VOORHEES v. TOLIA et al
Filing
47
OPINION filed. Signed by Judge Brian R. Martinotti on 3/17/2020. (jem)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
__________________________________________
:
LYNNANN VORHEES,
:
:
Plaintiff,
:
:
v.
:
:
INDU TOLIA, et al.,
:
:
:
Defendants.
:
__________________________________________:
Case No. 3:16-cv-8208-BRM-LHG
OPINION
MARTINOTTI, DISTRICT JUDGE
Before this Court is Defendants Indu Tolia’s (“Tolia”) and Care LLC’s (individually,
“Care”; collectively with Tolia, “Defendants”) Motion to Dismiss pro se Plaintiff Lynnann
Vorhees’s (“Vorhees”) Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6)
(ECF No. 43). Vorhees opposes the Motion. (ECF No. 44.) Vorhees also filed an Amended
Response. 1 (ECF No. 45.) Defendants did not file a Reply. Having reviewed the filings submitted
in connection with the Motion and having declined to hold oral argument pursuant to Federal Rule
of Civil Procedure 78(b), for the reasons stated below, Defendants’ Motion to Dismiss is DENIED
in part and GRANTED in part.
1
Plaintiff explained the Amended Response reflected the correction of various spelling and other
so-called clerical errors, and she requested that the Amended Response be recognized as the
“primary” document for her opposition to the Motion. The Court grants this request.
I.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY 2
A. Factual Background
This matter arises from a dispute over the alleged misappropriation of trade secrets related
to Plaintiff’s business dealings with Tolia and co-Defendant Adam Newman, and with the
corporate entities the parties created. (ECF No. 1 §§ I, II.) Though Vorhees filed an Amended
Complaint, the differences from the original Complaint extend only to identifications of the parties,
to be discussed below. Therefore, the Court refers to and adopts the complete recitation of the facts
of this matter contained in this Court’s Opinion of October 26, 2018. (ECF No. 54 at 1-5.)
B. Procedural History
On November 3, 2016, Vorhees filed her Complaint, asserting ten claims: (1) against all
Defendants for violations of the New Jersey Trade Secrets Act (“NJTSA”), N.J.S.A. 56:15-1, et
seq. (Count One); (2) against Tolia and Newman for breach of contract (Count Two); (3) a claim
against Tolia and Newman for fraud (Count Three); (4) a claim against all Defendants for breach
of confidence (Count Four); (5) a claim against all Defendants for conversion (Count Five); a claim
against all Defendants for trespass to chattels (Count Six); (7) against all Defendants for unlawful
interference with prospective business advantage (Count Seven); (8) against all Defendants for
unfair competition (Count Eight); (9) against all Defendants for breach of the implied covenant of
good faith and fair dealing (Count Nine); and (10) against all Defendants for civil conspiracy
(Count Ten). (ECF No. 1.) On February 6, 2017, Plaintiff filed a Request for Default against
2
For the purposes of this Motion to Dismiss, the Court accepts the factual allegations in the
Amended Complaint as true and draws all inferences in the light most favorable to Plaintiff. See
Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Furthermore, the Court also
considers any “document integral to or explicitly relied upon in the complaint.” In re Burlington
Coat Factory Secs. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quoting Shaw v. Dig. Equip. Corp.,
82 F.3d 1194, 1220 (1st Cir. 1996)).
2
Newman. (ECF No. 13.) The Clerk entered default as to Newman that same day for failure to plead
or otherwise defend. (See 2-6-2017 Docket Entry.) On August 4, 2017, Plaintiff filed a Motion for
Entry of Default Judgment against Newman. (ECF No. 23.) On February 28, 2017, Tolia and Care
moved to dismiss the claims against them, pursuant to Rule 12(b)(6). (ECF No. 14.) On March 2,
2017, Tolia and Care filed an Amended Motion to Dismiss pursuant to Rule 12(b)(6). (ECF No.
17.) This Court granted the Motion to Dismiss with prejudice in January 2018, holding that
Vorhees’s right to sue was barred by the Stock Surender Agreement executed by the parties, while
an Employment Agreement required Vorhees to arbitrate all her claims. (ECF No. 24.)
Vorhees appealed that decision to the United States Court of Appeals for the Third Circuit
in March 2018. (ECF No. 27.) The Third Circuit vacated that judgment, holding that the arbitration
agreement in the Stock Surrender Agreement did not waive the parties right to all litigation, only
to a jury trial, while the Employment Agreement’s arbitration clause was not triggered by claims
in the Complaint that were not related to Plaintiff’s employment. (ECF No. 32 at 4-5.) The Third
Circuit further required this Court to consider on remand the issue of diversity jurisdiction, a claim
it held was not sufficiently alleged in the Complaint. (Id. at 6.)
This Court reopened the matter on March 14, 2019, and ordered Vorhees to show cause by
April 4, 2019 why this Court has subject-matter jurisdiction over the Complaint by filing a
proposed Amended Complaint curing the jurisdictional allegations set forth in the Third Circuit’s
Opinion. (ECF No. 34.) Vorhees filed a Motion for the Recusal of this Court on March 22, 2019,
alleging “prior judgments in this matter have been insufficient to allow due process of the law” as
“evident by the Judgment of the Court of Appeals.” (ECF No. 35.) On April 8, 2019, the Court
denied Vorhees’s Motion for Recusal, holding that “Generally, beliefs or opinions which merit
recusal must involve an extrajudicial factor,” Selkridge v. United of Omaha Life Ins. Co., 360 F.3d
3
155, 167 (3d Cir. 2004) (quotations omitted), while “judicial rulings alone almost never constitute
a valid basis” for recusal, Liteky v. United States, 510 U.S. 540, 555 (1994). The Court further held
that, because Vorhees had not filed an Amended Complaint remedying the jurisdictional defects
identified by the Third Circuit, the matter was dismissed without prejudice. (ECF No. 36.) Vorhees
moved to reopen the case on April 26, 2019, a motion this Court granted on May 13, 2019. (ECF
Nos. 37, 38.) Vorhees filed an Amended Complaint on May 24, 2019. (ECF No. 39.) Defendants
filed this Motion to Dismiss the Amended Complaint on July 22, 2019. (ECF No. 43.) Vorhees
filed opposition to the Motion on August 5, 2019, and an Amended Response on August 15, 2019.
(ECF No. 44, 45.) Defendants did not file a Reply.
II.
LEGAL STANDARDS
A. Rule 12(b)(6) Standard
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a
district court is “required to accept as true all factual allegations in the complaint and draw all
inferences in the facts alleged in the light most favorable to the [plaintiff].” Phillips, 515 F.3d at
228. “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). However,
the plaintiff’s “obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Id.
(citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A court is “not bound to accept as true a
legal conclusion couched as a factual allegation.” Papasan, 478 U.S. at 286. Instead, assuming the
factual allegations in the complaint are true, those “[f]actual allegations must be enough to raise a
right to relief above the speculative level.” Twombly, 550 U.S. at 555.
4
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the defendant is
liable for misconduct alleged.” Id. This “plausibility standard” requires that the complaint allege
“more than a sheer possibility that a defendant has acted unlawfully,” but it “is not akin to a
‘probability requirement.’” Id. (quoting Twombly, 550 U.S. at 556). “Detailed factual allegations”
are not required, but “more than an unadorned, the defendant-harmed-me accusation” must be
pleaded; it must include “factual enhancements” and not just conclusory statements or a recitation
of the elements of a cause of action. Id. (citing Twombly, 550 U.S. at 555, 557).
“Determining whether a complaint states a plausible claim for relief [is] . . . a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
However, courts are “not compelled to accept ‘unsupported conclusions and unwarranted
inferences,’” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (quoting Schuylkill Energy
Res. Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1997)), nor “a legal conclusion
couched as a factual allegation.” Papasan, 478 U.S. at 286.
While, as a general rule, the court may not consider anything beyond the four corners of
the complaint on a motion to dismiss pursuant to Rule 12(b)(6), the Third Circuit has held that “a
court may consider certain narrowly defined types of material without converting the motion to
dismiss [to one for summary judgment pursuant to Rule 56].” In re Rockefeller Ctr. Props. Sec.
5
Litig., 184 F.3d 280, 287 (3d Cir. 1999). Specifically, courts may consider any “‘document integral
to or explicitly relied upon in the complaint.’” Burlington Coat Factory, 114 F.3d at 1426 (quoting
Shaw, 82 F.3d at 1220).
III.
DECISION
As instructed by the Third Circuit, the Court’s inquiry for this Motion to Dismiss begins
with an inquiry into whether this Court has jurisdiction over the litigation.
In her original Complaint, Vorhees alleged, based on her “being informed and
believe[ing],” that she “resides” in Pennsylvania and that Tolia and Newman reside in New Jersey.
(Compl. (ECF No. 1) ¶¶ 5, 7-8.) Vorhees also alleged, again based on “being informed and
believe[ing],” the entity defendants are organized in and have their principal place of business in
New Jersey. (Id. ¶ 6.)
The Third Circuit concluded Vorhees’s invocation of this Court’s diversity jurisdiction was
insufficiently pleaded because she alleged only that she and defendants were residents of different
states and not citizens of different states as required by § 1332, while she had not made any
allegations about the membership or citizenship of the entity defendants. The Third Circuit said
GBForefront, L.P. v. Forefront Management Group, LLC stood for the proposition that allegations
of residence are insufficient to establish an individual’s citizenship. Vorhees v. Tolia, 761 F. App’x
88, 91 (3d Cir. 2019) (citing GBForefront, 888 F.3d 29, 34 (3d. Cir. 2018)); (see also ECF No. 32
at 6).
“[F]ederal courts ‘have an independent obligation to determine whether subject-matter
jurisdiction exists, even in the absence of a challenge from any party.’” Hartig Drug Company Inc.
v. Senju Pharmaceutical Co. Ltd., 836 F.3d 261, 267 (3d Cir. 2016) (quoting Arbaugh v. Y & H
Corp., 546 U.S. 500, 514, 126 S. Ct. 1235, 163 L.Ed.2d 1097 (2006)). In a case such as this resting
6
on diversity jurisdiction, the Court must determine for itself whether or not every defendant is
completely diverse from the plaintiff. See Auto-Owners Ins. Co. v. Stevens & Ricci, Inc., 835 F.3d
388, 394 (3d Cir. 2016) (quoting Grand Union Supermarkets of the V.I., Inc. v. H.E. Lockhart
Mgmt., Inc., 316 F.3d 408, 410 (3d Cir. 2003)).
This Court has jurisdiction over cases between “citizens of different states.” Id. (quoting
§ 1332(a)(1). To qualify for so-called diversity jurisdiction, “the parties must be completely
diverse, meaning ‘no plaintiff can be a citizen of the same state as any of the defendants.’” AutoOwners Ins. Co., 835 F.3d at 394 (quoting Grand Union, 316 F.3d at 410).
Generally, a corporation takes on the citizenship of “both its state of incorporation and the
state of its principal place of business.” GBForefront, 888 F.3d 29, 34 (3d Cir. 2018). “[T]he
citizenship of an LLC is determined by the citizenship of its members.” Zambelli Fireworks Mfg.
Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010). If the members are themselves limited liability
companies (or partnerships, or trusts, or unincorporated associations, etc.), this Court may need to
trace the parties’ citizenship through multiple layers of entities. See Lincoln Benefit Life Co. v. AEI
Life, LLC, 800 F.3d 99, 105 n. 16 (3d Cir. 2015).
In her Amended Complaint, Vorhees now explicitly alleges she is a citizen of
Pennsylvania, and that Tolia and Newman are citizens of New Jersey. (Am. Compl. (ECF No. 39)
¶¶ 5-7.) She provides specific residential addresses for all three individuals. (Id.) Gone is the
language that these allegations are based on her “being informed and believe[ing].” The Court
therefore concludes Vorhees has sufficiently pleaded that all three individuals are citizens of their
respective states.
Vorhees now alleges further that Virtuality is a New Jersey limited liability company with
a principal place of business in New Jersey and that the only members of the LLC are Tolia and
7
Newman. Because the Court concluded above that Vorhees had sufficiently pleaded the citizenship
of individuals Tolia and Newman—the only members of the LLC—as being in New Jersey, it
follows that Vorhees has sufficiently pleaded the New Jersey citizenship of Virtuality.
Similarly, Vorhees alleges Care LLC is a New Jersey limited liability company with a
principal place of business in North Brunswick, New Jersey, and that Tolia, a New Jersey citizen,
is the sole member of Care. Accordingly, Vorhees has sufficiently pleaded the New Jersey
citizenship of Care. Vorhees also alleges Augthat LLC is a New Jersey limited liability company
with a principal place of business in Marlboro, New Jersey, and that Newman, a New Jersey
citizen, is the sole member of Augthat. Vorhees has thus sufficiently pleaded the New Jersey
citizenship of Augthat. As Vorhees is alleged to be a citizen of Pennsylvania and all Defendants
are alleged to be citizens of New Jersey, the Court concludes Vorhees has established this litigation
is between citizens of different states as contemplated by § 1332 and that the Court thus has
subject-matter jurisdiction.
Having determined the threshold concern identified by the Third Circuit, the Court now
turns to Defendants’ arguments for dismissing the Amended Complaint.
A. Motion to Dismiss Pursuant to Rule 12(b)(6)
Tolia and Care seek dismissal of the Amended Complaint because, while Vorhees alleges
the five defendants breached a contract, committed fraud, and misappropriated $3 million of
plaintiff’s trade secrets and intellectual property, the Amended Complaint “fails to include any
specific details of alleged fraud, and fails to identify: (a) the contract that was allegedly breached,
(b) any alleged trade secrets, and (c) any intellectual property belonging to the plaintiff.” 3 (Defs.’
3
Defendants also attack the Amended Complaint by contrasting what they conclude is Vorhees’s
“styl[ing] herself as ‘a developer and distributor/supplier for Augmented Reality for Education
(AR4ED) software services,’” and possessing only a high school education, with Tolia, who “has
8
Br. in Supp. of Mot. to Dismiss (ECF No. 43-1) at 18.) Furthermore, Defendants argue, to the
extent any intellectual property Vorhees shared with Defendants had value, Vorhees “admitted”
such property was worthless by her execution of the Stock Surrender Agreement. 4 (Id.) The result
of that admission, Defendants contends, should be the dismissal of “counts one (trade secrets
misappropriation), five (conversion), six (trespass to chattels), seven (tortious interference), eight
(unfair competition), and ten (civil conspiracy) for failure to state a claim under Fed. R. Civ.
P. 12(b)(6).” (Id. at 2.) Defendants further contend the Amended Complaint should be dismissed
because none of the counts meets the plausibility standard required by Iqbal and Twombly. Finally,
Defendants argue Count 3 in particular should be dismissed because allegations resting on
Vorhees’s “information and belief” cannot meet the heightened pleading standard required for
claims of fraud.
Vorhees counters that Tolia “signed a Non Discloser [sic] Agreement and was acting Vice
President of the Plaintiff’s Company Pear Enterprises Inc. during and after forming a cloned
Augmented Reality company Care LLC,” and so had “a direct access and relationship to the
Plaintiff’s business dealings, trade secrets, intellectual property, known how, and anything else
deemed proprietary and secret to the Plaintiff.” (Pl.’s Amended Br. in Opp. to Mot. (ECF No. 45)
a bachelor’s degree in computer sciences, and over 20 years in the computer technology industry.”
ECF No. 43-1 at 4.) The Court, however, is guided by the standards governing a Motion to Dismiss,
in which the Court is “required to accept as true all factual allegations in the complaint and draw
all inferences in the facts alleged in the light most favorable to the [plaintiff].” Phillips, 515 F.3d
at 228. Therefore, the Court declines to consider Defendants’ attempt to contrast the intellectual
pedigrees of Vorhees and Tolia.
4
Plaintiff did not include the Stock Surrender Agreement with either the Complaint or the
Amended Complaint; Moving Defendants filed a copy with the Motion to Dismiss the original
Complaint. (ECF No. 17-2.) The Court considers this Agreement as it is “integral to or explicitly
relied upon” both in the Complaint and the Amended Complaint. In re Burlington Coat Factory
Sec. Litig., 114 F.3d at 1426.
9
at 6.) In other words, Vorhees identifies the Non Disclosure Agreement 5 as the source of her
claims, not the Stock Surrender Agreement or the Employment Agreement that Defendants see as
the genesis of her claims.
Vorhees likens the allegations of the Amended Complaint to a 2011 case, TechForward
Inc. v. Best Buy Co. Inc., where a California jury awarded the plaintiff $22 million in damages for
defendant’s use of the plaintiff’s Guaranteed Buyback Program trade secrets. (Id. at 7 (citing
TechForward, No. CV 11-01313-ODW (JEMx) (C.D. Cal. Nov. 16, 2012).) 6
Vorhees further argues the Amended Complaint “clearly identified her Augmented Reality
for Education (AR4ED) inventions and created content that was cloned and stolen by the
Defendants and used to start competing companies.” (ECF No. 45 at 10) Vorhees then lists the
following as either inventions or created content:
AR4ED Worksheets with curriculum, AR4ED Posters,
AR4Reality(Real Estate ads), AR Yearbook, ART-Shirts,
ARCARDS,(Greeting Cards, Flash Cards, that come to life) AR for
Marketing, AR for Enterprise and Training (Pharmaceutical), AR
for Wearable displays to help those with vision issues (SightAR),
AR4ET (Exposure Therapy) AR4ART (FiFi Face Painting App.)
5
The Non Disclosure Agreement was not attached to either the Complaint or the Amended
Complaint. Vorhees filed a copy of the Non Disclosure Agreement between Plaintiff, Pear and
Tolia with her Opposition to Tolia’s Motion to Dismiss the original Complaint. (ECF No. 18-3.)
The Court considers this agreement as it is “integral to or explicitly relied upon” both in the
Complaint and the Amended Complaint. In re Burlington Coat Factory Sec. Litig., 114 F.3d at
1426.
6
Plaintiff cites the website http://tsi.brooklaw.edu/cases/techforward-inc-v-best-buy-co-inc; see
also Trade Secrets News: Court Awards $5 Million in Exemplary Damages in Trade Secrets Case
Against Best Buy, After Jury Awarded $22 Million for Unjust Enrichment, 2012 WL 9498125.
10
Tiger Face App, AR Puzzle, ARBooks, and the Pear Imaginality
Play and Create Software (Partner Mindspace Solutions)
(Id. at 10.)
As to Defendants’ argument this intellectual property is worthless, Vorhees in her brief
alleges Tolia on April 24, 2014 “filed the paperwork for a patent application (#61/984,498)
claiming her as sole inventor of “Augmented Reality Assisted Education Content Management
System” that includes clones of Vorhees’s “AR4ED Worksheet and processes” as well as material
“created using Pear Imaginality and Create software (with Teacher curriculum guides) and its 3D
object software interactions and delivery system to the end user.” (Id. at 10-11; see also ECF No.
44-1 at 13-34.) Though April 2014 was a period in which Tolia was working for Vorhees’s Pear,
Vorhees alleges she did not know then about the patent filing. But, she argues, Tolia’s filing for a
patent on an Augmented Reality system that includes Vorhees’s content belies Defendants’
contention that Vorhees’s intellectual property was worthless.
To begin, the Court must determine whether Vorhees has put forth sufficient allegations to
allow the Court to identify the contract allegedly breached. From a review of the Amended
Complaint, it is clear Vorhees sees the Non Disclosure Agreement as the source of the rights she
seeks to enforce through this litigation.
This contract provides that Tolia “shall not otherwise use [Pear’s and Vorhees’s]
Confidential Information except as specifically agreed/approved by PEAR [sic] in writing and only
where any and all proposed recipients of Confidential Information shall have first executed a
confidentiality agreement substantially in the form of this Agreement.” (ECF No. 18-3 at 20.)
Count One’s misappropriation of trade secrets claim rests on the allegation Tolia “was provided
access to such trade secrets in her position” as vice president of Pear. (ECF No. 39 ¶ 67.) Count
Two’s breach of contract claim expressly alleges Defendants “[b]reach[ed] their obligations of the
11
NDA confidentiality and trade secret agreement.” (Id. ¶ 79(a).) Count Seven’s unlawful
interference with prospective business advantage claim relates to Defendants’ use of Vorhees’s
and Pear’s “contacts, industry networks, and projected customer demographics,” information this
Court reads as constituting Pear’s confidential information. (Id. ¶ 109.) Count Nine’s breach of
implied covenant of good faith and fair dealings rests upon allegations of Defendants’ “theft of
processes, know how, wrongful retention of trade secrets and product concepts.” (Id. ¶ 123.) Count
Ten’s civil conspiracy claim centers on the allegation that Defendants had a “secret plan to commit
fraud and steal data, information, selectively solicit key employees and associates, and provide
confidential information to a competing business.” (Id. ¶ 127.)
Four remaining counts reference allegations pertaining to so-called non-trade secrets. (See
Count Four breach of confidence, id. ¶ 91; Count Five, conversion, id. ¶ 97; Count Six, trespass to
chattels, id. ¶ 102; Count Eight, unfair competition, id. ¶ 119.) Vorhees does not define the term
“non-trade secrets.” However, at least one reference in the Amended Complaint to non-trade secret
information describes it as proprietary information in the Amended Complaint. (See, e.g, id. ¶ 91.)
For its part, the Non Disclosure Agreement covers, among other categories of information: “Any
other documents, information or things that have value to Pear and it is [sic] business or which
might reasonably be characterized as confidential or proprietary.” (ECF No. 18-3 at 20.)
More directly, the Amended Complaint begins with the allegation: “This action arises out
of Defendants Tolia and Newman’s collusion and use of misappropriated proprietary, confidential
and trade secret information in connection with the Defendants’ intent to make use of the
misappropriated trade secrets to form Virtuality, Care, and Augthat, unbeknownst to Plaintiff
Voorhees.” In other words, the entire action arises from or relates to the Non Disclosure
12
Agreement. 7 Having determined Vorhees has adequately alleged facts for the Court to conclude
the Non Disclosure Agreement is the contract Vorhees alleges was breached by Defendants, the
Court will address each Count of the Amended Complaint in turn.
1. Count One: Misappropriate of Trade Secrets
To begin, Vorhees alleges misappropriation of trade secrets pursuant to N.J. Stat. Ann.
§ 56:15-1. et seq. Specifically, Vorhees alleges Tolia was provided access to Vorhees’s trade
7
The Non Disclosure Agreement contains forum-selection and choice-of-law clauses. Though the
parties are silent about the potential implications of these clauses, the Court sua sponte reviews
those clauses to determine whether this NDA itself deprives this Court of jurisdiction. See M/S
Bremen v. Zapata Off-Shore Co., 92 S. Ct. 1907, 1916, 407 U.S. 1, 15 (1972) (The “forum clause
should control absent a strong showing that it should be set aside.”). The NDA provides that it “is
governed by and shall be construed” in accordance with Pennsylvania law and that “any action
arising out of or pertaining to this Agreement shall be initiated and maintained in
LACKAWANNA COUNTY.” (Id. at 21.) A forum selection clause generally “is treated as a
manifestation of the parties’ preferences as to a convenient forum” and is “entitled to substantial
consideration.” Jumara v. State Farm Ins. Co., 55 F.3d 873, 879-80 (3d Cir. 1995). Vorhees does
not explain in the Amended Complaint nor in her opposition to this Motion why she invokes the
authority of this Court to enforce an agreement that clearly limits forum choice to courts in
Pennsylvania. Defendants also are silent about the implications of this forum selection clause.
Pursuant to the doctrine of forum non conveniens, this Court may dismiss a case if “a court
abroad is the more appropriate and convenient forum for adjudicating the controversy.” Sinochem
Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 425 (2007). “The Third Circuit applies a
three-part analysis in determining if dismissal based on [] forum non conveniens is
appropriate.” Warner Tech. & Inv. Corp. v. Hou, No. 13-7415, 2014 WL 7409978, at *3 (D.N.J.
Dec. 31, 2014). First, the Court must “determine whether an adequate alternative forum can
entertain the case.” Id. (quoting Windt v. Qwest Commc’ns Int’l, Inc., 529 F.3d 183, 188–89 (3d
Cir. 2008)). Second, “the district court must then determine the appropriate amount of deference
to be given the plaintiff’s choice of forum.” Id. (quoting Windt, 529 F.3d at 190). Third, “the
district court must balance the relevant public and private interest factors.” Id. (quoting Windt, 529
F.3d at 190). “If the balance of these factors indicates that trial in the chosen forum would result
in oppression or vexation to the defendant out of all proportion to the plaintiff’s convenience, the
district court may, in its discretion, dismiss the case on forum non conveniens
grounds.” Id. (quoting Windt, 529 F.3d at 190).
It is clear another, adequate forum exists for this action, as the Non Disclosure Agreement
expressly provides for Lackawanna County courts. On the second Windt factor, Vorhees asked
Tolia to sign a Non Disclosure Agreement expressly providing for a Pennsylvania forum for any
action arising from that agreement, but she filed this action in the U.S. District Court for the District
of New Jersey and explicitly stated as the basis for the litigation the common law and statutes of
New Jersey. When considering the balance of the public and private interests, the public interest
13
secrets while at Pear and then at Virtuality, which Tolia took with her to Care, 8 and were the
subject of the Non Disclosure Agreement. (ECF No. 39 ¶¶ 67-68.) Vorhees further alleges Tolia
and Care “continue[] to possess and make use of [Vorhees’s] trade secrets held in their memory,
factors include: (1) the administrative difficulties flowing from court congestion; (2) the local
interest in having localized controversies decided at home; (3) the avoidance of unnecessary
problems in conflict of laws, or in the application of foreign law; and (4) the unfairness of
burdening citizens in an unrelated forum with jury duty. Archut v. Ross Univ. Sch. of Veterinary
Med., No. 10-1681, 2013 WL 5913675, at *7 (D.N.J. Oct. 31, 2013). The first factor is neutral, as
this litigation has been on the Court’s docket since the Complaint was filed in April 2016. The
second factor weighs in favor of retaining jurisdiction because, while Plaintiff is a citizen of
Pennsylvania, the remaining parties all are citizens of New Jersey and many of the acts alleged in
the Amended Complaint occurred in New Jersey. The third factor weighs in favor of retaining
jurisdiction, as Vorhees’s Amended Complaint references New Jersey’s trade secrets statutory
regime and New Jersey’s common law. Finally, the fourth factor also weighs in favor of retaining
jurisdiction because, as the decision of the Third Circuit makes clear, via the Stock Surrender
Agreement the parties waived their right to a jury trial for any dispute related to that agreement.
Accordingly, the Court concludes the relevant factors weigh against dismissal on the basis of forum
non conveniens.
The Court also must consider the NDA’s choice-of-law clause. In considering choice-oflaw issues, New Jersey follows the “most significant relationship” test. Maniscalo v. Brother Int’l
(USA) Corp., 709 F.3d 202, 206 (3d Cir. 2013) (citing P.V. ex rel. T.V. v. Camp Jaycee, 962 A.2d
453, 459-60 (2008)). Here, the misappropriation and intentional torts all are alleged to have been
conducted by New Jersey entities or citizens, and most are alleged to have been conducted in New
Jersey. Thus, the Court concludes New Jersey law governs claims related to trade secrets and
intentional torts, including Counts One, Three, Four, Five, Six, Seven, Eight, and Ten.
For the fraud claim, there is a conflict of laws, as under Pennsylvania law the statute of
limitations is two years from the date of injury, 42 Pa. Con. Stat. § 5524, while the statute of
limitations is six years in New Jersey. N.J. Stat. Ann. § 2A:14–1. Where a conflict exists, the Court
“must determine which jurisdiction has the ‘most significant relationship’ to the
claim.” Mansicalo, 709 F.3d at 207 (quoting Camp Jaycee, 962 A.2d at 461). For breach-ofcontract claims, the general rule is that the law of the state with the most significant relationship
to the parties and the transaction under the principles stated in Restatement section 6 governs.
Gilbert Spruance Co. v. Pennsylvania Mfrs. Ass'n Ins. Co., 629 A.2d 885, 888, 134 N.J. 96, 102
(1993). Because the fraud and breach-of-contract actions are alleged to have been conducted by
New Jersey entities or citizens, and most are alleged to have been conducted in New Jersey, the
Court concludes New Jersey law governs claims related to fraud and breach of contract.
8
Vorhees similarly alleges Newman was exposed to her trade secrets while at Virtuality and that
he took with him to Augthat. (ECF No. 39 at ¶¶ 66-75.) Since Newman has not moved for
dismissal, this Opinion focuses only on counts and allegations in the Amended Complaint as they
relate to Tolia and/or Care.
14
samples, and by way of an electronic format of downloaded files, emails and work product created
by” Vorhees. (Id. ¶¶ 69-70.)
The NJTSA, N.J. Stat. Ann. § 56:15-1, et seq., prohibits the actual or threatened
misappropriation of a “trade secret.” N.J. Stat Ann. § 56:15-3. The NJTSA defines “trade secret”
as “information” 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) that the holder reasonably
endeavors to maintain as confidential. N.J. Stat. Ann. § 56:15-2. Misappropriation of a qualifying
trade secret is defined as:
(1) Acquisition of a trade secret of another by a person who knows
or has reason to know that a person acquired the trade secret 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;
(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.
To determine whether confidential business information is recognized as a trade secret, a
court must consider the following factors:
(1) the extent to which the information is known outside of the
owner’s business; (2) the extent to which it is known by employees
and others involved in the owner’s business; (3) the extent of
measures taken by the owner to guard the secrecy of the information;
(4) the value of the information to the owner and to his competitors;
(5) the amount of effort or money expended by the owner in
developing the information; and (6) the ease or difficulty with which
the information could be properly acquired or duplicated by others.
15
Communications Workers of America v. McCormac, 9 A.3d 1106, 1123 (N.J. Super. 2008)
(quoting Hammock v. Hoffman–LaRoche, Inc., 662 A.2d 546, 560 (N.J. 1995) (citing Restatement
of Torts § 757 comment b (1971)). The Court is not persuaded Vorhees has sufficiently pleaded
facts to meet the six-part Hammock test. For instance, factors one through three require an inquiry
into the extent Vorhees’s information was known outside of her business, the extent to which it is
known by employees and others involved in that business, and the extent of measures taken by her
to guard the secrecy of this information. However, her measures taken to guard the secrecy of her
information were inconsistent, as seen in the fact that while Vorhees had Tolia sign a Non
Disclosure Agreement, Newman did not. (ECF No. 39 ¶¶ 19, 31.) The information was known
outside her business because Tolia, a Pear executive, revealed this information to Newman at a
time when he was not an employee of that entity. (Id. ¶ 24) Similarly, in the Amended Complaint,
Vorhees is silent about the fifth factor—the extent of any expenditures she made to develop her
alleged trade secrets.
As to the fourth factor, the value of the confidential information to Vorhees, Defendants
invoke a separate agreement among the parties, the Stock Surrender Agreement. Tolia argues that
contract “proves that any intellectual property contributions by plaintiff were worthless.”
Specifically, the agreement provides, in relevant part: “WHEREAS, [Plaintiff] acknowledges that
[the] market value of shares of [Virtuality] is zero dollars due to absence of any[] revenues,
business or any Intellectual Property Rights, whatsoever . . . .” (ECF No. 17-2 at 2.) Plaintiff alleges
she signed the Stock Surrender Agreement on February 1, 2014, because she “was informed by
[Tolia and Newman] that shares in [Virtuality] had no value.” (ECF No. 39 ¶ 40.) Plaintiff alleges
she “felt coerced into selling her stock on the basis that if she did not do so, the investor would
pull out.” (Id.)
16
The Third Circuit has held a claim of coercion “is a challenge to the validity (rather than
the formation) of [a contract].” See SBRMCOA, LLC v. Bayside Resort, Inc., 707 F.3d 267, 274
(3d Cir. 2013). Vorhees does not allege, in the words of SBRMCOA, that her “capacity to consent
was so diminished that no contract was ever formed or that [she] was necessarily unable to
consent” to the contract. Id. Instead, Vorhees appears to claim to have felt coerced only by the
prospect of a bad outcome: losing an investor. Vorhees does not dispute the authenticity of the
Stock Surrender Agreement. (See ECF No. 18.) Therefore, because Vorhees has not alleged that
her capacity to consent to the Agreement was so diminished that no contract was ever formed and
because Vorhees has not adequately challenged the validity of the Stock Surrender Agreement the
Court concludes for the purposes of this Motion the Stock Surrender Agreement was a valid
contract. It follows, then, that Vorhees is bound by the clause of that agreement in which she
“acknowledges that [the] market value of shares of [Virtuality] is zero dollars due to absence of
any[] revenues, business or any Intellectual Property Rights, whatsoever.”
In the Amended Complaint, however, Vorhees asserts a value of the Augmented Reality
trade secrets at roughly $2.9 million. Even utilizing the standards for a Motion to Dismiss, the
Court cannot reconcile conflicting statements from the Amended Complaint based on the factual
allegations presented therein, that Vorhees would sign a Stock Surrender Agreement for which a
predicate act was her acknowledgment Virtuality had no value and that the “trade secrets” she
alleges were misappropriated by Tolia, 9 Newman, Care and Augthat are valued at $2.9 million.
Furthermore, in the Non Disclosure Agreement Tolia acknowledged that Pear’s “Confidential
9
Separately, in signing the Non Disclosure Agreement Tolia acknowledged “the Confidential
Information [of Pear] is of significant value and is the result of material investment by Pear.” (ECF
No. 18-3 at 20.) Here again, however, no value of the confidential information is provided.
17
Information is of significant value and is the result of material investment by Pear.” (ECF No. 183 at 20.) Of course, even if the confidential information at present indeed had no economic value,
one need look no further than, say, a Honus Wagner baseball card for an example of a product
once considered of little value that acquired tremendous value later. 10 However, Plaintiff has
provided no cognizable facts from which this Court could conclude or imply the alleged trade
secrets had actual or potential economic value as contemplated by the NJTSA. While she claims
Defendants are using her secrets, there are no facts that would enable the Court to establish an
economic value to her secrets. Accordingly, Defendants’ Motion to Dismiss Count One’s Trade
Secret Acts claim is GRANTED.
Defendants contend Vorhees’s inability to sufficiently plead any basis for attributing
economic value to any trade secrets or intellectual property she alleges should lead this Court to
dismiss “counts one (trade secrets misappropriation), five (conversion), six (trespass to chattels),
seven (tortious interference), eight (unfair competition), and ten (civil conspiracy) for failure to
state a claim under Fed. R. Civ. P. 12(b)(6) and Twombly.” (ECF No. 43-1 at 2.) The Court is not
persuaded Plaintiff’s failure on this point sweeps five other claims out the courthouse doors along
with the misappropriation claim. The Court must then examine each claim separately.
2. Count Two: Breach of Contract
In New Jersey, a “party alleging a breach of contract satisfies its pleading requirement if it
alleges (1) a contract; (2) a breach of that contract; (3) damages flowing therefrom; and (4) that
the party performed its own contractual duties.” Video Pipeline, Inc. v. Buena Vista Home Entm’t,
Inc., 210 F. Supp. 2d 552, 561 (D.N.J. 2002) (citations omitted). The Amended Complaint alleges
10
See, e.g, Montanile v. Botticelli, No. 1:08cv716, 2009 WL 2378684, at *7 (E.D.Va. July 28,
2009) (describing the Honus Wagner T206 American Tobacco Company likeness to be the most
sought after baseball card of all time).
18
Tolia signed the Non Disclosure Agreement and is in breach of that agreement because she is using
Pear’s confidential information to further the business of Care, and that this has resulted in
damages in the form of Vorhees’s inability to get Pear started. Vorhees therefore has pleaded
factual allegations touching each of these four factors. Accordingly, Defendants’ Motion to
Dismiss Count Two is DENIED.
3. Count Three: Fraud
The Supreme Court of New Jersey has stated the elements of common-law fraud as: “(1) a
material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the
defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance
thereon by the other person; and (5) resulting damages.” Allstate New Jersey Ins. Co. v. Lajara,
117 A.3d 1221, 1231 (2015) (quoting Banco Popular N. Am. v. Gandi, 876 A.2d 253, 260 (N.J.
2005) (internal quotation marks omitted)).
Vorhees’s fraud claim hinges on the misrepresentations about Virtuality investors
discussed above. Had she known there were no investors, Vorhees alleges, she never would have
signed the Stock Surrender Agreement through which she signed away her ownership interest in
Virtuality, nor would she have contributed funds to that entity. (ECF No. 39 ¶¶ 82-88.)
Defendants argue the fraud claim “doesn’t even come close to satisfying even the Twombly
pleading standard, let alone the heightened pleading standard required under Fed. R. Civ. P. 9(b).”
(ECF No. 43-1 at 2.) Defendants base this argument in part on Vorhees’s use of language that here
allegations are based on her being “also informed and believes, and based upon such information
and belief alleges.”
Defendants contend that “pursuant to Fed. R. Civ. P. 9(b), when alleging a claim for fraud,
a plaintiff must include in its pleading, the date, time, and place of the alleged fraud, or else
19
otherwise inject some degree of precision or other measure of substantiating a fraud allegation.”
(Id. at 18-19 (citing Rapid Models & Prototypes, Inc. v. Innovated Sols., 71 F. Supp.3d 492, 503–
04 (D.N.J. 2014) (citing Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007))).) Defendants
contend such information is missing from the Amended Complaint. The Court disagrees.
First, the window in which these events occurred is fairly tight: Vorhees alleges Virtuality
was formed on December 29, 2013, while the Stock Surrender Agreement was executed on
February 1, 2014. (ECF No. 39 ¶¶ 36, 45; see also Stock Surrender Agreement at ECF No. 17-2
at 2). The Court is satisfied that the Amended Complaint contains “some degree of precision” in
establishing the time element required by Rule 9(b) and Rapid Models.
However, the Court is not persuaded that Vorhees has adequately pleaded facts pointing to
Tolia as a perpetrator of the alleged fraud. That is because Vorhees alleges she learned of the
fabricated investors in a November 2014 phone call with Newman. On that call, Vorhees learned
“that ‘investors’ never existed” and that the “investors” were “fabricated as a means to force
Plaintiff Voorhees out.” The Amended Complaint does not allege Tolia fabricated the investors.
Indeed, the Amended Complaint states that Newman responded to Vorhees’s inquiries by saying
“he would be handling all communications with the alleged investor.” (ECF No. 39 ¶ 43.) While
Vorhees makes clear Newman told her Tolia always wanted Vorhees removed from Virtuality,
Vorhees has not made any allegations explicitly stating that Tolia and Newman acted in concert.
Tolia, after all, was the one who told Vorhees on February 20, 2014 that Newman had raided
Viruality funds to purchase a vehicle for himself. Because the Amended Complaint does not
20
implicate Tolia in the alleged fraud, Defendants’ Motion to Dismiss Count Three as to Tolia and
Care is GRANTED. 11
4. Count Four: Breach of Confidence
Defendants argue Count Four should be dismissed because breach of confidence “isn’t
even recognized as a cause of action under New Jersey law.” (ECF No. 43-1 at 2.) Vorhees does
not dispute this contention.
The Third Circuit, however, has recognized that the tort of “a breach of confidence involves
‘the unconsented, unprivileged disclosure to a third party of nonpublic information that the
defendant has learned within a confidential relationship.’” Kamal v. J. Crew Group, Inc., 918 F.3d
102, 114 (3d Cir. 2019) (citing Alan B. Vickery, Note, Breach of Confidence: An Emerging Tort,
82 Colum. L. Rev. 1426, 1455 (1982)); see also McGuire v. Shubert, 722 A.2d 1087, 1091 (Pa.
Super. Ct. 1998) (breach of confidence requires “banker [to] divulge to third persons, without the
consent of the customer . . . any information relating to the customer acquired through the keeping
of his account” (quoting Peterson v. Idaho First Nat. Bank, 83 Idaho 578, 367 P.2d 284, 290 (Idaho
1961))).
Kamal involved alleged violations of the Fair and Accurate Credit Transactions Act by a
retailer whose receipts includes various digits from a customer’s credit-card number. 918 F.3d at
106. The plaintiff contended the injury of having his credit-card identifiers publicized on the
retailer defendant’s receipts was “analogous to common law privacy torts and an action
for breach of confidence.” Id. at 114. The Third Circuit, however, held that central to a breach-ofconfidence claim is that a “third party gain[ed] unauthorized access to a plaintiff’s personal
11
Because Newman did not move to dismiss, the Court takes no position on the sufficiency of the
fraud pleading as to Newman.
21
information,” something absent from the facts alleged by the plaintiffs. Id. This element also is
missing from Vorhees’s Amended Complaint. That is because Tolia and Newman learned of the
information Vorhees claims is confidential from Vorhees herself. Because Vorhees has not alleged
that a third party gained unauthorized access to her personal information, Vorhees has not stated a
claim for breach of confidence. 12 Accordingly, Defendants’ Motion to Dismiss Count Four is
GRANTED.
5. Count Five: Conversion
Under New Jersey law, “conversion is ‘the exercise of any act of dominion in denial of
another’s title to the chattels or inconsistent with such title.’” Latef v. Cicenia, A-5747-13T2, 2015
WL 10458543, at *5 (N.J. Super. App. Div. March 14, 2016) (citing Lembaga Enters., Inc. v. Cace
Trucking & Warehouse, Inc., 727 A.2d 1026, 1029 (N.J. Super. Ct. App. Div. 1999)
(quoting Mueller v. Tech. Devices Corp., 84 A.2d 620, 623 (1951)). To state a conversion claim,
Plaintiff must establish (1) “the property and right to immediate possession thereof belong to the
plaintiff” and (2) “the wrongful act of interference with that right by the defendant.” Latef, A5747-13T2, 2015 WL 10458543, at *5 (citing First Nat’l Bank v. N. Jersey Trust Co., 14 A.2d
765, 768 (N.J. Super. Ct. 1940)). In other words, Vorhees must only allege she has a property right,
here the confidential information of she and Pear, and that Defendants interfered with that right.
Whether that economic or property right has value or not is an issue not implicated in this inquiry.
Vorhees does allege a property right in trade secrets, and she alleges Defendants have interfered
with that property right by “depriv[ing] Vorhees of [her] ability to exclusively use and possess
[this] property.” (ECF No. 39 ¶ 98.) More specifically, Vorhees alleges Defendants continue to
12
Because Newman did not move to dismiss, the Court takes no position on the sufficiency of
the breach-of-confidence pleading as to Newman.
22
“make use of” her property in their businesses. (Id. ¶ 71.) Accordingly, the Court is persuaded
Vorhees has sufficiently alleged facts to meet the Latef factors, and the Motion to Dismiss Count
Five for Conversion is DENIED.
6. Count Six: Trespass to Chattels
As this Court has recognized, “[s]ome previous decisions of New Jersey Supreme Court
have intimated the tort of trespass to chattels is recognized under New Jersey state law.” Knox v.
Samsung Electronics America, Inc., No. 08–4308, 2009 WL 1810728, at *8 (D.N.J. 2009) (citing
Mueller v. Technical Devices Corp., 84 A.2d 620, 623 (1952) (quoting Frome v. Dennis, 45 N.J.L.
515 (N.J. 1883), for the proposition that a lesser interference than a conversion would constitute a
trespass to chattels)). Though the Knox court could not identify any New Jersey decision formally
adopting the approach of the Restatement (Second) of Torts, Knox, No. 08–4308, 2009 WL
1810728, at *8, the Court is at least persuaded by the Restatement’s recognition that trespass to a
chattel is not confined only to damage to the chattel, but also “may be committed by intentionally
. . . intermeddling with a chattel in the possession of another.” Restatement (Second) of Torts § 217
(1965). As trespass to chattels connotes a lesser interference than conversion does and the Court
already has denied the Motion to Dismiss the conversion count, it follows then that the Motion to
Dismiss the trespass-to-chattels count also is DENIED.
7. Count Seven: Unlawful Interference With Prospective Business Advantage
Vorhees titles Count Seven Unlawful Interference with Prospective Business Advantage.
As there is no statute or case in New Jersey recognizing such a claim, the Court construes Count
Seven as alleging tortious interference with a prospective business relation. In New Jersey, an
“action for tortious interference with a prospective business relation protects the right ‘to pursue
one’s business, calling or occupation free from undue influence or molestation.’” Printing Mart-
23
Morristown v. Sharp Electronics Corp., 563 A.2d 31, 36 (N.J. 1989) (quoting Louis Kamm, Inc.
v. Flink, 113 N.J.L. 582, 586, 175 A. 62 (E.&A. 1934)). The actionable conduct of a tortious
interference claim is “[t]he luring away, by devious, improper and unrighteous means, of the
customer of another.” Printing Mart-Morristown, 563 A.2d at 36 (quoting Louis
Kamm, 113 N.J.L. at 586). As the Printing Mart-Morristown Court stated, to prevail on a tortious
interference claim a plaintiff must allege facts that show some protectable right—a prospective
economic or contractual relationship; that the interference was done intentionally and with
“malice”; that the interference caused the loss of the prospective gain; and that the injury caused
damage. 563 A.2d at 37, 116 N.J. at 751–52. (internal citations omitted).
In the Amended Complaint, Vorhees appears to allege Defendants interfered with a
protectable right held by herself and Pear, the right being Pear’s “contacts, industry networks, and
projected customer demographics, future economic relationships, and with which is expected
contracts in the future.” (ECF No. 39 ¶ 109.) However, Vorhees identifies Pear as a dormant
business, so the Court cannot conclude on the basis of the facts alleged here that there has been a
“luring away” by any means of a Pear customer. Printing Mart-Morristown, 563 A.2d at 36 (see
also ECF No. 39 ¶ 14.) While Vorhees further alleges the actions of Tolia and Care have frustrated
the start-up efforts of Vorhees and Pear, she provides no facts to support this conclusory
statement. 13 Accordingly, Defendants’ Motion to Dismiss Count Seven is GRANTED.
8. Count Eight: Unfair Competition
New Jersey has an unfair competition statutory regime. See N.J. Stan. Ann. §§ 54:4-1 to 2.
In the introduction of the Amended Complaint, Vorhees states it is an action for, inter alia,
13
Because Newman did not move to dismiss, the Court takes no position on the sufficiency of
the tortious-interference pleading as to Newman.
24
“common law and statutory unfair competition (N.J.S.A. 56:4 - 1 to 2).” (ECF No. 39 § 1.)
However, Count Eight invokes only the common-law tort. (Id. ¶¶ 116-21). The common-law tort
of unfair competition is “an ‘amorphous’ area of law and is generally defined as the
‘misappropriation of one’s property by another . . . which has some sort of commercial or
pecuniary value.’” ADP, LLC v. Kusins, 215 A.3d 924, 951 (N.J. Super. App. Div. 2019) (citing
Duffy v. Charles Schwab & Co., 97 F. Supp. 2d 592, 600 (D.N.J. 2000) (quoting N.J. Optometric
Ass’n v. Hillman-Kohan Eyeglasses, Inc., 365 A.2d 956, 965 (Ch. Div. 1976)). “A prima facie case
of unfair competition . . . requires evidence of bad faith or malicious conduct.” Samsung America
Inc. v. Park, 2006 WL 3627072, at *17 (N.J. Super. App. Div. 2006) (citing National Football
League Properties Inc., v. New Jersey Giants, Inc., 637 F. Supp. 507, 518 (D.N.J 1986).) Vorhees
alleges Defendants committed acts constituting unfair competition by “stealing non-trade secret
proprietary information, using for Defendants’ own purposes, and adversely to the interests of
[Vorhees] and Pear . . . and interfering with her ability to establish her start up business.” (ECF
No. 39 ¶119.) More specifically, Plaintiff alleges Tolia severed her working relationship with
Vorhees but continued to use Pear’s lmaginality platform through December 2014. (Id. ¶¶ 57-60.)
Generally the common law tort of unfair competition “espouse[s] more scrupulous
standards of business fairness and commercial morality in trade.” Columbia Broadcasting System,
Inc. v Melody Recordings, Inc., 341 A.2d 348, 352 (N.J. Super. App. Div. 1975) (citing Q-Tips v.
Johnson & Johnson, 206 F. 2d 144, 145 (3d Cir. 1953), cert. den’d 346 U.S. 867, 74 S. Ct. 106,
98 L.Ed. 377 (1953).) As the CBS Court noted, “Reflecting this bent, it has been observed that the
essence of unfair competition is fair play.” CBS, 341 A.2d at 376 (citing American Shops, Inc. v.
American Fashion, etc., Inc., 80 A.2d 575, 577 (N.J. Super. App. Div. 1951). Vorhees alleges
Tolia and Care misappropriated Pear’s business information. (ECF No. 39 ¶¶ 57-60.) Among other
25
conduct, Vorhees alleges that, in the wake of discovering Newman’s misuse of Virtuality funds,
Tolia established Care using the business information of Pear and Virtuality, all without the
knowledge of Vorhees. The Court concludes from this that Vorhees has sufficiently pleaded a
claim for common law unfair competition. Accordingly, Defendants’ Motion to Dismiss Count
Eight is DENIED.
9. Count Nine: Breach of Implied Covenant of Good Faith and Fair Dealing
As the Supreme Court of New Jersey has stated, it is well established that “every contract
in New Jersey contains an implied covenant of good faith and fair dealing.” Sons of Thunder, Inc.
v. Borden, Inc., 690 A.2d 575, 587 (1997) (citing Pickett v. Lloyd’s, 621 A.2d 445, 450 (1993);
Onderdonk v. Presbyterian Homes, 425 A.2d 1057, 1062 (1981); Bak–A–Lum Corp. v. Alcoa
Bldg. Prods., Inc., 351 A.2d 349, 352 (1976); Association Group Life, Inc. v. Catholic War
Veterans, 293 A.2d 382 (1972); Palisades Properties, Inc. v. Brunetti, 207 A.2d 522, 531 (1965).)
“In every contract there is an implied covenant that ‘neither party shall do anything which will
have the effect of destroying or injuring the right of the other party to receive the fruits of the
contract; in other words, in every contract there exists an implied covenant of good faith and fair
dealing.’” Sons of Thunder, 690 A.2d at 587 (citing Palisades Properties, 207 A.2d at 531 (citing
5 Williston on Contracts § 670, at 159–60 (3d ed. 1961)).) “A breach of the implied covenant of
good faith and fair dealing differs from a ‘literal violation of a contract[.]’” Wade v. Kessler
Institute, 798 A.2d 1251, 1259–60 (2002) (quoting Bak–A–Lum, 351 A.2d at 352; see
also Richard A. Lord, Williston on Contracts § 38:12 at 423–24 (4th ed. 2000) (outlining
distinction between implied and express contractual conditions).
In the Non Disclosure Agreement agreed to by Pear, Vorhees (both as President of Pear
and individually), and Tolia, Tolia agreed “all Confidential Information is and shall remain the
26
exclusive property of Pear.” (ECF No. 18-3 at 20.) The Amended Complaint is silent on whether
Pear’s “confidential information” traveled with Vorhees to Virtuality. The Amended Complaint
does claim Tolia and Care “continue[] to possess and make use of [Vorhees’s] trade secrets held
in their memory, samples, and by way of an electronic format of downloaded files, emails and
work product created by” Vorhees. (Id. ¶¶ 69-70.) In viewing the Amended Complaint in the light
most favorable to Vorhees as the nonmoving party, the Court concludes Vorhees has sufficiently
pleaded a breach of implied covenant of good faith and fair dealing. Therefore, Defendants’
Motion to Dismiss Count Nine is DENIED.
10. Count Ten: Civil Conspiracy
In New Jersey, a civil conspiracy is “a combination of two or more persons acting in
concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal
element of which is an agreement between the parties to inflect a wrong against or injury upon
another and an overt act that results in damage.” Banco Popular North America v. Gandi, 876 A.2d
253, 263 (2005) (citing Morgan v. Union County Bd. of Chosen Freeholders, 633 A.2d 985, 998
(App. Div. 1993), cert. den’d, 640 A.2d 850 (1994) (quoting Rotermund v. U.S. Steel Corp., 474
F.2d 1139, 1145 (8th Cir. 1973) (internal quotations omitted)).
Vorhees alleges Tolia and Newman had a “secret plan to commit fraud and steal data,
information, selectively solicit key employees and associates, and provide confidential information
to a competing business” while still affiliated with Vorhees and that they did so “with full
knowledge of each other’s actions.” (ECF No. 39 ¶ 127.) The source for this allegation of what
Vorhees calls a secret plan appears to be a conversation Vorhees had with Newman in November
2014, from which Vorhees learned Tolia wanted to force Plaintiff out of Pear/Virtuality from the
beginning of their relationship. (Id. ¶ 62.) Newman also told Vorhees there were never any actual
27
investors, who were fabricated as a means to drive Vorhees from Virtuality. (Id.) Yet, as alleged
in the Amended Complaint, there is little evidence of an agreement between Tolia and Newman
“to inflect a wrong against or injury upon another and an overt act that results in damage.” Banco
Popular, 876 A.2d at 263. For instance, the Amended Complaint alleges Newman stated that the
investors were fabricated. It does not allege whether this fabrication was the product of an
agreement between Tolia and Newman, or even that Tolia knew about this fabrication. Indeed,
Vorhees alleges she was told by Newman that he would handle all contacts with these investors.
A review of the Amended Complaint reveals that all other actions attributed to Tolia and Newman
aided their separate companies, Tolia with Care and Newman with Augthat. Because the Amended
Complaint does not sufficiently allege an agreement between Tolia and Newman to inflict a wrong
against Vorhees or Pear, Defendants’ Motion to Dismiss Count Ten’s Civil Conspiracy claim is
GRANTED. 14
IV.
CONCLUSION
For the reasons set forth above, Defendants’ Motion to Dismiss is GRANTED as to Counts
One (Breach of Contract), Three (Fraud), Four (Breach of Confidence), Seven (Tortious
Interference with Prospective Business Relations) and Ten (Civil Conspiracy), and only as to Tolia
and Care, and DENIED as to Counts Two (Breach of Contract), Five (Conversion), Six (Trespass
to Chattels), Eight (Unfair Competition) and Nine (Breach of Implied Covenant of Good Faith and
Fair Dealing). An appropriate Order will follow.
Date: March 17, 2020
/s/ Brian R. Martinotti___________
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE
Because Newman did not move to dismiss, the Court takes no position on the sufficiency of the
civil-conspiracy pleading as to Newman.
14
28
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?