkin ever had access
to Milso's "business plan," and that Milso never protected its
business information as confidential, and that in any event there
was no misappropriation by them of Milso's information.3
A plaintiff must establish the existence of a trade secret
before it can seek protection under CUTSA.
The statute defines a
compilation, program, device, method, technique, process, drawing,
cost data or customer list that: (1) [d]erives independent economic
value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (2)
circumstances to maintain its secrecy."
Conn. Gen. Stat. § 35-
The plaintiff asserts that "Nazzaro and Larkin, because they had worked
for Milso for many years, were intimately aware of additional Milso trade
secrets that constituted Milso's confidential 'business plan': the nature of
its business, information about its distribution network, discounts and
pricing given to customers, price points and margins on Milso's products,
inventory buying patterns, and confidential information concerning Milso's
suppliers." (Mem. Law Supp. Pl. Milso Indus. Corp.'s Mot. Summ. J. (Doc. No.
129-1) ("Pl.'s Br."), 33-34.)
The court notes that one point not raised by the parties, and therefore
not addressed by the court, is the fact that CUTSA "supersede[s] any
conflicting tort, restitutionary, or other law of this state pertaining to
civil liability for misappropriation of a trade secret." Conn. Gen Stat. §
35-57(a); see also Nora Beverages, Inc. v. Perrier Grp. Of Am., Inc., 164 F.3d
736 (2d Cir. 1998) ("The district court correctly found that CUTSA preempts
any tort remedy for misuse of trade secrets.").
"The three part statutory test for the definition of a
trade secret therefore requires that the information: (1) be of the
kind included in the nonexhaustive list contained in the statute;
(2) be 'of independent economic value'; and (3) 'was the subject of
Software Dev., LLC v. Pop Warner Little Scholars, Inc., 298 F.
Supp. 2d 276, 282 (D. Conn. 2004) (quoting Elm City Cheese Co. v.
Federico, 251 Conn. 59, 78 (1999)).
The question of whether
information sought to be protected rises to level of a trade secret
under CUTSA is a question of fact.
See id. at 282; Elm City
Cheese, 251 Conn. at 68; Allen, 145 Conn. at 516.
With respect to the first prong, there is no genuine issue as
information of the kind included in the nonexhaustive list in § 3551(d).
Although customer lists are on the "periphery of the law
of trade secrets," Air Support, Inc. v. Acuna, No. CV 950148386S,
1996 WL 362097, at *3 (Conn. Super. May 29, 1996), courts have
frequently held that customer lists and pricing information are
deserving of trade secret protection.
See, e.g., Town & Country
House & Home Serv., 150 Conn. at 319 ("A list of customers, if
their trade and patronage have been secured by years of business
effort and advertising and the expenditure of time and money,
constitutes an important part of a business and is in the nature of
a trade secret."); Triangle Sheet Metal Works, Inc. v. Silver, 154
Conn. 116, 126 (1966) ("[F]inancial details of [plaintiff’s] costs,
pricing, and bidding . . . fully meet the definition of trade
secrets . . . ."). Therefore, Milso’s customer lists and "business
plan" satisfy the first prong of the statutory test for a trade
With respect to the second prong, there are genuine issues of
material fact as to whether Milso's customer lists and "business
plan" are of independent economic value.
The plaintiff has
provided evidence that its customer lists were carefully vetted and
maintained lists of private contact information, cell phone numbers
and e-mails that would not be retrievable by public means, or would
require significant resources to duplicate, and evidence as to the
economic value of its "business plan."
On the other hand, the
defendants have provided evidence that Milso's customer lists and
"business plan" are comprised of information that is publicly
available or readily ascertainable, inter alia, because listings of
directors on Milso's customer lists were long-time personal friends
of Nazzaro and Larkin, whose relationships with these individuals
predate their employment by Old Milso; and Milso's customers are
free to share Milso’s price list, the volume and types of caskets
purchased, and discounts received from Milso. Compare Holiday Food
Co., Inc. v. Munroe, 37 Conn. Supp. 546, 553 (1981) (customer list
not a trade secret where the customers "were [former employee’s]
friends as well as potential clients"), with Dreamcatcher Software
Dev., 298 F. Supp. 2d at 282 ("An alleged secret is not deprived of
trade secrets simply because it is comprised of materials that are
"common [and] commercially available.") (quoting Elm City Cheese
Co., 251 Conn. at 74).
With regard to the third prong, there are also genuine issues
of material fact as to whether Milso made reasonable efforts to
maintain the secrecy of its customer lists and pricing information.
"The question of whether . . . a party has made reasonable efforts
to maintain the secrecy of a purported trade secret is by nature a
highly fact-specific inquiry."
Elm City Cheese, 251 Conn. at 80.
Reasonable efforts to maintain secrecy include "requiring employees
to sign confidentiality agreements or otherwise advising them of
the confidential nature of the process; posting of warning or
confidentiality agreements, having them sign in, and shielding the
process from their view; segregating information, so that no one
process; and using unnamed or coded ingredients."
1 R. Milgrim,
Trade Secrets (1999) § 1.04, 1-178 through 1-189.
The plaintiff has provided evidence as to the employment
agreements it entered into with employees other than Larkin and
Nazzaro, as well as confidentiality agreements it entered into with
business parties and prospective business partners.
On the other
hand, each of Nazzaro and Larkin avers that, in his experience,
Milso's customers are under no obligation to protect information
relating to pricing, discounts or payment terms and that customers
often share this information to obtain a better deal from competing
casket companies, and Pontone testified that he never had any
trouble obtaining information from a customer about the discount he
or she was paying.
(Simeonidis Aff., Ex. 12 - Dep. of Scott
In addition, genuine issues of material fact exist as to
whether there was a misappropriation of any of Milso's information
that constitutes trade secrets under CUTSA.
motions for summary judgment on the CUTSA claim are being denied.
Breach of Fiduciary Duties (Third Cause of Action)
Milso claims in the Third Cause of Action that Larkin and
Nazzaro breached their fiduciary duties to Milso, including the
duty of loyalty.
Milso has moved for summary judgment on this
claim as to Nazzaro, and Larkin and Nazzaro have also moved for
summary judgment on this claim.
"The essential elements to pleading a cause of action for
breach of fiduciary duty under Connecticut law are: (1) That a
fiduciary relationship existed which gave rise to (a) a duty of
loyalty on the part of the defendant to the plaintiff, (b) an
obligation on the part of the defendant to act in the best
interests of the plaintiff, and (c) an obligation on the part of
the defendant to act in good faith in any matter relating to the
plaintiff; (2) That the defendant advanced his or her own interests
to the detriment of the plaintiff; (3) That the plaintiff has
sustained damages; and (4) That the damages were proximately caused
by the fiduciary's breach of his or her fiduciary duty."
Merritt, 16 Connecticut Practice Series: Elements of an Action
§ 8.1 (2010-2011 Ed.).
With respect to Larkin, Milso fails to identify in its
opposition any conduct by him that would amount to a breach of
It is undisputed that Larkin was not involved in
Liberty’s formation, that he never solicited any customer for
Liberty or informed any customer of his plans to work for Liberty
prior to resigning from Milso, and that he resigned from Milso on
October 7, 2008, accepted Liberty’s offer of employment three days
later, and did not solicit customers for Liberty until November
2008. Therefore, the defendants’ motion for summary judgment as to
the claim of breach of fiduciary duties with respect to Larkin is
With respect to Nazzaro, the plaintiff contends that Nazzaro
breached his fiduciary duties to Milso both while he was employed
by Milso and after his resignation.
"In the absence of clear
consent or waiver by the principal, an agent, during the term of
the agency, is subject to a duty not to compete with the principal
concerning the subject matter of the agency.
143; Restatement (Second), 2 Agency
3 C.J.S., Agency, §
Town & Country House
& Homes Serv., 150 Conn. at 317.
Before the end of his employment, an employee "can properly
purchase a rival business and upon termination of employment
He is not, however, entitled to solicit
customers for such rival business before the end of his employment
. . . in direct competition with the employer’s business."
(quoting Restatement (Second) of Agency § 393 cmt. 3); see also
Mec-Gar, S.R.L. v. Hard, No. CV020077396S, 2002 WL 31440778 (Conn.
Super. Oct. 2, 2002) (finding that defendant breached his fiduciary
duty where defendant solicited plaintiff’s customer while still
employed by plaintiff).
In addition, "[k]nowledge acquired by an
employee during his employment cannot be used for his own advantage
to the injury of the employer during employment."
Town & Country
House & Home Serv., 150 Conn. at 317 (citations omitted).
"The limits of proper conduct with reference to securing the
services of fellow employees are not well marked."
Adjusters, Inc. v. Nardi, No. CV980061967S, 2000 WL 562318, at *22
(Conn. Super. Apr. 20, 2000).
However, in Elec. Assocs., Inc. v.
Automatic Equip. Dev. Corp., 185 Conn. 31, 36 (1981), the court
concluded that "[o]nce Merritt left the plaintiff’s employment, no
fiduciary duty restrained him from using ordinary methods to
encourage his former coworkers or subordinates to follow him to its
Finally, "after the employment has ceased the employee remains
subject to a duty not to use trade secrets, or other confidential
information which he has acquired in the course of his employment,
for his own benefit or that of a competitor to the detriment of his
Allen, 145 Conn. at 514.
Here, genuine issues of material fact exist as to whether
Nazzaro breached his fiduciary duty of loyalty while he was
employed by Milso by, inter alia, soliciting customers for Liberty
or otherwise competing with Milso before the end of his employment
by Milso, and using knowledge acquired by him during his employment
by Milso to his own advantage to the injury of Milso, and also as
resignation by, inter alia, employing methods other than ordinary
methods to encourage Larkin to resign and go to work for Liberty,
and using confidential information he acquired in the course of his
employment by Milso for his own benefit or the benefit of Liberty,
to the detriment of Milso.
Therefore, both motions for summary judgment on the claim for
breach of fiduciary duties with respect to Nazzaro are being
Aiding and Abetting Breach of Fiduciary Duty (Fourth
Cause of Action)
Milso claims in the Fourth Cause of Action that Boggia and
Liberty aided and abetted alleged breaches of fiduciary duties by
Nazzaro and Larkin.
Milso has moved for summary judgment with
respect to the part of the claim that relates to aiding and
judgment as to the entire claim.
To prevail on a claim for aiding and abetting a breach of
fiduciary duty under Connecticut law, a plaintiff must show "(1) a
wrong by the primary violator or principal; (2) knowledge of that
wrong by the alleged aider and abettor; and (3) substantial
assistance to the principal by the aider and abettor in achievement
of the primary violation."
Harris v. Wells, Civ. Nos. B-89-391
(WWE), B-89-482 (WWE), 1991 WL 23535, at *2 (D. Conn. Feb. 6,
Master-Halco, Inc. v. Scillia Dowling &
Natarelli, 739 F. Supp. 2d 109, 121 (D. Conn. 2010) ("[I]t goes
without saying that individuals cannot aid and abet themselves.").
As to Larkin, summary judgment has been granted in his favor as to
the underlying tort, so Milso can not establish that Boggia and/or
Liberty aided and abetted Larkin.
As to Nazzaro, the defendants
argue that the aiding and abetting claim fails because the breach
of fiduciary duties claim fails.
However, genuine issues of
material fact exist as to whether Nazzaro breached his fiduciary
duties to Milso.
Therefore, the defendants' motion for summary judgment as to
the aiding and abetting breach of fiduciary duties claim against
Boggia and Liberty is being granted insofar as it relates to aiding
and abetting Larkin and denied insofar as it relates to Nazzaro,
and the plaintiff's motion for summary judgment on the aiding and
abetting of fiduciary duties claim is being denied.
Unjust Enrichment (Fifth Cause of Action)
Milso claims in the Fifth Cause of Action that all the
defendants received benefits for which they unjustly did not pay by
improperly soliciting Milso’s clients, customers, employees, and
other business relations, and by utilizing Milso’s confidential and
proprietary information and trade secrets.
To prevail on a claim
of unjust enrichment, a plaintiff must prove: "(1) that the
defendants were benefitted, (2) that the defendants unjustly did
not pay the plaintiffs for the benefits, and (3) that the failure
of payment was to the plaintiffs' detriment."
Jo-Ann Stores, Inc.
v. Prop. Operating Co., 91 Conn. App. 179, 194 (2005) ("[R]ight of
recovery under the doctrine of unjust enrichment is essentially
equitable, its basis being that in a given situation it is contrary
to equity and good conscience for one to retain a benefit which has
come to him at the expense of another.").
"Unjust enrichment is a
very broad and flexible equitable doctrine that has as its basis
the principle that it is contrary to equity and good conscience for
a defendant to retain a benefit that has come to him at the expense
of the plaintiff."
Gagne v. Vaccaro, 255 Conn. 390, 409 (2001).
judgment as to this claim because it is entirely predicated on the
However, the unjust enrichment claim is not entirely predicated on
any trade secrets claim, and in any event the plaintiff's CUTSA
claim survives summary judgment.
In addition, genuine issues of
material fact exist, inter alia as to whether the defendants
unjustly did not pay the plaintiff for benefits.
motions for summary judgment on the claim for unjust enrichment are
Tortious Interference with Contractual Relations (Sixth
Cause of Action
Milso claims in the Sixth Cause of Action that Liberty and
Boggia tortiously interfered with the contractual relationship that
existed between Larkin and Milso in the form of Larkin's Employment
In Robert S. Weiss & Assoc., Inc. v. Wiederlight, the court
"'This court has long recognized a cause of action for
tortious interference with contract rights or other
business relations. (Citations omitted.) Blake v. Levy,
191 Conn. 257, 260, 464 A.2d 52 (1983).'" Solomon v.
Aberman, 196 Conn. 359, 364, 493 A.2d 193 (1985).
Nevertheless, "not every act that disturbs a contract or
business expectancy is actionable. Jones v. O'Connell,
[189 Conn. 648, 660-61, 458 A.2d 355 (1983).]." Blake v.
Levy, supra, 191 Conn. at 260-61, 464 A.2d 52.
208 Conn. 525, 535-36 (1988).
In order to prove a claim for tortious interference with
existence of a contractual or beneficial relationship, (2) the
defendants’ knowledge of that relationship, (3) the defendants’
intent to interfere with the relationship, (4) the interference was
tortious, and (5) a loss suffered by the plaintiff that was caused
by the defendants’ tortious conduct."
Appleton v. Bd. of Educ. of
In Wiederlight, the court stated with respect to the fourth
"'[F]or a plaintiff successfully to prosecute such an
action it must prove that the defendant's conduct was in
fact tortious. This element may be satisfied by proof
misrepresentation, intimitation or molestation . . . or
that the defendant acted maliciously.'. . . "[A]n action
for intentional interference with business relations . .
. requires the plaintiff to plead and prove at least some
improper motive or improper means. . . . '[A] claim is
made out [only] when interference resulting in injury to
another is wrongful by some measure beyond the fact of
the interference itself.'"
Wiederlight, 208 Conn. at 536 (internal citations omitted).
Wiederlight also involved a claim of interference with a
The third count of the plaintiff's amended complaint
alleged that IAC "knew or in the exercise of reasonable
care should have known" of the restrictive covenant in
the Wiederlight-Weiss agreement and that, "[d]espite this
knowledge either actual or constructive," IAC encouraged
Wiederlight to sell insurance in violation of the
agreement to IAC's financial benefit. The third count
interference with a contractual relationship."
Id. at 535.
The court concluded that "[t]he assertion that IAC
restricted area when it knew or should have known of the covenant's
misrepresentation, intimidation or molestation' or that it acted
Id. at 536 (quoting Blake v. Levy, 191 Conn. at
plaintiff has not produced evidence that interference with the
Employment Agreements was tortious, the plaintiff argues that the
defendants' conduct was tortious "as they knew that the competing
employment would immediately injure Milso by diverting existing
accounts serviced by Nazzaro and Larkin from Milso to Liberty."
(Pl.'s Br. 43.)
However such knowledge shows only that the
defendants knew that they would be taking business away from Milso,
which would be in the normal course because they were competing
defendants acted with fraud, misrepresentation, intimidation or
molestation or that they acted with malice.
Therefore, the defendants’ motion for summary judgment on the
claim for interference with contractual relations is being granted,
and the plaintiff's motion is being denied.
Interference with Business Expectancies (Seventh Cause of
Milso claims in the Seventh Cause of Action that all the
defendants tortiously interfered with its business expectancies,
i.e., its relationships with customers.
In order to maintain a
claim for interference with business expectancies, Milso must
establish "(1) a business relationship between the plaintiff and
another party; (2) the defendant’s intentional interference with
the business relationship while knowing of the relationship; and
(3) as a result of the interference, the plaintiff suffers actual
Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 27
In Biro v. Hirsch, the court explained:
The plaintiff need not prove that the defendant caused
the breach of an actual contract; proof of interference
with even an unenforceable promise is enough. . . . A
cause of action for tortious interference with a business
expectancy requires proof that the defendant was guilty
of fraud, misrepresentation, intimidation or molestation
. . . . The plaintiff is required to plead and prove at
least some improper motive or improper means.
omitted). "[T]o substantiate a claim of tortious interference with
a business expectancy, there must be evidence that the interference
resulted from the defendant's commission of a tort."
Id. at 22
(citations and quotation marks omitted).
Here the defendants
contend that the plaintiff has not produced evidence that the
interference resulted from the commission of a tort by one or more
of the defendants.
However, the plaintiff has produced evidence
that creates genuine issues of material fact, inter alia, as to
whether the defendants used improper means by misappropriating the
plaintiff's trade secrets to solicit customers for Liberty.
Therefore, both motions for summary judgment on the claim for
tortious interference with business expectancies are being denied.
CUTPA (Eighth Cause of Action)
Milso claims in the Eighth Cause of Action that all the
defendants' conduct constitutes unfair competition in violation of
The court notes that CUTSA and CUTPA claims may both be
pursued in the same action.
See, e.g., Gerner v. Applied Indus.
Materials Corp., No. X08CV020192069S, 2005 WL 1805670 (Conn. Super.
June 30, 2005); Matrix Inv. Corp. v. Ward, No. 567613, 2004 WL
2284195 (Conn. Super. Sept. 16, 2004).
CUTPA provides, in relevant part, that "[n]o person shall
engage in unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce."
Gen. Stat. § 42-110b(a).
Connecticut courts have adopted the
following factors, known as the "cigarette rule," to determine
whether a trade practice is unfair or deceptive: "(1) whether the
practice, without necessarily having been previously considered
unlawful, offends public policy as it has been established by
statutes, the common law, or otherwise-whether, in other words, it
is within at least the penumbra of some common-law, statutory, or
immoral, unethical, oppressive, or unscrupulous; and (3) whether it
causes substantial injury to consumers (or competitors or other
De La Concha of Hartford, Inc. v. Aetna Life Ins.
Co., 269 Conn. 424, 433-34 (2004).
"Whether a practice is unfair
and thus violates CUTPA is an issue of fact."
Id. at 434 (quoting
Ancona v. Manafort Bros., Inc., 56 Conn. App. 701, 714-15, cert.
denied, 252 Conn. 953 (2000)).
There are two parts of Milso's CUPTA claim: (a) the claim that
the defendants used Milso's confidential information for the startup
targeting Milso's Connecticut customer base, and (b) a claim that
Liberty deceived its customer base into buying caskets from Liberty
instead of Milso, by undercutting Milso's price for its Americanmade caskets and delivering inferior Chinese-manufactured products,
despite Liberty's patriotic logo and marketing materials.
issues of material fact exist, inter alia, as to whether Milso's
customer list and "business plan" are comprised of information that
is publicly available or readily ascertainable, and as to whether
Liberty sold Chinese-made caskets in a manner that constituted
Therefore, both motions for summary judgment
on the CUTPA claim are being denied.
Conversion (Ninth Cause of Action)
Milso claims in the Ninth Cause of Action that all the
defendants unlawfully misappropriated and converted confidential
and proprietary information for their own personal advantage,
discount information, and information concerning Milso’s overall
business plan and operation."
(Pl's Br. 40.)
"The tort of
'[c]onversion occurs when one, without authorization, assumes and
exercises ownership over property belonging to another, to the
exclusion of the owner's rights.'" Hi-Ho Tower, 255 Conn. at 43-44
(citing Wellington Sys., Inc. v. Redding Grp., Inc., 49 Conn. App.
152, 169 (1998)) (emphasis omitted).
"In Connecticut, intangible
property interests have not traditionally been subject to the tort
evidenced in a document."
Id. at 45.
See also Froom Dev. Corp. v.
Developers Realty, Inc., No. X05CV054004243S, 2007 WL 1470533, at
*3 (Conn. Super. Apr. 24, 2007) ("In general, conversion applies to
tangible personal property, however, an exception is made where
(quoting Hi-Ho Tower, 255 Conn. at 44).
defendants argue that the plaintiff has failed to identify anything
that was actually converted by the defendants.
In response the
plaintiff maintains only that Nazzaro converted Milso's property
when he retained information on his Treo handheld device. Assuming
arguendo that the exception made where intangible property rights
are evidenced by a document is properly extended to information on
a handheld device, the plaintiff nonetheless has failed to produce
evidence as to an essential element of a conversion claim, i.e.
that the defendant assumed and exercised ownership over property
belonging to another, to the exclusion of the owner's rights.
Milso has produced evidence that could show that Nazzaro retained
information to the plaintiff's harm, but Milso has not produced
evidence that could show that Nazzaro deprived Milso of its
property permanently or for a period of time, or acted in a way
that was inconsistent with Milso's right of dominion.
v. Nationwide Mut. Ins. Co., 279 Conn. 745, 770 (2006) ("Thus,
'[c]onversion is some unauthorized act which deprives another of
unauthorized assumption and exercise of the powers of the owner to
The essence of the wrong is that the property rights of
the plaintiff have been dealt with in a manner adverse to him,
inconsistent with his right of dominion and to his harm.") (quoting
Label Sys. Corp. v. Aghamohammadi, 270 Conn. 291, 329 (2004)).
While Nazzaro exercised dominion over the Treo device, it is
undisputed that the device was his property.
Therefore, the defendants' motion for summary judgment on the
conversion claim is being granted, and the plaintiff's motion for
summary judgment is being denied.
Civil Conspiracy (Tenth Cause of Action)
Milso claims in the Tenth Cause of Action that all the
misappropriating and using Milso's confidential information about
its customers, products, pricing and discounts."
(Mem. Law Opp'n
Defs.' Mot. Summ. J. (Doc. No. 145) ("Pl.'s Opp."), 29.)
prevail on a cause of action for conspiracy to commit a tort, or
"civil conspiracy," the plaintiff must prove "(1) [a] combination
between two or more persons; (2) to do a criminal or an unlawful
act or a lawful act by criminal or unlawful means; (3) an act done
by one or more of the conspirators pursuant to the scheme and in
furtherance of the object; (4) which act results in damage to the
Williams v. Maislen, 116 Conn. 433, 437 (1933).
To prove a claim for civil conspiracy, a plaintiff must
establish that the underlying acts are wrongful.
See Weinberg v.
Isom, No. CV 0140152, 1995 WL 785051, at *6 (Conn. Super. Dec. 26,
1995) ("To be legally sufficient the plaintiff must allege that the
underlying acts are wrongful."). Where the party asserting a claim
underlying cause of action, the cause of action for conspiracy also
See Litchfield Asset Mgmt. Corp. v. Howell, 70 Conn. App.
plaintiff to recover on a conspiracy claim, the court must find the
underlying cause of action. More specifically, where the plaintiff
is unable to establish the underlying cause of action for fraud,
the cause of action for conspiracy to defraud must also fail.)
(citations and quotations omitted).
Under the "intracorporate conspiracy" doctrine, "[e]mployees
of a corporation acting in the scope of their employment cannot
conspire with one another or with the corporation that employs
them; each acts for the corporation and the corporation cannot
conspire with itself."
Harp v. King, 266 Conn. 747, 781 (2003)
(quoting Day v. Gen. Elec. Credit Corp., 15 Conn. App. 677, 684
(1988)); see also Hartline v. Gallo, 546 F.3d 95, 99 n.3 (2d Cir.
2008) ("[U]nder the intracorporate conspiracy doctrine, officers,
agents and employees of a single corporate entity are legally
incapable of conspiring together.") (quotation omitted); Herrmann
v. Moore, 576 F.2d 453, 459 (2d Cir. 1978) ("[T]here is no
conspiracy if the conspiratorial conduct challenged is essentially
a single act by a single corporation acting exclusively through its
own directors, officers, and employees, each acting within the
scope of his employment."); Cole v. Univ. of Hartford, 391 F. Supp.
888, 893 (D. Conn. 1975) ("Simply joining corporate officers as
defendants in their individual capacities is not enough to make
Thus, Liberty cannot form a conspiracy with its
own officers, directors and employees.
Both sides have moved for summary judgment on this claim.
support of its motion, Milso simply makes a conclusory assertion
that the defendants acted in concert to commit all the business
torts alleged by Milso, but it provides no explanation why there
are no genuine issues of material fact as to its contention. Thus,
Milso fails to meet its initial burden with respect to summary
In response to the defendants' argument, in support of their
motion for summary judgment, that the civil conspiracy claim fails
because of the intracorporate conspiracy doctrine, Milso narrows
its claim to the period prior to May 18, 2008, i.e. the date
intracorporate conspiracy doctrine and an argument that the civil
conspiracy claim fails because the plaintiff cannot establish the
underlying torts are the only arguments the defendants make.
However, as discussed above, genuine issues of material fact exist
as to certain of the underlying torts.
Therefore, the plaintiff's motion for summary judgment on the
claim for civil conspiracy is being denied, and the defendants'
motion for summary judgment is being granted as to the period
beginning May 18, 2008 and otherwise denied.
False Designation of Origin and False Advertising under
the Lanham Act (Eleventh and Twelfth Causes of Action)
Milso claims that Liberty violated § 43(a) of the Lanham Act:
(a) in the Eleventh Cause of Action, because of false designation
of origin, and (b) in the Twelfth Cause of Action, because of false
The Lanham Act's purpose is to "make 'actionable the deceptive
and misleading use of marks,' and 'to protect persons engaged in
Twentieth Century Fox Film Corp., 539 U.S. 23, 28 (2003) (quoting
15 U.S.C. § 1127).
The Lanham Act was intended "to promote fair
business dealing" and "not to provide a windfall to an overly eager
Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d
641, 649 (3d Cir. 1958).
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1),
provides in pertinent part:
Any person who, on or in connection with any goods ...
uses in commerce ... any false designation of origin ...
which-(A) is likely to cause confusion ... as to the
origin ... of his or her goods, or (B) in commercial
geographic origin of his or her or another person's goods
... shall be liable in a civil action to any person who
believes that he or she is likely to be damaged by such
Subsection (a)(1)(A) creates, inter alia, a "false designation of
origin" cause of action, while subsection (a)(1)(B) creates a
“false advertising” cause of action.
See Res. Developers, Inc. v.
Statue of Liberty-Ellis Island Found., Inc., 926 F.2d 134, 139 (2d
"Falsity may be established by proving that (1) the
advertising is literally false as a factual matter, or (2) although
the advertisement is literally true, it is likely to deceive or
NBA v. Motorola, Inc., 105 F.3d 841, 855 (2d
Cir. 1997) (citation omitted).
Milso contends that the manner in which the defendants sell in
the United States imported Chinese-made caskets constitutes both
false geographic "designation of origin" and, taken with Liberty's
iconography, "false advertising" in violation of the Lanham Act.
As a threshold issue, the defendants argue that Milso does not
have standing to bring its Lanham Act claims.
"demonstrate a 'reasonable interest to be protected' against the
advertiser’s false or misleading claims, and a 'reasonable basis'
for believing that this interest is likely to be damaged by the
false or misleading advertising.
The 'reasonable basis' prong
embodies a requirement that the plaintiff show both likely injury
and a causal nexus to the false advertising." Havana Club Holding,
S.A. v. Galleon S.A., 203 F.3d 116, 130 (2d Cir. 2000) (citations
"[T]he likelihood of injury and causation will not be
presumed, but must be demonstrated."
Johnson & Johnson v. Carter-
Wallace, Inc., 631 F.2d 186, 190 (2d Cir. 1980).
Relying on New Colt Holding Corp. v. RJG Holdings of Florida,
Inc., 312 F. Supp. 2d 195, 234-35 (D. Conn. 2004), the defendants
argue that a competitor who sells foreign-made goods lacks "likely
injury," and therefore standing, when asserting a false advertising
claim based on designation of origin.
Thus, they contend, because
Milso sells Mexican-made caskets, it lacks standing.
In New Colt, the defendants asserted false designation of
origin and false advertising counterclaims.
The defendants argued
that the plaintiffs' designation of their revolver as “Made in the
USA” was false, and they conducted a consumer survey the results of
which suggested that whether a revolver is of domestic origin is an
important consideration to many firearms purchasers.
held that the defendants failed to demonstrate injury and therefore
The court reasoned that even if consumers knew
that the plaintiffs’ revolvers were of foreign origin, there was no
evidence suggesting that they would necessarily choose to instead
purchase defendants’ revolvers, which were also foreign-made.
court observed that “Plaintiffs may reap some undue benefit, but at
manufactured in the U.S. and not Defendants.”
Id. at 234.
As in New Colt, in this case the party bringing Lanham Act
claims has produced a survey suggesting that consumers prefer
products of domestic origin. And, as in New Colt, the party
bringing Lanham Act claims also sells products that are foreignmade; Milso does not dispute that it sells caskets made in Mexico.
complaining party's revolvers were foreign-made ("it is undisputed
that Defendants' revolvers are of foreign origin. . . . It is
therefore unclear how Defendants are damaged.", id. at 234), here
it is undisputed that Milso sells both American-made and Mexicanmade caskets.
The plaintiff argues that "to the extent Milso
advertising unfairly elevates its less desirable foreign-made
product to compete on the same ground."
(Pl.'s Opp. 31.)
court agrees that Milso has standing because it manufactures
Per se violation based on the Tariff Act
The plaintiff argues, relying on Alto Prods. Corp. v. Ratek
Indus. Ltd., No. 95 Civ. 3314 (LMM), 1996 WL 497027 (S.D.N.Y. Sept.
3, 1996), that the defendant failed to mark its caskets as "Made in
China" in accordance with the Tariff Act, 19 U.S.C. § 1304, and
such failure constitutes a per se violation of the Lanham Act.4
In Alto Prods., the court placed weight on the "rationale
underlying the marking requirements of the Tariff Act," id. at 5,
and the logic supporting the holding in Bohsei Enter. Co., U.S.A.
v. Porteous Fastener Co., 441 F. Supp. 162 (1977). See Bohsei, 441
F. Supp. at 164 ("To hold that omission of such a material fact [as
country of origin] is not such a false representation as to affect
the competition of the sale to the detriment of a seller who
complies with the mandate of 19 U.S.C. § 1304 requires an utterly
naive view of the realities of the market place.").
Prods., the court reasoned:
[T]he court now holds that failure to designate country
of origin in violation of the Tariff Act violates § 43(a)
of the Lanham Act as a matter of law. Logic dictates
that in light of these considerations, a consumer
encountering goods with no marking as to country of
origin will assume that they are American-made, thus
creating a likelihood of confusion with goods which are,
in fact, American-made.
1996 WL 497027 at *5.
However, such a per se rule would be in conflict with the fact
The Tariff Act provides, in relevant part, that:
[E]very article of foreign origin . . . imported into
the United States shall be marked in a conspicuous place
as legibly, indelibly, and permanently as the nature of
the article (or container) will permit in such manner as
to indicate to an ultimate purchaser in the United
States the English name of the country of origin of the
19 U.S.C. § 1304(a).
that "[t]he [Lanham] Act imposes no affirmative duty of disclosure
. . . and a claim cannot be based on the failure to disclose a
fact." Clark Consulting, Inc. v. Fin. Solutions Partners, LLC, No.
05 Civ. 06296(SAS), 2005 WL 3097892, at *3 n.38 (S.D.N.Y. Nov. 17,
2005) (citing Agency Dev., Inc. v. Med Am. Ins. Co., 310 F. Supp.
2d 538, 547 (W.D.N.Y. 2004) ("Plaintiff's proposed claim must fail
because it cannot base a Lanham Act claim on the defendants'
failure to disclose a fact.")); Avon Prods., Inc. v. S.C. Johnson
& Son, Inc., 984 F. Supp. 768, 798 (S.D.N.Y. 1997) ("[T]he Lanham
Act 'impos[es] no affirmative duty of disclosure.'") (quoting Int'l
Paint Co. v. Grow Grp., Inc., 648 F. Supp. 729, 730 (S.D.N.Y.
1986)); Int'l Paint Co., 648 F. Supp. at 730 ("[T]his court has
construed the reach of § 43(a) of the Lanham Act proscription
against the false representations as imposing no affirmative duty
of disclosure."); McNeilab, Inc. v. Am. Home Prods. Corp., 501 F.
Supp. 517, 532 (S.D.N.Y. 1980) ("[A] failure to inform consumers of
something, even something that they should know, is not per se a
misrepresentation actionable under section 43(a) of the Lanham
In analyzing whether a claim can be based on a failure to
disclose, the court in Universal City Studios, Inc. v. Sony Corp.
of America reasoned:
Rather than looking to case law, therefore, it is
necessary to look to the statute. It is hard to see how
a simple failure to disclose can be brought within its
terms. No reference to omissions of material fact or
obligation to disclose such as is found in other federal
statutes (e.g. 15 U.S.C. § 77l) appears.
language seems to be "false description," false
"representation," and false "designation of origin." The
absence of any statement is neither "false" nor a
"representation." And it is difficult to see where such
a disclosure requirement, if implied, would end, for no
limits on the extent and nature of that disclosure can be
429 F. Supp. 407, 410 (C.D. Cal. 1977).
In addition, in the absence of language in the statute such a
per se rule would inappropriately restrict the ability of the
finder of fact to evaluate the particular circumstances of each
Cf. York Grp., Inc. v. York S., Inc., Civil Action No. H-06-
0262, 2006 WL 3057782, at *7 (S. D. Texas Oct. 25, 2006) (rejecting
the argument that an alleged Tariff Act violation is a per se
violation of the Lanham Act because, inter alia, the Fifth Circuit
has "expressed its refusal to interfere with or predict factual
determinations by administrative agencies . . . ."). Any number of
factual scenarios will be present in cases where a claim is brought
pursuant to § 43(a) of the Lanham Act.
While it is likely that in
a number of those cases the factual representations made will be
false or misleading in the absence of a designation of origin in
accordance with the Tariff Act, it is also likely that in at least
some instances the factual representations will not be false or
misleading in the absence of a designation in accordance with the
To the extent the plaintiff is advancing a claim for false
designation of origin that does not rely on its argument that
violation of the Tariff Act constitutes a per se violation of the
Lanham Act, that claim for false designation of origin rests on the
same argument and evidence as the plaintiff's Lanham Act claim for
literally false advertising.
Although the plaintiff argues that
Liberty's Chinese-made caskets are either never marked as "Made in
China" or are marked with such a flimsy sticker that it is removed
or falls off, the plaintiff has produced no evidence in support of
The plaintiff has, however, created a genuine
issue as to whether the stickers designating caskets as having been
manufactured in China are inadequate to inform consumers that those
caskets are made in China.
Relying on this evidence, Milso
contends that Liberty's extensive use of American iconography,
including the name of the company and its logo containing the
Statue of Liberty wrapped in an American flag, constitute a false
designation of origin and literally false advertising in view of
the fact that the stickers designating caskets as having been
manufactured in China are inadequate under the circumstances to
inform consumers that the caskets are made in China.
iconography of the Statue of Liberty and the American flag evoke
clear associations with the United States of America, these words
and symbols are too general to evoke any specific geographical
associations or to support an inference that there is an implied
claim of domestic manufacture. See Hamilton-Brown Shoe Co. v. Wolf
Bros. & Co., 240 U.S. 251, 256 (1916) (“We do not regard the words
‘The American Girl,’ . . . [used] in connection with shoes . . . as
being a geographical or descriptive term. It does not signify that
the shoes are manufactured in America, or intended to be sold or
characteristics of the shoes.”); Forschner Grp., Inc. v. Arrow
Trading Co., 30 F.3d 348, 355 (2d Cir. 1994) (“The phrase Swiss
Army knife cannot fairly be read to say ‘made in Switzerland’ so as
to be geographically descriptive. Therefore, the use of the phrase
by the distributor of a knife made in China does not constitute
Therefore, the defendants' motion for summary judgment on the
literally false advertising in violation of the § 43(a) of the
Lanham Act is being granted, and the plaintiff's motion is being
Claim for Impliedly False Advertising
"'[P]laintiffs alleging an implied falsehood are claiming that
a statement, whatever its literal truth, has left an impression on
the listener [or viewer] that conflicts with reality' – a claim
that 'invites a comparison of the impression, rather than the
statement with the truth.' . . . Therefore, whereas 'plaintiffs
seeking to establish a literal falsehood must generally show the
substance of what is conveyed, . . . a district court must rely on
extrinsic evidence [of consumer deception or confusion] to support
a finding of an implicitly false message.'"
Time Warner Cable,
Inc. v. DIRECTV, Inc., 497 F.3d 144, 153 (2d Cir. 2007) (quoting
Schering Corp. v. Pfizer, Inc., 189 F. 3d 218, 229 (2d Cir. 1999)).
"[T]he success of a plaintiff's implied falsity claim usually
turns on the persuasiveness of a consumer survey."
Johnson * Merck Consumer Pharm. Co. v. Smithkline Beechman Corp.,
960 F.2d 294, 298 (2d Cir. 1992).
"[W]here the plaintiff cannot
demonstrate that a statistically significant part of the commercial
audience holds the false belief allegedly communicated by the
challenged advertisement, the plaintiff cannot establish that it
suffered any injury as a result of the advertisement's message."
The plaintiff contends that "[t]he [Poret] Report conclusively
demonstrates that omission of the words 'Made in China' from
Liberty's lithographs is materially misleading to consumers with a
deception rate significantly higher than 20%."
(Pl.'s Br. 55.)
However, the record supports the defendant's contention that "the
Poret study provides no evidence that 'a statistically significant
part of the commercial audience holds the false belief allegedly
communicated by the challenged advertisement.'"
(Mem. Law Supp.
Defs.' Mot. Summ. J. (Doc. No. 132) 40 (citing Johnson & Johnson,
960 F.2d at 298).)
The Poret Report explains how the study was designed:
400 qualified respondents participated in this study,
which was conducted in 9 locations in Connecticut and
The objectives of the study were to determine: (a)
whether or not the information that a Liberty casket is
made in China would be material to a potential casket
purchaser; and (b) whether the failure to properly
disclose such information is misleading to consumers.
Accordingly, a standard market research experiment was
designed to test whether the presence or absence of such
information would potentially impact a consumer's
decision about which casket to purchase.
The experiment was composed of two Cells.
200 respondents were assigned at random to Cell 1 and 200
to Cell 2.
Overview of Design
Respondents in Cell 1 were shown a booklet containing
three lithographs of Liberty caskets and a booklet
containing three lithographs of Matthews caskets. The
Liberty lithographs did not designate the caskets as
being made in China. Respondents were then asked which
casket (out of the six shown to them) would be their
first, second, and third choices to buy (if they had a
preference or preferences at all).
Respondents in Cell 2 were also shown a booklet
containing three lithographs of Liberty caskets and a
booklet containing three lithographs of Matthews caskets.
The Matthews booklet was identical to the booklet shown
to Cell 1. The Liberty booklet was the same as the one
shown to Cell 1 except that the lithographs were changed
to indicate that the Liberty caskets are "Made in China."
Respondents were then asked the identical question as in
Cell 1 – which casket (out of the six shown to them)
would be their first, second, and third choices to buy
(if they had a preference or preferences at all).
(Decl. Hal Poret (Doc. No. 129-6), Ex. A - Expert Report of Hal
The "Summary of Key Findings and Opinions" includes
five findings and opinions.
The final finding and opinion is: "5)
Based on the survey results, it is my opinion to a high degree of
professional certainty that the information that a Liberty casket
is made in China is material to consumers and that the omission of
such information is misleading to consumers."
(Id. at 18.)
consumers, it does not support a conclusion that the omission of
materials renders them impliedly false.
No part of Poret's survey
focused on Liberty's advertising and promotional materials and
Nor for that matter did any part of the study focus
on advertising and promotional materials in general to determine
what characteristics of such materials, if any, would suggest to
consumers that a product is manufactured domestically. Rather, the
Poret Report draws an inference that because information that a
casket is made in China is material to consumers, the omission of
such information is misleading to consumers, which is a conclusion
that would apply to the promotional materials of any company in the
However, Milso's claim here is not that omission from a
casket manufacturer's advertising and promotional materials of the
fact that a casket is made in China renders them impliedly false,
and for that reason Liberty's advertising and promotional materials
violate the Lanham Act, but rather that Liberty's pervasive use of
American iconography, including the name of the company and its
manufactured in China in order for Liberty's advertising and
promotional materials not to be implicitly false.
In addition, the mere fact that information that was material
to consumers was omitted in advertising and promotional materials
is not enough to support a claim under the Lanham Act in light of
the fact that "the Lanham Act 'impos[es] no affirmative duty of
Avon Prods., 984 F. Supp. 768 at 798 (quoting Int'l
Paint Co., 648 F. Supp. 729).
Therefore, the defendants' motion for summary judgment on the
plaintiff's claim for impliedly false advertising in violation of
the Lanham Act is being granted, and the plaintiff's motion is
Declaratory Judgment (Count One of Counterclaim)
In the First Counterclaim, the defendants seek a declaratory
judgment that the Employment Agreements are unenforceable. For the
reasons set forth above in the discussion of the plaintiff's First
Cause of Action, there are genuine issues of material fact as to
whether the Employment Agreements are enforceable. Therefore, both
motions for summary judgment as to the First Counterclaim are being
"Sham" Litigation in Violation of CUTPA (Count Two of
The defendant's Second Counterclaim is that Milso violated
CUTPA by filing "sham" litigation.
The Second Circuit has held
that "the filing of a single non-sham lawsuit-cannot form the basis
for a CUTPA claim." Suburban Restoration Co., Inc. v. ACMAT Corp.,
700 F.2d 98, 102 (2d Cir. 1983).
"Sham" litigation in the CUTPA
context consists of "actions rife with abusive intent and absent
any indicia of success," and "[f]actors present in sham litigation
litigation . . . deliberate fraud, supplying false information, and
whether lower courts have stated or implied that the action is
frivolous or objectively baseless and whether they have dismissed
it out of hand."
Zeller v. Consolini, 59 Conn. App. 545, 555
Milso’s action is not a "sham" lawsuit. First, the lawsuit is
not "objectively baseless in the sense that no reasonable litigant
could realistically expect success on the merits."
Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S.
49, 50 (1993) (defining "sham" litigation).
There is no evidence
that could support a finding of fraudulent intent, repetitiveness,
or frivolity on Milso’s part, particularly in view of the fact a
Therefore, the plaintiff's motion for summary judgment on the
Second Counterclaim is being granted, and the defendants' motion is
For the reasons set forth above, Plaintiff’s Motion for
Summary Judgment (Doc. No. 129) is hereby GRANTED in part and
DENIED in part, and Defendants’ Motion for Summary Judgment (Doc.
No. 122) is hereby GRANTED in part and DENIED in part.
Judgment shall enter in favor of the plaintiff with respect to
the defendants' Second Counterclaim. Judgment shall enter in favor
of the defendants with respect to the plaintiff's Third Cause of
Action as to Larkin only (Breach of Fiduciary Duties), Fourth Cause
of Action only as to Boggia and Liberty insofar as relates to
aiding and abetting Larkin (Aiding and Abetting Breach of Fiduciary
Contractual Relations), Ninth Cause of Action (Conversion), Tenth
Cause of Action only as to the period beginning May 18, 2008 (Civil
Conspiracy), Eleventh Cause of Action (Lanham Act claim for false
designation of origin), and Twelfth Cause of Action (Lanham Act
claim for false advertising).
It is so ordered.
Dated this 30th day of August 2012, at Hartford, Connecticut.
Alvin W. Thompson
United States District Judge
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