Tesla Wall Systems, LLC v. Related Companies, L.P. et al

Filing 37

OPINION AND ORDER re: 22 MOTION to Dismiss, filed by New Hudson Facades LLC, Related Companies, L.P. For the reasons set forth above, the Court hereby grants defendants' motion to dismiss counts III, IV, VIII, and IX of plainti ffs' amended complaint and denies defendants' motion to dismiss counts I, II, V, and VI. As plaintiff has withdrawn count VII, the Court finds that defendants' motion to dismiss that claim is moot. The Clerk of Court is hereby instructed to close docket entry number 22, and as further set forth herein. (Signed by Judge Jed S. Rakoff on 12/15/2017) (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------x
TESLA WALL SYSTEMS, LLC,
l 7-cv-5966 (JSR)
Plaintiff,
OPINION AND ORDER

-vRELATED COMPANIES, L.P. and NEW
HUDSON FACADES LLC,
Defendants.

JED S. RAKOFF, U.S.D.J.
On August 7,

2017,

Tesla Wall Systems,

LLC

the instant action against Related Companies, L.P.
New Hudson

Facades

LLC

("NHF")

seeking

relief

("Tesla")

filed

("Related") and
for

defendants'

misappropriation of trade secrets in violation of the Def end Trade
Secrets Act

("DTSA")

(18 U.S.C.

§

1836)

and Related's false and

misleading statements in interstate commerce in violation of the
Lanham Act (15 U.S.C.
Dkt.

14.

1125). See Am. Compl.

Tesla also brought

competition,
fiduciary

§

tortious

duty,

aiding

seven state

interference

with

~~

141-154, 160-165,

law claims
contract,

and abetting breach of

for

unfair

breach

fiduciary

of

duty,

breach of the covenant of good faith and fair dealing, common law
fraud, and unjust enrichment. See id.

~~

155-159, 166-211.

This is the fourth suit arising out Tesla's "demise" in 2014,
see id.

~

Companies,

7, and the second pending before this Court, see Related
L.P.

v.

Ruthling,

No.

1

17

Civ.

4175

(JSR)

(S.D.N.Y.

2017).

Defendants now move to dismiss Tesla's claims on various

grounds including improper claim splitting, res judicata, laches,
and failure to state a claim upon which relief can be granted. See
Memorandum of

Law

in

Support

of

Defendants'

Motion

to

Dismiss

Plaintiff's Complaint ("Def. Mem."), Dkt. 22.
For the reasons set forth below,

the Court dismisses counts

III, VIII, and IX of plaintiff's complaint for failure to state a
claim and count IV as time barred, but denies defendants' motion
to dismiss counts I,
The

pertinent

II, V, and VI.
allegations,

1

as

set

forth

in

plaintiffs'

amended complaint, are as follows:
Related is a New York-based, multi-billion dollar real estate
developer. Am. Compl.

~~

1, 9. Tesla is a Nevada-based, vertically-

integrated "curtain wall" supplier that,
years,

supplied

building

high-end

projects.

Id.

'll':II

glass
8,

facades
25-29.

for a period of several
to

NHF

three
is

a

of

New

Related' s
York-based

affiliate of Related that manufactures and installs curtain wall
for Related's building development projects. Id.
Tesla

is majority-owned by its

founder

~

10.

Carleton Ruthling.

Related owns a non-controlling interest in Tesla, holds one of the

Tesla has voluntarily withdrawn count VII, its claim against
Related for breach of the covenant of good faith and fair dealing,
rendering defendants' motion to dismiss this claim moot. See
Plaintiff Tesla Wall Systems LLC's Memorandum of Law in Opposition
to Defendants' Motion to Dismiss ("Pl. Mem.") at 19, Dkt. 26.
1

2

three seats on its Board of Directors, and has the right to approve
certain corporate actions.
Pursuant

to

a

"Term

Sheet"

executed

in

2013,

Tesla

is

contractually obligated to distribute its cash in a "waterfall" as
follows:

(1) in payment of taxes;

(2) in repayment of cash advances

from Related, with accrued interest at 9%;

(3)

60% to Related and

40% to Skye Holdings [controlled by Ruthling] until existing loans
from Related are paid off [approximately $6 million]; and (4) 25%
to Related and

7 5%

to

Skye Holdings.

See Related v.

Ruthling,

Declaration of Nicholas A. Gravante, Jr. in Support of Plaintiffs'
Opposition to Defendant Christopher Du's Motion to Dismiss, Ex. 6,
Affidavit of Dr. Carleton Ruthling

~

13, Dkt. 69.

Because of a dispute between Ruthling and Related over these
terms, Related ended its partnership with Tesla in 2014. Prior to
this dissolution and, in or around July 2013, Related, in an effort
to

acquire

Tesla's

trade

secrets

allegedly

"began

a

concerted

campaign to induce Budd to leave his position as Tesla's President"
and to work for Related to form a competing curtain wall company
that would design, manufacture, and install curtain wall at reduced
costs.

See Arn.

employment

agreement

interference,
id.

~~

65-72,

~

Compl.

with

73.

Although Related knew that

Tesla

non-competition,

included

Budd's

confidentiality,

and non-solicitation clauses,

nonsee

Related nonetheless held numerous secret meetings

with him, see id.

~

75.

3

On or about
curtain

wall

indicated

to

it

distributed

December

13,

Related,

wanted
Tesla's

to

2013,

and

cease

business

while Tesla was

several
doing
plan

months

business
and

before

with

financials

executives without Tesla's knowledge or permission.
January

and

potential

February,

projects

Budd

for

a

travelled
new,

incorporated as NHF, see id.

~

to

New

competing

supplying

York

company,

Related

Tesla,
to
Id.
to

Budd

Related
~

84.

In

discuss

eventually

85, and on March 7 Related extended

Budd a written offer of employment, see id.

~

86.

The next day, Budd tendered his resignation with an effective
date of May 8,
months.

Id.

~

remaining President of Tesla for a

further two

87. During this time, and throughout his six-month

non-interference

period,

Budd

and

Related

worked

secretly

to

develop NHF and, at Related's request, Budd solicited Tesla's U.S.
employees in violation of a non-solicitation agreement. Id.
Subsequently,

~

94.

Related induced Budd to breach his obligations to

Tesla by requesting and receiving Tesla's confidential information
and trade secrets. 2 Id.

~

96.

Tesla's trade secrets allegedly consist of "the business design
and data demonstrating the feasibility, reliability, and cost of
building a curtain wail company from the ground up," id. ~ 108;
"information related to its operating practices and procedures,
including pricing and billing methods, financing, business plans,
and data concerning the strengths and weaknesses of the business
model and operations," id. ~ 109; "technical data, internal pricing
information, cost information, business methods and systems,
research, engineering designs, product plans, products, services,
2

4

In
recover

2015,
$3.3

following
million

Tesla's

that

a

"demise,"

contractor

on

Related
a

sought

Related

to

building

project still owed Tesla in conjunction with Tesla's work on that
project. See id.
contractor

~~

sought

123-24. In response to Related's request, the
an

executed

power

of

attorney

showing

Related had the authority to bill on Tesla's behalf. Id.
Related could not produce this,

~

that

129. As

Related directed a former Tesla

employee working for Related to create a false payment application
to submit it to the contractor. Id.
Related

employee

accessed

~

Tesla's

132. On January 16, 2015, a
billing

portal

without

authorization and fraudulently notarized a payment application.
See

id.

~~

million. Id.

133,
~

135.

Subsequently,

Related

received

the

$3.3

137.

DISCUSSION

In

connection

with

these

aforementioned nine claims

for

allegations,

Tesla

brings

the

relief against Related and NHF.

Defendants move to dismiss these claims on various grounds. They
argue that plaintiff's Lanham Act,

fraud,

and unjust enrichment

claims (the "fraud claims"), which are related to the $3.3 million
defendants allegedly stole,

are barred by res judicata, as they

should have been raised as counterclaims in a New York State Court

vendor lists, markets, software, inventions, marketing, finances,
and other information," id. ~ 110.
5

action,

The Related Companies,

L.P.

v.

Tesla Wall Systems,

LLC,

brought by defendants, which resulted in a $15.6 million judgment
against Tesla. No.
remaining claims
should have

been

resulted in a
retrial

on

650778/2015

(N.Y. Sup. Ct. 2015).

Plaintiff's

(its "trade secrets claims"), defendants argue,
raised

final

damages.

in

Tesla Wall

judgment against
No.

14

Civ.

Systems

v.

Budd,

which

Related and is pending a

8564

Defendants also contend that counts I,

(LLS)

(S.D.N.Y.

2014).

III, and VII fail to state

a claim and that counts II, IV, V, and VI are time barred.
The Court considers each argument in turn:
I.

The Fraud Claims
Counts

III,

VIII,

and IX of plaintiffs'

complaint

involve

payment to Related - by a third-party contractor - of $3.3 million
owed to Tesla.
A. Count III: Lanham Act Violation
Defendants argue that plaintiff's complaint fails to state a
claim under the Lanham Act arising out of this incident.
The

Lanham Act

provides

that

"any

term, name,

symbol, or device,

who,

on

or

in

uses in commerce any

connection with any goods or services .
word,

person

or any combination thereof,

or any false designation of origin, false or misleading description
of fact or false or misleading representation of fact, which
is

or to deceive as to the

likely to cause confusion

affiliation,

connection,

or

association

6

of

such

person

with

another person

shall be

liable in a civil action by any

person who believes that he or she is or is likely to be damaged
by such act." 15 U.S.C.

§

1125 (a) (1) (A).

In order to state a Lanham Act claim, Tesla must "show that
defendant's use of its mark is likely to cause
number

of

origin,

ordinarily prudent

sponsorship,

purchaser's

or approval'

of

'an appreciable

'confusion as

the defendant's

to

product."

Louis Vuitton Malletier S.A. v. Warner Bros. Entm't Inc.,
Supp.

2d 172,

177

(S.D.N.Y.

2012)

(quoting Savin Corp.

the

v.

868 F.
Savin

Group, 391 F.3d 439, 456 (2d Cir. 2004)).
But Tesla makes no allegations that Related used plaintiff's
mark "in commerce" either "on goods" - meaning "on the goods or
their containers or the displays associated therewith or on the
tags or labels affixed thereto, or if the nature of the goods makes
such placement impracticable,

then on documents associated with

the goods or their sale, and the goods are sold or transported in
commerce" -

or "on services"

(meaning "used or displayed in the

sale or advertising of services"). 15 U.S.C. § 1127.
The

Lanham Act

is

designed

to

protect

"trademark

owners

against confusion as to 'affiliation, connection, or association'
in the marketplace." V&S Vin & Spirit Aktiebolag ( Publ) v. Absolute
Pub. USA Inc., No. 05 Civ. 4429

(RMB)

(RLE), 2005 WL 3272828, at

*2 (S.D.N.Y. Nov. 28, 2005), report and recommendation adopted sub
nom. V&S Vin & Sprit Aktiebolag (publ) v. Absolute Publ'g USA Inc.,

7

2006

WL

197001

1125(a) (1) (A)

(S.D.N.Y.

Jan.

25,

2006)

(quoting

15

U.S.C.

§

(emphasis added)). Tesla's claim here has nothing to

do with Related's use of Tesla's trademark on its goods or services
in the marketplace. It is more akin to a conversion claim against
Related for misrepresenting to a third-party a right to receive
monies allegedly owed to Tesla. Thus, defendants' motion to dismiss
count III is granted.
B. Counts VIII and IX: Fraud and Unjust Enrichment

Turning to plaintiff's unjust enrichment and common law fraud
claims,

defendants

argue

that

these

claims

are

barred

by

res

judicata.
Under New York

law,

"once

a

claim is

brought

to

a

final

conclusion, all other claims arising out of the same transaction
or series of transactions are barred, even if based upon difference
theories or if seeking a different remedy." O'Brien v.

City of

Syracuse, 54 N.Y.2d 353, 357 (1981). "While New York does not have
a compulsory counterclaim rule (see, C.P.L.R.

§

3011), a party is

not free to remain silent in an action in which he is the defendant
and then bring a second action seeking relief inconsistent with
the judgment in the first action by asserting what is simply a new
legal theory." Henry Modell & Co. v. Minister, Elders & Deacons of
Reformed Protestant Dutch Church of City of N.Y.,
461 (1986)

(collecting cases)).

8

68 N.Y.2d 456,

Related contends that Tesla remained silent in a state court
case brought by Related, which awarded Tesla the same $3.3 million
they

now

bring

Companies,
million
before

L. P.

suit
v.

judgment

to

Tesla Wall

against

interest,

recover.

(In

Systems,

Tesla,

that

case,

LLC,

Related won a

which was

The

Related

$3. 3 million

than it otherwise would have been due

$15

lower,
to

the

contractor's 2015 payment to Related. See Declaration of Nicholas
A. Gravante, Jr. in Support of Defendants' Motion to Dismiss, Exs.
2-3, Dkt. 23.)
Under New York law, even if there is a relationship between
the offset in the state court action and the al legations here,
Tesla had no obligation to assert its cause of action here as a
counterclaim in the prior suit. Motler v. Motler,
246

(1983)

60 N.Y.2d 244,

(noting that all counterclaims are permissive and a

party may assert

his

or her

claim against

the

plaintiff

as

a

counterclaim or may bring a separate suit). Thus, defendants cannot
avoid liability for fraud by crediting plaintiff in an unrelated
contractual dispute under a collateral commercial agreement.
Nevertheless,
damages

alleged

Tesla
in

the

cannot

recover

complaint

here

the

$3.3

because

recovered this amount in the state court action.
one action is conclusive in a later one .

million

Tesla

in

already

"A judgment in

when the two causes

of action have such a measure of identity that a different judgment
in

the

second

would

destroy

or

9

impair

rights

or

interests

established by the first." Schuykill Fuel Corp. v. B. & C. Nieberg
Realty Corp., 250 N.Y. 304, 306-07 (1929). Thus, res judicata bars
Tesla

from

claiming

these

same

damages,

after

it

was

already

awarded those monies in an earlier proceeding.
As

a

result

Tesla

fails

to

state

a

claim

for

unjust

enrichment, which requires that Tesla "show that the other party
was

enriched,

at

plaintiff's

expense,

equity and good conscience to permit

and

that

'it

is

[the other party]

to retain

what is sought to be recovered.'" Georgia Malone & Co.,
Ralph Rieder,

86 A.D.3d 406,

408

(N.Y. App.

Div.

against

2011)

Inc.

v.

(quoting

Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182

(2011)).

Related was not enriched at Tesla's expense now that the monies at
issue have been disgorged in the state court action.
Nor does Tesla state a claim for fraud,

which requires that

Tesla allege (1) a material misrepresentation or omission of fact
(2) made by defendants with knowledge of its falsity (3) and intent
to defraud, which (4) plaintiff reasonably relied on,
in damage to plaintiff.
354 F. App'x 488,

Herzfeld v.

489 (2d Cir. 2009)

(5) resulting

JP Morgan Chase Bank, N.A.,
(citations omitted).

Were Tesla to plead damages beyond the $3.3 million Related
allegedly stole, Tesla might satisfy prong five. But Tesla includes
no such pleading in its complaint. Tesla only alleges loss of the
$3.3

million.

See

Am.

Compl.

':II

205

("As

a

direct

result

of

Related's fraudulent misrepresentations, the general contractor on

10

the 111 W. Wacker project paid Related $3.3 million owed Tesla");
id.

'1I

209

general

("As

a

result

contractor

for

of

the

Related' s

111 W.

misrepresentations,

the

Wacker project paid Related

approximately $3.3 million in contract proceeds that rightfully
belong to Tesla");

id.

Tesla's

id.

expense");

conscience

to

permit

9I 210
'1I

("Related was unjustly enriched at

211

Related

("It
to

is

against

retain

the

equity and good

$3. 3 million

that

rightfully belongs to Tesla. The Court should therefore disgorge
Related of those funds.").
Indeed,
harm as

it would be hard for Tes la to prove any additional

Tesla

was

purportedly a

defunct

entity

in 2015,

with

Related presumably holding a senior claim on any funds Tesla might
have recovered from the third-party contractor at that time.
Accordingly, defendants' motion to dismiss counts VIII and IX
of plaintiff's complaint is granted.
II.

The Trade Secret Claims

The
conduct

remainder
prior

Defendants

to

move

of
2015

to

plaintiff's
and

its

dismiss

claims

role

these

including improper claim splitting,

relate

Related's

plaintiff's

in

to

"demise."

claims

on

various

grounds

laches, and failure to state

a claim. The Court considers each argument in turn:
A. Improper Claim Splitting

Defendants argue that counts I,
plaintiff's

complaint

should

be

11

II,

IV,

dismissed

V,

VI,

because

and VII of
Tesla

was

required

to

bring

such

claims

in

its

earlier

lawsuit

against

Michael Budd. See Def. Mem. at 8.
"Claim-splitting is generally prohibited by the doctrine of
res

judicata,

which bars parties to a prior action or those in

privity with them from raising in a subsequent proceeding any claim
that they could have raised in the prior one,

where all of the

claims arise from the same set of operative facts." In re Methyl
Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 209 F.R.D. 323,
339

(S.D.N.Y.

filed

suit

2002)
is

(citations omitted).

duplicative,

courts

"To decide if a later-

examine

whether

the

two

proceedings involve the same (1) parties or their privies and (2)
transactions or series of transactions." Roca Labs, Inc. v. Century
Scis., LLC, No. 14 Civ. 60123, 2014 WL 11775477, at *3 (S.D. Fla.
June 16, 2014). "In its modern form, the principle of privity bars
relitigation of the same cause of action against a new defendant
known by a plaintiff at the time of the first suit where the new
defendant has a sufficiently close relationship to the original
defendant to justify preclusion." Central Hudson Gas & Elec. Corp.
v. Empresa Naviera Santa S.A., 56 F.3d 359, 367-68 (2d Cir. 1995);
see also Lacy v. Principi, 317 F. Supp. 2d 444, 447 (S.D.N.Y. 2004)
("When a party has litigated a claim to final judgment, that party
cannot avoid the res judicata effect of that judgment by bringing
suit against a new defendant that is in privity with the original
defendant.").

12

Defendants

argue

that

plaintiff's

complaint

seeks

damages

from Related and NHF for harm to Tesla arising from Budd joining
Related

and

NHF.

According

to

defendants,

these

are

the

same

"transactions" and "occurrences" for which Tesla previously sought
relief in Budd. Thus, defendants argue, plaintiff must prove that
there is privity between Budd and defendants to recover on their
trade secret claims. Def. Mem. at 11.
This argument mischaracterizes plaintiff's complaint in Budd,
as well as the applicable law here. Though courts have routinely
found pri vi ty between co-employees sued in separate suits over
allegedly tortious acts that occurred during the course of their
employment, 3 working together toward a common goal is insufficient
to establish privity.
Related
interests

and

NHF,

defendants

from Michael Budd.

here,

have

distinct

See Faiveley Transp.

USA,

Wabtec Corp., 758 F. Supp. 2d 211, 217 n.20 (S.D.N.Y. 2010)

legal

Inc.

v.

(noting

that the "general rule of privity for purposes of res judicata 'is

3

See, e.g., Amadsau v. Bronx Lebanon Hosp. Ctr., No. 03 Civ. 6450
(LAK) (AJP), 2005 WL 121746, at *8 (S.D.N.Y. Jan. 21, 2005), report
and recommendation adopted sub nom. Amadasu v. Rosenberg, 2005 WL
954916 (S.D.N.Y. Apr. 26, 2005), aff'd, 225 F. App'x 32 (2d Cir.
2007). Courts have also found privity where plaintiffs brought
claims against an employer in a prior suit and then brought suit
against that employer's employees. See Mccarroll v. U.S. Fed.
Bureau of Prisons, No. 3:11 Civ. 934 (VLB), 2012 WL 3940346, at *8
(D. Conn. Sept. 10, 2012) (collecting cases) ("Courts have long
recognized that privily exists between co-employees or employees
and their employers for res judicata purposes"). Privily may also
exist between corporate entities and their directors or trustees.
13

that one whose interests were adequately represented by another
vested

with

the

authority

of

representation

is

bound

by

the

judgment'"). Indeed, Budd was initially in privity with plaintiff,
not defendants.

In the earlier action,

plaintiff brought claims

against Budd arising out of his violation of his non-compete, nondisclosure

agreement,

Related' s,

contractual obligations to Tesla.

claims against

and

fiduciary

Budd's,

obligations
Here,

not

Tesla brings

Related arising out of a distinct

set of

legal

obligations that Related had to Tesla as its customer, part-owner,
and competitor.

While Budd is undoubtedly a

between the two suits,

common denominator

and judicial economy would have been far

better served had Tesla brought its claims against all parties
simultaneously, defendants cite no authority for the proposition
that

Tes la,

on

these

facts,

is

not

entitled to

re 1 ief merely

because Tesla chose not to sue them three years ago.
As Budd was not defendants' privy in plaintiff's prior suit,
and the

legal

rights

and obligations

of

Budd and Related are

separate and distinct, the Court finds no improper claim splitting
and denies defendants' motion to dismiss plaintiff's trade secret
claims on the basis of res judicata. See Burberry Ltd. v. Horowitz,
534

F.

App'x

41,

46

(2d

Cir.

2013)

plaintiff's "right to relief arises

(noting

from what

that
is

even

if

a

realistically

viewed as a single episode," plaintiff needn't join all the alleged
tortfeasors

in

one

suit

"unless

14

there

is

pri vi ty

among

those

parties, for in that event separate suits against them are treated
as the equivalent of separate suits against the same party").
B. Laches

Defendants also move to dismiss plaintiff's state law claims
for

unfair

breach

of

competition,
fiduciary

tortious

interference

and

and

duty,

aiding

with

abet ting

contract,
breach

of

fiduciary duty on the grounds that these claims were filed outside
the applicable limitations period. Murphy v. Morlitz, No. 15 Civ.
7256,

2017

WL

4221472,

at

*6

(S.D.N.Y.

Sept.

21,

2017)

("[a]

defendant may raise a limitations argument in a motion to dismiss
'if the defense appears on the face of the complaint'")
Staehr v. Hartford Fin. Servs. Grp.,

Inc.,

(quoting

547 F.3d 406,

425

(2d

Cir. 2008)).
In
Tesla's
Google

New

York,

claims
Inc.,

(S.D.N.Y. Mar.

defendants

are

No.

untimely.

12

31,

Civ.

2014).

bear

the

burden

See Voiceone

9433

(PGG),

2014

of

proving

Communic' ns,
WL

that

LLC

10936546,

v.

at

*7

Dismissal is appropriate only if "the

complaint facially shows noncompliance with the limitations period
and the affirmative defense clearly appears on the face of the
pleading." In re S. African Apartheid Litig., 617 F. Supp. 2d 228,
287

(S.D.N.Y. 2009)
To determine

(internal quotations omitted).
the

applicable

limitations period,

must apply the choice of law rules of the forum state,

the Court
here New

York. El-Hanafi v. United States, 40 F. Supp. 3d 358, 365 (S.D.N.Y.

15

2014)

(citing

1989)).

Under

Rogers
New

v.

Grimaldi,

York

C.P.L.R.

875
§

F.2d

202,

94,

1002

"when

a

(2d Cir.

nonresident

plaintiff sues upon a cause of action that arose outside of New
York,

the

court

must

apply

the

shorter

limitations

including all relevant tolling provisions, of either:
or

(2)

the

state where

the

cause

of

action

Kleinhandler, 807 F.3d 492, 497 (2d Cir. 2015)

period,

(1) New York;

accrued."

Thea

v.

(quotation omitted).

Thus, for an action accruing outside New York, plaintiff must
comply with the statute of limitations of two jurisdictions. Id.;
see also Stuart v. Am.
1998)

Cyanamid Co.,

158 F.3d 622,

627

( 2d Cir.

(noting that "an action by a nonresident on a foreign cause

of action is untimely if it is barred under the law of either New
York or the state where the injury occurred").
Here,

Tesla

alleges

purely economic

injury and

itself as a resident of Nevada. See Am. Compl.

~

identifies

8. Accordingly,

plaintiff's claims must be dismissed if they are time-barred under
either New York or Nevada law.

See Voiceone Communications,

2014

WL 10936546, at *9 (noting that "the residence of an LP or LLC is
determined not by the citizenship of its members,

but rather by

the location of its principal office") .
Although Tesla attempts to dispute its residency in Nevada arguing that the pleadings merely state its residence at the time
of the alleged injuries and that it will show ultimately that the

16

economic impact of its loss occurred in New York 4

these arguments

-

are wholly without merit.
There are no allegations in the complaint supporting Tesla's
contention that its financial base is in New York. Moreover,

the

connection between defendants' conduct and New York is irrelevant
to this question. There is also no evidence that Tesla's principal
place of business is anywhere other than Nevada,

which is what

Tesla pleads in its complaint here, and in its 2014 complaint in
Budd. See Budd, No. 14 Civ. 8564, Dkt. 1, Compl.

~

5.

As courts regularly grant motions made pursuant to § 202 based
on the allegations, see, e.g., Luv N' Car, Ltd. v. Goldberg Cohen,
LLP, the Court will apply both the Nevada and New York statute of
limitations to evaluate the timeliness of plaintiff's claims. No.
16-3219, 2017 WL 3588274, at *l (2d Cir. Aug. 21, 2017).
(1)

Count II: Unfair Competition

Defendants argue that a three year limitations period on Count
II

began to toll as early as March 2014 when Budd tendered his

resignation to Tesla and as late as July 2014 when communications
between Budd and Tesla show that Tesla was aware that Budd had
left Tesla to join Related. See N.R.S. 600A.080 ("[a]n action for

See Pl. Mem. at 14 (arguing that its loss was sustained in New
York because "Related resides and operates from New York," "the
Hudson Yards projects that were among the primary reasons for
Tesla's creation were in New York," "Tesla was awarded work in and
from New York," and "a litany of wrongful acts were committed and
orchestrated by Related in and from New York") .
4

17

misappropriation

must

be

brought

within

3

years

after

the

misappropriation is discovered or by the exercise of reasonable
diligence should have been discovered") .
Defendants point to a May 2, 2014 letter from Tesla to Budd,
incorporated by reference in plaintiff's complaint, see Am. Compl.
!

4,

which states in relevant part:

"You have engaged in self-

dealing activities with Related Limited Partners,

a customer of

the Company, during your term as President of the Company and that
you intend to work for them after leaving the Company." See Budd,
Compl. !

36; id. Ex. D. Thus, defendants argue, plaintiff knew or

should have discovered the facts upon which it bases its claim
prior to August 2014. See Glob. Advanced Metals USA, Inc. v. Kemet
Blue Powder Corp., No.

11 Civ. 793

(RCJ), 2013 WL 2319348, at *3

(D. Nev. May 28, 2013).
But

defendants

do

not

point

to

any

allegations

in

the

complaint that establish that Tesla knew by July 2014 that Related
had established NHF or awarded it contracts for

four projects.

Where

complaint

it

is

not

apparent

from

the

face

of

the

that

plaintiff's claim is time barred, defendants cannot prevail on a
motion

to

dismiss

on

that

basis.

Litig., 127 Nev. 196, 228 (2011)

See

In

re Amerco

Derivative

("[w]hen the plaintiff knew or in

the exercise of proper diligence should have known of the facts
constituting the elements of his cause of action is a question for
the

trier

of

fact")

(internal

18

quotations

omitted).

As

Tesla

plausibly claims that

it did not learn of Related's efforts to

recruit its other employees or acquire misappropriated information
until

after

defendants'

discovery
motion

to

commenced
dismiss

in

count

Budd,
II

on

the
that

Court
basis

denies
without

prejudice to defendants making an affirmative defense of laches
following discovery.
(2)

Count IV: Tortious Interference With Contract

A three years statute of limitations period - triggered upon
breach of the contract at issue - applies to plaintiff's tortious
interference claim. See Stalk v. Mushkin,

125 Nev. 21, 27

(2009)

(citing N.R.S. 11.190(3) (c)).
While

Tesla

certainly

discovered

far

more

information

regarding defendants' alleged wrongful acts during the course of
discovery in Budd, Tesla knew the essential facts giving rise to
their

tortious

interference

claim

in

July

2014.

Specif ical 1 y,

Tesla knew that Budd had left to Join Related in contravention of
a contract Related had approved which included anti-competition,
anti-solicitation, and confidentiality clauses.
The Court rejects plaintiff's general argument, see Pl. Mem.
at 18-19, that it has plead facts sufficient to warrant equitable
tolling of its trade secret claims. See Cantor Fitzgerald Inc. v.
Lutnick, 313 F.3d 704, 710-13 (2d Cir. 2002)

(applying Nevada law

and rejecting plaintiff's attempt to assert equitable tolling in
opposition to motion to dismiss where plaintiff was on "inquiry

19

notice"); Putter v. N. Shore Univ. Hosp., 7 N.Y.3d 548, 553 (2006)
(rejecting invocation of equitable tolling in opposition to motion
to dismiss based on plaintiff's "level of awareness and subsequent
inaction"). Moreover, Tesla does not address these issues in its
answering papers. See Romeo & Juliette Laser Hair Removal, Inc. v.
Assara I LLC, No. 08 Civ. 442
(S.D.N.Y. Sept. 23, 2014)

(TPG)

(FM),

2014 WL 4723299, at *7

("At the motion to dismiss stage .

a plaintiff abandons a claim by failing to address the defendant's
arguments in support of dismissing that claim") .
Accordingly, as the relevant contract was breached in March
2014,

and Tesla knew of the breach as early as May,

the Court

dismisses plaintiff's tortious interference claim as time barred.
(3)

Count V: Breach of Fiduciary Duty

A breach of fiduciary duty claim is subject to a three year
statute

of

limitations,

accruing

when

plaintiff

reasonably should have known facts giving rise to

"knew

[the]

or

alleged

breach of fiduciary duty." Shupe v. Ham, 98 Nev. 61, 65 (1982).
Tesla alleges the Related breached its fiduciary duties to
Tesla by,
its

own

inter alia,
benefit,

using Tesla's confidential information for

using

Tesla's

property,

planning,

forming,

purchasing, staffing, and operating a building fa9ade company to
compete

with

interfering

Tesla,

prospective business
Budd. See Am. Compl.

relationships,
~~

with
and

Tesla's

and

colluding with Michael

85, 94, 104, 118, 187.

20

current

Defendants
Related' s
claim

for

argue

that

Tesla

knew or

alleged breach by July 2014.
unfair

competition,

should have

known of

But as with plaintiff's

plaintiff's

claim

for

breach

of

fiduciary duty involves far more than mere allegations that Related
hired Budd in violation of his non-compete. Tesla's complaint here
includes

allegations

that

Related

fraudulently

efforts to form a competing curtain wall company,
hid information it had a duty to disclose,

concealed
see id.

see id.

118, and induced Budd to solicit its employees, see id.

~~
~

~

85,

its
187,
104,

94. There

are no allegations in the complaint suggesting that Tesla was aware
of these transgressions prior to August 2014. Therefore, the court
denies defendants' motion to dismiss count V on this basis, without
prejudice to defendants making an affirmative defense of laches
following discovery.
(4)

Count VI: Aiding and Abetting Breach of Fiduciary Duty

Defendants

argue

that

Tesla's

aiding

and

abetting

Budd's

breach of fiduciary duty claim is time barred.
Under New York law,
a

tort

~[a]

claim that a person aided and abetted

is governed by the same statute of

limitations that

is

applicable to the underlying tort allegedly aided and abetted."
Hudson v. Delta Kew Holding Corp., 992 N.Y.S.2d 158 (Sup. Ct. 2014)
(citation omitted); accord Access Point Med., LLC v. Mandell, 106
A.D.3d 40, 46 (N.Y. App. Div. 2013).

21

The

parties

stipulate

for

purposes

of

this

motion

that

plaintiff's aiding and abetting claim elapses after three years
following either plaintiff's injury or when plaintiff knows or has
reason to know the facts supporting its claim. See Pl. Mem. at 18.
Tesla was aware prior to August 2014 that Budd had breached
his contractual obligations, because Tesla knew that Budd had left
Tesla to join Related. But it is not clear from the face of the
complaint that Tesla knew that Related and Budd had breached his
fiduciary duties with the aid of Related by developing NHF while
he

was

still

defendants'

employed

at

Tesla.

Therefore,

the

Court

motion to dismiss count VI as time barred,

denies
without

prejudice to defendants making an affirmative defense of laches
following discovery.
C. Failure to State a Claim

Defendants move in the alternative to dismiss counts I

and

VII for failure to state a claim pursuant to Rule 12(b) (6):
(1)

Count I: DTSA Violation

The Defend Trade Secrets Act ("DTSA") creates a federal claim
for misappropriation of trade secrets.
A

trade

information,

secret

is

defined

as,

inter

alia,

technical

including "programs," "processes," and "codes," if

(A) "the owner thereof has taken reasonable measures to keep such
information secret; and
economic value

(B)

"the information derives independent

from not being generally known

22

[or]

readily ascertainable
economic value

[to]

another person who can obtain

from the disclosure or use of the

information."

Syntel Sterling Best Shores Mauritius Ltd. v. Trizetto Grp., Inc.,
No. 15 Civ. 211 (LGS)
2 3, 2016 )

(RLE), 2016 WL 5338550, at *6 (S.D.N.Y. Sept.

( quot i n g 18 U . S . C .

Defendants
dismissed

argue

because

that

Tesla

18 3 9 ( 3 ) (A) - ( B ) ) .

§

plaintiff's
offers

only

DTSA

claim

vague

and

should

be

conclusory

allegations as to what purportedly constitute its trade secrets.
See Dennis v.

Zuckerberg, No.

*2 (N.D. Ohio Sept. 5, 2017)

4:17 Civ.

670, 2017 WL 3873761, at

(holding that plaintiff's "conclusory

allegations that Defendants violated multiple trade secret laws by
using

'proprietary business information owned by the Plaintiff'

without

Plaintiff's

consent"

were

insufficient

to

"afford

Defendants fair notice of the grounds on which Plaintiff's claims
rest").
But

Tesla's

complaint

is

highly

regarding

specific

defendants' course of conduct, pleads numerous specific categories
of

information,

such

as

information, work product,
Am.

Compl.

<JI

110,

and

"technical
research,

includes

data,

internal

pricing

engineering designs," etc.,

email

evidence

suggesting

that

defendants believed Tesla had valuable trade secret information.
See

id.

<JI

41

("What

is

proprietary

is

what

[Tesla]

buys,

how

[Tesla] pays for it, and how [Tesla] deals with the transactions
. . . The product outflow from China for 500 NLSD [a Tesla-Related

23

building project in Chicago] has been amazing, we have not had a
single hold up . . . it is not being propagated within the industry,
so [Tesla's] proprietary methods are kept confidential.").
Moreover,

there

is

no

heightened pleading

Chang, No. 16 Civ. 2354 (BRM)
Feb.

7,

on

See Chubb Ina Holdings Inc.

actions brought under the DTSA.

requirement

v.

(DEA), 2017 WL 499682, at *10 (D.N.J.

2017)

("there is no heightened pleading standard for a

[DTSA] claim")

(internal quotation omitted). Thus, "trade secrets

need

disclosed

not

be

in

detail

in

a

complaint

alleging

misappropriation." Mission Measurement Corp. v. Blackbaud,
216 F. Supp. 3d 915, 921 (N.D. Ill. 2016)

Inc.,

(quotation omitted). The

Court therefore declines to dismiss count I on this basis.
Separately,
should

be

defendants

restricted,

as

argue
the

that

DTSA

plaintiff's

"applies

only

DTSA
to

claim

acts

of

misappropriation that occur on or after the date of the enactment
of th[e] Act, May 11,
224

F.

Supp.

omitted).

3d

317,

2016." Champions League,
326

(S.D.N.Y.

See also Syntel Sterling,

2016)

Inc.

v. Woodard,

(internal

2016 WL 5338550,

quotation
at

*6

(as

claimants "allege that Syntel continues to use its Intellectual
Property to directly compete with

[claimants],

the wrongful act

continues to occur after the date of the enactment of DTSA").
"Misappropriation" is defined within DTSA as an unconsented
disclosure or use of a trade secret by one who (i) used improper
means to acquire the secret, or,

24

(ii) at the time of disclosure,

knew or had reason to

know that

the

trade secret was

acquired

through improper means, under circumstances giving rise to a duty
to maintain the secrecy of the trade secret,
through a person who owed such a duty.
5338550, at *6 (citing 18 U.S.C.

§

or derived from or

Syntel Sterling,

2016 WL

1839 (5)).

Tesla clearly alleges that "Defendants' misappropriation of
Tesla's trade secrets is ongoing." Arn. Compl. '1I 121. See also id.
("They continue using Tesla's trade secrets to obtain business as
a

result

of

their

suffered and will

misappropriation.");
continue

to

id.

':!!

153

suffer damages.") .

("Tesla

has

Additionally,

Tesla states a plausible claim arising out of defendants'

pre-

enactment conduct. Moreover, defendants appear to concede that as
long

as

plaintiff

continues

to

use

trade

secrets

acquired

wrongfully prior to enactment, the Act's requirements are met.
If Tesla is able to substantiate its allegations, it is likely
to be able to show an "act of misappropriation" occurring after
2016 in the form of defendants continued use of its trade secrets.
Thus,

the question is whether Tesla should be allowed to recover

for damages that occurred as a result of its pre-enactment use of
Tesla's trade secrets - an issue which the parties suggest has not
been reached previously by other courts. See Pl. Mem. at 22.
For now, the Court finds that this question is not ripe. If,
following discovery,
enactment damages,

Tesla is able to prove both pre- and post-

Tesla will be permitted to argue that it can

25

collect

for

both

injuries.

Likewise,

if

Tesla

makes

such

an

argument, Related may argue that, regardless of whether Tesla can
prove these damages,

it cannot collect for any of the damages it

experienced pre-enactment. The Court therefore denies defendants'
motion to dismiss count I without prejudice to the parties taking
up these further issues on summary judgment or at trial.
(2)

Count

VII: Good Faith and Fair Dealing Breach

The seventh count of plaintiff's complaint seeks to recover
damages for Related's alleged breach of the covenant of good faith
and fair dealing. Tesla voluntarily "withdraws" this claim in its
answering papers. See Pl. Mem. at 19.
III. CONCLUSION

For

the

reasons

set

forth

above,

the Court

defendants'

motion to dismiss

counts

III,

plaintiffs'

amended complaint

and denies

IV,

hereby grants

VIII,

defendants'

and

IX of

motion to

dismiss counts I, II, V, and VI. As plaintiff has withdrawn count
VII, the Court finds that defendants' motion to dismiss that claim
is moot.
The Clerk of Court is hereby instructed to close docket entry
number 22.

SO ORDERED.
Dated:

New York, NY
December /5, 2017

26