Von Rohr Equipment Corp. v. Tanner Bolt & Nut Corp. et al
MEMORANDUM & ORDER, For the foregoing reasons, Defendants' motion for partial dismissal of the complaint (Dkt. 23 ) is GRANTED IN PART and DENIED IN PART. Plaintiff's claims for breach of contract, tortious interference with contract, to rtious interference with prospective business relations, and Plaintiff's action for an accounting as to Tanner Bolt & Nut Corp. and Jeff Tannenbaum are DISMISSED WITHOUT PREJUDICE. Defendants' motion to dismiss Plaintiff's action for an accounting as to Brian Schroder is DENIED. So Ordered by Judge Nicholas G. Garaufis on 11/6/2017. (Lee, Tiffeny)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
VON ROHR EQUIPMENT CORP.,
MEMORANDUM & ORDER
-againstTANNER BOLT & NUT CORP.,JEFF
TANNENBAUM and BRIAN SCHRODER,
NICHOLAS G. GARAUFIS,United States District Judge.
On May 12, 2017,Plaintiff Von Rohr Equipment Corp. filed this action seeking monetary
and injunctive relief against Defendants Tanner Bolt & Nut Corp.("Tanner"), Jeff Tannenbaum,
and Brian Schroder. (Compl.(Dkt. 1).) Plaintiff alleges that Tanner and Tannenbaum obtained
certain ofPlaintiffs confidential business information from Schroder, who was formerly
employed by Plaintiff, and used that information to achieve an unfair commercial advantage over
Plaintiff. (See, e.g.. id. 11.)
Before the court is Defendants' motion for partial dismissal ofthe complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6)(the "Motion"). (Mot. to Dismiss("Mot.")(Dkt. 23).)
For the following reasons,the court GRANTS IN PART and DENIES IN PART the Motion.
Plaintiffis a New Jersey-based construction equipment supplier that provides "tools and
equipment to trade contractors in the highly competitive markets ofNew York, New Jersey,
Pennsylvania, and Connecticut." (Compl. 12.) Plaintiff asserts that "[o]ne of[its] key
competitive advantages ...is its substantial and longstanding customer relationships." (Id.
^13.) Plaintifffurther alleges that it "has ... invested heavily in procuring strategic assets to
expand its market as well as recruiting, training and retaining, at considerable cost, a sales and
management work force with dedicated subject matter expertise and whose members could be
trusted with [Plaintiffs] proprietary sales data." (Id ^ 14.)
In May 2014,Plaintiff acquired Kass Building Supply, Inc.("Kass"), as part of a strategy
to expand its business to new customers and products. (Id
15-16.) Plaintiff alleges that,
when it purchased Kass, it obtained lists of Kass's customers,those customers' previous
purchases, and information about vendor identities and pricing. (Id UK 17-18.) Plaintiff also
"retained key Kass employees ...to manage and operate the former Kass business for
Plaintiff hired Defendant Brian Schroder, a former Kass employee,roughly a year before
it acquired Kass. (Id K 21.) Plaintiff avers that Schroder's role at Kass was "largely confined to
... maintaining customer relationships with Kass customers." (Id K 22.) Plaintiff alleges that
Schroder's hiring was conditioned on his agreement to sign a confidentiality agreement, which
he did in May 2013. (Id K 23-24.) According to Plaintiff, that agreement contained the
following language (the "Confidentiality Provision"):
The protection of confidential business information and customer relationships is
vital to the interest and the success ofthe Company.
Emplovees who imnroperlv use or disclose trade secrets or confidential business
information will be subject to termination and possible legal action. Such
information includes, but is not limited to, the following; lists of customers and
potential customers; identity of customers and potential customers; customer
contact people and buyers; the particular preferences and predilections of
customers and their representatives; customer usages and requirements; sources of
supply; identity of vendors and vendor contact people; proprietary information;
processes; product information, including specifications, capabilities, availability
and inventories; computer programs; marketing methods, plans and systems;
present and future marketing strategy; identity of markets; sales methods; sales
plans; sales information; cost information, including overhead; pricing
information; profit information; business methods; financial information; any
portion of the Company's database; plans for future development; and any other
non-public business information and data.
It is crucial that all employees abide by this policy in all respects.
dd.^ 25(emphasis added).)
The primary dispute in this case stems jfrom alleged efforts by one ofPlaintiffs
competitors and that company's principal, Defendants Tanner and Tannenbaum (together, the
"Tanner Defendants"), to recruit Schroder and another of Plaintiff's employees, Anthony Vicari.
dd. H 28.) Plaintiff contends that this recruitment effort was part of a "scheme to solicit and hire
[Plaintiffs] employees with the purpose of obtaining an unfair competitive commercial
advantage over [Plaintiff] by wrongfully obtaining [Plaintiffs] Confidential Information." (Id
K 27.) Plaintiff asserts that the Tanner Defendants' recruitment efforts were driven by an
expectation that, once employed by Tanner, Schroder and Vicari would provide confidential
information regarding Plaintiffs business. Qd.^ 29.) In particular. Plaintiff alleges that the
Tanner Defendants sought access to information including Plaintiff's "individual customer
contact information, customer buying habits, customer pricing, and vendor identity and pricing
Plaintiff avers that, during the recruitment effort, both Schroder and Vicari informed
Tannenbaum that they were bound by the Confidentiality Agreement, and that Vicari
"repeatedly" told Tanner that Plaintiff would likely bring legal action "on the assumption that
[Vicari and Schroder] had been recruited with the intention of providing [Plaintiffs]
Confidential Information to Tanner." (Id
30-31.) Nevertheless, the Tanner Defendants
offered jobs to Schroder and Vicari. (Id ^ 32.) Those offers included provisions that explicitly
contemplated the possibility that Tanner would be required to defend Schroder and Vicari
against litigation brought by Plaintiff, under which Vicari and Schroder's entitlement to
discretionary bonus payments would be limited in any month in which Tanner incurred $5,000 or
more in legal fees defending against such litigation.^ (Id. H 33.)
While Vicari declined the employment offer, Schroder allegedly accepted and,on
February 4,2017,resigned from his position with Plaintiff with immediate effect. (Id
Following Schroder's departure, on February 6,2017,Plaintiff avers that it sent a letter to
Schroder and Tannenbaum stating that, in Plaintiff's view, Schroder was subject to employment
and post-employment obligations "not to use, disclose, or otherwise misappropriate any
confidential business information that [Schroder] learned during his employment." (Id
37-38.) However, within a month of Schroder's departure. Plaintiff claims that "longtime...
customers that Schroder serviced were either no longer buying from [Plaintiff] or were buying
far less than in the past." (Id ^ 39.) Plaintiffthen sent a "cease and desist" letter to Tanner,
alleging that Schroder was violating his purported post-employment obligations to maintain the
confidentiality ofPlaintiffs propriety information and that "Tanner has, by implication,
endorsed [Schroder's] unlawful conduct by virtue ofits failure to stop hun." (Id KK 40-41.)
Plaintiff alleges that the Tanner Defendants and Schroder have not complied with Plaintiffs
demands as stated in its letters, have expressly denied having any post-employment obligation to
refrain from using Plaintiffs confidential information, and have "continued to contact
' quoted from Vicari's offer, the provision reads as follows:
EmpIovee*s Contribution Towards Legal Fees. Notwithstanding Employee's entitlement to the
bonus ... provided for above, as a material inducement to Tanner's employment of Employee,
Employee agrees that in the event that any claims are asserted against Tanner or Employee, in
court or otherwise, by Employee's former employer. Employee agrees that in any calendar month
during which Tanner spends at least $5,000 in legal fees in defense of such claims or in resolving
same. Employee will only be entitled to payment of one-half of any bonus to which he is
otherwise entitled . .for such month.
(Id. Tf 33.) Plaintiff alleges, on information and belief, that Schroder's offer included substantially identical
language. (Id ^ 34.)
[Plaintiffs] customers, including through the use of Confidential Information stolen from
Plaintifffiled its complaint in this court on May 12, 2017. (Compl.) Plaintiff asserts
claims against all defendants under the Defend Trade Secrets Act, 18 U.S.C. §§ 1836 et seq.. as
well as common law claims of misappropriation oftrade secrets,tortious interference with
prospective business relations, imjust enrichment, and an action for accounting. Qd HH 45-64,
72-78,107-114.) Plaintiff also asserts separate breach of contract and breach ofthe duty of
loyalty claims against Schroder(id HH 86-99), and claims oftortious interference with contract,
unfair competition, and aiding and abetting a breach ofthe duty ofloyalty against the Tanner
Defendants(id HH 65-71, 79-85,100-06). Plaintiff seeks an order enjoining Defendants and
their agents from using any ofPlaintiffs trade secrets and requiring Defendants to destroy or
return^ to Plaintiff all documents or materials which contain any such trade secrets. (Id at ECF
p.18). Plaintiff also seeks an award of actual, compensatory, and punitive damages in an
unspecified amount, as well as costs and attorneys' fees. (Id at ECF p.19.)
The complaint also seeks a preliminary injunction, to be converted to a permanent
injunction at conclusion oftrial. (Compl. at ECF 18). By separate motion filed on the same day
that it filed the complaint. Plaintiff sought entry of a temporary restraining order and issuance of
an order to show cause concerning the motion for a preliminary injunction. (Unsigned Order to
Show Cause("Unsigned OTSC")(Dkt. 3).) The court issued an order to show cause granting the
^ The prayer for relief confusingly seeks both an injunction requiring Defendants to "certifyQ that any and all
documents containing [Plaintiffs confidential information] has [sic] been permanently destroyed" and "[t]o the
extent not accomplished by the foregoing,[entry of] an Order requiring defendants to return to [Plaintiff] any and all
documents and materials which reflect or contain [Plaintiffs] trade secrets, confidential or proprietary information."
(Compl. at ECF p.18.) While the issue is not material at this point. Plaintiff must specify whether it seeks an
injunction requiring Defendants to destroy confidential materials or an order requiring the return ofthose materials.
temporary restraining order and directing the parties to appear before Magistrate Judge Ramon E.
Reyes, Jr., for hearings on the motion for a preliminary injunction. (Order to Show Cause
(Dkt. 9).) Following evidentiary hearings held on May 16 and 17,2017, Judge Reyes
recommended that the court deny Plaintiff's motion for a preliminary injunction. (May 17, 2017,
R&R.) The court adopted Judge Reyes's recommendation in full. (June 9,2017, Order
Adopting R&R (Dkt. 19).)
Before the court is Defendants' motion to partially dismiss the complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6). (Mot.; see also Mem.in Supp. of Mot.("Defs.
Mem.")(Dkt. 24).) Defendants move to dismiss Plaintiff's claims for breach ofcontract, tortious
interference with a contract, tortious interference with prospective business relations, and
PlaintifPs action for an accounting. fSee generallv Defs. Mem.)
For the following reasons, the court grants the Motion with respect to Plaintiffs claims
for breach of contract, tortious interference with a contract, tortious interference with prospective
business relations, and Plaintiffs action for an accounting as against the Tanner Defendants, but
denies the Motion with respect to Plaintiffs action for an accounting against Schroder.
The purpose of a motion to dismiss for failure to state a claim under Rule 12(b)(6) is to
test the legal sufficiency of a plaintiffs claims for relief. Patane v. Clark. 508 F.3d 106,112-13
(2d Cir. 2007). A complaint will survive a motion to dismiss ifit contains "sufficient factual
matter, accepted as true, to 'state a claim to reliefthat is plausible on its face.'" Ashcroft v.
IqbaL 556 U.S. 662,678(2009)fquoting Bell Atl. Corp. v. Twomblv.550 U.S. 544,570(2007)).
"Threadbare recitals ofthe elements of a cause of action, supported by mere conclusory
statements, do not suffice." Iqbal. 556 U.S. at 678.
In reviewing a complaint on a motion to dismiss for failure to state a claim, the court
must accept as true all allegations offact in the complaint and draw all reasonable inferences in
favor ofthe plaintiff. ATSI Commc'ns.Inc. v. Shaar Fund. Ltd.,493 F.3d 87,98(2d Cir. 2007).
"In deterrnining the adequacy ofthe complaint,the court may consider any written instrument
attached to the complaint as an exhibit or incorporated in the complaint by reference, as well as
documents upon which the complaint relies and which are integral to the complaint." Subaru
Distribs. Corp. v. Subaru of Am.. Inc.. 425 F.3d 119,122(2d Cir. 2005). "[W]hatever
documents may properly be considered in connection with the Rule 12(b)(6) motion,the bottom-
line principle is that once a claim has been stated adequately, it may be supported by showing
any set offacts consistent with the allegations in the complaint." Roth v. Jennings, 489 F.3d
499,510(2d Cir. 2007)(internal quotation marks and citation omitted).
The Disputed Claims
Breach of Contract
Defendants present two separate arguments in favor of dismissing Plaintiffs breach of
contract claim against Schroder. First, Defendants claim that the document that forms the basis
for the claim is not in fact a "contract" but is instead an employment application and an
appended, xmsigned policy. (Defs. Mem. at 3-4.) Second, Defendants contend that, even ifthe
document in question is viewed as a contract, its terms do not impose on Schroder any post-
employment obligations. (Id at 4-5.) Plaintiff both contests these arguments and counters that
Defendants' arguments, based as they are on documents outside the complaint, are insufficient to
merit dismissal offacially valid claims presented in the complaint. (PL Mem.in Opp'n to Mot.
("PI. Opp'n")(Dkt. 25)at 3-9.)
In order to assert a claim for breach of contract under New York law,^ the plaintiff must
allege "(i)the formation of a contract between the parties;(ii) performance by the plaintiff;
(iii) failure ofthe defendant to perform; and (iv) damages." Orchard Hill Master Fund Ltd. v.
SRA Commc'ns Corp.. 830 F.3d 152,156(2d Cir. 2016)(intemal quotation marks and citation
omitted). Where a motion to dismiss is based on the terms ofthe contract, dismissal is only
proper ifthose terms are unambiguous. Id. A contract is ambiguous,in turn, if its terms "could
suggest more than one meaning when viewed objectively by a reasonably intelligent person who
has examined the context ofthe entire integrated agreement and who is cognizant ofthe customs,
practices, usages and terminology as generally understood in the particular trade or business."
Chesapeake Energv Corp. v. Bank ofN.Y. Mellon Trust Co.. N.A.,773 F.3d 110,114(2d
Cir. 2014)(intemal quotation marks and citation omitted).
As a threshold matter, the court notes that Plaintiffis mistaken that the alleged contract
may not be considered in assessing the challenged breach of contract claim. It is true that, as a
general matter, courts assessing motions to dismiss are limited to consideration ofthe complaint
and documents appended thereto. Halebian v. Berv. 644 F.3d 122,130(2d Cir. 2011).
However, as noted above,"the court may also consider any written instrument...incorporated
in the complaint by reference, as well as documents upon which the complaint relies and which
While the parties do not address any potential choice-of-law questions, both Plaintiffand Defendants cite
exclusively to New York law in their briefing. Because the parties do not dispute the issue and have not suggested
an alternative, the court is not obligated to consider the issue sua sponte and instead concludes that the parties have
consented to application ofthe law ofNew York as the forum state. See, e.g.. Krumme v. WestPoint Stevens. Inc.,
238 F.3d 133, 138(2d Cir. 2000)("The parties' briefs assume that New York law controls, and such implied consent
... is sufficient to establish choice oflaw."(intemal quotation marks and citation omitted)); Henneberrv v.
Sumitomo Corp. of Am.. No.04-CV-2128(PKL),2005 WL 991772, at *5 n.3 (S.D.N.Y. Apr. 27,2005)("Plaintiffs
claims are govemed by state law, but the parties have not raised choice oflaw issues. Instead, the parties' briefs
assumed that New York State law applies. Where the parties so assume, the Court need not address choice oflaw
are integral to the complaint." Subam Distribs., 425 F.3d at 122. Where, as here, a plaintiffs
claim is based explicitly on the terms of an alleged contract and the complaint incorporates those
express terms,the document is treated as integral to the pleading and thus properly considered on
a motion to dismiss.
Chambers v. Time Warner. Inc.. 282 F.3d 147,153-54 & n.4(2d
Cir. 2002)(concluding that district court considering motion to dismiss breach of contract and
other claims did not err in weighing contracts because they were "integral to the Amended
Complaint," which was "replete with references to the contracts and requests judicial
interpretation oftheir terms"); Ax:iom Inv. Advisors. LLC,v. Deutsche Bank AG.234 F.
Supp. 3d 526,533(S.D.N.Y. 2017) rciting Interoharm. Inc. v. Wells Fargo Bank. Naf1 Ass'n.
655 F.3d 136,141 (2d Cir. 2011))(holding that, in a breach of contract action,the document on
which the complaint is based is "by definition  integral to the complaint").
The document at issue in Plaintiffs breach of contract claim contains two parts, an
"application for employment" and an "employment policy." CSee Ex. B to Mot.("Employment
Appl.")(Dkt. 23-1).) The application section ofthe document requests information regarding
applicants' background and employment history and contains a signature page which requires
applicants to(1)certify that information they provided in the application is true;(2)authorize
investigation ofthose statements; and(3)agree that any employment resulting from the
application would be on an "at-will" basis. (Id. at ECF p.5.) The second section ofthe
document lists employment policies regarding "Confidential and Trade Secret Information" and
includes the Confidentiality Provision quoted in Section I, supra.
Defendants contend that this document does not constitute a contract as a matter oflaw
and that, even if it does, it is insufficient to give rise to post-employment obligations and thus
does not support Plaintiffs breach of contract claim. The court need not decide the first point, as
it instead concludes that, even ifthe document is a contract, it does not give rise to post-
employment obligations and so cannot support the breach alleged here. On its face,the
emplojmient policy—and the Confidentiality Provision in particular—^refers only to
"employees," stating that it is "crucial that all employees abide by this policy" and threatening to
terminate and possibly sue any "employees" who fail to do so. (Employment Appl. at ECF
pp.6-7.) The exclusive use of"employees" as the covered persons and the reference to
"termination" as the remedy for violation ofthe policy unambiguously demonstrate that the
policy contemplates only conduct during employment. Given this limitation, the court concludes
that allegations regarding post-employment actions by Schroder cannot satisfy the required
showing of a "failure ofthe defendant to perform" under the alleged contract.
While Plaintiff suggests that the included threat oflegal action demonstrates that policy
applies to post-employment conduct, this argument misses the mark because it conflates the
conduct prohibited in the policy with the consequences of violating that prohibition. The fact
that litigation based on actions taken during an individual's employment may commence or
continue after an employee no longer works at the company has no logical relationship to
whether an individual may be sued for actions taken after their employment. In other words,that
the consequences of violating obligations imposed by the employment policy may extend after
employment does not mean that the obligations imposed by the policy continue postemployment.
Plaintiff also argues that "[Plaintiffs] breach of contract action alleges Schroder
breached his agreement with [Plaintiff] during the term of his employment." (PI. Opp'n at 7.)
In support ofthis argument. Plaintiff points to statements in the complaint that:
• "Plaintiff entrusted its Confidential Information to  Schroder ... on the
condition ... that Schroder protect and maintain its confidentiality both
during and after his employment"(Compl.151);
• "Schroder's Confidentiality Agreement . . . obligates him to . . . refrain
from disclosing [Plaintiffs] Confidential Information during the term of
his employment" (Id ^ 66);
• "Schroder acknowledged that he would abide by the terms of [the]
confidentiality policy which . . . required Schroder to protect the
confidentiality of[Plaintiffs] Confidentii Information during the term of
his employment"(Id ^ 87);
• "Upon information and belief, Schroder has breached the Confidentiality
Agreement by, among other things,(i)failing to protect the confidentiality
of [Plaintiffs] Confidential Information during the term of his
employment . . . ; or (ii) otherwise promising not to protect the
confidentiality of[Plaintiffs] Confidential Information during the term of
his employment" (Id I 89.)
From this. Plaintiff argues that the complaint sufficiently alleges a violation ofthe policy during
Schroder's employment and so fits within the express terms ofthat policy. (PL Opp'n at 8.)
In the court's view, however,these allegations are insufficient to salvage Plaintiffs
breach of contract claim. At the outset, the court notes that the first three statements cited by
Plaintiff do not in fact pertain to any conduct by Schroder during his employment with Plaintiff,
but instead speak only to the scope ofthe Confidentiality Provision. With respect to the
remaining statement—^that Schroder "breached the Confidentiality Agreement by ... failing to
protect the Confidentiality of[Plaintiffs] Confidential Information during the term ofhis
employment"(Compl. H 89)—^the court fmds this conclusory allegation regarding the timing and
nature of Schroder's actions to be insufficient to support Plaintiffs breach of contract claim. See
Anna v. Buvseasons. Inc.. 591 F. Supp. 2d 637,643(S.D.N.Y. 2008)("The bare allegations that
Defendants 'failed to make timely payments' and 'failed to properly account' to Plaintiffs are,
without more, conclusory."(intemal citation omitted)). After searching the complaint, the court
notes only one other statement which, in similarly perfunctory language, might be read as
alleging that Schroder disclosed confidential information during the period of his employment.
(See id 102(alleging that the Tanner Defendants aided and abetted Schroder's "breach of his
duty ofloyalty ... when they directed, encouraged,facilitated, or permitted Schroder during the
term of his employment...to improperly use [Plaintiffs] confidential information which he
obtained through his employment."(emphasis added).) In contrast, the complaint expressly
alleges that the claimed disclosure of confidential information occurred after Schroder began
working for Tanner. (See, e.g.. Compl. H 29("Tannenbaum expected that once they came to
work for Tanner. Schroder and Vicari would provide Tanner with [Plaintiffs] Confidential
Information."(emphasis added); cf. also
44("Schroder and Tanner have continued to contact
[Plaintiffs] customers."), 39(alleging that the decrease in sales began after Schroder's departure
fi om Plaintiffs employ).) In the absence of non-conclusory allegations offact in support of
Plaintiffs claim,the court is not required to credit Plaintiffs contention that Schroder violated
his alleged contractual duties during the term of his employment. S^ Hirsch v. Arthur Andersen
& Co..72 F.Bd 1085,1092(2d Cir. 1995)("General, conclusory allegations need not be credited,
however, when they are belied by more specific allegations ofthe complaint.").
Accordingly,the court concludes that Plaintiff has failed to properly plead a breach of
contract by Schroder and dismisses that claim without prejudice.
Tortious Interference with Contract
Defendants next challenge Plaintiffs tortious interference with contract claim, asserted
against the Tanner Defendants. (Defs. Mem. at 6-7.) In order to establish a claim oftortious
interference with contract under New York law. Plaintiff must allege "(1)the existence ofa valid
contract between the plaintiff and a third party,(2)the defendant's knowledge ofthat contract,
(3)the defendant's intentional procurement of a third-party's breach ofthat contract without
Nagan Constr.. Inc. v. Monsignor McClancv MemU High
Sch., 986 N.Y.S.2d 532,533(N.Y. App. Div. 2014). Implicit, of course, in these elements is the
requirement that the third-party actually breach a contact. See, e.g.. Kirch v. Liberty Media
Corp.. 449 F.3d 388,401-02(2d Cir. 2006)(citing Holding Co. v. Smith Bamev Inc.. 88 N.Y.2d
413,424(1996))(listing "actual breach" as one ofthe elements oftortious interference with
contract). Here, however,the only contract alleged to have been breached is Schroder's claimed
confidentiality agreement with Plaintiff. (Compl. K 68.) As discussed supra in Section III.B.l,
Plaintiff has not pleaded a breach ofthat agreement, even assuming arguendo that it is a contract.
For the same reason. Plaintiff's claim that the Tanner Defendants procured Schroder's breach of
that contract fails.
Accordingly,the court dismisses Plaintiffs tortious interference with contract claim
Tortious Interference with Prospective Business Relations
Defendants next move to dismiss the tortious interference with prospective business
relations claim asserted against the Taimer Defendants. Defendants argue the claim is
insufficiently pled because Plaintiff fails to allege that the Tanner Defendants interfered with
relationships with specific third parties or state how such interference occurred. (Defs. Mem.
In order to state a claim for tortious interference with prospective business relations, a
plaintiff must allege that "(1)it had a business relationship with a third party;(2)the defendant
knew ofthat relationship and intentionally interfered with it;(3)the defendant acted solely out of
malice, or used dishonest, unfair, or improper means; and(4)the defendant's interference caused
injury to the relationship." Kirch v. Liberty Media Corp..449 F.3d 388,400(2d Cir. 2006)
(internal quotation marks and citation omitted). In order to survive a motion to dismiss,the
plaintiff must allege that it was "actually and wrongfully prevented from entering into or
continuing in a specific business relationship." Kom v. Princz. 641 N.Y.S.2d 283,283(N.Y.
App. Div. 1996)(emphasis added); see also DiFolco v. MSNBC Cable LLC.622 F.3d 104,115
(2d Cir. 2010)("[T]he complaint fails entirely to describe any third party with whom [the
plaintiff] had prospective business relations to be interfered with. The lack ofsuch an allegation
is fatal to this claim."(internal citation omitted)); Bus. Networks of N.Y.. Inc. v. Complete
Network Solutions, Inc., 696 N.Y.S.2d 433,435(N.Y. App. Div. 1999)("Concerning the motion
to dismiss, the cause of action for tortious interference with prospective business relations should
have been dismissed for failure to allege any specific prospective relationship with which
defendants interfered."^ accord Pacheco v. United Med. Assocs.. P.O.. 759 N.Y.S.2d 556, 559
(N.Y. App. Div. 2003).
The complaint falls short ofthe required pleading standard, as it fails to identify any
specific business relationship with which the Tanner Defendants allegedly interfered. Plaintiff
offers the wholly spurious argument that no such identification is required in order to survive a
motion to dismiss. This argument disregards the vast number of binding opinions holding just
the opposite, a small sample of which are cited in the preceding paragraph. Moreover, while
Plaintiff purports to distinguish away one—and only one—ofthe cases cited by Defendants, it
does so by merely cherry-picking quotes from that opinion while disregarding language that
directly supports Defendants' position.
Four Finger Art Factory. Inc. v. Dinicola, No.99-
CV-1259(JGK),2000 WL 145466, at *7(S.D.N.Y. Feb. 9,2000)(concluding that the tortious
interference with prospective business relations claim should be dismissed because
"the complaint does not specify any business relations with third parties with which any ofthe
defendants interfered, or any economic opportunities which were lost as a result ofthe
Plaintiff attempts to rescue the claim by pointing to allegations in the declarations
submitted in connection with its motion for a preliminary injunction, which specifically identify
several such relationships. (PI. Opp'n at 11 n.4; see also Decl. of John Cancelhere (Dkt.6)
29-32; Decl. of Anthony Vicari(Dkt. 7)
38-47.) As discussed supra at Section in.B.3, a
court assessing,a motion to dismiss is only to consider "any written instrument attached to the
complaint as an exhibit or incorporated in the complaint by reference, as well as documents upon
which the complaint relies and which are integral to the complaint." Subaru Distribs.. 425 F.3d
at 122; see also Fed. R. Civ. P. 12(d)("If, on a motion under Rule 12(b)(6)[,] matters outside the
pleadings are presented to and not excluded by the court,the motion must be treated as one for
summaryjudgment under Rule 56,"). The declarations in question were submitted as annexes to
Plaintiffs unsigned order to show cause seeking a temporary restraining order, not the
complaint. (Unsigned OTSC at 1.) Moreover,the complaint contains no reference, explicit or
otherwise,to those declarations. Accordingly, the court declines to review those declarations in
reviewing the present motion to dismiss.^ See Cooper v. N.Y. State Dep't of Mental Health. No.
Ol-CV-943(AGS),2001 WL 456348, at *3(S.D.N.Y. May 1, 2001)("The parties have
submitted affidavits in connection with this motion and the previously decided motions for
preliminary injimctions. The Court excludes those affidavits and decides this Rule
12(b)(6) motion based solely on the complaint and the parties' legal arguments.").
* IfPlaintifffiles an amended complaint in response to this order, it may ofcourse include allegations from those
declarations to bolster its claims. ^Yoder v. Orthomolecular Nutrition Inst.. Inc.. 751 F.2d 555, 562
(2d Cir. 1985)(stating that affidavits submitted in connection with motion for preliminary injunction "indicate that
&e complaint could readily have been amended to afford greater particularity, and we have little doubt that the
district court should and would have permitted an amendment").
For the foregoing reasons, Plaintiffs claim oftortious interference with prospective
business relations against the Tanner Defendants is dismissed without prejudice.
Defendants' final challenge is directed at Plaintiffs action for an accounting asserted
against Schroder.^ Defendants contend that Plaintifffails to allege the presence ofa fiduciary
duty and that the action is duplicative ofthe previously discussed breach ofcontract claim.
(Defs. Mem. at 9-11.) The court disagrees and concludes that the action for an accounting has
been adequately pled.
"The right to an accounting is premised upon the existence ofa confidential or fiduciary
relationship and a breach ofthe duty imposed by that relationship respecting property in which
the party seeking the accounting has an interest." LoGerfo v. Trs. of Columbia Univ. in the Citv
ofN.Y.. 827 N.Y.S.2d 166, 169(N.Y. App. Div. 2006)(intemal quotation marks and citation
omitted). In order to bring an equitable action for an accounting, the plaintiff must show "(1) a
relationship ofa fiduciary or confidential nature;(2) money or property entrusted to the
defendant imposing upon him the burden of accounting;(3)the absence of an adequate legal
remedy; and(4)in some cases, a demand for an accounting and a refusal." Matsumura v.
Renihan;^ Naf1 Com.. No.06-CV-7609(NRB),2007 WL 1489758, at *4(S.D.N.Y.
May 21, 2007).
Defendants first contend that Plaintifffails to establish the existence of a fiduciary or
confidential relationship.^ Characterizing Plaintiffs claim as based only on the purported
^ In its response,Plaintiff withdraws its claim for an accounting against the Tanner Defendants (PI. Mem. at 13 n.5),
and so the court dismisses the claim against those defendants.
® Some courts have indicated that a confidential or fiduciary relationship is not required where, as here, the
plaintiflfs action for an accounting primarily seeks money damages. See, e.g.. Arrow Commc'n Labs.. Inc. v. Pico
Prods.. Inc.. 632 N.Y.S.2d 903,905(N.Y. App.Div. 1995)(holding that, where the "primary demand [in an
accounting action] is for monetary damages,&e accounting is merely a method to determine the amount ofthe
contract between Schroder and Plaintiff, discussed at greater length in Section III.B.l,
Defendants point to cases holding that a fiduciary relationship may not, without more, be based
on contractual undertakings. (Defs. Mem.at 10.) Defendants' argument disregards the
employment relationship between Schroder and Plaintiffthat resulted jfrom that agreement,
however. Courts have repeatedly held that the fiduciary relationship required to support an
action for an accounting may be found where an employee acts against the interests oftheir
employer by using confidential information obtained during the course oftheir employment.^
See Nutronics Imaging. Inc. v. Danan, No.96-CV-2950,1998 WL 426570, at *3(E.D.N.Y. June
10, 1998)(finding action for an accounting adequately pleaded where defendant allegedly
formed a competitor to employer and solicited employer's customers while still employed);
Krause v. Gelman, 580 N.Y.S.2d 750(N.Y. App. Div. 1992)(finding action for an accounting
based on diversion of business while the defendant was employed by the plaintiff was adequately
pleaded). Accordingly,the court concludes that Schroder's undisputed prior employment
relationship with Plaintiff is sufficient to establish the required fiduciary or confidential
Defendants next argue that Plaintiffs breach of contract claim demonstrates that Plaintiff
does,in fact, have an adequate remedy at law and obviates the need for an accounting.
monetary damages ....[and] sounds in law and not in equity."(intentional quotation marks and citation omitted)).
Because the court finds that the required relationship is adequately alleged here, it does not decide whether that
element is required to be proven.
' court notes the seeming tension between its decision as to the breach ofcontract action, with respect to which
it concluded that the complaint fails to allege any actions that Schroder took during the course of his employment
with Plaintiff, and the conclusion here that an action for an accounting may proceed under the same facts. The
difference in these outcomes results fi*om the language ofthe purported contract itself, which forbids the "use or
disclos[ure] oftrade secrets or confidential business information" by current employees. (Employment Appl. at 6.)
By contrast, even if Schroder did not take any affirmative action to use or disclose confidential information during
his employment with Plaintiff, his post-employment use ofinformation obtained while engaged in a fiduciary
relationship constitutes an actionable violation of his duty to the employer. Cf.. e.g.. Kaufinan v. IntT Bus. Machs.
Corp..470 N.Y.S.2d 720,723(N.Y. App. Div. 1983)("The duty of an employee not to use or divulge confidential
knowledge acquired during his employment is implicit in the employer-employee relation [and] is an absolute, and
not a relative, duty." (intemal quotation marks and citation omitted)).
Numerous decisions have dismissed accounting actions where the claims are duplicative of a
breach of contract claim asserted in the same complaint. See, e.g.. Ellington Credit Fund. Ltd. v.
Select Portfolio Servicing. Inc.. 837 F. Supp. 2d 162,193(S.D.N.Y. 2011)("Even ifPlaintiffs
had adequately alleged the existence and breach of a fiduciary duty, their claims would
nonetheless be 'merely a restatement, albeit in slightly different language, ofthe 'implied'
contractual obligations asserted in the cause of action for breach of contract.'"(quoting ClarkFitzpatrick. Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 390(N.Y. 1987)); cf. Leveraged
Leasing Admin. Com,v. PacificCorp Capital. Inc.. 87 F.3d 44,49(2d Cir. 1996)(approving
dismissal ofan accounting action that was duplicative ofa breach of contract action). However,
the same duplication concerns do not arise where, as here, the breach of contract claim has been
dismissed. Under the circumstances,the court does not see a basis to conclude that Plaintiff has
an adequate remedy at law that merits dismissal ofthe action for an accounting.
Defendants' fmal argument, stated only in passing, is that Plaintiff does not allege that he
entrusted Schroder with any money. (Defs. Mem.at 11.) This argument misses the second
prong ofthat element ofthe action for an accounting, which requires an allegation that the
defendant was entrusted with either money^property. See Matsumura.2007 WL 1489758, at
*4. Here, Plaintiff alleges that it entrusted Schroder with confidential business information
regarding Plaintiff's customers and sales in the course of his employment. (Compl.
This allegation is sufficient to meet Plaintiffs burden with respect to the "money or property"
requirement at this stage. See, e.g.. Nutronics Imaging. 1998 WL 426570, at *3.
Accordingly, Defendants' motion to dismiss the action for an accounting against
Schroder is denied.
For the foregoing reasons. Defendants' motion for partial dismissal of the complaint
(Dkt. 23)is GRANTED IN PAJIT and DENIED IN PART. Plaintiffs claims for breach of
contract, tortious interference with contract, tortious interference with prospective business
relations, and Plaintiff's action for an accounting as to Tanner Bolt & Nut Corp. and Jeff
Tannenbaum are DISMISSED WITHOUT PREJUDICE. Defendants' motion to dismiss
Plaintiffs action for an accounting as to Brian Schroder is DENIED.
s/Nicholas G. Garaufis
Dated: Brooklyn, New York
NICHOLAS G. GARAUFIIJ
November ^ ,2017
United States District Judge
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?