Transaero, Inc. v. Graham Chappell et al

Filing 22

ORDER granting in part and denying in part 13 Motion to Dismiss for Lack of Jurisdiction; granting in part and denying in part 13 Motion to Dismiss for Failure to State a Claim. For the reasons set forth herein, defendant IAS's motion to dismiss for lack of personal jurisdiction is granted, Chappell's motion to dismiss for lack of personal jurisdiction is denied, and Chappell's motion to dismiss for failure to state a claim upon which relief may be granted is denied except with respect to the conversion claim. Accordingly, all claims against IAS, and the conversion claim against Chappell, are dismissed. Finally, the Court grants plaintiff leave to file an amended complaint if plaintiff wishes to maintain this action against IAS. Plaintiff shall submit an amended complaint no later than thirty days from the date of this Memorandum and Order. SO ORDERED. Ordered by Judge Joseph F. Bianco on 5/6/2014. (Gibaldi, Michael)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 13-CV-5752 (JFB)(GRB)
_____________________

TRANSAERO, INC.,
Plaintiff,
VERSUS

GRAHAM CHAPPELL AND INTERNATIONAL AVIATION SERVICES PTY LTD.,
Defendants.
___________________
MEMORANDUM AND ORDER
May 6, 2014
___________________

has made a prima facie showing of personal
jurisdiction over Chappell, but not IAS.
Accordingly, the Court grants the motion to
dismiss brought under Rule 12(b)(2) with
respect to IAS, only. However, the Court
will give plaintiff leave to re-plead, so that
plaintiff may attempt to provide additional
allegations in order to address the personal
jurisdiction issue as to IAS. Because the
Court denies Chappell’s motion to dismiss
for lack of personal jurisdiction, it considers
Chappell’s motion to dismiss for failure to
state a claim upon which relief can be
granted. The Court grants that motion with
respect to the conversion claim only, and
denies the motion in all other respects.

JOSEPH F. BIANCO, District Judge:
Plaintiff Transaero, Inc. (“plaintiff” or
“Transaero”) brings this action against
Graham
Chappell
(“Chappell”)
and
International Aviation Services Pty Ltd.
(“IAS”)
(collectively,
“defendants”),
alleging that defendants have unlawfully
used plaintiff’s confidential information and
trade secrets to compete unfairly with
plaintiff—Chappell’s former employer.
Specifically, plaintiff asserts the following
causes of action under New York law: (1)
breach of contract; (2) conversion; (3) unfair
competition; (4) misappropriation of
confidential and proprietary information; (5)
tortious interference with business relations;
and (6) breach of the duty of loyalty.
Plaintiff seeks damages and injunctive relief.

I. BACKGROUND
A. Factual Background

Before the Court is defendants’ motion
to dismiss the complaint pursuant to Rules
12(b)(2) and 12(b)(6) of the Federal Rules
of Civil Procedure. For the following
reasons, the Court concludes that plaintiff

The following facts are taken from the
complaint. These are not findings of fact by
the Court. Instead, the Court assumes these
facts to be true for purposes of deciding the
1

was maintained at Transaero’s Melville,
New York office. (Id.)

present motions and construes them in the
light most favorable to plaintiff, the nonmoving party. The Court provides a more
detailed recitation of the facts in connection
with the specific issues raised.

Transaero’s relationship with Chappell
“entered a new phase” on February 7, 2011.
(Id. ¶ 19.) Transaero decided to “move in
another direction in the Australian market,”
meaning it decided to hire a new sales
representative to service the region. (Id.)
Transaero and Chappell entered into a Letter
Agreement on February 7, 2011, pursuant to
which Chappell remained employed by
Transaero through the end of 2012 in order
to assist the new sales representative’s
transition to Transaero. (Id.) In particular,
the Letter Agreement prohibited Chappell
“from entering into any business that
[would] conflict with the interests of
Transaero for a period of two (2) years after
the conclusion of the transition period.” (Id.
¶ 22.) This prohibition covered “(i)
representing, owning or consulting with any
company that markets products that would
interfere with Transaero’s business in the
Australian market; (ii) contacting existing
customers or principals without the written
consent of Transaero; and (iii) making
disparaging remarks to customers, contacts
or principals regarding Transaero, its
employees and/or principals.” (Id.)

Transaero distributes aerospace products
to airline, life support, and military
industries around the world. (Compl. ¶ 12.)
The company is based in Melville, New
York. (Id. ¶¶ 1, 12.)
Chappell was a sales representative for
Transaero from September 1999 until
December 2011. (Id. ¶¶ 2, 11, 13, 23, 30.)
Based in Australia, he was responsible for
Transaero’s sales in Australia, New Zealand,
and Papua New Guinea. (Id. ¶ 14.)
According to plaintiff, Chappell operated
through IAS, a company he organized. (Id.
¶ 9.) As a Transaero sales representative,
Chappell was paid a salary and received a
commission on each sale he generated. (Id.
¶ 16.) Almost all products that Chappell sold
were stored in Transaero’s New York
warehouse. (Id. ¶ 9.) After completing
almost every sale, Chappell, operating
through IAS, placed an order with
Transaero, who packaged and invoiced the
products in its New York warehouse, and
then sent those products from New York
directly to the seller. (Id.)

Transaero alleges that Chappell breached
the Letter Agreement. (Id. ¶¶ 23, 51.)
Specifically, in December 2011, Transaero
learned that Chappell had failed to inform
Transaero about two former employees who
had been competing unlawfully with
Transaero. (Id. ¶ 23.) Instead of informing
Transaero about these two employees,
Chappell attempted to participate in the
unlawful competition. (Id. ¶ 24.) In
particular, Transaero discovered an e-mail
from December 2010, in which Chappell
was attempting to sell certain products to the
Filipino army. (Id. ¶ 25.) The Filipino army
is a customer of Transaero. (Id. ¶ 26.) When
Transaero uncovered the December 2010 e-

During his tenure with Transaero,
Chappell gained access to a great deal of
Transaero’s
confidential
information,
including “product bundling, numerous
product and/or parts applications, pricing
information, financial information and
forecasts, sales analyses, global market
analyses, quotations and the identity of
Transaero’s customer base and their
purchasing history, including the names and
addresses of contact persons, as well as sales
and pricing history, and the identity of
Transaero’s vendors, suppliers and potential
suppliers.” (Id. ¶ 18.) All of this information
2

mail, it terminated Chappell’s employment.
(Id. ¶ 30.)

on a motion to dismiss that challenges the
sufficiency of the factual allegations, the
plaintiff need only make a prima facie
showing of jurisdiction through its own
affidavits and supporting materials to defeat
the motion. Dorchester Fin. Sec., Inc. v.
Banco BRJ, S.A., 722 F.3d 81, 84–85 (2d
Cir. 2013); see also Welinsky v. Resort of the
World D.N.V., 839 F.2d 928, 930 (2d Cir.
1988) (quoting Marine Midland Bank, N.A.
v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)).
In considering a Rule 12(b)(2) motion, the
pleadings and affidavits are to be construed
in the light most favorable to plaintiff, the
non-moving party, and all doubts are to be
resolved in plaintiff’s favor. DiStefano v.
Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d
Cir. 2001). However, the Court will neither
“draw argumentative inferences in the
plaintiff’s favor,” nor “accept as true a legal
conclusion couched as a factual allegation.”
Licci ex rel. Licci v. Lebanese Canadian
Bank, SAL, 673 F.3d 50, 59 (2d Cir. 2012)
(internal quotation marks and citations
omitted).

In addition, Transaero alleges that
Chappell and IAS have unlawfully solicited
the business of other Transaero customers,
including the Australian military. (Id. ¶¶ 36,
46.) Transaero also claims that three of its
suppliers—Communication
and
Ear
Protection,
Inc.
(“CEP”),
Signature
Industries,
and
Aqua
Lung—have
terminated their agreements with Transaero,
and have turned to Chappell and IAS to
distribute their products. (Id. ¶¶ 31–35, 38–
43.) According to Transaero, Chappell and
IAS are using Transaero’s confidential
information in order to compete unlawfully
with Transaero. (Id. ¶ 44.)
B. Procedural Background
Plaintiff commenced this action in the
Supreme Court of the State of New York,
County of Suffolk, on June 13, 2013.
Defendants removed the action to this Court
on October 21, 2013.

B. Failure to State a Claim

Defendants filed the instant motion on
February 2, 2014. Plaintiff filed its
opposition to the motion on April 8, 2014,
defendants replied to the opposition on April
22, 2014, and the Court heard oral argument
on May 2, 2014. The Court has fully
considered the submissions of the parties.

In reviewing a motion to dismiss
pursuant to Rule 12(b)(6), the Court must
accept the factual allegations set forth in the
complaint as true and draw all reasonable
inferences in favor of the plaintiff. See, e.g.,
Cleveland v. Caplaw Enters., 448 F.3d 518,
521 (2d Cir. 2006); Nechis v. Oxford Health
Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005).
“In order to survive a motion to dismiss
under Rule 12(b)(6), a complaint must
allege a plausible set of facts sufficient ‘to
raise a right to relief above the speculative
level.’” Operating Local 649 Annuity Trust
Fund v. Smith Barney Fund Mgmt. LLC, 595
F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555
(2007)). This standard does not require
“heightened fact pleading of specifics, but
only enough facts to state a claim to relief

II. STANDARD OF REVIEW
A. Personal Jurisdiction
On a motion to dismiss for lack of
personal jurisdiction pursuant to Rule
12(b)(2), the “plaintiff bears the burden of
showing that the court has jurisdiction over
the defendant.” In re Magnetic Audiotape
Antitrust Litig., 334 F.3d 204, 206 (2d Cir.
2003); see, e.g., Metro. Life Ins. Co. v.
Robertson-Ceco Corp., 84 F.3d 560, 566 (2d
Cir. 1996). However, before discovery and
3

that is plausible on its face.” Twombly, 550
U.S. at 570.

III. DISCUSSION
A. Personal Jurisdiction

The Supreme Court clarified the
appropriate pleading standard in Ashcroft v.
Iqbal, setting forth two principles for a
district court to follow in deciding a motion
to dismiss. 556 U.S. 662 (2009). First, the
Court instructed district courts to “identify[ ]
pleadings that, because they are no more
than conclusions, are not entitled to the
assumption of truth.” Id. at 679. “While
legal conclusions can provide the framework
of a complaint, they must be supported by
factual allegations.” Id. Second, if a
complaint contains “well-pleaded factual
allegations, a court should assume their
veracity and then determine whether they
plausibly give rise to an entitlement to
relief.” Id.

1. Legal Standard
Resolving issues of personal jurisdiction
requires a “‘two-part analysis.’” Grand
River Enters. Six Nations, Ltd. v. Pryor, 425
F.3d 158, 165 (2d Cir. 2005) (quoting Bank
Brussels Lambert v. Fiddler Gonzalez &
Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)
[hereinafter BBL I]). First, a district court
must determine whether there is personal
jurisdiction over the defendant under the
laws of the forum state, here, New York. Id.;
see, e.g., D.H. Blair & Co., Inc. v.
Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006)
(“In diversity cases, the issue of personal
jurisdiction is governed by the law of the
forum state . . . .”); Bensusian Rest. Corp. v.
King, 126 F.3d 25, 27 (2d Cir. 1997) (same).
Under New York law, there are two bases
for personal jurisdiction over an out-of-state
defendant: (1) general jurisdiction pursuant
to N.Y. C.P.L.R. § 301, and (2) long-arm
jurisdiction pursuant to N.Y. C.P.L.R. § 302
(“Section 302”). Second, if the court
concludes that the exercise of jurisdiction is
proper under the law of the forum state, “the
court then must decide whether such
exercise comports with the requisites of due
process.” Bensusian Rest., 126 F.3d at 27.

The Court notes that, in adjudicating a
motion to dismiss under Rule 12(b)(6), it is
entitled to consider: (1) facts alleged in the
complaint and documents attached to it or
incorporated in it by reference, (2)
documents integral to the complaint and
relied upon in it, even if not attached or
incorporated by reference, (3) documents or
information contained in defendant’s motion
papers if plaintiff has knowledge or
possession of the material and relied on it in
framing the complaint, (4) public disclosure
documents required by law to be, and that
have been, filed with the Securities and
Exchange Commission, and (5) facts of
which judicial notice may properly be taken
under Rule 201 of the Federal Rules of
Evidence. Jones v. Nickens, 961 F. Supp. 2d
475, 483 (E.D.N.Y. 2013); David Lerner
Assocs., Inc. v. Phila. Indem. Ins. Co., 934
F. Supp. 2d 533, 539 (E.D.N.Y. 2013), aff’d,
542 F. App’x 89 (2d Cir. 2013); SC Note
Acquisitions, LLC v. Wells Fargo Bank,
N.A., 934 F. Supp. 2d 516, 524 (E.D.N.Y.
2013), aff’d, 548 F. App’x 741 (2d Cir.
2014).

Where a plaintiff alleges more than one
cause of action, the Court must consider
whether it has personal jurisdiction for each
separate claim. Huang v. iTV Media, Inc., --F. Supp. 2d ----, No. 13-CV-3439 (JFB)
(WDW), 2014 WL 1377500, at *4 n.3
(E.D.N.Y. Apr. 8, 2014).
2. Application
The issue in the instant case is whether
this Court has long-arm jurisdiction over
defendants, who are non-domiciliaries of

4

New York.1 For the reasons that follow, the
Court concludes that plaintiff has made a
prima facie showing of personal jurisdiction
over Chappell, but not IAS.

302(a)(2) does not apply here, because
plaintiff does not claim that any of the
allegedly tortious acts occurred in New
York. Section 302(a)(4) is also inapplicable,
as plaintiff does not allege that either
defendant owns, uses or possesses any real
property in New York.3 Thus, plaintiff must
establish long-arm
jurisdiction
over
defendants under either Section 302(a)(1) or
Section 302(a)(3).

a. Section 302
Section 302(a) sets forth four bases for
specific jurisdiction over an out-of-state
defendant.2 As an initial matter, Section

Section 302(a)(1) provides for personal
jurisdiction “only over a defendant who has
‘purposefully availed himself of the
privilege of conducting activities within
New York and thereby invoke[ed] the
benefits and protections of its laws.’” Fort
Knox Music Inc. v. Baptiste, 203 F.3d 193,
196 (2d Cir. 2000) (quoting Parke-Bernet
Galleries v. Franklyn, 26 N.Y.3d 13, 17
(1970)) (alteration in original). To establish
personal jurisdiction under this statute, “two
requirements must be met: (1) The
defendant must have transacted business
within the state; and (2) the claim asserted
must arise from that business activity.” Sole
Resort, S.A. de C.V. v. Allure Resorts Mgmt.,
LLC, 450 F.3d 100, 103 (2d Cir. 2006)

1

Plaintiff does not argue that this Court has general
jurisdiction over defendants, and the complaint does
not allege that either defendant engaged in the sort of
“continuous and systematic course of doing business”
in New York that would support general jurisdiction.
Cf. Universal Trading & Inv. Co., Inc. v. Credit
Suisse (Guernsey) Ltd., --- F. App’x ----, No. 131639-CV, 2014 WL 1099222, at *2 (2d Cir. Mar. 21,
2014) (summary order) (“To establish general
jurisdiction, a plaintiff must set forth facts of a
‘continuous and systematic course of doing business’
in New York that ‘warrant[s] a finding of
[defendants’] presence’ in the state.” (quoting Laufer
v. Ostrow, 55 N.Y.2d 305, 309–10 (1982) (alterations
in original))).
2
Section 302(a) provides:
As to a cause of action arising from
any of the acts enumerated in this
section, a court may exercise
personal jurisdiction over any nondomiciliary, or his executor or
administrator, who in person or
through an agent:

(i) regularly does or solicits
business, or engages in any
other persistent course of
conduct, or derives substantial
revenue from goods used or
consumed
or
services
rendered, in the state, or

1. transacts any business within the
state or contracts anywhere to
supply goods or services in the
state; or

(ii)
expects
or
should
reasonably expect the act to
have consequences in the state
and derives substantial revenue
from interstate or international
commerce; or

2. commits a tortious act within the
state, except as to a cause of action
for defamation of character arising
from the act; or
3. commits a tortious act without
the state causing injury to person or
property within the state, except as
to a cause of action for defamation
of character arising from the act, if
he

4. owns, uses or possesses any real
property situated within the state.
N.Y. C.P.L.R. § 302(a).
3
Plaintiff does not argue that either Section 302(a)(2)
or Section 302(a)(4) applies in the instant case.

5

(citing McGowan v. Smith, 52 N.Y.2d 268,
273 (1981)). Among the factors that bear on
whether an out-of-state defendant transacts
business in New York are: (1) whether the
defendant has an on-going contractual
relationship with a New York entity; (2)
whether the contract was negotiated or
executed in New York and whether, after
executing a contract with the New York
entity, the defendant visited New York to
conduct meetings regarding the relationship;
and (3) the choice-of-law clause in any such
contract. Sunward Elecs., Inc. v. McDonald,
362 F.3d 17, 22–23 (2d Cir. 2004) (citing
Agency Rent A Car Sys., Inc. v. Grand Rent
A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)).
No one factor is dispositive; ultimately, the
determination is based on the totality of the
defendant’s interactions with, and activities
in, New York. Id. With respect to the
connection between the plaintiff’s cause of
action and the defendant’s business
transactions in New York, the statute “does
not require a causal link between the
defendant’s New York business activity and
a plaintiff’s injury.” Licci, 732 F.3d at 168.
“Instead, it requires a relatedness between
the transaction and the legal claim such that
the latter is not completely unmoored from
the former, regardless of the ultimate merits
of the claim.” Id. at 168–69 (internal
quotation marks omitted).

defendant expected or should
reasonably have expected
that his or her action would
have consequences in New
York, and (5) the defendant
derives substantial revenue
from
interstate
or
international commerce.
Penguin Grp. (USA) Inc. v. Am. Buddha,
609 F.3d 30, 35 (2d Cir. 2010) (citing
LaMarca v. Pak-Mor Mfg. Co., 95 N.Y.2d
210, 214 (2000)).4
i. Chappell
Chappell worked for Transaero, a
company based in New York, from
September 1999 to December 2011. (Andrea
Aff. Ex. B, Aff. of Perry Youngwall, Apr. 7,
2014 (“Youngwall Aff.”) ¶ 7.) Transaero
paid Chappell’s salary from its New York
headquarters through a New York bank.
(Id.) As an employee of a New York
company, Chappell routinely received sales
support from New York-based employees,
including Transaero’s Vice President of
Sales, Operations Manager, Accounts
Receivable Coordinator, and “numerous
Melville[, New York] based Program
Managers.” (Id. ¶ 8.) Sales support included
“access to confidential pricing and product
information” and Transaero’s “customer
base and their purchasing history.” (Id. ¶ 7.)
All of the confidential information that
Chappell acquires as a sales representative
for Transaero is maintained in Transaero’s

Section 302(a)(3) provides for long-arm
jurisdiction over an out-of-state defendant
who committed a tort outside New York,
where the tort caused injury within New
York. In particular, Section 302(a)(3)(ii)
requires proof of the following elements:

“The same test applies for assessing jurisdiction
under Section 302(a)(3)(i), except that instead of the
last two elements, the defendant must: (1) engage in
conduct in New York that is regular, persistent, or
substantial; or (2) derive substantial revenue from
goods sold and consumed in New York or services
performed in New York.” Symmetra Pty Ltd. v.
Human Facets, LLC, No. 12-CV-8857 (SAS), 2013
WL 2896876, at *5 (S.D.N.Y. June 13, 2013). In the
instant case, plaintiff does not rely on Section
302(a)(3)(i). (See generally Pl.’s Opp.)
4

(1) the defendant’s tortious
act was committed outside
New York, (2) the cause of
action arose from that act, (3)
the tortious act caused an
injury to a person or property
in New York, (4) the
6

Melville, New York office. (Compl. ¶ 18.)
As part of his job as a sales representative,
Chappell “routinely submitted orders,
invoices and numerous e-mails to the New
York team for the purchase of aerospace
products which were then distributed from
the Transaero headquarters in New York.”
(Youngwall Aff. ¶ 8; see also id. ¶ 10.)
Once Chappell placed an order with
Transaero, the product was packed and
invoiced in New York, and then shipped
from New York. (Compl. ¶ 9.) Moreover,
Chappell traveled to New York for one
week each year to participate in Transaero’s
annual sales meeting, “where products,
pricing and proprietary information were
discussed.” (Youngwall Aff. ¶ 11.) In
addition to the annual sales meetings,
Chappell traveled to New York “several
times per year” to receive training and “to
conduct business.” (Id.) Finally, toward the
end of Chappell’s tenure with his New
York-based employer, Chappell and
Transaero executed a Letter Agreement,
pursuant to which Chappell agreed to
“refrain from entering into any business that
[would] conflict with the interests of
Transaero for a period of two years” after
the end of his employment. (Andrea Aff. Ex.
C, Letter Agreement, Feb. 15, 2011
(emphasis in original); see also Youngwall
Aff. ¶ 13.)

(PKC), 2010 WL 3958761, at *3 (S.D.N.Y.
Oct. 4, 2010). In particular, the court found
it significant that the defendant—a former
sales representative for a New York
company—had exchanged e-mails with New
York-based employees in order to produce
marketing materials, interacted regularly
with the New York employer’s CEO,
received directives from New York, and
entered into a confidentiality agreement with
his New York employer. Id. at *3–4.
Similarly, in Mercator Risk Services Inc. v.
Girden, the court held that out-of-state
employees of a New York company had
transacted business in New York because
they had “interacted with their employer’s
New York headquarters, accessed data
maintained by their employer in New York,
availed themselves of the benefit of being
employed by a New York company, and
generated profits for a New York company.”
No. 08-CV-10795 (BSJ), 2008 WL
5429886, at *3 (S.D.N.Y. Dec. 30, 2008).
The Mercator decision also noted that some
of the employees had traveled to New York
on business. Id. Finally, in Opticare
Acquisition Corp. v. Castillo, the court held
that out-of-state sales representatives had
transacted business in New York because
they “had systematic, ongoing relationships
with a New York company.” 806 N.Y.S.2d
84, 90 (N.Y. App. Div. 2005). The Opticare
decision relied on the facts that the out-ofstate sales representatives entered into
contracts on behalf of their New York
employer, obligated that employer to ship
products from New York, and created
accounts payable and receivable. Id.
Furthermore, the court concluded that the
employees had transacted business in New
York “[e]ven assuming none of the [former
employees] ever entered New York to
conduct business.” Id.

On the basis of these facts, plaintiff has
made at least a prima facie showing of longarm jurisdiction over Chappell pursuant to
Section 302(a)(1). The Court finds support
for its conclusion in several recent decisions
involving similar facts, which have held that
an out-of-state sales representative who
worked for a New York company had
transacted business in New York. First, in
LeCroy Corp. v. Hallberg, the court held
that an out-of-state defendant had transacted
business in New York because the defendant
had “made his living by working for a New
York-based company.” No. 09-CV-8767

Navaera Sciences, LLC v. Acuity
Forensic Inc., a case upon which Chappell
relies, is not to the contrary. See 667 F.
7

Supp. 2d 369, 373–78 (S.D.N.Y. 2009).
Unlike LeCroy, Mercator, Opticare, and this
case, Navaera did not concern the exercise
of personal jurisdiction over a former
employee of a New York company.5 In
Navaera, the plaintiffs (New York limited
liability companies) had entered into an
agreement with the defendants (a Canadian
company and its sole shareholder), pursuant
to which the defendants had agreed to be an
“independent seller” of the plaintiffs’
services and products in Canada. Id. at 371–
72. In holding that the defendants had not
transacted business in New York for
purposes of Section 302(a)(1), the court
emphasized that the defendants had entered
into the agreement with the plaintiffs in
Canada, had performed the contract entirely
in Canada, and had traveled to New York
only on several occasions. Id. at 375–76.
The defendants’ minimal contacts with New
York did not warrant the exercise of
personal jurisdiction over them, even though
the agreement at issue contained a choice of
law provision assigning New York as the
governing law. Id.

Plaintiff has also made a prima facie
showing that its claims arise out of
Chappell’s transaction of business in New
York. Simply put, plaintiff’s claims arise out
of Chappell’s alleged breach of the Letter
Agreement
and
his
alleged
“misappropriation
of
confidential
information that he acquired during his
employment” with Transaero. LeCroy, 2010
WL 3958761, at *4. In other words, but for
his employment activities for a New York
employer, Chappell “would not have had
access to the confidential information at
issue” in plaintiff’s causes of action.
LaChapelle v. Torres, --- F. Supp. 2d ----,
No. 12-CV-9362 (AJN), 2014 WL 805955,
at *11 (S.D.N.Y. Feb. 28, 2014).
Accordingly, the Court concludes that
plaintiff has demonstrated the requisite
nexus between Chappell’s New York
business transactions and its causes of
action. See, e.g., id.; LeCroy, 2010 WL
3958761, at *4; Mercator, 2008 WL
5429886, at *4; Opticare, 806 N.Y.S.2d at
91.
In sum, the Court concludes that Section
302(a)(1) authorizes the exercise of personal
jurisdiction over Chappell. Because the
Court determines that Section 302(a)(1)
provides a basis for the exercise of long-arm
jurisdiction over Chappell, the Court need
not consider the applicability of Section
302(a)(3) to Chappell.

This Court finds LeCroy, Mercator, and
Opticare both persuasive and directly
analogous to the instant case. Like the
defendants in those cases—and unlike the
defendants in Navaera—Chappell “made his
living by working for a New York-based
company” over a number of years. LeCroy,
2010 WL 3958761, at *3. Accordingly, the
Court concludes that Chappell transacted
business in New York.

ii. IAS
The Court cannot say the same for IAS.
Plaintiff hardly mentions IAS in its
complaint, except to allege vaguely that
Chappell organized IAS and sold products
through IAS. (See Compl. ¶ 9.) Although
plaintiff has submitted several purchase
orders submitted to Transaero by Chappell
on IAS letterhead (Andrea Aff. Ex. D,
Purchase Orders), IAS’s role in generating
the present dispute remains unclear. The fact

5

At oral argument, defendants attempted to
distinguish LeCroy, Mercator, and Opticare by
arguing that Chappell had not been not Transaero’s
employee, but an independent contractor. However,
plaintiff’s complaint, declarations, and exhibits
establish that Chappell was an employee of
Transaero. (See, e.g., Compl. ¶¶ 15, 38, 47 (referring
to Chappell’s employment with Transaero); Andrea
Aff. Ex. H, Expense Reports (referring to Chappell as
a Transaero employee).)

8

Although the Court grants IAS’s motion
to dismiss on the basis that plaintiff’s
allegations concerning IAS are factually
insufficient, the Court grants plaintiff leave
to amend its complaint. Federal Rule of
Civil Procedure 15(a)(2) states that a district
court “should freely give leave [to amend]
when justice so requires.” Moreover,
although not required, “the Court may sua
sponte grant leave to amend.” Straker v.
Metro. Transit Auth., 333 F. Supp. 2d 91,
102 (E.D.N.Y. 2004). A district court’s
discretion to grant such leave “is broad,” and
depends upon “many factors, including
‘undue delay, bad faith or dilatory motive on
the part of the movant, repeated failure to
cure deficiencies by amendments previously
allowed, undue prejudice to the opposing
party by virtue of allowance of the
amendment, futility of amendment, etc.’”
Local 802, Associated Musicians of Greater
N.Y. v. Parker Meridien Hotel, 145 F.3d 85,
89 (2d Cir. 1998) (quoting Foman v. Davis,
371 U.S. 178, 182 (1962)). Under this
liberal standard, the Court concludes that it
is appropriate to grant leave to amend in the
instant case. In particular, the Court notes
that plaintiff’s action against Chappell will
continue, and the defect in plaintiff’s
complaint with respect to IAS is only a

that each cause of action refers to
“Defendant”
in
the
singular—clear
references to Chappell—only adds to the
Court’s uncertainty about IAS. In short,
without any concrete allegations concerning
IAS’s actions or its relationship to Chappell,
plaintiff has failed to make a prima facie
showing that IAS either transacted business
in New York or committed a tort outside
New York causing injury within New York.
Accordingly, the Court grants IAS’s motion
to dismiss for lack of personal jurisdiction,6
without prejudice.7

6

Given the conclusory nature of the allegations
regarding IAS’s connection to New York or to
Chappell, the Court does not grant plaintiff the
opportunity to conduct limited discovery on this
issue. See, e.g., Manhattan Life Ins. Co. v. A.J.
Stratton Syndicate (No. 782), 731 F. Supp. 587, 593
(S.D.N.Y. 1990) (holding that “a court should not
approve a fishing expedition when little more exists
than plaintiff’s bare assertions that jurisdiction is
proper”); Socialist Workers Party v. Att’y Gen. of
U.S., 375 F. Supp. 318, 325 (S.D.N.Y. 1974)
(“Surely a plaintiff must make some specific factual
showing in order to assert such jurisdiction.”); cf.
Viko v. World Vision, Inc., No. 08-CV-221, 2009 WL
2230919, at *16 (D. Vt. July 24, 2009) (“[T]he
Circuit has . . . suggested that district courts may be
obligated to order jurisdictional discovery based on a
lesser showing [than a prima facie case], in particular
when the plaintiff fails to allege legally sufficient
facts to establish jurisdiction, but nonetheless asserts
specific, non-conclusory facts that, if further
developed, could demonstrate substantial state
contacts.” (citing Texas Int’l Magnetics, Inc. v. BASF
Aktiengesellschaft, 31 F. App’x 738, 739 (2d Cir.
2002) (summary order))); Ayyash v. Bank Al-Madina,
No. 04-CV-9201 (GEL), 2006 WL 587342, at *5
(S.D.N.Y. March 9, 2006) (“District courts have
considerable discretion in determining how to best
handle jurisdictional questions, and generally may
allow plaintiff to conduct limited discovery with
respect to the jurisdictional issue. Such discovery has
typically been authorized where the plaintiff has
made a threshold showing that there is some basis for
the assertion of jurisdiction[,] facts that would
support a colorable claim of jurisdiction.” (internal
quotation marks and citations omitted) (alteration in
original)); Hollins v. U.S. Tennis Assoc., 469 F. Supp.
2d 67, 71 (E.D.N.Y. 2006) (“[T]he Second Circuit

has ordered jurisdictional discovery where plaintiffs
allege more than conclusory statements but without
supporting facts”). However, as noted infra, the
Court will give plaintiff an opportunity to re-plead in
order to allege additional facts regarding Chappell’s
relationship to IAS and/or IAS’s connection to New
York.
7
A dismissal for lack of personal jurisdiction should
be without prejudice because “the resulting judgment
of dismissal is not a determination of the claim, but
rather a refusal to hear it.” Leviton Mfg. Co., Inc. v.
Reeve, 942 F. Supp. 2d 244, 273 (E.D.N.Y. 2013);
accord Friedman v. Cunard Line Ltd., No. 95-CV5232 (CSH), 1997 WL 698184, at *7 (S.D.N.Y. Nov.
10, 1997) (report & recommendation) (“Because a
dismissal for lack of personal jurisdiction does not
implicate the merits of plaintiffs’ claims, that
dismissal will be without prejudice.”).

9

“engaged
in
a
major
contractual
relationship—an employment relationship—
with a New York corporation,” traveled to
New York on numerous occasions in
connection with that employment, acquired
information belonging to that New York
corporation, and “earned profits for that
corporation.” Mercator, 2008 WL 5429886,
at *4 (discussing minimum contacts); see
also Chloe, 616 F.3d at 171 (concluding that
“assertion of personal jurisdiction over
[defendant] comports with due process for
the same reasons that it satisfies New York’s
long-arm statute”).

failure to allege sufficient facts to support
the exercise of personal jurisdiction over
IAS. In other words, better pleading could
correct the defect identified in plaintiff’s
complaint. Accordingly, the Court grants
plaintiff leave to file an amended complaint
if it wishes to maintain this action against
IAS.
b. Due Process
Having concluded that there is an
adequate basis for the exercise of specific
jurisdiction over Chappell, the Court must
determine whether the exercise of
jurisdiction over Chappell comports with the
Due Process Clause of the Fourteenth
Amendment, which requires “some act by
which the defendant purposefully avails
itself of the privilege of conducting activities
within the forum State, thus invoking the
benefits and protections of its laws.” Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475
(1985); see also World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 297 (1980)
(“[T]he defendant’s conduct and connection
with the forum state [must be] such that he
should reasonably anticipate being haled
into court there.”). There are two aspects of
the due process analysis: (1) the minimum
contacts inquiry, and (2) the reasonableness
inquiry. Chloe v. Queen Bee of Beverly
Hills, LLC, 616 F.3d 158, 171 (2d Cir.
2010).

With respect to the reasonableness
inquiry, even where an out-of-state
defendant is deemed to have purposefully
availed himself of the forum state, a plaintiff
“must still demonstrate that the exercise of
jurisdiction does not ‘offend traditional
notions of fair play and substantial justice’
and is thus reasonable under the Due
Process Clause.” Id. at 172–73 (quoting
Asahi Metal Indus. Co. v. Superior Court of
Cal., Solano Cnty., 480 U.S. 102, 113
(1987)). As set forth by the Supreme Court,
courts should consider five factors when
determining the reasonableness of a
particular exercise of jurisdiction:
A court must consider [1] the
burden on the defendant, [2]
the interests of the forum
State, and [3] the plaintiff’s
interest in obtaining relief. It
also must weigh in its
determination
[4]
the
interstate judicial system’s
interest in obtaining the most
efficient
resolution
of
controversies; and [5] the
shared interest of the several
States
in
furthering
fundamental
substantive
social policies.

Although the constitutional due process
issue is a separate question, “[o]rdinarily . . .
if jurisdiction is proper under the CPLR, due
process will be satisfied because CPLR
§ 302 does not reach as far as the
constitution permits.” Topps Co. v. Gerrit J.
Verburg Co., 961 F. Supp. 88, 90 (S.D.N.Y.
1997). Here, Chappell had sufficient
minimum contacts with New York that the
exercise of personal jurisdiction over him
satisfies due process for the same reasons
discussed supra: Chappell purposefully
10

Asahi, 480 U.S. at 113 (citation and internal
quotation marks omitted). “Where the other
elements for jurisdiction have been met,
dismissals on reasonableness grounds should
be ‘few and far between.’” Gucci Am., Inc.
v. Frontline Processing Corp., 721 F. Supp.
2d 228, 246 (S.D.N.Y. 2010) (quoting
Robertson-Ceco, 84 F.3d at 575).

notions of fair play and substantial justice,
such that it satisfies the reasonableness
inquiry of the Due Process Clause.” Chloe,
616 F.3d at 173 (citation and internal
quotation marks omitted).
B. Sufficiency of the Allegations
Because the Court concludes that
plaintiff has made a prima facie showing of
personal jurisdiction over Chappell, the
Court proceeds to consider Chappell’s
motion to dismiss for failure to state a claim
upon which relief can be granted. The
parties do not dispute that New York law
controls in this diversity suit. Accordingly,
the Court applies New York law. See, e.g.,
Fed. Ins. Co. v. Am. Home Assurance Co.,
639 F.3d 557, 566 (2d Cir. 2011) (“[W]here
the parties agree that New York law
controls, this is sufficient to establish choice
of law.”); 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 of law.”
(internal quotation marks and ellipsis
omitted)).

Although there may be some burden on
Chappell in defending himself in New York,
his choice to conduct business in New York
in the past suggests that it is not an
unreasonable burden. See, e.g., Huang, 2014
WL 1377500, at *5 (“Although there may be
some burden on Lin in defending himself in
New York, his choice to conduct business
there suggests that it is not an unreasonable
burden.”); see also Bank Brussels Lambert
v. Fiddler Gonzalez & Rodriguez, 305 F.3d
120, 129–30 (2d Cir. 2002) (“Even if
forcing the defendant to litigate in a forum
relatively distant from its home base were
found to be a burden, the argument would
provide defendant only weak support, if any,
because the conveniences of modern
communication and transportation ease what
would have been a serious burden only a
few decades ago.” (internal quotation marks
and citation omitted)). The second factor
favors keeping New York as the forum state,
since “a state frequently has a manifest
interest in providing effective means of
redress for its residents,” Chloe, 616 F.3d at
173 (internal quotation marks and citation
omitted), as does the third factor, since
plaintiff is located here. The fourth and fifth
factors appear to be neutral in this case.

1. Breach of Contract
“The elements of a breach of contract
claim in New York are: (1) the existence of
a contract, (2) performance by the party
seeking recovery, (3) non-performance by
the other party, and (4) damages attributable
to the breach.” Kramer v. N.Y.C. Bd. of
Educ., 715 F. Supp. 2d 335, 356 (E.D.N.Y.
2010) (quoting RCN Telecom Servs., Inc. v.
202 Centre St. Realty LLC, 156 F. App’x
349, 350–51 (2d Cir. 2005)). “A breach of
contract claim will withstand a motion to
dismiss only if plaintiff ‘allege[s] the
essential terms of the parties’ purported
contract in nonconclusory language,
including the specific provisions of the
contract upon which liability is predicated.’”
Kapsis v. Am. Home Mortg. Servicing Inc.,

Accordingly, the Court concludes that
this is not one of the few and far between
cases in which the exercise of jurisdiction
would be unreasonable despite the fact that
plaintiff has satisfied the state long arm
statute and minimum contacts analyses. In
short, the exercise of personal jurisdiction
over Chappell “comports with traditional
11

923 F. Supp. 2d 430, 450 (E.D.N.Y. 2013)
(quoting Sirohi v. Trs. of Columbia Univ.,
162 F.3d 1148 (Table), No. 97-7912, 1998
WL 642463, at *2 (2d Cir. Apr. 16, 1998)
(summary order)).

Farber, LLP, 903 N.Y.S.2d 517, 520 (N.Y.
App. Div. 2010)). Plaintiff has met that
burden here, as its damages may reasonably
be inferred from the allegations concerning
Chappell’s actions to take business away
from plaintiff. In sum, plaintiff has
adequately alleged a breach of contract
claim against Chappell.

Chappell contends that plaintiff has
failed to allege all of the foregoing elements.
The Court disagrees. First, plaintiff alleges
that it and Chappell executed a Letter
Agreement in February 2011. (Compl.
¶¶ 19–20.) Pursuant to that agreement,
plaintiff agreed to employ Chappell through
2012 and, in exchange, Chappell agreed “to
refrain from entering into any business that
[would] conflict with the interests of
Transaero for a period of two (2) years
after” Chappell’s tenure at Transaero ended.
(Id. ¶¶ 20, 22.) Plaintiff has submitted a
copy of that agreement in connection with
its opposition to the present motion.8
Second, plaintiff alleges that it performed all
of its obligations under the Letter
Agreement until discovering Chappell’s
breach. (Id. ¶¶ 23, 50.) Third, plaintiff
alleges that Chappell breached the
agreement by contacting and selling
products to plaintiff’s clients (see id. ¶¶ 25–
29, 36–37), by executing agreements with
plaintiff’s distributors (see id. ¶¶ 31–34, 38–
43), and by using plaintiff’s confidential
information to compete with plaintiff (id.
¶¶ 44–45.) Fourth, plaintiff alleges that it
suffered lost profits as a result. (Id. ¶ 53.)
Contrary
to
defendants’
argument,
“‘plaintiff is not obligated to show, on a
motion to dismiss, that it actually sustained
damages’”; plaintiff “‘need only plead
allegations from which damages attributable
to defendant’s [breach] might be reasonably
inferred.’” Kapsis, 923 F. Supp. 2d at 450
(quoting Rock City Sound, Inc. v. Bashian &

2. Conversion
“A conversion takes place when
someone,
intentionally
and
without
authority, assumes or exercises control over
personal property belonging to someone
else, interfering with that person’s right of
possession.” Colavito v. N.Y. Organ Donor
Network, Inc., 8 N.Y.3d 43, 49–50 (2006);
see also Thyroff v. Nationwide Mut. Ins. Co.,
460 F.3d 400, 403–04 (2d Cir. 2006)
(“According
to
New
York
law,
‘[c]onversion
is
the
unauthorized
assumption and exercise of the right of
ownership over goods belonging to another
to the exclusion of the owner’s rights.’”
(quoting Vigilant Ins. Co. of Am. v. Hous.
Auth., 87 N.Y.2d 36, 44 (1995))). A claim
for conversion includes a “denial or
violation of the plaintiff’s dominion, rights,
or possession” over his property, Sporn v.
MCA Records, Inc., 58 N.Y.2d 482, 487
(1983) (internal quotation marks and citation
omitted), and “requires that the defendant
exclude the owner from exercising her rights
over the goods,” Thyroff, 460 F.3d at 404
(citing New York v. Seventh Regiment Fund,
Inc., 98 N.Y.2d 249, 259 (2002)). Thus,
“[t]wo key elements of conversion are (1)
plaintiff’s possessory right or interest in the
property and (2) defendant’s dominion over
the property or interference with it, in
derogation of plaintiff’s rights.” Colavito, 8
N.Y.3d at 50 (citations omitted).
Here, plaintiff’s conversion claim fails
as a matter of law because the types of
property allegedly converted—“Transaero’s

8

The Court may consider the Letter Agreement in
deciding the instant motion because it is integral to,
and relied upon in, the complaint. See, e.g., Jones v.
Nickens, 961 F. Supp. 2d 475, 483 (E.D.N.Y. 2013).

12

confidential and proprietary information”
(Compl. ¶ 56)—“are not amenable to claims
for conversion.” Ferring B.V. v. Allergan,
Inc., No. 12-CV-2650, 2014 WL 988595, at
*14 (S.D.N.Y. Mar. 13, 2014). The Court
reaches this conclusion notwithstanding the
New York Court of Appeals’ decision in
Thyroff v. Nationwide Mutual Insurance
Co., which held that “electronic records that
were stored on a computer and were
indistinguishable
from
printed
documents . . . [were] subject to a claim of
conversion in New York.” 8 N.Y. 3d 283,
292–93 (2007). Although Thyroff modified
the common law rule that only tangible
objects could be the subject of a conversion
action, see id. at 290–92, “[t]he Court does
not read Thyroff to alter the traditional rule
requiring ‘the exercise of unauthorized
dominion and control to the complete
exclusion of the rightful possessor.’” Geo
Grp., Inc. v. Cmty. First Servs., Inc., No. 11CV-1711 (CBA), 2012 WL 1077846, at *9
(E.D.N.Y. Mar. 30, 2012) (quoting Harper
& Row, Publishers, Inc. v. Nation Enterps.,
723 F.2d 195, 201 (2d Cir. 1983), rev’d on
other grounds, 471 U.S. 539 (1985)). As
Chief Judge Amon has explained,

Id. (holding that wrongful taking of
proprietary work product did not give rise to
conversion claim). This Court finds Geo’s
application of New York law to be
persuasive. Therefore, because plaintiff has
not alleged that Chappell excluded plaintiff
from possession or use of plaintiff’s
confidential and proprietary information, the
Court grants defendants’ motion to dismiss
plaintiff’s cause of action for conversion.9
3. Unfair Competition
The New York Court of Appeals has
“long recognized two theories of commonlaw unfair competition: palming off and
misappropriation.” ITC Ltd. v. Punchgini,
Inc., 9 N.Y.3d 467, 476 (2007). “Palming
off” is “the sale of the goods of one
manufacturer as those of another.” Id. The
misappropriation
theory
of
unfair
competition “usually concerns the taking
and use of the plaintiff’s property to
compete against the plaintiffs own use of the
same property.” Id. at 478. An unfair
competition claim based on a theory of
misappropriation requires proof of two
elements: (1) defendant “misappropriated
the plaintiff’s labors, skills, expenditures, or
good will”; and (2) “displayed some element
of bad faith in doing so.” Barbagallo v.
Marcum LLP, 820 F. Supp. 2d 429, 446
(E.D.N.Y. 2011) (internal citation and
quotation marks omitted). Claims of unfair
competition may be based on the
misappropriation of trade secrets or ideas,
client lists, internal company documents,
and business strategies. Berman v. Sugo
LLC, 580 F. Supp. 2d 191, 209 (S.D.N.Y.
2008) (citing cases).

Thyroff itself had no need to
confront this issue because
the plaintiff in that case was
fully deprived of access to
information stored on a
computer hard drive. Thyroff
simply eliminated the law’s
arbitrary distinction between
the theft of information
stored on a computer and the
theft of information printed
on paper. In other words, it
expanded the scope of
property
subject
to
conversion, not the wrongful
conduct necessary to convert
it.

Chappell’s only objection to plaintiff’s
unfair competition claim is that plaintiff has
9

At oral argument, counsel for plaintiff conceded
that Chappell had not excluded plaintiff from
possession or use of plaintiff’s confidential and
proprietary information.

13

failed to allege likelihood of confusion by
the public. However, “[l]ikelihood of
confusion by the public is not an essential
element in a misappropriation-based unfair
competition claim.” Sidney Frank Importing
Co., Inc. v. Beam Inc., No. 13-CV-1391
(NSR), 2014 WL 643696, at *13 (S.D.N.Y.
Feb. 14, 2014) (citing Beverage Mktg. USA,
Inc. v. S. Beach Beverage Co., Inc., 799
N.Y.S.2d 242, 244 (N.Y. App. Div. 2005));
see Telecom Int’l Am., Ltd. v. AT&T Corp.,
280 F.3d 175, 198 (2d Cir. 2001) (“An
unfair competition claim under New York
law is not, therefore, as conceived by the
district court, dependent upon a showing of
confusion or deception as to the origin of a
product or service.”); Milton Abeles, Inc. v.
Farmers Pride, Inc., 603 F. Supp. 2d 500,
502–03 (E.D.N.Y. 2009) (“Defendant
erroneously argues that a required element
of an unfair competition claim under New
York law is a showing of actual customer
confusion or deception as to the origin of the
product or service.”). The Second Circuit’s
decision in Jeffrey Milstein, Inc. v. Greger,
Lawlor, Roth, Inc. is not to the contrary. 58
F.3d 27 (2d Cir. 1995). There, the Second
Circuit determined that an unfair
competition claim required proof of “either
actual confusion in an action for damages or
a likelihood of confusion for equitable
relief,” but that case concerned trademark
infringement. See id. at 35. However, where
an unfair competition claim is not based on
trademark
infringement,
but
misappropriation
of
confidential
or
proprietary information, the plaintiff need
not establish either actual confusion or a
likelihood of confusion. Beverage Mktg.
USA, 799 N.Y.S.2d at 244. Accordingly, the
Court determines that the complaint
sufficiently alleges an unfair competition
claim.

4. Misappropriation
“To state a claim for misappropriation of
confidential information, a plaintiff must
allege that the defendant used the plaintiff’s
confidential information for the purpose of
securing a competitive advantage.” Reed
Constr. Data Inc. v. McGraw-Hill Cos., Inc.,
745 F. Supp. 2d 343, 352 (S.D.N.Y. 2010)
(citing Bender Ins. Agency, Inc. v. Treiber
Ins. Agency, Inc., 729 N.Y.S.2d 142, 144–45
(N.Y. App. Div. 2001); B-S Indus.
Contractors Inc. v. Burns Bros. Contractors
Inc., 681 N.Y.S.2d 897, 899 (N.Y. App.
Div. 1998)). In addition, where, as here, “the
plaintiff and defendant are both parties to a
contract, the plaintiff must allege a breach of
‘a duty ‘independent’ of [the] duties under
the contract.’” Id. (quoting Carvel Corp. v.
Noonan, 350 F.3d 6, 16 (2d Cir. 2003)).
“This legal duty must spring from
circumstances extraneous to, and not
constituting elements of, the contract,
although it may be connected with and
dependent upon the contract.” ClarkFitzpatrick, Inc. v. Long Island R.R. Co., 70
N.Y.2d 382, 389 (1987).
The allegations in the complaint meet all
of the foregoing elements. In particular, the
complaint alleges that “Chappell retains
Transaero confidential, technical, financial
and client information . . . including, but not
limited to, client histories and sales data,
quotations and financial reports.” (Compl.
¶ 45.) It further alleges that Chappell is
using this information to solicit plaintiff’s
customers and suppliers (id. ¶ 46), and it
points to specific examples where Chappell
has allegedly done so (see id. ¶¶ 31–43).
Finally, plaintiff has alleged that, by
misappropriating the confidential and
proprietary information of his employer,
Chappell breached a duty independent of his
duties under the 2011 Letter Agreement.
“‘Under New York law, an employee has a
common law duty of good faith and fair
14

dealing to the employer not to exploit
confidential information for the benefit of
himself and others.’” Wrap-N-Pack, Inc. v.
Kaye, 528 F. Supp. 2d 119, 126 (E.D.N.Y.
2007) (quoting Paz Sys., Inc. v. Dakota Grp.
Corp., 514 F. Supp. 2d 402, 409–10
(E.D.N.Y. 2007)). Thus, Chappell’s duty to
refrain
from
misappropriating
the
confidential information of his employer
existed independently of the 2011 Letter
Agreement. Accordingly, the complaint
states a plausible misappropriation claim
against Chappell.

¶ 37), Signature Industries (id. ¶ 38), and
Aqua Lung (id. ¶ 41). The complaint further
alleges that Chappell interfered with these
relationships by competing directly with
plaintiff for the business of plaintiff’s clients
and distributors, and that, as a result,
plaintiff lost business opportunities and
long-term,
exclusive
distribution
agreements. (See generally id. ¶¶ 26–43.)
Finally, the complaint states the “wrongful
means” element of this claim because, as
described supra, it alleges that plaintiff
interfered with plaintiff’s business relations
by committing “an independent tort,” i.e.,
unfair competition and misappropriation.
See, e.g., Catskill, 547 F.3d at 132
(determining that, for purposes of this cause
of action, “a defendant’s commission of a
crime or an independent tort clearly
constitutes wrongful means”); Carvel Corp.
v. Noonan, 3 N.Y.2d 182, 190 (2004) (“[A]s
a general rule, the defendant’s conduct must
amount to a crime or an independent tort.”);
see also Sidney Frank Importing, 2014 WL
643696, at *15–16 (describing “wrongful
means” element of a cause of action for
tortious
interference
with
business
relations). Accordingly, plaintiff has stated a
plausible claim of tortious interference with
business relations against Chappell.10

5. Tortious Interference with
Business Relations
A claim for tortious interference with
business relations consists of four elements:
“(1) the plaintiff had business relations with
a third party; (2) the defendant interfered
with those business relations; (3) the
defendant acted for a wrongful purpose or
used dishonest, unfair, or improper means;
and (4) the defendant’s acts injured the
relationship.” Catskill Dev., L.L.C. v. Park
Place Entm’t Corp., 547 F.3d 115, 132 (2d
Cir. 2008). The third element renders this
claim—sometimes known as tortious
interference with prospective economic
advantage—more difficult to prove than the
similar claim of tortious interference with a
contract. Id. “The standard is more
demanding because a plaintiff’s mere
interest or expectation in establishing a
contractual relationship must be balanced
against the ‘competing interest of the
interferer,’ as well as the broader policy of
fostering healthy competition.” Id. (quoting
Guard-Life Corp. v. S. Parker Hardware
Mfg. Corp., 50 N.Y.2d 183, 191 (1980)).

6. Breach of the Duty of Loyalty
“A claim for breach of fiduciary duty
must allege both the existence of a duty
based on a relationship of trust and
confidence and breach of that duty.” Gortat
v. Capala Bros., Inc., 585 F. Supp. 2d 372,
376 (E.D.N.Y. 2008) (citing Fagan v. First
Sec. Invs., Inc., No. 04-CV-1021 (LTS),
2006 WL 2671044, at *4 (S.D.N.Y. Sept.

As discussed supra, the complaint
alleges that plaintiff had business
relationships with the Filipino army (Compl.
¶ 26), Communication and Ear Protection,
Inc. (id. ¶ 31) the Australian military (id.

Chappell’s reliance on White Plains Coat & Apron
Co., Inc. v. Cintas Corp. is misplaced, because that
decision concerned tortious interference with an
existing contract, not tortious interference with
business relations. See 460 F.3d 281, 285 (2d Cir.
2006).
10

15

15, 2006)). In particular, “[u]nder New York
law, an employee owes a duty of good faith
and loyalty to his employer.” Design
Strategies, Inc. v. Davis, 384 F. Supp. 2d
649, 659 (S.D.N.Y. 2005) (citing W. Elec.
Co. v. Brenner, 41 N.Y.2d 291, 295 (1977)),
aff’d sub nom. Design Strategy, Inc. v.
Davis, 469 F.3d 284 (2d Cir. 2006); see,
e.g., Gortat, 585 F. Supp. 2d at 376; Slue v.
N.Y. Univ. Med. Ctr., 409 F. Supp. 2d 349,
373–74 (S.D.N.Y. 2006). The duty of
loyalty includes the duty to refrain from
misusing the employer’s confidential
information. Gortat, 585 F. Supp. 2d at 376;
see also Wrap-N-Pack, 528 F. Supp. 2d at
126; Paz, 514 F. Supp. 2d at 409–10.

IV. CONCLUSION
For the foregoing reasons, IAS’s motion
to dismiss for lack of personal jurisdiction is
granted, Chappell’s motion to dismiss for
lack of personal jurisdiction is denied, and
Chappell’s motion to dismiss for failure to
state a claim upon which relief may be
granted is denied except with respect to the
conversion claim. Accordingly, all claims
against IAS, and the conversion claim
against Chappell, are dismissed. Finally, the
Court grants plaintiff leave to file an
amended complaint if plaintiff wishes to
maintain this action against IAS. Plaintiff
shall submit an amended complaint no later
than thirty days from the date of this
Memorandum and Order.

For the reasons discussed supra, the
complaint adequately alleges that Chappell
misappropriated plaintiff’s confidential
information
for
his
own
benefit.
Accordingly, the complaint states a plausible
claim for breach of the duty of loyalty.11

SO ORDERED.

__________________
JOSEPH F. BIANCO
United States District Judge
Dated: May 6, 2014
Central Islip, NY

Plaintiff’s complaint titles Count VI as “Diversion
of Corporate Opportunity and Breach of Duty of
Loyalty.” (Compl., at 21.) “The doctrine of
‘corporate opportunity’ provides that corporate
fiduciaries and employees cannot, without consent,
divert and exploit for their own benefit any
opportunity that should be deemed an asset of the
corporation.” Alexander & Alexander of N.Y., Inc. v.
Fritzen, 542 N.Y.S.2d 530, 533 (N.Y. App. Div.
1989). Courts identify a “corporate opportunity”
either by asking whether the corporation has a
“tangible expectancy” in the opportunity, or by
asking whether the opportunity is “the same as or is
necessary for, or essential to, the line of business of
the corporation.” Design Strategies, 384 F. Supp. 2d
at 672 (internal quotation marks omitted). Here,
based on the allegations in Count VI and in the
complaint as a whole, the Court construes plaintiff’s
claim to be one for breach of the duty of loyalty by
misappropriating confidential information, and not
one diversion of corporate opportunity.
11

*

*

*

Plaintiff is represented by Frank A.
Andrea, III, and Robert L. Towsky, Andrea
& Towsky, Esqs., 320 Old Country Road,
Suite 202, Garden City, NY 11530.
Defendants are represented by Gregory S.
Lisi and Alesia J. Kantor, Forchelli Curto
Deegan, Schwartz, Mineo & Terrana, LLP,
333 Earle Ovington Boulevard, Suite 1010,
Uniondale, NY 11553.

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