The A Star Group, LLC v. Manitoba Hydro et al
ORDER AND OPINION re: 21 MOTION to Dismiss the Complaint filed by Manitoba Hydro, 24 MOTION to Dismiss Notice of KPMG LLP (Canada) and KPMG LLP (US)'s Motion to Dismiss Plaintiff's Complaint filed by KPMG LLP (Canada), KPMG LLP (US), 27 MOTION to Dismiss /Notice of Motion by Defendant The Public Utilities Board of Manitoba to Dismiss the Complaint and Strike the Demand for a Jury Trial filed by Manitoba Public Utilities Board: Accordingly, the Court GRANTS PUB's motion to dismiss with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(1) and Hydro and KPMG's motions to dismiss with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). The Clerk of the Court is directed to enter judgment and close this case. (Signed by Judge Paul A. Crotty on 6/30/2014) (tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DOC #: _________________
DATE FILED: June 30, 2014
THE A STAR GROUP, INC,
13 Civ. 4501 (PAC)
ORDER AND OPINION
MANITOBA HYDRO, KPMG LLP
(CANADA), KPMG LLP (US), and
MANITOBA PUBLIC UTILIES BOARD,
HONORABLE PAUL A. CROTTY, United States District Judge:
Plaintiff The A Star Group, Inc. (“AStar”)1 alleges 15 claims against Manitoba Hydro
(“Hydro”), KPMG LLP (Canada), KPMG LLP (US) (collectively, “KMPG”), and the Manitoba
Public Utilities Board (“PUB”) (collectively, “Defendants”), inter alia, for breach of contract,
misappropriation of trade secrets, unfair competition, copyright infringement, unjust enrichment,
and tortious interference with contract. From 2004 to 2008, AStar worked as an independent
consultant for Hydro, the electric power and natural gas utility for Manitoba, Canada, and
purports to have uncovered series risk management issues at Hydro. When the arrangement with
Hydro ended, AStar decided to switch sides to become a “whistleblower.” It supplied various
documents to PUB for use in its regulatory review of Hydro. Subsequently, PUB released the
reports AStar had supplied to the public. At about the same time, Hydro retained KPMG to
review AStar’s findings and provided KPMG with AStar’s reports. Plaintiff claims that its
AStar is a New York-based risk consulting and software firm founded by Samantha Kumaran, who is its principal
and apparently only officer. Compl. ¶¶ 2-3.
reports contained confidential information and therefore Defendants should be held liable for the
disclosure and use of that information.
On November 22, 2013, Defendants moved to dismiss the Complaint. For the following
reasons, Defendants’ motions to dismiss are GRANTED with prejudice.
PUB’s Oversight of Hydro
Hydro, whose principal business is the generation of hydro-electric power, is a Crown
Corporation formed under the laws of Manitoba, Canada. Compl. ¶¶ 21-22; see Declaration of
Kenneth E. Lee in Support of Defendant the Public Utilities Board of Manitoba’s Motion to
Dismiss and Strike the Demand for a Jury Trial (“Lee Decl.”), ECF No. 29, Ex. A (The Manitoba
Hydro Act). PUB has exclusive jurisdiction to review Hydro’s proposed service rate charges.
See id., Ex. B (The Crown Corporations Public Review and Accountability Act). When Hydro
applies for a rate increase, PUB conducts a general rate application proceeding (“GRA”) to
determine whether the requested change is in accordance with Hydro’s mandate and the public
interest. See id., Ex. B.
GRA proceedings are public, and it is presumed that all documents filed with PUB will
be placed “on the public record.” See id., Ex. D, PUB Rules of Practice and Procedure § 13(1).
Rule 13 also allows PUB to protect information it deems to be commercially sensitive
The following section is based on AStar’s allegations, which are assumed to be true. The Court also relies on
documents not attached the complaint, but were either incorporated into the complaint by reference, relied upon by
AStar in bringing the suit, or their accuracy cannot reasonably be questioned. See ATSI Commc’ns, Inc. v. Shaar
Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007); Fed. R. Evid. 201(b)(2); see Jordan (Bermuda) Inv. Co. v. Hunter Green
Inv., Ltd., 154 F. Supp. 2d 682, 689 (S.D.N.Y. 2001) (permitting judicial notice of foreign judgments). Documents
filed in another court are considered “not for the truth of the matters asserted in the other litigation, but rather to
establish the fact of such litigation and related filings.” See Int’l Star Class Yacht Racing Ass’n v. Tommy Hilfiger
U.S.A., Inc., 146 F.3d 66, 70 (2d Cir. 1998).
information or trade secrets. See id., Ex. D, PUB Rule § 13(2). PUB has the discretion to place
the documents in the public record, redact them, or withhold them entirely. See id., Ex. D, PUB
Rule § 13(3). If the party who originally filed the document objects to its release, it may request
that the document be withdrawn. See id., Ex. D, PUB Rule § 13(5). PUB’s decision may be
appealed to the Manitoba Court of Appeal. See id., Ex. C § 58(1).
AStar’s Work for Hydo
In late 2004, Hydro engaged AStar to assist in addressing its growing risk management
issues. Compl. ¶ 76. Hydro and AStar subsequently entered into the Master Service Agreement
(“MSA”) and Software License Agreement (“SLA”), which governed the terms of AStar’s
engagement. Id. ¶ 92; see Declaration of Michael R. Hepworth in Support of Manitoba Hydro’s
Motion to Dismiss (“Hepworth Decl.”), ECF No. 23, Exs. G & L. Both agreements provide that
Hydro will maintain the confidentiality of AStar’s proprietary information and trade secrets; and
not disclose the information to third parties. Compl. ¶¶ 94-106; see Hepworth Decl., Ex. G §§ 8,
10.1, 10.4, 10.6(b), Ex. L §§ 5.5-5.6, 8.1. Both agreements also contain a New York governing
law clause and forum selection clause. See Hepworth Decl., Ex. G § 21.2, Ex. L § 12.3-12.4.
The parties subsequently entered into letter agreements on August 21, 2007 and January 31, 2008
extending the terms of the MSA and SLA (the “letter agreements”). Compl. ¶¶ 107-11.
AStar alleges that it uncovered a number of management issues at Hydro, including (a)
discrepancies, misalignments, and risks in the hydraulic water management system, id. ¶ 121, (b)
operational risks, id. ¶ 122, and (c) serious flaws in the front office business approach, id. ¶ 123.
On September 29, 2008, AStar prepared advanced findings of its Hydraulics report and provided
them to Hydro CEO Bob Brennan. Id. ¶ 139. AStar concluded that Hydro operated far below
optimum and would face the risk of forced blackouts, if the flaws were not corrected
immediately. Id. ¶ 140. The next day, Hydro terminated its relationship with AStar. Id. ¶ 142.
KPMG’s Work for Hydro
Subsequently, Hydro retained KPMG to analyze AStar’s findings and ultimately prepare
a report either validating or rebutting AStar’s analysis. Id. ¶ 162-63.3 On December 21, 2009,
Hydro filed an action with the Manitoba Court of Queen’s Bench seeking approval to publically
release KPMG’s analysis. Id. ¶ 176. On January 22, and 29, 2010, the court ordered that “no
person shall publish in any newspaper, radio, television, internet or other medium of mass
communication any information from any document filed or evidence taken in this proceeding
that discloses the identity of the respondent or of any principal of the respondent.” See
Hepworth Decl., Exs. J & K.
On February 18, 2010, David Cormie, a Hydro executive, filed an affidavit with the court
in support of its application (the “Cormie Affidavit”), with AStar’s name redacted. See
Hepworth Decl., Ex. B. On the same day, Hydro published the Cormie Affidavit on its website.
See Compl. ¶¶ 180, 182. On April 15, 2010, KPMG completed its external quality review of the
risk management issues identified by AStar (the “KPMG report”). See Declaration of Daniel B.
Goldman in Support of Motion to Dismiss of KPMG (“Goldman Decl.”), ECF No. 26, Ex. 3.
The Manitoba court did not resolve whether Hydro was authorized to publically release the
The 2010-2012 GRA Proceeding
In March 2009, prior to the dispute regarding disclosure, PUB began a GRA proceeding
concerning Hydro’s proposed rate increase. AStar approached PUB as a “whistleblower” to
Although the Complaint does not make this clear, it appears that Hydro retained only KPMG LLP (Canada), who
then directed KPMG LLP (US) to perform sub-contract work for Hydro. See Compl. ¶ 37.
share its own findings on Hydro. Compl. ¶ 153. On September 29, 2009, AStar agreed to
provide PUB with its reports as part of the GRA proceeding. Id. ¶¶ 157-58; see Affidavit of
Jesse Strauss in Opposition to Defendants’ Motions to Dismiss (“Strauss Aff.”), ECF No. 42,
Exs. A & B. AStar also applied to appear as an intervener in the GRA proceeding, which would
have included a comprehensive review of Hydro’s risk management on behalf of PUB. See Lee
Decl., Ex. F, at 7. On March 26, 2010, PUB denied AStar’s request but sought AStar’s
cooperation and assistance for the “purpose of enabling its reports to be placed on the public
record” and in order to “meet with and inform the independent experts appointed by the Board as
to [AStar’s] findings and conclusions.” Id., Ex. F, at 30-39, 36. AStar met with PUB consultants
in New York on June 6, 2010, Compl. ¶¶ 207-11, but ultimately withdrew its documents due to
During this time, PUB also ordered Hydro to provide it with all internal and external risk
management reports, including AStar’s risk reports and the KPMG report. See Lee Decl., Ex. E,
at 31, 47-48 (ordering Hydro to “file all internally and externally prepared reports, since the
2003-04 drought, that address any of and all of the energy supply and other risks faced by [it]”).
AStar claimed that the reports contained AStar’s proprietary information and trade secrets and
proposed redactions. See Compl. ¶¶ 222-26. But since Hydro—not AStar—filed these
documents with PUB, AStar did not have the ability to request that they be withdrawn pursuant
to PUB Rule 13(5). See Lee Decl., Ex. D, PUB Rule § 13(5).
On September 20, 2010, PUB issued Order 95/10 (the “Redaction Order”), which
provided its final determination on the redaction process. See id., Ex. H. PUB held that AStar’s
proposed redactions were unnecessary because the reports “do not contain formulae, any detailed
explanation of [AStar]’s methodology, nor any software or hard copy data respecting software
details or outputs generated.” Id., Ex. H, at 39. According to PUB, “[t]his finding does not infer
that [AStar’s] conclusions are not valid, simply that the supporting detail is by and large not
contained in the [reports].” Id., Ex., H, at 39. On September 27, 2010, the reports were placed
on the public record. Compl. ¶ 232. AStar then moved for leave to appeal PUB’s decision to the
Manitoba Court of Appeal, but abandoned the motion. See Lee Decl., Exs. J, K, & L.
On November 9, 2012, AStar filed its first complaint against Hydro, PUB, and KPMG in
this Court. See Complaint, The A Star Group Inc. v. Manitoba Hydro, No. 12 Civ. 8198, ECF
No. 1. On February 28, 2013, the Court held that the 318-page, 1,417-paragraph complaint did
not comply with the Federal Rules of Civil Procedure and dismissed the complaint sua sponte
without prejudice. See Transcript, The A Star Group Inc. v. Manitoba Hydro, No. 12 Civ. 8198,
ECF No. 10. On June 28, 2013, AStar filed the present 70-page complaint under a new civil
AStar’s Complaint alleges that Hydro engaged in a campaign to discredit AStar’s
findings and retaliate against AStar by disclosing AStar’s “proprietary information” on Hydro’s
website and to PUB and KPMG. Compl. ¶¶ 176-81. AStar claims that KPMG and PUB reverse
engineered the “proprietary information” and used AStar’s methodologies to either compete with
AStar, id. ¶¶ 166-75, or to build computer software and metrics to measure Hydro’s risks, id. ¶
211. As a result, AStar brings 15 claims for breach of contract (Hydro, PUB), aiding and
abetting breach of contract (KPMG), breach of covenant of good faith and fair dealing (Hydro),
misappropriation of trade secrets (all Defendants), unfair competition and misappropriation of
confidential information (Hydro, KPMG), unjust enrichment (Hydro), copyright infringement
(all Defendants), and tortious interference (KPMG, PUB).
To state a claim for relief, a plaintiff must “provide the grounds upon which his claim
rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.’”
ATSI Commc’ns, Inc., 493 F.3d at 98 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). Plaintiff must allege “‘enough facts to state a claim to relief that is plausible on its
face.’” Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly,
550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court accepts as true all wellpleaded factual allegations and draws all inferences in Plaintiff’s favor. See Allaire Corp. v.
Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006).
The Claims Against PUB Are Dismissed
PUB moves to dismiss because it is a foreign sovereign, immune to the Court’s
jurisdiction. The Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §§ 1330, 1332(a),
1391(f), 1441(d), and 1602-11, provides the sole basis for obtaining jurisdiction over a foreign
state. Saudia Arabia v. Nelson, 507 U.S. 349, 355 (1993). A foreign state is immune from
federal jurisdiction unless a specific exception applies. See 28 U.S.C. §§ 1330(a), 1604. AStar
asserts that PUB falls within three exceptions to immunity: (1) the waiver exception under
Section 1605(a)(1); (2) the commercial activity exception under Section 1605(a)(2); and (3) the
non-commercial torts exception under Section 1605(a)(5). AStar failed to meet its burden of
proof that any of these exceptions are applicable.
AStar first claims that PUB waived its immunity under Section 1605(a)(1) by
contemplating the United States as a possible forum for any dispute with AStar. See Plaintiff’s
Brief in Opposition to the Motions to Dismiss (“Pl.’s Opp’n”), ECF No. 40, at 9-11. A foreign
state implicitly waives jurisdiction where it “has agreed to arbitration in another country or . . .
that the law of a particular country should govern a contract.” H.R. Rep. No. 94-1487, at 18
(1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6617; see Smith v. Socialist People’s Libyan Arab
Jamahiriya, 101 F.3d 239, 243 (2d Cir. 1996). But AStar does not claim that either circumstance
existed here. Instead, AStar claims that PUB waived its immunity merely by agreeing not to
violate the terms of the MSA and SLA and by suggesting that AStar retain New York counsel.4
Yet the MSA and SLA’s forum selection clause purported to bind Hydro and AStar, not PUB. In
fact, AStar’s September 29, 2009 letter to PUB confirmed its “understanding that the PUB will
act in accordance with its own powers of jurisdiction under applicable Canadian laws” and does
not mention New York law. See Strauss Aff., Ex. A, at 3. Furthermore, whether PUB suggested
that AStar retain New York counsel has no bearing on whether PUB, itself, submitted to New
York jurisdiction. As a result, AStar fails to demonstrate that PUB implicitly waived its
immunity under Section 1605(a)(1).
Next, AStar alleges that PUB engaged in commercial activity pursuant to 1605(a)(2). See
Pl.’s Opp’n at 11-12. The FSIA defines “commercial activity” as “either a regular course of
commercial conduct or a particular commercial transaction or act.” 28 U.S.C. § 1603(d). “[A]
state engages in commercial activity . . . where it exercises only those powers that can also be
exercised by private citizens, as distinct from those powers peculiar to sovereigns.” Nelson, 507
AStar also points to its own letters “explicitly stating that New York law applied to any dispute regarding the
confidentiality of [its] Proprietary Information and that the PUB would be sued in New York if it violated the MSA
and SLA.” Pl.’s Opp’n at 10. But PUB did not agree to or sign these letters so they cannot support AStar’s
U.S. at 360 (internal quotation marks omitted). Any actions taken by PUB, however, were taken
in furtherance of its role as a Canadian regulatory body. Although AStar claims that it “was
retained by the PUB to provide commercial services information related to the PUB’s review of
Hydro,” see Pl.’s Opp’n at 11-12, PUB explicitly declined to retain AStar for this purpose, see
Lee Decl., Ex. F, at 30-39. Instead, PUB requested that AStar explain its past findings to the
Board and agreed to pay the costs associated with that request. This is not commercial activity;
rather, it is routine practice for a regulatory body during the course of an investigation.
Furthermore, even if PUB used AStar’s proprietary information, see Pl.’s Opp’n at 12,—which is
entirely unsubstantiated—that use was in furtherance of its investigation, not a commercial
activity. Thus, PUB cannot be subject to the jurisdiction of this Court under the commercial
Lastly, AStar argues that PUB waived its immunity by committing a tortious act or
omission pursuant to Section 1605(a)(5). See Pl.’s Opp’n at 12. But the non-commercial tort
exception pertains only to “personal injury or death, or damage to or loss of property, occurring
in the United States,” 28 U.S.C. § 1605(a)(5), and is not applicable to tort actions by defendants
abroad, see In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 109, 115-17 (2d Cir. 2013).
AStar makes no attempt to identify any tort that PUB committed in the United States and
therefore cannot establish that the non-commercial tort exception applies. Accordingly, PUB is
entitled to immunity under the FSIA, and this Court lacks jurisdiction over all of AStar’s claims
against PUB (Counts VIII, XIII, XIV, and XV).
The Claims Against Hydro Are Dismissed
Breach of Contract
AStar alleges that Hydro breached the MSA (Count I), SLA (Count II), and letter
agreements (Count III) by (1) disclosing AStar’s proprietary information to PUB, (2) providing
KPMG with AStar’s proprietary information, and (3) posting AStar’s proprietary information on
its website. See Pl.’s Opp’n at 16-19. First, Hydro did not breach the agreements when it
complied with PUB’s March 30, 2009 order by producing AStar’s risk reports. See Pl.’s Opp’n
at 17. Specifically, PUB required Hydro to “file all internally and externally prepared reports,
since the 2003-04 drought, that address any of and all of the energy supply and other risks faced
by [it].” See Lee Decl., Ex. E, at 31, 47-48.5 The agreements explicitly provided for the “forced
disclosure” of AStar’s proprietary information “by a court or other governmental body” and
therefore authorized Hydro’s disclosures to PUB. See Hepworth Decl., Ex. G § 8.6, Ex. L § 8.5.
Furthermore, plaintiff must plead and—eventually prove—damages resulting from any alleged
breach. See Nat’l Mkt. Share, Inc. v. Sterling Nat’l Bank, 392 F.3d 520, 525 (2d Cir. 2004). But
AStar provided its reports to PUB and therefore cannot plausibly allege any damages stemming
from Hydro’s disclosure of the same information.
Hydro’s disclosures to KPMG were also permissible under the agreements because AStar
was authorized to disclose confidential information to Hydro’s “directors, officers, employees,
and agents.” See Hepworth Decl., Ex. G § 8.1, Ex. L § 8.3. In fact, AStar concedes that KPMG
had an “agency relationship with Hydro,” see Pl.’s Opp’n at 23-24 & n.22; Compl. ¶ 37, and
“performed work for Hydro under the MSA,” Compl. ¶ 38. Since KPMG was merely working
as Hydro’s agent to validate AStar’s work, Hydro cannot have breached the agreements by
providing KPMG with AStar’s reports.
Lastly, AStar alleges that Hydro breached the MSA, SLA, and letter agreements by
As a regulatory body, PUB is entrusted with all the “powers, rights, and privileges as are vested in the Court of
Queen’s Bench,” including the power to require the production of documents. See Lee Decl., Ex. C, § 24(4).
posting AStar’s proprietary information and trade secret methodologies on its website. See Pl.’s
Opp’n at 16-17. But Hydro only posted the Cormie Affidavit to its website. See Hepworth
Decl., Ex. B, ¶ 5. Rather than containing trade secrets and business proprietary information, see
Compl. ¶ 180, the Cormie Affidavit merely provides background information on Hydro and
AStar’s dispute. Moreover, the Cormie affidavit was publically filed with the Manitoba Court of
Queen’s Bench. Under the agreements, information that “is or becomes publicly known through
lawful means” does not constitute confidential information. See Hepworth Decl., Ex. G § 8.2;
see also Boccardi Capital Sys., Inc. v. D.E. Shaw Laminar Portfolios, LLC, 355 Fed. App’x 516,
518 (2d Cir. 2009) (slip op.) (holding that information generally available to the public could not
support a claim for breach of a confidentiality clause because the clause expressly excluded
public information). As a matter of law, the information disclosed in the Cormie Affidavit was
not confidential and therefore AStar cannot maintain a claim for breach of contract on this basis.
Accordingly, Counts I, II, and III must be dismissed.
AStar’s copyright claim against Hydro (Count VIII) also fails to state a claim for relief.
Section 411(a) of the Copyright Act “requires copyright holders to register their works before
suing for copyright infringement.” See Reed Elsevier, Inc. v. Muchnik, 559 U.S. 154, 157
(2010). At the time of filing the current complaint, however, AStar only had a pending
application for registration and therefore did “not satisfy the registration precondition of Section
411(a).” See Patrick Collins, Inc. v. John Does 1-7, No. 12 Civ. 2963, 2012 WL 1889766, at *1
(S.D.N.Y. May 24, 2012). Even if AStar were permitted to file another amended complaint
asserting identical claims under the now-registered copyrights, see Pl.’s Opp’n at 12-13, its
copyright claims would still be deficient. The only potentially copyrighted materials are what
the Complaint describes as “Screen Shots” of its computer software displaying unexplained
statistics and graphs. See Compl. ¶ 299; Hepworth Decl., Exs. E & F. But AStar does not
plausibly allege how or when Hydro or KPMG used these “Screen Shots.” Indeed, it appears
that the “Screen Shots” do not depict computer software at all; rather, they are simply the results
of the risk assessment AStar performed for Hydro. See Hepworth Decl., Exs. E & F. As a result,
allowing AStar leave to amend its Complaint would be futile because it has not alleged facts that
plausibly state a claim for copyright infringement.6
AStar also fails to state a claim against Hydro for breach of good faith and fair dealings
(Count IV), misappropriation of trade secrets (Count V), misappropriation of confidential
information and unfair competition (Count VI), and unjust enrichment (Count VII). These
claims are duplicative of AStar’s breach of contract claims and do not support an independent
claim. See Bear, Stearns Funding Inc. v. Interface Group-Nevada, Inc., 361 F. Supp. 2d 283,
298 (S.D.N.Y. 2005) (“[A] breach of the implied covenant of good faith and fair dealing is
redundant where the conduct allegedly violating the implied covenant is also the predicate for a
claim of breach of an express provision of the underlying contract.”); Reed Constr. Data Inc. v.
McGraw-Hill Cos., Inc., 745 F. Supp. 2d 343, 353 (S.D.N.Y. 2010) (“A claim of
misappropriation ‘must spring from circumstances extraneous to, and not constituting elements
of, the contract, although it may be connected with and dependent upon the contract.’” (quoting
As the prevailing party on the copyright claim, Hydro requests attorneys’ fees under Section 505 of the Copyright
Act. See Hydro’s Mot. at 6-7. Although Second Circuit guidance clearly precludes AStar’s copyright infringement
claim, AStar’s request for leave to amend its complaint is not entirely frivolous or unreasonable. See Hallford v.
Fox Entm’t Grp., Inc., No. 12 Civ. 1806, 2013 WL 2124524, at *1 (S.D.N.Y. Apr. 18, 2013) (directing courts to
consider, in part, whether the non-prevailing party’s claims were frivolous or objectively reasonable). As a result,
the Court declines to award attorneys’ fees to Hydro.
Productivity Software Int’l, Inc. v. Healthcare Techs., Inc., No. 93 Civ. 6949, 1995 WL 437526,
at *8 (S.D.N.Y. July 25, 1995))); Orange Cnty. Choppers, Inc. v. Olaes Enters., Inc., 497 F.
Supp. 2d 541, 558 (S.D.N.Y. 2007) (“[N]o claim [for unfair competition] lies where its
underlying allegations are merely a restatement, albeit in slightly different language, of the
implied contractual obligations asserted in the cause of action for breach of contract.” (internal
quotation marks omitted)); Coty, Inc. v. L’Oreal S.A., 320 Fed. App’x 5, 6 (2d Cir. Mar. 31,
2009) (summary order) (“[I]t is black-letter law in New York that recovery on an equitable
theory of unjust enrichment is not permitted where the matter at issue is covered by a valid,
AStar asserts that these claims are independent of its contract claims in a number of
ways. But these arguments are meritless. For example, AStar argues that its misappropriation of
trade secrets and unfair competition claims are independent torts because Hydro willfully
intended to harm AStar. See Pl.’s Opp’n at 20-21, 23. AStar, however, does not plausibly allege
that Hydro went “beyond a mere breach of contract and act[ed] in such a way that a trier of fact
could infer that it willfully intended to harm the plaintiff.” See Carvel Corp. v. Noonan, 350
F.3d 6, 16 (2d Cir. 2003). AStar also claims that it had a separate fiduciary relationship with
Hydro and that the agreements “were simply a means to facilitate the transfer of knowledge from
Plaintiff to Hydro.” See Pl.’s Opp’n at 23. Yet the Complaint relies exclusively on the
confidentiality provisions contained in the contracts, not on a separate business relationship. See
Compl. ¶¶ 90-111. Thus, Counts IV-VII are duplicative of the breach of contract claims and
must be dismissed.
The Claims Against KPMG Are Dismissed
Aiding and Abetting Breach of Contract
AStar claims KPMG aided and abetted Hydro’s breach of contract (Count IX). New
York law, however, provides “no cause of action for aiding and abetting breach of contract,” see
Fisch v. New Heights Acad. Charter Sch., No. 12 Civ. 2033, 2012 WL 4049959, at *7 (S.D.N.Y.
Sept. 13, 2012), and therefore the claim is dismissed.
AStar’s tortious interference claim against KPMG (Count XII) also cannot survive
KPMG’s motion to dismiss. “[W]hen there is knowledge of a contract, and a competitor takes an
active part in persuading a party to the contract to breach it by offering better terms or other
incentives, there is an unjustifiable interference with the contract.” White Plains Coat & Apron
Co. v. Cintas Corp., 460 F.3d 281, 285 (2d Cir. 2006) (internal quotation marks omitted).
Plaintiff must show an “intentional inducement of the third party breach,” not merely that the
breach was a collateral effect of the defendant’s conduct. See In re Refco Inc. Sec. Litig., 826 F.
Supp. 2d 478, 520-21 (S.D.N.Y. 2011) (adopting Special Master Daniel J. Capra’s Report and
Recommendation). Here, AStar claims that “KPMG induced Hydro to provide it with Plaintiff’s
Proprietary Information so that after one year, KPMG could use Plaintiff’s Proprietary
Information to compete with it.” Pl.’s Opp’n at 29-30. But the Complaint is devoid of any facts
to support this claim. In fact, the Complaint alleges that Hydro first engaged ICF International to
analyze its risk issues, Compl. ¶ 160-61, and then “requested” KPMG’s assistance in analyzing
those issues further, id. ¶ 163. Since the facts alleged fail to support the inference that KPMG
intentionally induced Hydro’s breach of contract, they cannot support a claim for tortious
AStar also fails to state a claim against KPMG for misappropriation of trade secrets
(Count X) and misappropriation of confidential information and unfair competition (Count XI).
Since these claims are duplicative of each other, the Court will consider them as a single cause of
action. See Friedman v. Wahrsager, 848 F. Supp. 2d 278, 300 (E.D.N.Y. 2012). “To succeed on
a claim for the misappropriation of trade secrets under New York law, a party must demonstrate:
(1) that it possessed a trade secret, and (2) that the defendants used that trade secret in breach of
an agreement, confidential relationship or duty, or as a result of discovery by improper means.”
N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 43-44 (2d Cir. 1999). Here, AStar claims that
KPMG had an “agency relationship with Hydro[, which] makes KPMG equally liable for
Hydro’s breach of contract” and, nonetheless, KPMG’s conduct was improper. See Pl.’s Opp’n
at 23-24 & n.22. But as Hydro’s agent, KPMG was authorized to review AStar’s confidential
information under the contract to validate AStar’s findings. See supra Part III.A. Furthermore,
the Complaint fails to allege that KPMG’s conduct rose to the level of “improper means.” See
Big Vision Private Ltd. v. E.I. DuPont De Nemours & Co., No. 11 Civ. 8511, 2014 WL 812820,
at *36 (S.D.N.Y. Mar. 3, 2014) (defining “improper means” as “fraudulent misrepresentations to
induce disclosure, tapping of telephone wires, eavesdropping or other espionage” (internal
quotations omitted)). Instead, KPMG obtained the information as part of an ordinary consulting
arrangement. As a result, the claims against KPMG for misappropriation of trade secrets, unfair
competition, and misappropriation of confidential information are dismissed.7
AStar also alleges a claim for copyright infringement against KPMG (Count VIII). This claim is identical to
AStar’s copyright claim against Hydro and therefore fails for the same reasons. See supra Part III.B.
Accordingly, the Court GRANTS PUB's motion to dismiss with prejudice pursuant to
Federal Rule of Civil Procedure 12(b)(l) and Hydro and KPMG's motions to dismiss with
prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). The Clerk of the Court is
directed to enter judgment and close this case.
Dated: New York, New York
June 30, 2014
United States District Judge
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