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

Filing 65

OPINION AND ORDER re: 45 MOTION for Summary Judgment filed by New Hudson Facades LLC, Related Companies, L.P. For the reasons stated above, the Court grants defendants' motion for summary judgment on Counts I, II, V, and VI, dismissing them with prejudice. The Court further permits limited discovery and supplemental briefing and motion practice with respect to Counts VIII and IX, as set forth above. The Clerk of Court is hereby instructed to close docket entry number 45. (Signed by Judge Jed S. Rakoff on 5/13/2018) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------x
TESLA WALL SYSTEMS, LLC,
17-cv-5966
Plaintiff,
OPINION AND ORDER
-vRELATED COMPANIES, L.P. and NEW
HUDSON FACADES LLC,
Defendants.

------------------------------------x
JED S. RAKOFF, U.S.D.J.
Before

the

Companies, L.P.

Court

is

the motion of

defendants The

Related

("Related") and New Hudson Facades LLC ("NHF") for

summary judgment as to four claims in a suit filed by plaintiff
Tesla Wall Systems LLC ("Tesla")

on August 7, 2017. See Dkt. 45;

Complaint, Dkt. 1. Defendants argue that all four claims - Counts
I, II, V, and VI of plaintiff's complaint - fail on the undisputed
facts and that, in addition, three of these claims are time barred
as a matter of law. See Memorandum of Law in Support of Defendants'
Motion
opposes.

for

Summary

See

Judgment

Plaintiff's

("Def.

Memorandum

Mem. "),
of

Dkt.

Law

in

46.

Plaintiff

Opposition

to

Defendants' Motion for Summary Judgment ("Pl. Opp."), Dkt. 49.
Also before the Court is the motion of Tesla to vacate the
Court's Opinion and Order dated December 15,
the pleadings Counts VIII
Letter dated April 3,

2018

2017 dismissing on

and IX of plaintiff's complaint.
("Pl.

1

Ltr."),

Dkt.

60.

See

Tesla argues

that these claims should be reinstated now that New York's First
Appellate Division has vacated a related New York State Supreme
Court judgment. Id. at 2. Defendants oppose. See Letter dated April
6, 2018

("Def. Ltr."), Dkt. 62.

For the reasons set forth below, the Court grants defendants'
motion for summary judgment in full,

dismissing Counts I,

II, V,

and VI with prejudice. With respect to plaintiff's motion regarding
Counts VIII and IX,

as discussed further herein,

permit

to

the

parties

thereafter,
these

to submit

claims

reopen

discovery

on

the Court will

these

claims

and,

full briefing on the question of whether

should be

reinstated and,

if

so,

whether

summary

judgment is warranted.
The pertinent facts,

either undisputed,

or, where disputed,

taken most favorably to plaintiff, are as follows:
Defendant Related is a privately-owned real estate firm that
manages

the

development,
sales

of

acquisition,

management,

residential,

marketing,

and

properties.

See The Related Companies,

retail,

L.P.,

financing,
and

off ice

New Hudson Facades

LLC, and MBM Supply LLC's Local Rule 56.1 Statement of Undisputed
Facts in Support of Their Motions for Summary Judgment ("Def. 56.1
St.")

<JI

6,

Dkt.

47;

Carleton Ruthling,

Tesla Walls LLC,

Hudson

Walls LLC, Skye Holdings Ltd. and Tesla Wall Systems LLC's Response
to Plaintiffs' Rule 56.1 Statements of Undisputed Facts ("Pl. Reply
56.1

St.")

<JI

6,

Dkt.

51.

Co-defendant

2

New

Hudson

Facades

LLC

("NHF") is a limited liability company specializing in the design,
engineering,
id.

20,

qr

and manufacturing of,

inter alia,

curtain wall,

see

a type of glass and aluminum fa9ade used in high-rise

buildings.
Tesla is a Delaware limited liability company, id. qr 12, with
its principal place of business in Las Vegas, Nevada,
Tesla's sole member is Carleton Ruthling,
id.

qr 7.

id. qr 47,

Ruthling formed Tesla on September 6,

qr 50.1

id.

an engineer,

2011,

id.

qr 49,

pursuant to an oral agreement with Related that Related would fund
Tesla,

id.

qr 53,

and Ruthling would run it,

id.

qr

47.

Although

Related and Ruthling were never able to execute a formal, written
operating agreement, id. qr 73, Ruthling was named as the managing
member

and

chairman

of

Tesla

in

every

draft

the

parties

contemplated, id. qr 47, and is named as the managing member in the
Certificate of Formation filed in Delaware, id. qr 49.
On November 28,

2012,

Ruthling and Related executed a two-

page term sheet naming Skye Holdings Ltd. Samoa ("Skye Holdings"),
a limited liability company formed in Hong Kong and owned in part
by Ruthling,

see id.

25% owner of Tesla,

qr 1 7,

as 75% owner of Tesla and Related as

id. qr 68. Although the Term Sheet includes no

1 Plaintiff's responding 56.l Statement skips over paragraph 36 of
defendants' 56.1 Statement. Accordingly, plaintiff's response to
defendants' paragraph 50 is numbered paragraph 49. The paragraph
numbers in this Opinion and Order correspond to those used in
defendants' moving 56.1 Statement.

3

substantive

guidance

for

the

day-to-day

operations

of

the

business, see Reply to the Ruthling Parties Response to Related's
Local

Rule

56.1

Statement

of

Undisputed

Facts

in

Support

of

Related's Motions for Summary Judgment and the Ruthling Parties'
Counter Statement of Undisputed Material Facts
9I

St.")

9,

Dkt.

54,

it

does

provide

for

"Available Cash" in a "Waterfall," first,

the

("Def. Reply 56.1
distribution

of

in "payment of taxes,"

then, in "repayment of all project cash advances [to Related] with
accrued interest," then,

60% to Related and 40% to Skye Holdings

until existing loans from Related are repaid, and finally, 25% to
Related and

75%

to

Skye

Holdings,

see

Tesla Wall

Systems

LLC

Tentative Term Sheet dated November 28, 2012, Dkt. 143-11, No. 17
Civ. 4175.
Tesla's business was to source curtain wall in Asia, ship it
to the United States, and install it on the exterior of Related's
buildings. See Def. 56.1 St. 9I 38. In addition to earning income
as a subcontractor on Related's developments, Tesla also received
cash advances from Related totaling over $15 million.

Id. 9I9I 84,

382. These payments were designed in part to help Tesla develop a
successful business.
id.

<JI

Tesla,

however,

never turned a profit,

see

199, and, at a meeting on August 1, 2013, Related informed

Ruthling that it was considering withdrawing its support for the
venture, id. 9I 224.

4

Thereafter,

Tesla's number two executive,

Michael Budd,

"a

curtain wall expert with over 30 years of experience in the field,"
id.

<JI

55, sought a meeting with Related to discuss its "perspective

on

the

future

forward," id.

of
<JI

Tesla

228.

and

my

role

and

Prior to joining Tesla,

opportunities

going

Budd led a team of

300 people at the largest custom cladding company in the world,
helping to build the Petronas Towers and the Getty Museum.
56.

Although

Budd was

initially concerned about

Id.

leaving a

<JI

big

company to join a startup like Tesla, he thought that Tesla offered
a "great opportunity to work with Related." Id.
an

Email

from

Brenner

to

Declaration of Nicholas A.
Companies,
Motions

for

L. P.,

MBM

Ruthling
Gravante,

Supply

Summary Judgment

Co.

LLC,

dated
Jr.

<JI

58; id.

April

28,

(citing
Ex.

32,

in Support of Related

and

New

("Gravante Deel."),

Hudson
Dkt.

Facades'
48-3

("I

reassured him that we had great confidence in you and the Company
and are committed to financial support. He is concerned about going
from a big company to a startup")).
With Ruthling's knowledge, Related hired Budd to serve as a
consultant on a New York building project unrelated to Tesla. Id.
<JI

227. Ruthling did not object to Budd's doing consulting work for

Related; he even wrote to Budd that Related's interest in securing
his services "would likely be good." Id. But if Ruthling thought
that Related's interest in working with Budd would lead Related to
decide not to pull the plug on Tesla, he was wrong.

5

Id.

<JI<JI

233,

238. By October, Related had decided to stop the business.

Id.

~

233 (Ruthling noting that Related had "stopped the business"); id.
~~

234, 256.
Also

in October,

Related sought

to

"finalize a

deal

with

Budd," ideally before commencing the "orderly wind down of Tesla."
Email from Stephen Ross to Ken Wong dated October 15,
25,
3.

Declaration of Lawrence A.
Related' s

executives

valuable going forward.

Dany III

thought

that

2013,

("Dany Deel."),
Budd's

services

Ex.

Dkt. 52would be

See Email from Brenner to Loughran dated

September 16, 2013, Ex. 21, Dany Deel.

(explaining that Budd "is

a

of

valuable

resource

given

the. volume

work

we

have

on

the

horizon" and that Related should "see if there is anything we can
work out that would be beneficial to both of us").
On March 8, several months later and with Tesla winding down,
Budd gave Ruthling his 60-days' notice. Def. 56.1 St.

~

325. Around

this time, Related approached a longtime manufacturer of glass and
metal products named Allen Cohen about developing a new curtain
wall manufacturing facility in Pennsylvania to supply Related's
projects.

Id.

~

318.

On March 19,

while still employed by Tesla,
meet with Cohen. Id.

~

without telling Ruthling and

Budd traveled to Pennsylvania to

331. The purpose of Budd's trip was to see

Cohen's operations, visit a possible site for a new factory,
discuss a business plan. Id.

~

331.

6

and

On April

16,

2014,

Ruthling wrote an email

intended for a

Related executive in which he accused Budd of "self-dealing" in
violation of his "duty of loyalty to Tesla." Id. q[ 261. Ruthling
explained that when Budd joined Tesla he signed up with Tesla, not
with Related,
clause.

and that his contract includes a non-interference

See Email

from Ruthling dated April 16,

2014,

Ex.

265,

Gravante Deel., Dkt. 48-16. He further noted that Related, having
reviewed

and

approved

Budd's

contract,

was

aware

of

the

non-

interference clause. Id. On April 24, Ruthling emailed Related to
say that Budd had "clearly interfered with Tesla's primary business
interest

and this

Related." Def.

was

56.1 St.

done
q[

with

the

of I supported by

knowledge

264. On May 2,

2014,

Ruthling emailed

Budd accusing him of breaching his fiduciary duties to the company.
Id. qr 265.
On May 5, 2014, NHF was established. Id. qr 335. On or around
May 8, 2014, Budd joined Related as a Senior Vice President.
q[ 336. On July 16,

Id.

Ruthling wrote to a colleague that Related was

backing what he called Budd's "new company." Id.

'lI 270.

In late

July, Related, Ruthling, and their attorneys exchanged redlines of
a

wind down

agreement.

Id.

qr

268.

As

part

of

that

agreement,

Related sought a release from any claims Tesla might have against
Related

or

its

affiliates

in

connect ion

with

Budd's

work

for

Related. See Closeout Agreement dated July 31, 2014 'lI 12, Ex. 297,
Gravante Deel., Dkt.

48-19

("This mutual release includes but is

7

not

limited

to

a

mutual

release

of

all

claims

of

any

kind

whatsoever, whether known or unknown, resulting from Related's or
its affiliates' past or future retention of Michael Budd ("Budd"),
as an employee, consultant or otherwise."). On July 31, 2014, Tesla
ceased operations.

See Def.

56.1 St.

~

165. On August 13,

2014,

the negotiations between Ruthling and Related broke down and the
wind down agreement was never executed. Id.

~

271.

A few weeks later, Tesla filed suit against Budd for breach
of contract and breach of fiduciary duty in the Southern District
of New York.
(S.D.N.Y.

See Tesla Wall

Systems v.

2014). On November 29,

2016,

Budd,

No.

14 Civ.

8564

a jury found Budd liable

and awarded Tesla $14.5 million in damages. 2 See Dkt. 87, No.

14

Civ. 8564. Thereafter, on February 17, 2017, Related brought suit,
inter alia,
L.P.

v.

against Ruthling for

Ruthling,

No.

17 Civ.

fraud.

4175

See Related Companies,

(S.D.N.Y.

2017).

On July 7,

Ruthling moved to dismiss Related's complaint. Id. at Dkt. 66. On
August 4, this Court issued a bottom-line Order denying Ruthling's
motion to dismiss. Id. at Dkt. 81. Three days later, on August 7,
2017, Tesla filed the instant action against Related and NHF. See
Dkt.

1. On October 6,

complaint.

See Dkt.

2017, defendants moved to dismiss Tesla's

21.

By Opinion and Order dated December 15,

2 The $14.5 million damages award was subsequently vacated.
See
Opinion and Order dated April 26, 2017, No. 14 Civ. 8564, Dkt.
130. Prior to retrial on damages, the case settled. See Notice of
Settlement, No. 14 Civ. 8564, Dkt. 172.

8

2017, the Court dismissed four of Tesla's claims, including Counts
VIII and IX. See Dkt. 37.
Defendants,

as

mentioned,

now

seek

inter

alia,

that

Count

for

I

judgment

on

II, V, and VI. Defendants

plaintiff's remaining claims: Counts I,
argue,

summary

misappropriation

of

trade

secrets fails because plaintiff has not identified any trade secret
information or any evidence of misappropriation by Related; Count
II

for

unfair

identified

competition

any

fails

confidential

because

plaintiff

information

or

has

not

evidence

of

misappropriation by Related; Count V for breach of fiduciary duty
fails

because,

as

a

fiduciary duty

to

Tesla;

breach

of

fiduciary

passive

duty

investor,

and Count
is

time

VI

Related
for

barred

does

not

owe

a

aiding and abet ting
as

a

matter

of

law.

Plaintiff opposes and, in addition, moves to reinstate Counts VIII
and IX for fraud and unjust enrichment. Plaintiff argues that the
Court should vacate its prior dismissal because a basis for

its

decision - a New York State Supreme Court judgment - was recently
vacated by New York's First Appellate Division.
The Court considers each of these arguments in turn:

I.

Count I: Misappropriation of Trade Secrets
Count I of plaintiff's complaint is for misappropriation of

trade secrets under the Defend Trade Secrets Act of 2016 or DTSA.
See 18 U.S.C. § 1839 et seq.

9

The DTSA defines "misappropriation" as the (A) acquisition of
a trade secret of another by a person who knows or has reason to
know that the trade secret was acquired by improper means; or [the]
(B) disclosure or use of a trade secret of another without express
or implied consent by a person who (i)

used improper means to acquire knowledge of the trade
secret;

(ii)

at the time of disclosure or use,

knew or had reason

to know that the knowledge of the trade secret was (I)

derived from or

improper

means

to

through a

acquire

person who had used

the

trade

secret;

(II)

acquired under circumstances giving rise to a duty to
maintain the secrecy of the trade secret or limit the
use

of

the

trade

secret;

or

(I I I)

derived

from or

through a person who owed a duty to the person seeking
relief to maintain the secrecy of the trade secret or
limit the use of the trade secret; or

(iii)

before
person,

a

material

change

of

knew or had reason to

the

position

know that

trade secret was a trade secret; and

(II)

of

the

(I)

the

knowledge

of the trade secret had been acquired by accident or
mistake.
18

u.s.c.

§

1839(5).

10

By

its

terms,

the

DTSA

"applies

only

acts

to

of

misappropriation that occur on or after the date of the enactment
of th[e]
224

F.

Act,

May 11,

Supp.

3d

317,

2016." Champions League,
326

(S.D.N.Y.

2016)

Inc.

v.

(internal

Woodard,
quotation

omitted). A DTSA claim may be valid, however, where the plaintiff
can establish that the defendant used trade secrets without consent
on or after May 11, 2016 in violation of§ 1839(5) (B).
Plaintiff here argues that defendants misappropriated trade
secrets

( 1)

by

acquiring

trade

secret

information

from

Budd,

knowing that Budd was under a fiduciary and contractual obligation
not to divulge the information and (2) by disclosing and using the
information knowing that

it had been acquired through

improper

means. See Pl. Opp. at 19.
As it is incontrovertible that any information "acquired" by
defendants

from Budd was acquired prior to May 2016,

plaintiff

cannot establish misappropriation on this first basis as a matter
of law. See The Ruthling Parties' Counter Statement of Undisputed
Material Facts in Opposition to Motions for Summary Judgment ("Pl.
56.1 St.")

~

37, Dkt. 50 ("in 2013, Related began working secretly

with Tesla's then-President,
form a competing business");
provided

Related

plan"); id.

~

48

with

a

Michael Budd,
id.

copy

of

~

41

to destroy Tesla and

(in "December 2013,

Tesla's

proprietary

Budd

business

(someone "told Dr. Ruthling, on August 8, 2014,

that Related had acquired a competing curtainwall company and that

11

Budd was running it"); Fed. R. Civ. P. 30 (b) (6) Deposition of Tesla
Wall Systems LLC dated Nov. 15, 2017 at 259, Ex. 12, Declaration
of Lawrence A. Dany III

("Dany Deel.

II"), Dkt. 143, No. 17 Civ.

4175 (Ruthling testifying that Tesla closed in or around July 31,
2014).
Nor does Tesla point to any evidence of use or disclosure
after May 2016.

Indeed, Tesla cites in support only to a factual

assertion regarding defendants'

acquisition of Tesla's purported

trade secrets. See Pl. Opp. at 19 (citing Pl. 56.1 St. qr 37); Pl.
56.1 St.
working

qr 37

(asserting that beginning in 2013,

secretly with

Tesla's

then-President

"Related began

Michael

Budd,

to

destroy Tesla and form a competing business, New Hudson Facades") .
This factual assertion is supported by only three emails, all of
which date to 2013 and none of which suggests use of trade secret
information. See Email from Brenner to Loughran dated July 8, 2013,
Ex.

17,

Dany Deel.

II

(stating that "[b] ringing

cause more problems than not");
dated

September

17,

2013,

Ex.

[Budd]

in will

Email from Loughran to Brenner
27,

Dany

Deel.

II

(questioning

"whether RLP has the stomach to deal with this [figuring out a way
to continue working with Budd] going forward"); Email from Budd to
Brenner dated October 4, 2013
Dany Deel.

II

("Budd to Brenner Email"), Ex. 28,

(attaching a copy of his employment agreement with

Tesla).

12

Although

plaintiff's

56.1

related factual assertions,
are

either

irrelevant

to

unsupported by evidence.

Statement

see Pl.
the

includes

56.1 St.

question

For example,

of

~~

41-44,

use

Tesla contends

cites

attaching

a

in

support

copy

of

only

Budd's

an

inapposite

employment

other

51,

after

sent Tesla's proprietary business plan to Related,
Tesla

five

2016
that

id.

~

see

or

Budd

41, but

one-sentence

agreement,

these

email

Budd

to

Brenner Email ("attached is a copy of my employment agreement with
Tesla Walls Systems") . Tesla asserts that Budd drafted a business
plan for a new curtain wall business that was "virtually identical"
to Tesla's, see Pl. 56.1 St.

~

42, but Tesla cites in support only

an email chain that does not include either plan,
Trovini to Cohen and Budd dated March 24, 2014
Ex.

23,

Dkt.

Declaration of Lawrence A.

158,

No 17 Civ.

4175

Dany III

see Email from

("Trovini Email"),
("Dany Deel.

III"),

(explaining that they "don't need to

reinvent the wheel" as "the document Mike Bud[d]

created for a

prior exercise is a good start") . 3 Tesla asserts that Related was
excited about various documents Budd allegedly pilfered, Pl. 56.1
St.
are

~

43, but it is not clear from the record what documents these

and whether they were pilfered.

Tesla asserts

that

shortly

Moreover, defendants argue, and plaintiff does not controvert,
that this email is taken out of context and refers to an unrelated
business proposal that Related did not pursue. See Def. Reply 56.1
St. ~ 42.

3

13

after its formation "NHF was named as the curtain wall fabricator
on several of Related's major projects," id.

~

44,

but this is

probative of little more than the fact that Related started NHF to
produce curtain wall domestically.

Tesla also asserts that "Dr.

Ruthling testified that NHF was using Tesla's trade secrets at the
time

of

the

Budd

trial,"

id.

~

52,

but

Tesla

cites

no

such

testimony.
Simply put, while Tesla asserts in its brief that defendants
misappropriated

"whole

sections

of

Tesla's

business

plans,

reflecting and consisting of Tesla's trade secret information,"
Pl.

Opp.

at 20,

Tesla,

following

full

and extensive discovery,

does not cite any evidence to support this assertion. Indeed, Tesla
has not even identified with the requisite specificity what trade
secrets were

allegedly misappropriated.

4

But

even

if

Tesla had

adequately identified some trade secrets in issue, Count I would

4

In support of Count I, plaintiff cites only to Ruthling's
testimony. See Pl. Opp. at 14-15 (citing Pl. 56.1 St. ~ 54 (citing
the Fed. R. Civ. P. 30(b) (6) depositions of Tesla and Tesla II)).
Ruthling' s testimony consists largely of Ruthling' s assertions
that Tesla used "different processes," "different billings," and
different pricing. Def. Reply 56.1 St. ~ 54. But trade secret
claims lacking "sufficient particularity" cannot survive on
summary judgment. Big Vision Private Ltd. V. E. I. DuPont De
Nemours & Co., 1 F. Supp. 3d 224, 263 (S.D.N.Y. 2014). Ruthling's
assertions that Tesla owned an unspecified "unique compilation" of
data is not the "concrete evidence that [Tesla's] business method
uniquely strung together certain elements in a particular way"
that plaintiff must adduce to sustain this claim. Sit-Up Ltd. v.
IAC/InterActiveCorp., No. 05 Civ. 9292, 2008 WL 463884, at *10
( S. D. N. Y. Feb. 2 0, 2 0 0 8) .
14

still fail because plaintiff asks the Court to accept that because
defendants continued to source curtain wall after they ceased doing
business with Tesla - including with people who used to work for
Tesla -

defendants must have stolen Tesla's

(unspecified)

secret information and are using it to this day.

trade

Such a leap is

wholly unmerited. As no reasonable juror could conclude from the
evidence presented by plaintiff that defendants misappropriated
Tesla's trade secret information (assuming it had any) on or after
May 11,

2016,

the

Court

grants

defendants'

motion

for

summary

judgment on Count I.
II.

Count II: Unfair Competition

Defendants

also

seek

summary

plaintiff's claim for unfair competition.
summary

judgment

is

warranted because

on

judgment

II,

Defendants argue that

plaintiff

identify any misappropriated confidential

Count

has

information.

failed

to

See Def.

Mem. at 12-15.
Under New York law,
competition

a

claim premised

misappropriation of
misappropriation

of

plain ti ff may prevail
on misappropriation

information "does not
trade

secrets

or

on an unfair

even

where

the

rise to the level of

ideas."

LinkCo,

Inc.

v.

Fujitsu Ltd., 230 F. Supp. 2d 492, 501 (S.D.N.Y. 2002). According
to plaintiff,

Tesla's protectable property here includes all of

the "labor, skill, and expenditures" that went into developing the
Tesla business model. Pl. Opp. at 22 (citing LinkCo, 230 F. Supp.

15

2d at 502). But Tesla points to only three paragraphs in its 56.1
Statement in support of its claim:

Paragraph 3 stating that "Dr.

Ruthling spent years researching and developing the framework" for
Tesla, "an entity intended to be a first-of-its-kind,
integrated fac;;ade

company,"

Pl.

56.1 Ct.

St.

<JI

3

vertically

(citing only

Ruthling's testimony); Paragraph 4 stating that Ruthling "obtained
an

aero

mechanical

engineering

degree

from

the

University

of

Virginia, an MS [in] aero mechanical engineering from George Tech,
and a

Ph.D.

in mechanical

engineering

from Stanford,"

id.

<JI

4

(citing only Ruthling's testimony); and Paragraph 5 stating that
"Tesla was able to deliver curtain wall to Related for multiple
major projects at prices far below what any other supplier could
offer," id.

<JI

5 (citing only the deposition testimony of Michael

Brenner) . 5
Although plaintiff argues that the "weight" of this evidence
"may only be decided by a jury," Def. Opp. at 22, the evidence is
not

even materially

relevant

to

the

possessed confidential information.
that Ruthling was highly educated,

question of whether Tesla

All this testimony shows is
that he spent time developing

Tesla, and that Tesla won two contracts to source curtain wall for
Related's building projects. This evidence does not address what

5 Brenner's testimony states in relevant part that Tesla bid lower
than the rest of the market on the NLSD and WWD projects. See
Deposition of Michael Brenner dated December 11, 2017 at 202-204,
Ex. 2, Dany Deel., Dkt. 53-2.

16

information

Tesla

used

to

do

its

business

or

why

it

was

confidential.
Nor

does

plaintiff

demonstrate

misappropriation.

All

plaintiff argues on this point is that "there is abundant evidence
that

( 1)

Related

acknowledged,

and

indeed

conceded,

proprietary nature of the Tesla business model;
secretly

with

Tesla's

former

President,

and

Michael

(2)

Budd,

the

worked
to

use

Tesla's business model to form a competing company." Pl. Opp. at
23. But none of the eight paragraphs plaintiff cites in its 56.1
Statement in support of these contentions, Pl. 56.1 St.

~~

37-45,

raise a genuine issue of material fact regarding any information
that was used by Related.
For example, one paragraph that asserts Budd provided Related
with a copy of Tesla's proprietary business plan cites only to an
email

in

which

Budd

sends

Related

a

copy

of

his

employment

contract. See Budd to Brenner Email. Another paragraph that asserts
that

Budd drafted a

virtually

identical

business

proposal

Related does not cite either proposal. See Pl. 56.1 St.

~

for

42. As

on its DTSA claim, Tesla's argument with respect to Count II rests
simply on Tesla's contention that Related improperly hired Budd
and thereafter, with Budd's help, continued to build buildings and
source curtain wall

for

those buildings.

But

the

law does not

prevent a company from exercising its "legal rights" to start a
new venture, Big Vision,

1 F. Supp. 3d at 275, and defendants do

17

not

claim here

constitutes

that

unfair

Related' s

improper

competition.

hiring

Accordingly,

of

the

Budd

itself

Court

grants

defendants' motion for summary judgment on Count II.
III. Count V: Breach of Fiduciary Duty

Defendants

argue,

inter

alia,

that

plaintiff's

breach

of

fiduciary duty claim fails because, as a passive investor, Related
owed no fiduciary duty to Tesla. See Def. Mem. at 16-20.
In Delaware, "while managers and managing members [of an LLC]
owe default

fiduciary duties,

modification of

passive members do not,

the LLC agreement or facts

absent

a

suggesting that the

purportedly passive member was acting in a managerial capacity."
CMS Inv. Holdings, LLC v. Castle, No. Civ. 9468, 2015 WL 3894021,
at *18

(Del.

Ch.

Jun.

23,

2015);

Imbert v.

LLC, No. Civ. 7845, 2013 WL 1934563, at *7
("Delaware

law

imposes

no

managing,

non-controlling

default

LCM Interest Holding
(Del. Ch. May 7, 2013)

fiduciary

members

of

duties

on

non-

limited

liability

"assume [d]

fiduciary

companies").
According

to

plaintiff,

Related here

duties" by taking "an active role in the management of" Tesla. Pl.
Opp.

at 23.

But plaintiff points only to the Term Sheet,

which

provides Related with approval rights over third-party work and
executive hiring, see Pl. 56.1 St.

18

~

7, and correspondence between

Ruthling

and

Related

suggesting

that

Related's

executives

considered Related to be a "partner" in the venture, id. en 17.6
On their own, "approval rights" are not sufficient to show an
active role in management. Not only are such rights commonplace
among passive LLC investors, see, e.g., Feeley v. NHAOCG, LLC, 62
A.3d 649, 654 (Del. Ch. 2012)
"approval

rights

over

(noting that non-managing member had

certain

major

decisions");

2009

Caiola

Family Trust v. PWA, LLC, No. 8028, 2014 WL 1813174, *3 (Del. Ch.
Apr.

3 0,

2014 )

(noting

approval rights),

that

non-managing

member

had

certain

but also such rights do not create fiduciary

duties absent evidence they were exercised to manage and direct
the company, see, e.g., Palmer v. Moffat, No. 01 Civ. 03-114, 2001
WL 1221749, *2-3 (Del. Sup. Ct. Oct. 10, 2001)

(noting that an LLC

operating agreement giving members "full, exclusive and complete
discretion,

power

and

authority

to

manage,

control,

administer and operate the business and affairs of the company"
did not make each member a "manager").
As regards Tesla's contention that Related considered itself
an "equal partner" in the venture, Pl. 56.1 St. en 17, Tesla cites

6 Plaintiff also argues that Related had a fiduciary duty because
it had access to Tesla's "confidential information." See Pl. Opp.
at 24. This argument is both without basis in fact and unavailing
as a matter of law. See Kuroda v. SPJS Holdings, L.L.C., No. 4030,
2010 WL 925853, at *3, 7-8, n.28 (Del. Ch. Mar. 16, 2010)
(rejecting the "entirely baseless" argument that a minority LLC
member with access "to high-level proprietary and confidential
information" had a fiduciary duty to the company) .
19

in support three emails

from a Related executive named Michael

Brenner in which Brenner states that Related is Ruthling's partner
in Tesla.
Ex.

16,

See Email from Brenner to Ruthling dated May 7,

Dany Deel.,

Dkt.

53-2

2013,

(Related "is your partner who has

invested over $12 million in our venture"); Email from Brenner to
Ruthling dated February 22,

2013, Ex.

71,

Dany. Deel.,

Dkt.

53-8

(stating that Related "invested $3 million to obtain an ownership
interest" in Tesla, "advanced over $9 million to fund operations,"
and

"[w]e

are

partners");

vendor/customer

id.

(stating

relationship");

Email

that

from

"[t]his

Brenner

is

to

not

a

Ruthling

dated September 5, 2012, Ex. 72, Dany Deel., Dkt. 53-8 (requesting
more information about cash flows and stating "[w]e are partners").
Under Delaware law,

however,

the use of the word "partner"

does not transform a minority LLC investor into a partner in the
eye of

the

law.

4762877, at *13

See,

e.g.,

Ramone v.

Lang,

No.

1592,

2006 WL

(Del. Ch. Apr. 3, 2006). Nor does plaintiff cite

any case where a court found that these sorts of exchanges created
a

fiduciary

Moreover,

duty

where

these exchanges

suggest that,

far

such

a

duty

did

not

otherwise

exist.

(along with many others in the record)

from being an actual partner in the venture,

Related had no ability to see even basic financial or operational
information

about

Tesla

without

Ruthling's

approval.

Indeed,

Ruthling himself has stated on several occasions that he is the
person authorized to manage Tesla. See Def. 56.l St.

20

~

75 (quoting

Ruthling testifying that he is "responsible for the operations of
the company" including "the financial and accounting aspects of
the business");

id.

(quoting Ruthling testifying "I

[]

ran the

operations [of Tesla] as the chairman of the company").
Accordingly,

as plaintiff has failed to identify any facts

tending to show that Related acted in a managerial capacity in
Tesla's operations, the Court finds that Related had no fiduciary
duty to Tesla as a matter of law and dismisses Count V.
IV.

Count VI: Aiding and .Abetting Breach of Fiduciary Duty

Count

VI

of

plaintiff's

complaint

is

against

Related

for

aiding and abetting Budd's breach of fiduciary duty.

Defendants

argue,

under

inter

alia,

that

Count

is

VI

time

barred

the

applicable three-year statute of limitations. See Def. Mem. at 21.
The

undisputed

facts

show

that

Ruthling

directly

Related of aiding and abetting Budd's breach in several

accused
emails

dated as early as April 2014. See Email from Ruthling to Brenner
dated

April

24,

2014,

Ex.

269,

Gravante

Deel.,

Dkt.

48-15

(referencing "the interference of Michael Budd and facilitation by
RLP of

that

services

of

interference" and stating that
Mike

Budd"

and,

therefore,

"RLP has

taken the

"greatly decreased

the

ability of Tesla 2 to survive as a company"); Email from Ruthling
to Brenner dated April 24,
[Budd]

2014,

Ex.

270

(stating that

"my #2

clearly interfered with Tesla's primary business interest

and this was done with the knowledge of/supported by Related" and

21

that "Tesla has been damaged, perhaps irreparably"). Related even
sought a release from Tesla in July 2014 for any claims Tesla might
have against Related arising from Related's activities with Budd.
Rather than dispute these facts, plaintiff points merely to
evidence of what Ruthling did not know prior to August 8,

2014,

namely that Budd and Related had collaborated in starting a new
company called NHF to manufacture curtain wall. See Pl.
<JI

48

2014,

("[a]

56.1 St.

fellow businessperson told Dr. Ruthling, on August 8,

that Related had acquired a competing curtainwall company

and that Budd was running it"); id.

<JI

49

("Ruthling also did not

learn that Budd had met with Related executives to discuss forming
NHF, developed a business plan for NHF, or made arrangements for
suppliers and financing before August 2014."). But the fact that
Tesla became aware,

after August 7,

2014,

of additional details

regarding Related's relationship with Budd is

inapposite.

Tesla

plainly was aware prior to August 7, 2014 that Related had colluded
with Budd, in violation of his fiduciary duties to Tesla, so as to
"interfere" with Tesla's "primary business interest."
In the alternative, plaintiff argues that Related should be
equitably estopped from raising this limitations defense because
Related

fraudulently

action.

See Pl. Opp. at 8-9

and

Budd

induced plaintiff

fraudulently

(citing Pl.

concealed

their

to

delay

56.1 St.

in
<JI

activities

filing
46

its

("Related

from

Tesla,

preventing it from discovering its claims until after August 8,

22

2014");

id.

CJ[

47

misrepresentations

("Tesla
about

acted

its

in

reliance

intentions

during

upon

Related's

the

relevant

period")). Equitable estoppel "requires proof that the defendant
made

an actual misrepresentation or,

if a

fiduciary,

concealed

facts which he was required to disclose, that the plaintiff relied
on the misrepresentation and that the reliance caused plaintiff to
delay bringing timely action." Kaufman v. Cohen, 760 N.Y.S.2d 157,
167 (App. Div. 2003). Plaintiff here argues that Related owed Tesla
a duty as a partner in the business and therefore was obligated to
disclose "its various attempts to replace Tesla with a competing
curtain wall

company." Pl.

Opp.

at

10.

But as discussed above,

Related was not a partner in Tesla and had no duties on that basis. 7
Accordingly,

as

Tesla

plainly

knew

the

predicates

of

its

aiding and abetting claim against Related more than three years
prior to bringing this action,

the Court finds that Count VI is

time barred as a matter of law.

V.

Counts VIII and IX: Fraud and Unjust Enrichment
Separately, as mentioned earlier,

Court's prior order of December 15,

Tesla moves to vacate the

2017 dismissing Counts VIII

Moreover, the Court is not inclined to apply equitable estoppel
here where Tesla brought its action against Budd for breach of
fiduciary duty in October 2014, shortly after the relevant events
transpired, and with no explanation waited until August 2017 to
bring an action against Related for aiding and abetting Budd's
breach. This delay does a gross disservice to the district court
as a whole, which held a trial in the Budd case in 2016.

7

23

and IX of Tesla's complaint. As set forth in the Opinion and Order
of that date, the Court, in reaching this decision, found relevant
a New York State Supreme Court judgment awarding to Tesla, as an
offset, the same $3.3 million Tesla seeks in connection with Counts
VIII and IX.

Separately,

however,

on March 27,

2018,

New York's

First Appellate Division vacated that Supreme Court judgment. See
Decision and Order in The Related Companies,
Systems, LLC, No. 15 Civ.
Dkt.

59-1.

vacate

its

Plaintiff
prior

650778

argues

order.

See

(N.Y. App.

that,
Pl.

L.P.

Tesla Wall

Div. Mar. 27, 2018),

therefore,
Ltr.

v.

(citing

the

Court

Fed.

R.

should
Civ.

P.

60(b)(5)).
Defendants argue that vacatur of the Supreme Court judgment
is of no moment because the parties are still proceeding on remand
on the basis that Tesla is entitled to the $3.3 million offset.
See Def. Ltr. at 2. In the event the Court reinstates these counts,
defendants seek leave to move for summary judgment on them. Id.
It is possible,

however,

that further discovery may now be

necessary before the Court can rule on any summary judgment motion
on these Counts. Accordingly, the Court will allow the parties to
briefly

re-open discovery and pursue

only as

related

to

these

Following such discovery

Counts

additional

and only until

(if any),

defendants

discovery,
June

shall

8,

but

2018.

have until

June 15 to make a motion for summary judgment and/or to submit a
brief arguing that

the Court

should deny plaintiff's motion to

24

vacate the December 15,

2017 Opinion and Order.

Plaintiff shall

have until June 15 to make a motion for summary judgment and until
June

29

to

answer

any

motion

for

summary

judgment

made

by

defendants and/or to respond to any arguments made by defendants
opposing

vacatur

of

the

December

15,

2017

Opinion

and

Order.

Defendants shall likewise have until June 29 to answer any motion
for

summary judgment made by plaintiff.

Replies

to any summary

judgment motion must be submitted by no later than July 6.

Conclusion

VI.

For the

reasons stated above,

the Court grants defendants'

motion for summary judgment on Counts I, II, V, and VI, dismissing
them with prejudice. The Court further permits limited discovery
and

supplemental

briefing

and motion

practice

with

respect

to

Counts VIII and IX, as set forth above.
The Clerk of Court is hereby instructed to close docket entry
number 45.

SO ORDERED.
Dated:

~S.D.J.

New York, NY
May J} 2018

25