DIVERSIFIED INDUSTRIES, INC. v. VINYL TRENDS, INC. et al

Filing 23

OPINION. Signed by Chief Judge Jerome B. Simandle on 5/1/2014. (drw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

DIVERSIFIED INDUSTRIES, INC.,

HONORABLE JEROME B. SIMANDLE

Plaintiff,
Civil Action
No. 13-6194 (JBS/JS)

v.
VINYL TRENDS, INC., et al.,

OPINION
Defendants.

APPEARANCES:
Kerri E. Chewning, Esq.
ARCHER & GREINER, PC
One Centennial Square
P.O. Box 3000
Haddonfield, NJ 08033
Attorney for Plaintiff Diversified Industries, Inc.
Gregg S. Kahn, Esq.
WILSON ELSER
33 Washington Street
Newark, NJ 07102
Attorney for Defendants Vinyl Trends, Inc. and William
Vance Hardin

SIMANDLE, Chief Judge:
I.

INTRODUCTION
This matter comes before the Court on Plaintiff Diversified

Industries, Inc.’s motion to dismiss Defendant Vinyl Trends,
Inc.’s counter-claims for tortious interference with a
prospective or existing economic relationship, unfair
competition, and misappropriation of trade secrets [Docket Item

12] and Defendant’s cross-motion for leave to file an amended
counter-claim [Docket Item 17.]
Because Plaintiff has had an opportunity to address
Defendant’s cross-motion to amend in its reply brief and at oral
argument, and in the interest of efficiency, the Court will
consider the merits of both motions.1 For the reasons discussed
below, the Court will grant Defendant’s cross-motion to amend
and grant in part and deny in part Plaintiff’s motion to
dismiss.
II.

BACKGROUND
A. Factual Background
The facts set forth below are those alleged in Defendant’s

“First Amended Answer to Complaint and Counterclaim” which the
Court accepts as true for purposes of the instant motions.2
Defendant Vinyl Trends, Inc. is in the business of manufacturing
and selling flooring products, including foam products for use

1

Plaintiff argues that Defendant’s original counter-claim should
be considered the operative pleading for the purposes of its
motion to dismiss because the Court has not yet granted
Defendant leave to amend its counter-claim and thus, the
original counter-claim has not been superseded. However, nothing
in West Run Student Hous. Associates, LLC v. Huntington Nat.
Bank, 712 F.3d 165 (3d Cir. 2013), cited by Plaintiff, prevents
the Court from considering Defendant’s amended counter-claim as
the operative complaint, and the Court elects to do so in the
interest of judicial economy and in the absence of prejudice to
Plaintiff.
2
Defendants’ First Amended Answer to Complaint and Counterclaim
is attached to Defendants’ opposition brief to Plaintiff’s
motion to dismiss. [Docket Item 17-1.]
2

as underlayment for flooring. (Amended Answer and Counterclaim
(“Am. Ans.”) [Docket Item 17-1] ¶ 9.) The products manufactured
and sold by Defendant include the Eternity and Eternity SG
products. (Id. ¶ 10.) Defendant and Plaintiff, Diversified
Industries, Inc., are competitors in the flooring underlayment
market, and Plaintiff sells the FloorMuffler product which
competes with Defendant’s Eternity and Eternity SG products.
(Id. ¶¶ 13, 15.)
Defendant’s counter-claim alleges that Defendant and
Plaintiff use the same foam supplier, Toray Plastics (“Toray”),
which has allowed Plaintiff to obtain information about
Defendant’s Eternity and Eternity SG products. (Id. ¶ 17.)
Plaintiff has obtained information from Toray concerning the
sound rating and volatile organic compound (“VOC”) content of
Defendant’s Eternity and Eternity SG products, as well as
information concerning other product specifications,
development, marketing, and sale of Defendant’s Eternity and
Eternity SG products.3 (Id. ¶ 18.) The information Plaintiff has
obtained from Toray is confidential, non-public, and provided to
Toray in furtherance of Defendant’s relationship with Toray.
(Id. ¶ 19.) Plaintiff has used and continues to use this

3

Defendant concedes that “Vinyl Trends does not yet know for
sure what information Diversified Industries obtained from Toray
Plastics (because Diversified Industries has not disclosed
such).” (Id. ¶ 18.)
3

information to gain an unfair competitive advantage over
Defendant in the marketplace. (Id. ¶ 20.)
Defendant alleges it has suffered actual losses in the form
of lower sales of its Eternity and Eternity SG products as a
direct consequence of Plaintiff’s conduct, and Plaintiff has
been unjustly enriched. (Id. ¶ 21.) Plaintiff has used and will
continue to use wrongfully obtained information to gain an
unfair competitive advantage of Defendant through its marketing
materials and in its communications with actual and prospective
customers. (Id.)
Plaintiff has also allegedly interfered with Defendant’s
business relationships with its manufacturers, Toray and Sekisui
Voltek (“Voltek”). (Id. ¶ 22.) Plaintiff first interfered with
Defendant’s relationship with Toray in or around 2007 when
Plaintiff made false statements about Defendant’s products and
product specifications/characteristics in an effort to
wrongfully induce Toray to stop doing business with Defendant.
(Id.) As a result, Defendant’s development and sale of its
products were significantly delayed, causing Defendant to suffer
lost sales and revenue. (Id.) Defendant did not resume doing
business with Toray until 2012. (Id.)
Because Toray supplied Plaintiff with a similar product,
Defendant engaged Voltek to design a separate luxury vinyl tile
(“LVT”) underlayment product which Defendant marketed and sold
4

under its Easy Step and Eternity brands. (Id. ¶ 23.) After
expending considerable effort and money developing and marketing
the products supplied by Voltek, one or more of Plaintiff’s
employees or agents around April or May 2013 allegedly made
false statements about Defendant’s products to Voltek including
statements concerning the sound rating, VOC content, and other
product specifications of Defendant’s products, in order to
induce Voltek to stop doing business with Defendant. (Id. ¶ 24.)
Plaintiff’s actions caused Voltek to stop supplying additional
LVT underlayment product after an initial amount, which was
insufficient to satisfy orders Defendant was already obligated
to provide to customers. (Id. ¶ 25.) Defendant allegedly
suffered monetary damages because Defendant was forced to spend
significant time and resources communicating with Voltek and
alternate suppliers to ensure existing orders were timely
completed. (Id.)
Additionally, the counter-claim alleges one or more of
Plaintiff’s employees, agents, or representatives, have made
false or misleading statements on its website or in its
marketing materials regarding the flooring underlayment products
offered by Plaintiff and Defendant in an effort to gain an
unfair competitive advantage over Defendant, including
statements concerning Plaintiff’s products’ sound rating and/or
acoustic barrier, statements concerning Defendant’s products’
5

purple and/or red color, statements concerning Defendant’s
tapper displays, and statements concerning Plaintiff’s patent on
cross link polypropylene foam product. (Id. ¶ 26.) Specifically,
Plaintiff falsely states in its marketing materials that its
FloorMuffler product has “[t]he highest rated and most effective
acoustic barrier on the market.” (Id. ¶ 27.) Plaintiff in its
marketing materials warns against being “fooled by the color. Be
sure to look for The FloorMuffler logo. Or you could end up
seeing red.”4 (Id.) Plaintiff falsely claims that it is the
creator or inventor of the tapper unit and has sent Defendant a
cease and desist letter demanding that Defendant stop using it.
(Id.)
B. Procedural Background
On October 18, 2013, Plaintiff filed a complaint against
Defendants Vinyl Trends, Inc. and its employee, William Vance
Hardin. [Docket Item 1.] Plaintiff’s Complaint asserts claims
for tortious interference with contractual relations or
prospective economic advantage, as well as for violations
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) and New
Jersey’s Fair Trade Act, N.J.S.A. § 56:4-1. On December 12,
2013, Defendants filed an answer denying the allegations in

4

Defendant contends that this is an “obvious and belittling
reference to Vinyl Trends’ products (i.e., Vinyl Trends’ Easy
Step product is red and its Eternity products are purple in
color).” (Id. ¶ 27.)
6

Plaintiff’s Complaint and asserting Defendant Vinyl Trends,
Inc.’s counter-claims against Plaintiff for tortious
interference with a prospective or existing economic
relationship, unfair competition, and misappropriation of trade
secrets. [Docket Item 9.] Plaintiff then filed the instant
motion to dismiss Defendant’s counter-claims on January 6, 2014.
[Docket Item 12.] In response, Defendant filed opposition to
Plaintiff’s motion to dismiss, as well as a cross-motion for
leave to file an amended counter-claim. [Docket Item 17.]
III. STANDARD OF REVIEW
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) may be
granted only if, accepting all well-pleaded allegations in the
complaint as true and viewing them in the light most favorable
to the plaintiff, a court concludes that plaintiff failed to set
forth fair notice of what the claim is and the grounds upon
which it rests that make such a claim plausible on its face.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Although a
court must accept as true all factual allegations in a
complaint, that tenet is “inapplicable to legal conclusions,”
and “[a] pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will
not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
If a responsive pleading has been served, “a party may
amend its pleading only with the opposing party’s written
7

consent or the court’s leave.” Fed. R. Civ. P. 15(a). “The court
should freely give leave when justice so requires.” Id. The
decision to grant leave to amend a complaint rests within the
sound discretion of the trial court. Massarsky v. General Motors
Corp., 706 F.2d 111, 125 (3d Cir. 1983). The district court may
deny leave to amend only if (a) the moving party’s delay in
seeking amendment is undue, motivated by bad faith, or
prejudicial to the non-moving party; or (b) the amendment would
be futile. Adams v. Gould, Inc., 739 F.2d 858, 864 (3d Cir.
1984). “Futility” means that the complaint, as amended, would
fail to state a claim upon which relief could be granted. Shane
v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000) (citation omitted).
In assessing “futility,” the court applies the same standard of
legal sufficiency as applies under Rule 12(b)(6). Id.
IV.

DISCUSSION
Plaintiff argues that Defendant’s original and amended

counter-claims should be dismissed for failure to state a claim
because Defendant’s allegations amount to a bare recitation of
the elements of the purported claims. The Court will address
each of Defendant’s counter-claims in turn.
A. Tortious Interference with a Prospective or Existing
Economic Relationship
Plaintiff argues that Defendant’s counter-claim fails to
identify any relationships with customers or potential customers

8

which were interfered with by Plaintiff and fails to identify
any damage to Defendant as a result of the alleged interference.
Further, Plaintiff contends that Defendant fails to identify the
incorrect, misleading, or false statements made by Plaintiff. To
the extent Defendant’s tortious interference claim is based on
Defendant’s relationship with Toray, Plaintiff argues that it is
barred by the applicable statute of limitations.
Defendant responds that it has sufficiently pleaded a claim
for tortious interference with a prospective or existing
economic relationship based on allegations that Plaintiff, in
bad faith and for no legitimate business purpose, has made false
statements about Defendant’s products to manufacturers including
Toray and Voltek, as well as false or misleading statements on
its website, in its marketing materials, and to current or
prospective customers of Defendant to gain an unfair competitive
advantage over Defendant.
Under New Jersey law in order to bring a claim of tortious
interference with a prospective or existing economic
relationship, a plaintiff must show: (1) a plaintiff’s existing
or reasonable expectation of economic benefit or advantage; (2)
the defendant’s knowledge of that expectancy; (3) the
defendant’s wrongful, intentional interference with that
expectancy; (4) the reasonable probability that the plaintiff
would have received the anticipated economic benefit in the
9

absence of interference; and (5) damages resulting from the
defendant’s interference. Lightning Lube, Inc. v. Witco Corp., 4
F.3d 1153, 1167 (3d Cir. 1993) (citing Fineman v. Armstrong
World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992); Printing
Mart–Morristown v. Sharp Elecs. Corp., 563 A.2d 31, 37 (N.J.
1989)).
Defendant’s amended counter-claim sufficiently states a
claim for tortious interference as to Defendant’s relationship
with Toray and Voltek. Defendant alleges that Defendant had an
existing economic relationship with its manufacturers, Toray and
Voltek (Am. Ans. ¶¶ 22-25); Plaintiff knew of Defendant’s
relationship with Toray and Voltek (id. ¶¶ 17, 24); Plaintiff
intentionally made false statements about Defendant to Toray and
Voltek concerning the sound rating, VOC content, and other
specifications/characteristics of Defendant’s products (id. ¶¶
22, 24); it was reasonably probable that Defendant would receive
economic benefit from its relationships with Toray and Voltek
without Plaintiff’s false statements (id. ¶¶ 22-25); and damages
resulted from Plaintiff’s false statements in the form of lost
sales revenue and additional costs (id. ¶¶ 22, 25). Accordingly,
the Court rejects Plaintiff’s arguments that Defendant has
failed to identify any relationships which were interfered with
by Plaintiff, failed to identify any damage to Defendant as a

10

result of the alleged interference, and failed to identify the
incorrect, misleading or false statements made by Plaintiff.
Defendant has sufficiently identified the relationships
with its manufacturers that were interfered with. Defendant
alleges that Plaintiff made false statements to Toray “in order
to wrongfully induce Toray Plastics to stop doing business with
Vinyl Trends.” (Id. ¶ 22.) Defendant also alleges that Plaintiff
made false statements about Defendant’s products to Voltek “in
order to wrongfully induce Sekisui Voltek to stop doing business
with Vinyl Trends.”5 (Id. ¶ 24.) Accordingly, Defendant has
identified contracts or relationships affected by Plaintiff’s
allegedly misconduct. Further, Defendant’s allegations that
Plaintiff made false statements about Defendant’s products to
Toray and Voltek “concerning the sound rating, VOC content and
other product specifications/characteristics of Vinyl Trends’
products” are sufficiently specific to put Plaintiff on notice
regarding the nature of Plaintiff’s allegedly wrongful conduct.6

5

The Court does not address Plaintiff’s argument that
Defendant’s counter-claim for tortious interference must fail
because efforts to advance one’s own interest does not establish
the requisite malice or wrongful conduct. Plaintiff acknowledges
that Defendant’s amended counter-claim is not limited to
allegations that Plaintiff acted in pursuit of its own business
interest. (Pl. Reply [Docket Item 18] at 3.) As noted above, the
Court disagrees with Plaintiff’s argument that Defendant’s
original counter-claim remains the operative pleading for the
purposes of the instant motion.
6
Details about the timing, context and content of the allegedly
false statements must be identified in discovery, but they are
11

(Id.; see also id. ¶ 22.) Accepting Defendant’s pleadings as
true, Plaintiff’s allegedly false statements to Toray and Voltek
amount to more than “healthy competition.” Ideal Dairy Farms,
Inc. v. Farmland Dairy Farms, Inc., 659 A.2d 904, 933 (N.J.
Super. Ct. App. Div. 1995). Instead, Defendant’s allegations, if
proved, could satisfy the malice requirement because Defendant
sufficiently alleges that “the harm was inflicted intentionally
and without justification or excuse.” Id. (quoting Printing
Mart–Morristown, 563 A.2d at 31).
Defendant’s amended counter-claim adequately allege damages
as the result of Plaintiff’s false statements in the form of
lost sales revenue and additional costs. Contrary to Plaintiff’s
position, Defendant need not identify, in the pleadings stage, a
specific amount of LVT underlayment Voltek intended to supply
Defendant. Defendant alleges that Plaintiff’s actions “caused
Sekisui Voltek to tell Vinyl Trends that it would not supply
additional LVT underlayment product after an initial amount,
which amount was far less than the aggregate amount of orders
Vinyl Trends already was obligated to provide to customers.”
(Id. ¶ 25.) Defendant’s allegations are clear that it maintained
an expectation that Voltek would supply additional LVT
underlayment product to satisfy its existing orders. The cases
not within the ambit of Rule 9(b), Fed. R. Civ. P., which
requires, for example, that the circumstances of an alleged
fraud be plead with factual particularity.
12

cited by Plaintiff support the proposition that interference
with existing business relationships is sufficient to establish
damages in a tortious interference claim, and the claimant need
not show interference with prospective customers. See Lightning
Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1169 (3d Cir. 1993)
(finding sufficient evidence of damages where plaintiff sold
franchises of business, but only a fraction of these franchisees
actually opened as a result of defendant’s interference);
Lamorte Burns & Co., Inc. v. Walters, 770 A.2d 1158, 1172 (N.J.
2001) (upholding grant of summary judgment where defendant
secretly solicited current clients of plaintiff).
However, the Court finds that Defendant’s claim for
tortious interference as it relates to Toray is barred by the
statute of limitations. Defendant conceded at oral argument that
the alleged interference between Plaintiff and Toray that forms
the basis of Defendant’s claim occurred before December, 2007,
more than six years before Defendant filed its original counterclaim on December 2, 2013, and a tortious interference claim
under New Jersey law must be asserted within six years. See
Fraser v. Bovino, 721 A.2d 20, 25 (N.J. Super. Ct. App. Div.
1998). Defendant has not alleged in the amended counter-claim
any interference by Plaintiff after December 2, 2007, nor could
Defendant’s counsel at oral argument identify any misconduct by
Plaintiff with respect to Toray after December 2, 2007.
13

Therefore, the Court will dismiss without prejudice Defendant’s
amended counter-claim for tortious interference as it relates to
Toray because it is barred by the statute of limitations. See
Clark v. Prudential Ins. Co. of Am., 736 F. Supp. 2d 902, 923
(D.N.J. 2010) (citing Oshiver v. Levin, Fishbein, Sedran &
Berman, 38 F.3d 1380, 1385 n.1 (3d Cir. 1994)).
In contrast to Defendant’s allegations based on its
relationship with Voltek, Defendant’s amended counter-claim
fails to state a claim for tortious interference as to
Defendant’s relationship with “actual and prospective
customers.” (Am. Ans. ¶ 26.) Defendant fails to identify any
actual contract or customer affected by Plaintiff’s alleged
misconduct.7 See Novartis Pharm. Corp. v. Bausch & Lomb, Inc.,
Civ. 07-5945 (JAG), 2008 WL 4911868, at *7 (D.N.J. Nov. 13,
2008) (“At the pleading stage, [plaintiff] must allege an injury
that is more concrete than lost business of unknown,
unsolicited, or hypothetical customers.”); Lucas Indus., Inc. v.
Kendiesel, Inc., Civ. 93-4480, 1995 WL 350050, at *9 (D.N.J.
June 9, 1995) (granting motion to dismiss where counter-claimant
7

When asked at oral argument if Defendant could identify any
customers by name who were affected by Plaintiff’s alleged
misconduct, Defendant’s counsel identified “T&L Distributors.”
However, T&L Distributors is not referenced anywhere in
Defendant’s amended counter-claims. Because the Court’s
dismissal of Defendant’s claim will be without prejudice,
Defendant will have an opportunity to plead with specificity the
identity of customers who were affected by Plaintiff’s alleged
misconduct.
14

failed to identify “a single customer or a single contract that
was likely to consummate, but failed to consummate, due to the
actions taken by” counter-claim defendant). While Defendant need
not identify specific customers by name, Defendant must plead
sufficient facts to put Plaintiff on notice as to the conduct
that allegedly caused harm to Defendant. See Syncsort Inc. v.
Innovative Routines Int’l, Inc., Civ. 04-3623 (WHW), 2005 WL
1076043, at *12 (D.N.J. May 6, 2005) (denying motion to dismiss
claim for tortious interference where counter-claimant alleged
that counter-claim defendant induced prospective customers of
counter-claimant to breach non-disclosure agreements and offered
to provide a customer with a free copy of counter-claim
defendant’s product and pay off any debt that customer owed to
counter-claimant).
Additionally, Defendant fails to identify any damage as the
result of Plaintiff’s alleged false statements on its website,
in its marketing materials, and to Defendant’s current or
prospective customers. (Am. Ans. ¶ 26.) Defendant’s allegations
as to damages consist of the bare conclusions that “Vinyl Trends
has lost revenue and profit – in the form of lost sales and
other business opportunities – as a direct result of Diversified
Industries’ false/misleading statements and other wrongful
conduct” and Defendant will continue to lose additional sales,
revenue and profit. (Id. ¶¶ 32-33.) Such conclusions are
15

insufficient to show that Defendant “had a reasonable
expectation of economic advantage that was lost as a direct
result of defendants’ malicious interference, and that it
suffered losses thereby.”8 Lamorte Burns & Co., Inc. v. Walters,
770 A.2d 1158, 1170 (N.J. 2001). Accordingly, Defendant cannot
maintain a claim that Plaintiff tortiously interfered with
Defendant’s relationship with unidentified or unknown
prospective customers.
Therefore, the Court will deny Plaintiff’s motion to
dismiss Defendant’s tortious interference claim as to
Defendant’s relationship with Voltek, but grant Plaintiff’s
motion to dismiss Defendant’s tortious interference claim as to
Defendant’s relationship with Toray and unidentified current or
prospective customers without prejudice to Defendant seeking
leave to file a Second Amended Counterclaim that cures the noted
deficiencies.
B. Unfair Competition
Plaintiff argues that Defendant’s counter-claim for unfair
competition should be dismissed because Defendant concedes that
there is no distinct cause of action for unfair competition
under New Jersey law, and Defendant asserts no argument for the
8

Having found Defendant’s amended counter-claim insufficient to
state a claim for tortious interference as to Defendant’s
current or prospective customers, the Court will not address
Plaintiff’s arguments that Plaintiff’s allegedly false
statements were neither false nor incorrect.
16

viability of an unfair competition claim distinct from its claim
for tortious interference. The Court agrees.
“The common law tort of unfair competition historically has
been considered a subspecies of the class of torts known as
tortious interference with business or contractual relations.”
Sussex Commons Outlets, L.L.C. v. Chelsea Prop. Grp., Inc., A3714-07T1, 2010 WL 3772543, at *9 (N.J. Super. Ct. App. Div.
Sept. 23, 2010) (citing Restatement (Third) of Unfair
Competition § 1 comment g (1995)). Stated differently, under New
Jersey law, “[t]here is no distinct cause of action for unfair
competition. It is a general rubric which subsumes various other
causes of action.” C.R. Bard, Inc. v. Wordtronics Corp., 561
A.2d 694, 696 (N.J. Super. Ct. Ch. Div. 1989). Accordingly,
courts have dismissed unfair competition claims where they are
duplicative of claims for tortious interference. See Juice
Entm’t, LLC v. Live Nation Entm't, Inc., Civ. 11-7318 (WHW),
2012 WL 2576284, at *5 (D.N.J. July 3, 2012) (dismissing claims
for unfair competition claim as duplicative of plaintiff’s
tortious interference claims); Coast Cities Truck Sales, Inc. v.
Navistar Int’l Transp. Co., 912 F. Supp. 747, 786 (D.N.J. 1995)
(dismissing claim for unfair competition where court determined
that claims for tortious interference and breach of good faith
and fair dealing did not withstand summary judgment); Sussex
Commons Outlets, L.L.C., 2010 WL 3772543, at *9-10 (upholding
17

dismissal of unfair competition claim where plaintiff conceded
that unfair competition claim was only a subspecies of its
tortious interference claim and both claims were grounded on the
same facts).
In the present action, Defendant concedes that “[t]he
factual basis for the unfair competition claim is the same as
for the tortious interference Count.” (Def. Opp. [Docket Item
17] at 12.) As such, the Court finds Defendant’s unfair
competition claim to be duplicative of its tortious interference
claim and will grant Plaintiff’s motion to dismiss Defendant’s
counter-claim for unfair competition with prejudice.
C. Misappropriation of Trade Secrets
Plaintiff argues that Defendant’s misappropriation of trade
secrets claim must fail because Defendant admits that it does
not know what information Plaintiff obtained from Toray.
Further, Defendant’s amended counter-claim does not allege how
Plaintiff misappropriated any information about Defendant’s
products from Toray or how any information was acquired by
improper means. Finally, Plaintiff argues that the use of any
information obtained from Toray in instituting this litigation
is protected by the litigation privilege.
In response, Defendant clarifies that it is only bringing a
claim for misappropriation of trade secrets under the New Jersey
Trade Secrets Act, N.J.S.A. § 56:15-1 et seq. (“the Act”).
18

Defendant contends that it has stated a claim under the Act
because Plaintiff, by its own admission, has obtained
confidential and proprietary information from Toray about
Defendant’s Eternity and Eternity SG products, and Plaintiff
used and continues to use this information to gain an unfair
competitive advantage over Defendant, causing damages to
Defendant.9 Defendant rejects Plaintiff’s assertion of litigation
privilege because Plaintiff continues to use the confidential
and proprietary information to make false statements to the
public.
The New Jersey Trade Secrets Act prohibits the actual or
threatened misappropriation of a trade secret. N.J. Stat. Ann. §
56:15–3. The Act defines “trade secret” broadly as “information
. . . without regard to form” that “derives independent economic
value” from not being known to others who can obtain economic
value from its disclosure or use and that is the subject of
reasonable efforts to maintain its secrecy. Id.; see also
StrikeForce Technologies, Inc. v. WhiteSky, Inc., Civ. 13-1895
(SRC), 2013 WL 3508835, at *8 (D.N.J. July 11, 2013). The
following acts constitute misappropriation:

9

Defendant relies on Plaintiff’s Complaint which states,
“Because Diversified and Vinyl Trends use the same foam
supplier, Diversified has been able to obtain information about
the foam product Vinyl Trends is utilizing for its Eternity
products.” (Compl. ¶ 40.)
19

(1) Acquisition of a trade secret of another by a person
who knows or has reason to know that the trade secret was
acquired by improper means; or
(2) Disclosure or use of a trade secret of another without
express or implied consent of the trade secret owner by a
person who:
(a) used improper means to acquire knowledge of the trade
secret; or
(b) at the time of disclosure or use, knew or had reason to
know that the knowledge of the trade secret was derived or
acquired through improper means; or
(c) before a material change of position, knew or had
reason to know that it was a trade secret and that
knowledge of it had been acquired through improper means.
N.J. Stat. Ann. § 56:15–2. The Act defines “improper means” as
“the theft, bribery, misrepresentation, breach or inducement of
a breach of an express or implied duty to maintain the secrecy
of, or to limit the use or disclosure of, a trade secret, or
espionage through electronic or other means, access that is
unauthorized or exceeds the scope of authorization, or other
means that violate a person's rights under the laws of this
State.” Id. “Damages can include both the actual loss caused by
misappropriation and the unjust enrichment caused by
misappropriation that is not taken into account in computing
actual loss.” § 56:15-4.
Defendant fails to state a claim for misappropriation of
trade secrets under the New Jersey Trade Secrets Act because
Defendant fails to identify with any specificity the allegedly
misappropriated information, the manner in which it was
obtained, or how Defendant was harmed as a result. Defendant

20

admits in its amended counter-claim that it “does not yet know
for sure what information Diversified Industries’ obtained from
Toray.” (Am. Ans. ¶ 18.) Defendant alleges only the following
regarding the information obtained: “Vinyl Trends alleges on
information and belief – especially in light of Diversified
Industries’ Complaint allegations – that Diversified Industries
has obtained information concerning the sound rating and VOC
content of the Eternity and Eternity SG products, and also
obtained information concerning other product specifications as
well as the development, marketing and sale of the Eternity and
Eternity SG products.” (Id.) The remaining allegations in
support of this claim for misappropriation of trade secrets
consist of a bare recitation of the elements required under the
Act. Defendant’s amended counter-claim contains no factual
detail supporting a conclusion that Plaintiff misappropriated
any trade secret by improper means as those terms are defined in
the Act. Nor has Defendant alleged any facts regarding damages
beyond the conclusion that “Vinyl Trends has suffered actual
losses as a direct consequence of Diversified Industries’
conduct” and “Diversified Industries also has been unjustly
enriched.” (Id. ¶ 21.) Defendant’s amended counter-claim amounts
to mere guesswork supported only by bare conclusions based on a
single statement in Plaintiff’s Complaint. Moreover, Defendant
provides no basis on which to find its allegations sufficient to
21

state a claim under the Act. Therefore, the Court will grant
Plaintiff’s motion to dismiss Defendant’s counter-claim for
misappropriation of trade secrets under the New Jersey Trade
Secrets Act without prejudice.10
V.

CONCLUSION
For the reasons discussed above, the Court will grant

Defendant’s cross-motion for leave to file the amended counterclaim attached to its opposition because it states a plausible
claim for tortious interference as to Defendant’s relationship
with Voltek. However, the Court will dismiss without prejudice
Defendant’s amended counter-claim for tortious interference to
the extent it is based on its relationship with Toray because
such claim is barred by the statute of limitations. Further, the
Court will dismiss without prejudice Defendant’s amended
counter-claim for tortious interference to the extent it is
based on its relationship with current or prospective customers,
as well as Defendant’s amended counter-claim for
10

The Court has considered Defendant’s argument that its New
Jersey Trade Secret Act claim should proceed because Defendant
has no alternative method to discover the information Plaintiff
obtained from Toray as alleged in Paragraph 40 of Plaintiff’s
Complaint. [Docket Item 1.] However, nothing prevents Defendant
from conducting discovery on this allegation in Plaintiff’s
Complaint, and because dismissal is without prejudice, Defendant
may seek leave to reassert its claim under the Act if warranted
during the course of discovery, and before the deadline for
seeking amendments to pleadings. Because the Court finds that
Defendant has failed to state a claim under the Act, the Court
does not reach Plaintiff’s argument regarding the litigation
privilege.
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misappropriation of trade secrets under the New Jersey Trade
Secrets Act. The Court will dismiss Defendant’s amended counterclaim for unfair competition with prejudice. An accompanying
Order will be entered.

May 1, 2014
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

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