Hoyle v. Dimond et al
Filing
116
DECISION AND ORDER denying Defendants' 106 Motion for Summary Judgment on their Counterclaims with respect to the counterclaims for defamation, conversion, misappropriation of trade secrets, and breach of fiduciary duty. The court sua sponte grants summary judgment to plaintiff dismissing Defendants' Counterclaims alleging violations of the Lanham Act and the ECPA. A status telephone conference shall be held on 4/24/2013 at 2 p.m. to schedule further proceedings. (The court will initiate the call.) Signed by Hon. John T. Curtin on 3/14/2013. (JEC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
ERIC E. HOYLE,
Plaintiff,
-vs-
08-CV-347C
FREDERICK DIMOND, ROBERT DIMOND,
and MOST HOLY FAMILY MONASTERY,
a New York Not-for-Profit Corporation,
Defendants.
APPEARANCES:
WYNN L. BOWMAN, ESQ., Rochester, New York for
Plaintiff.
DUKE, HOLZMAN, PHOTIADIS & GRESENS LLP,
(CHARLES C. RITTER, JR., ESQ., OF COUNSEL),
Buffalo, New York for Defendants.
INTRODUCTION
Plaintiff commenced this action seeking damages and restitution from
defendants Frederick and Robert Dimond, who operate the defendant not-for-profit
corporation Most Holy Family Monastery (“MHFM”) in Fillmore, New York. Specifically,
plaintiff sought to recover monies he donated to MHFM allegedly in reliance on the
defendants’ representations regarding their affiliation with the Order of St. Benedict
(“O.S.B.”). In a Decision and Order dated June 22, 2012, the court granted the
defendants’ motion for summary judgment in part and dismissed the plaintiff’s
complaint, but held in abeyance that aspect of the defendants’ motion in which they
sought judgment on their counterclaims (Item 106). As the parties have been
unsuccessful in their attempts to resolve the case through mediation, the court will now
address the remainder of the defendants’ motion for summary judgment (Item 89).
BACKGROUND
Plaintiff filed his original complaint on May 9, 2008 (Item 1). In it, he alleged that
he learned of MHFM in 2005. Id., ¶ 15. Plaintiff investigated the monastery through its
website, which stated that MHFM was a Benedictine monastery supervised by Brother
Michael Dimond, O.S.B., a Benedictine monk.1 Id., ¶ 16. Allegedly in reliance on this
and other representations, plaintiff made contributions to MHFM of approximately
$65,700 in cash and stocks worth $1.2 million, and took up residence at MHFM on
September 27, 2005 . Id., ¶¶ 21, 26, 28. Plaintiff further alleged that he executed a
document, at the request of defendant Frederick Dimond, specifying that he was to
receive $750,000 upon his departure from MHFM. Id., ¶¶ 29, 30. Plaintiff alleged that
he later learned that Frederick Dimond was not a member of the Order of St. Benedict
and that MHFM was neither founded nor operated in accordance with the requirements
of the Order of St. Benedict. Id., ¶ 31. Plaintiff left MHFM on December 31, 2007. Id.,
¶ 33. The defendants have refused plaintiff’s demand for the return of previously
transferred funds. Id., ¶ 34.
Plaintiff filed an amended complaint on March 10, 2009, asserting 10 causes of
action - fraud, constructive fraud/negligent misrepresentation, unjust
1
Defendant Frederick Dim ond uses the nam e “Brother Michael Dim ond” and defendant Robert
Dim ond uses the nam e “Brother Peter Dim ond.” The court will use the defendants’ given nam es to
identify them when necessary.
2
enrichment/constructive trust, mandatory accounting, money had and received,
violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§
1962(c) and (d) (“RICO”), deceptive trade practices pursuant to New York General
Business Law § 349, false advertising, and vicarious liability of MHFM (Item 42).
Defendants filed an answer to the amended complaint on March 20, 2009 and
interposed seven counterclaims for defamation/injurious falsehood, violation of the
Lanham Act, 28 U.S.C. § 1125 et seq., interference with prospective advantage/tortious
interference with contract, conversion, breach of fiduciary duty, misappropriation of
trade secrets, and violation of the Electronic Communications Privacy Act, 18 U.S.C. §
2510 et seq. (“ECPA”) (Item 43). Plaintiff filed his reply to the counterclaims on April 9,
2009 (Item 44).
On January 6, 2012, defendants filed this motion for summary judgment, seeking
dismissal of the complaint and judgment on their counterclaims (Item 89). Plaintiff’s
response to the motion was filed February 24, 2012 (Item 97) and defendants’ reply
was filed March 16, 2012 (Item 105). As stated above, the court granted the
defendants’ motion for summary judgment in part and dismissed the plaintiff’s
complaint, but held in abeyance that aspect of the defendants’ motion in which they
sought judgment on their counterclaims (Item 106). As the parties were unable to
resolve the remainder of the case through mediation, the court will now address the
motion for summary judgment on the defendants’ counterclaims. For the reasons that
follow, the remainder of defendants’ motion for summary judgment is denied in part.
Additionally, the court grants summary judgment to plaintiff, sua sponte, on defendants
counterclaims under the Lanham Act and the ECPA.
3
FACTS2
The court will assume some familiarity with the facts of this case. Briefly, in
2005, plaintiff was introduced to MHFM and visited the monastery’s website (Item 89,
Exh. B, hereafter “Hoyle Dep.,” p. 104). At that time, plaintiff professed to follow “the
Roman Catholic religion as it has been practiced throughout the centuries” and rejected
what he called “the Vatican II Church” (Hoyle Dep., pp. 19-21).3
In 2005, plaintiff believed it was very important to spread the MHFM message
and wanted to make a monetary donation to that end (Hoyle Dep., p. 144). In e-mail
correspondence to his financial advisor, plaintiff wrote that his money had become “an
undesired burden” and that he fully intended to “give away the vast majority of my
money to good Catholic persons and organizations” (Dimond Decl., Exh. B; Hoyle
Dep., pp. 163-64). Plaintiff told his financial advisor that he wanted to make a $300,000
donation to MHFM, a group he felt deserved “some serious money” (Hoyle Dep., p.
165). Plaintiff also stated that his “financial plan for the future is quite literally to give my
money away.” Id., p. 166. The financial advisor convinced plaintiff to reduce the
amount of the donation. Id., p. 170. Plaintiff then donated $700 to MHFM which was
acknowledged by defendants in a letter (Dimond Decl., Exh. A). In June 2005, plaintiff
2
The factual statem ent is taken from the docum ents in support of and in opposition to the
defendants’ m otion for sum m ary judgm ent including plaintiff’s deposition testim ony (Item 89, Exh. A), em ails between plaintiff and his financial advisor (Item 89, Exh. B), the declaration of Frederick Dim ond
(Item 89, Att. 9), the Plaintiff’s Declaration (Item 97), and the deposition transcript of Frederick Dim ond
(Item 97, Att. 6). Additionally, the court has considered the defendants’ statem ent of undisputed facts
(Item 90) and plaintiff’s response thereto (Item 97, Att. 4).
3
As plaintiff defines it, the “Vatican II Church” is the m odern Rom an Catholic Church.
4
donated $65,000 to MHFM, a contribution which was also acknowledged in writing by
defendants. Id., Exh. B.
It was plaintiff’s understanding that to enter MHFM, he would be required to
relinquish his assets to the monastery. Plaintiff admitted that Frederick Dimond did not
require that he donate all his money to MHFM (Hoyle Dep., p. 181). Defendant
Frederick Dimond told plaintiff that he should chose an amount that would revert to him
if he left the monastery. Id. In e-mail correspondence to Frederick Dimond dated
August 30, 2005, plaintiff stated that he needed to keep money in reserve to pay capital
gains taxes. He also stated that he planned “to give the vast majority of my holdings as
an outright gift” to MHFM and that he wished to receive “around $30,000" if he departed
MHFM (Dimond Decl., Exh. C). In his Declaration, Defendant Frederick Dimond stated
that plaintiff ultimately decided to make all of his assets an outright gift to MHFM, as
well as his future inheritance assets. Id., ¶ 26. Plaintiff recommended to defendants
that MHFM hold his donation in a stock account so that they would have easier access
to it (Hoyle Dep., p. 182). In the August 2005 e-mail to Frederick Dimond, plaintiff did
not suggest that any portion of his gift be reserved to revert back to plaintiff upon his
departure. Id., p. 183.
Plaintiff visited MHFM twice during the summer of 2005 and entered the
monastery in September 2005 (Hoyle Dep., pp. 50-51). While at MHFM, plaintiff
assisted the defendants in updating and maintaining their website. Id., p. 53. He was
involved in production work associated with radio discussions and debates about
Catholicism. Id. Plaintiff answered the telephone at MHFM and discussed religious
5
issues with callers. Id., p. 57. He managed MHFM’s online store, handled all
telephone, internet, and mail-generated orders and managed MHFM’s database of
customers, clients, supporters, and benefactors (Dimond Decl., ¶ 49).
In November 2005, plaintiff made a donation to MHFM of stock worth $1,233,100
which was acknowledged in writing on March 27, 2006 (Item 89, Dimond Decl. Exh. D).
In e-mail correspondence from his tax preparer dated January 91, 2006, plaintiff was
advised that the tax preparer treated plaintiff’s stock donation “as gifts to qualifying
501(c)(3) organizations” and that he needed a receipt from MHFM before his 2005
taxes could be filed (Item 89, Dimond Decl., Exh. E). At the time of this transfer of
stock to MHFM, plaintiff reserved several hundred thousand dollars of additional assets
in his own name (Hoyle Dep., p. 223). There was no written agreement regarding an
amount of that transfer to MHFM that would be reserved and returned to plaintiff upon
his departure. Id.
In April 2006, plaintiff intended to make another million dollar donation to MHFM
when he received the assets of a trust fund. At that time, plaintiff prepared a second
document that acknowledged a gift to MHFM of $750,00.00. Frederick Dimond testified
that this second receipt was prepared based on the expectation of an additional million
dollar gift and that, should it receive another million dollars from plaintiff, MHFM would
have “the flexibility to possibly give him $438,000 back” if he left the monastery (Item
97, Dimond Dep., p. 65).4 Defendant Dimond stated that there was never any
agreement, either written or verbal, or any “guarantee that [plaintiff] would receive
4
$483,000.00 is the difference between the am ount of plaintiff’s donation of 1.2 m illion dollars and
the later-acknowledged am ount of $750,000.00.
6
money back” if he left MHFM Id., pp. 64-65. Plaintiff’s mother and grandmother
blocked the transfer of the additional million dollars to plaintiff until he reached age 35
(Hoyle Dep., pp. 78-79). On October 1, 2007, defendants acknowledged plaintiff’s
additional gift of stock worth $307,989 (Item 89, Dimond Decl., Exh. F). Plaintiff’s tax
filings for 2005 indicate that plaintiff made a charitable donation to MHFM of $750,000.
Id., p. 233.5 Plaintiff’s 2006 tax return indicated a charitable donation to MHFM of
$307,989. Id., p. 234.6
In December 2007, defendant Frederick Dimond decided to move MHFM’s
stocks and investments from M&T Securities to a Scottrade account and to give plaintiff
the authority to transfer funds (Dimond Decl., ¶ 50; Hoyle Dep., p. 62-63). Plaintiff
testified that on December 30, 2007, he read an article on mass attendance by a former
member of MHFM and decided that defendants’ position on this issue was wrong
(Hoyle Dep., pp. 50, 60). He did not discuss his disagreement with the defendants, but
abruptly decided to leave MHFM. Id., p. 60. On the morning of December 31, 2007,
plaintiff attempted to transfer funds online from MHFM’s Scottrade account into his
personal bank account, but was unable to do so because the transaction required a
second signature. Id., p. 66. Later that day, after he left MHFM, plaintiff telephoned the
Scottrade office in Rochester, New York, but the representative would not discuss the
account with him. Id., p. 68.
5
Plaintiff’s 2005 donations resulted in a charitable donation deduction of $384,079.00 against
incom e of $1,061,262.00 for tax year 2005 with an allowable carryover of $269,000 (Hoyle Dep., pp. 229 231).
6
Plaintiff’s 2006 donations to MHFM resulted in a charitable deduction of approxim ately
$35,000.00 against incom e of $69,000.00 for tax year 2006 and a carryover of $258,000.00 (Hoyle Dep.,
p. 236).
7
When he left MHFM, plaintiff took business records with him, including MHFM’s
bank and investment account records and customer and donor information (Dimond
Decl. ¶ 55). Plaintiff stated that he left MHFM hurriedly and did not have the opportunity
to separate MHFM property from his personal property (Item 97, ¶ 40). He also
explained that he promptly offered to return MHFM property to the defendants. Id., ¶
41. Plaintiff took the laptop computer that housed much of MHFM’s business
information and stated that defendants did not immediately assert ownership of the
computer. Id., ¶ 44. After leaving MHFM, plaintiff telephoned the New York State
Police and reported that the defendants had stolen approximately $460,000 or
$470,000 from him (Hoyle Dep., pp. 210-11). State Trooper LaRose asked plaintiff if
he had a written agreement regarding the return of funds, and plaintiff could not recall if
there was such a document. Id., p. 212.
At his deposition, plaintiff testified that he believed he was entitled to the return
of money in an amount agreed upon in a conversation he had with Frederick Dimond in
approximately April 2006 (Hoyle Dep., p. 71). Plaintiff further testified that he prepared
a handwritten document in which he stated that he was to receive $750,000 if he were
to leave MHFM. Id., p. 74. Plaintiff does not have the document and does not know
whether it was ever signed. Id., p. 75.
Following his departure from MHFM, plaintiff set up his own website that
condemned MHFM as heretical (Item 55, ¶ 59, Exhs. J, K). Plaintiff admitted that he
contacted MHFM supporters, but denied that he used confidential information to do so
(Item 97, ¶¶ 45-46).
8
DISCUSSION
1. Summary judgment Standard
The standard for granting summary judgment is well established. “The court
shall grant summary judgment if the movant shows that there is no genuine dispute as
to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Gallo v.
Prudential Residential Servs., Ltd. P' ship, 22 F.3d 1219, 1223 (2d Cir. 1994). “[T]he
trial court's task at the summary judgment motion stage of the litigation is carefully
limited to discerning whether there are any genuine issues of material fact to be tried,
not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does
not extend to issue-resolution.” Gallo, 22 F.3d at 1224. The moving party bears the
initial burden of informing the district court of the basis for its motion and identifying the
matter that it believes demonstrates the absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323. The substantive law governing the case will identify those
facts that are material and “[o]nly disputes over facts that might affect the outcome of
the suit under the governing law will properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Summary judgment is appropriate if it appears that the nonmoving party cannot
prove an element that is essential to the nonmoving party's case and on which it will
bear the burden of proof at trial. See Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S.
795, 805–06 (1999); Celotex, 477 U.S. at 322; Powell v. Nat'l Bd. of Med. Exam'rs, 364
F.3d 79, 84 (2d Cir. 2004). In determining whether summary judgment is appropriate, a
9
court must resolve all ambiguities and draw all reasonable inferences against the
moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587–88 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see
also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in
the record from any source from which a reasonable inference could be drawn in favor
of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d
Cir. 1994). If the moving party meets its initial burden of showing a lack of a material
issue of fact, the nonmoving party must produce evidence in the record and “may not
rely simply on conclusory statements or on contentions that the affidavits supporting the
motion are not credible.” Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir.
1993); see also Scotto v. Almenas, 143 F.3d 105, 114–15 (2d Cir. 1998).
2. Defendants’ Counterclaims
Defendants seek summary judgment on their counterclaims for defamation,
conversion, misappropriation of trade secrets, breach of fiduciary duty, violation of the
Lanham Act, and violation of the ECPA.7 The court will address these counterclaims in
turn.
A. Defamation
Defendants allege that plaintiff told New York State Trooper Larry LaRose and
other named individuals, including donors and customers of MHFM, that the defendants
stole money from him (Item 43, ¶¶ 180-185). “Defamation is the injury to one's
reputation either by written expression, which is libel, or by oral expression, which is
7
Defendants have not sought sum m ary judgm ent on the counterclaim alleging interference with
prospective advantage/tortious interference with contract (Item 43, ¶¶ 206 - 214).
10
slander.” Idema v. Wager, 120 F.Supp.2d 361, 365 (S.D.N.Y. 2000), aff’d, 29 Fed.
Appx. 676 (2d Cir. 2002). The elements of a cause of action for defamation under New
York law are: (1) a defamatory statement of fact about the plaintiff, (2) that is false, and
(3) published to a third party; (4) fault on the part of the speaker (either negligence or
actual malice, depending on the status of the libeled party); and (5) either special harm
or slander per se. Albert v. Loksen, 239 F.3d 256, 265–66 (2d Cir. 2001); Celle v.
Filipino Reporter Enter. Inc., 209 F.3d 163, 176 (2d Cir. 2000). Under New York law,
words are per se defamatory if they import criminal activity, impute certain types of
disease, would tend to injure a party's trade, occupation or business, or impute certain
sexual conduct. Epifani v. Johnson, 882 N.Y.S.2d 234, 234 (App. Div. 2009); Pure
Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F.Supp.2d 489, 550
(S.D.N.Y. 2011).
Plaintiff argues that the truth of his statement, that defendants “stole” his money,
is a defense to the defamation claim. It is well-established that truth provides a
complete defense to a claim of defamation. See Couloute v. Ryncarz, 2012 WL
541089, *5 (S.D.N.Y. February 17, 2012). Plaintiff has alleged that he was entitled to
the return of a certain amount of money upon leaving MHFM. He argued in response to
the motion for summary judgment that he reduced this figure to writing but that the
document was no longer available. Defendants contend that no such document
existed, no understanding was reached, and plaintiff intended to transfer his funds to
MHFM without reservation. The record indicates that the defendants acknowledged
plaintiff’s monetary gifts in varying amounts and at times not contemporaneous with the
11
donation for plaintiff’s tax purposes. Additionally, Frederick Dimond stated that a
specific receipt was prepared to allow MHFM the “flexibility” to refund certain amounts
to plaintiff in the event of an additional million dollar gift (Item 97, Dimond Dep., p. 65).
It appears that the parties engaged in what could be characterized as “creative
accounting,” the purpose of which is not entirely clear on the record.
The court did not have the occasion to consider plaintiff’s contention that the
defendants wrongfully withheld any amount of funds because plaintiff framed his
equitable claims as based on the assertion that he was misled as to the establishment
of MHFM as a Benedictine community. The court concluded that a resolution of the
claim as pled required an examination of doctrinal issues that was prohibited by the
First Amendment. In the context of defendants’ motion for summary judgment on their
counterclaim for defamation, however, plaintiff has raised a genuine issue of fact with
regard to the defense of truth. If the finder of fact were to credit plaintiff’s contention
that he and the defendants had come to an agreement regarding the return of funds
upon plaintiff’s departure from MHFM, then the defendants’ refusal to honor that
agreement could be considered theft. Accordingly, the court concludes that plaintiff has
established a genuine issue of material fact and defendants’ motion for summary
judgment on this counterclaim is denied.
B. Conversion
Defendants further allege that, when he left MHFM on December 31, 2007,
plaintiff took proprietary and confidential business records and materials (Item 43, ¶
217). Specifically, they allege that plaintiff took computer databases containing
12
customer and donor contact information, as well as financial records.8 On July 23,
2008, the court granted defendants’ application for injunctive relief and ordered plaintiff
to return to defendants all confidential and proprietary records and/or to destroy his
electronic copies of those records (Item 23). It is unclear whether the defendants
sought the return of the personal computer, or simply the electronic information stored
therein.
Under New York law there are two critical elements to a claim of conversion: “(1)
plaintiff's possessory right or interest in the property and (2) defendant's dominion over
the property or interference with it, in derogation of plaintiff's rights.” Colavito v. N.Y.
Organ Donor Network, Inc., 860 N.E.2d 713, 717 (N.Y. 2006) (citations omitted).
Plaintiff has admitted that he took business records upon his departure from MHFM, but
explained that he left MHFM hurriedly and took only those records that were with his
own personal possessions (Hoyle Dep., p. 161). Additionally, plaintiff took his personal
computer which contained the e-mail addresses of many of MHFM’s customers and
supporters, along with e-mail archives and Pay-Pal receipts. Id., p. 54. Defendants
contend that plaintiff donated this computer to MHFM (Dimond Decl., ¶ 56).
While there is no “good faith” defense to conversion, see In re Allou Distrib., Inc.,
446 B.R. 32, 77 (Bankr. E.D.N.Y. 2011), there is a factual dispute as to the ownership
of the computer. Moreover, if plaintiff rightfully took the personal computer, the finder of
fact could conclude that he was also within his rights to take the information stored
8
W hile defendants have alleged that plaintiff wrongfully took financial docum ents and business
records, the only dam ages they have com plained of arose as a result of the alleged conversion of
electronic inform ation.
13
therein, at least until the defendants demanded its return. “Where the original
possession is lawful, a conversion does not occur until the defendant refuses to return
the property after demand or until he sooner disposes of the property.” Schwartz v.
Capital Liquidators, Inc., 984 F.2d 53, 54 (2d Cir. 1993) (quoting Johnson v. Gumer,
464 N.Y.S.2d 318, 319 (App. Div. 1983). On July 23, 2008, the court granted
defendants’ application for injunctive relief and ordered plaintiff to return to defendants
all confidential and proprietary records and/or to destroy his electronic copies of those
records (Item 23). Plaintiff advised the court of his compliance with this order in an
affidavit filed August 8, 2008 (Item 30).
As plaintiff has raised genuine issues of material fact regarding his ownership of
the property allegedly converted, defendants’ motion for summary judgment on the
conversion counterclaim is denied.
C. Misappropriation of Trade Secrets
Defendants allege that plaintiff took defendants’ computer databases of its
supporters, donors, and customers when he left MHFM on December 31, 2007. They
argue that this proprietary information constituted trade secrets and plaintiff’s
misappropriation of it has allowed him to compete directly with MHFM for donations and
to defame the defendants (Item 43, ¶ 238). To bring a claim for the misappropriation of
trade secrets, a plaintiff must allege that “(1) [defendant] possessed a trade secret, and
(2) defendant is using that trade secret in breach of an agreement, confidence, or duty,
or as a result of discovery by improper means.” Integrated Cash Management Serv.,
Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990).
14
The issue on this motion is whether customer contact information is considered a
“trade secret.” New York courts apply six factors to determine whether an item qualifies
as a trade secret:
(1) the extent to which the information is known outside of the business;
(2) the extent to which it is known by employees and others involved in the
business; (3) the extent of measures taken by the business to guard the
secrecy of the information; (4) the value of the information to the business
and its competitors; (5) the amount of effort or money expended by the
business in developing the information; (6) the ease or difficulty with which
the information could be properly acquired or duplicated by others.
Ashland Mgmt. Inc. v. Janien, 624 N.E.2d 1007, 1013 (N.Y. 1993) (quoting
Restatement of Torts § 757, comment b) (internal brackets omitted). A customer list is
not on its face a trade secret. Friedman v. Wahrsager, 848 F.Supp.2d 278, 302
(E.D.N.Y. 2012). “A customer list developed by a business through substantial effort
and kept in confidence may be treated as a trade secret and protected at the owner's
instance against disclosure to a competitor, provided the information it contains is not
otherwise readily ascertainable. However, the owner is entitled to such protection only
as long as he maintains the list in secrecy.” Defiance Button Machine Co. v. C & C
Metal Prods. Corp., 759 F.2d 1053, 1063 (2d Cir. 1985) (internal citations omitted); see
also Leo Silfen, Inc. v. Cream, 278 N.E.2d 636, 640 (N.Y. 1972) (“[W]here the
customers are not known in the trade or are discoverable only by extraordinary efforts
courts have not hesitated to protect customer lists and files as trade secrets.”).
Plaintiff contends that MHFM’s customer information was readily available and
not maintained in secrecy. The record reflects that plaintiff assisted the defendants in
updating their website, managed MHFM’s online store, handled all telephone, internet,
and mail-generated orders and managed MHFM’s database of customers, clients,
15
supporters, and benefactors on his personal computer (Dimond Decl., ¶ 49). Even if it
is established that plaintiff intended to donate the computer to MHFM, it is not disputed
that plaintiff had access to the computer and the information stored therein.
Accordingly, the court concludes that a determination as to whether MHFM’s customer
information constitutes a trade secret is a question of fact, inappropriate for resolution
on this motion for summary judgment. See, Friedman, 848 F.Supp.2d at 302
(determination whether customer list is a trade secret is a question of fact); Ashland
Mgmt., Inc. v. Janien, 624 N.E.2d at 1013 (question of secrecy is generally one of fact).
Defendants’ motion for summary judgment on this counterclaim is therefore denied.
D. Breach of Fiduciary Duty
Defendants allege that plaintiff had a fiduciary duty to the defendants by virtue of
his entry into MHFM and participation in monastic life, and that he breached this
fiduciary duty when he “took defendants’ property without permission, when he made
false statements about defendants’ honesty and business conduct, and when he used
confidential and proprietary business information of MHFM to his own economic
advantage and to MHFM’s detriment.” (Item 43, ¶ 229). In New York, a claim for
breach of fiduciary duty consists of the following elements: “(1) the existence of a
fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly
caused by the defendant's misconduct.” Rut v. Young Adult Inst., Inc., 901 N.Y.S.2d
715, 717 (App.Div. 2010) (citation omitted). “A fiduciary relationship exists under New
York law when one [person] is under a duty to act for or to give advice for the benefit of
another upon matters within the scope of the relation.” Flickinger v. Harold C. Brown &
16
Co., 947 F.2d 595, 599 (2d Cir. 1991) (alteration in the original) (internal quotation
marks and citations omitted).
Broadly stated, a fiduciary relationship is one founded upon trust or
confidence reposed by one person in the integrity and fidelity of another. It
is said that the relationship exists in all cases in which influence has been
acquired and abused, in which confidence has been reposed and
betrayed. The rule embraces both technical fiduciary relations and those
informal relations which exist whenever one man trusts in, and relies
upon, another. Such a relationship might be found to exist, in appropriate
circumstances, between close friends or even where confidence is based
upon prior business dealings.
Penato v. George, 383 N.Y.S.2d 900, 904–05 (App.Div.1976) (citations omitted). The
determination of a fiduciary relationship is generally a “fact-sensitive” inquiry. Berman
v. Rotterman, 2011 WL 2149431, *5 (W.D.N.Y. June 1, 2011).
The relationship between plaintiff and the defendants is not easily categorized.
Plaintiff acted, at times, as a student or colleague of the defendants. At other times, he
acted more as an employee or agent, although there is no evidence that plaintiff earned
any salary for his efforts. There is no question but that defendants were in a superior
position to plaintiff as to their knowledge and authority in the monastery hierarchy. To
the extent that plaintiff has argued that the defendants held his assets temporarily while
he resided at MHFM, it could be argued that defendants owed a fiduciary duty to the
plaintiff. In any event, the court finds genuine issues of fact regarding the existence of
a fiduciary relationship between the parties. Accordingly, the motion for summary
judgment on this counterclaim is denied.
E. Unfair Competition under the Lanham Act
Defendants allege that plaintiff “made a false or misleading representation
17
regarding the nature, characteristics, or quality of MHFM’s services” in violation of the
Langham Act, 28 U.S.C. § 1125, et seq. (Item 43, ¶ 201). Specifically, defendants
allege that plaintiff set up a competing website and solicited donations using
defendants’ customer contact information. Section 43(a) of the Lanham Act prohibits
the use in commerce or in connection with any goods or services, “any word, term,
name, symbol, or device, 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 likely to cause confusion . . ..” 15 U.S.C. § 1125(a)(1)(A). A party
establishes liability under Section 43(a) of the Lanham Act if it can demonstrate “(1) that
it has a valid trademark entitled to protection under the Act, and (2) defendant's actions
are ‘likely to cause confusion.’” Phillip Morris USA Inc. v. Marlboro Express, 2005 WL
2076921, *4 (E.D.N.Y. August 26, 2005) (quoting Arrow Fastener Co. v. Stanley Works,
59 F.3d 384, 390 (2d Cir. 1995)).
Defendants have not established either that they have a valid trademark entitled
to protection or that plaintiff’s actions are likely to cause confusion as to the source of
the product or goods. Here, it is quite apparent that plaintiff’s website is not the
creation of MHFM and no consumer could be confused as to the source of the product.
The gravamen of defendants’ claim is that plaintiff used their customer contact
information to establish a competing website. This alleged conduct is subsumed by the
defendants’ other causes of action.
Although plaintiff did not make a formal motion seeking summary judgment on
defendants’ counterclaims, a summary judgment motion “searches the record” and thus
the court may grant summary judgment to the non-movant where justified by the
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evidence in the record, even in the absence of a cross motion. MyPlayCity, Inc. v.
Conduit Ltd., 2012 WL 1107648, *17 (S.D.N.Y. March 30, 2012); Aviation Dev. Co. v. C
& S Acquisition Corp., 1999 WL 123718, at *2 (S.D.N.Y. March 8, 1999), aff’d, 201 F.3d
430 (2d Cir. 1999); 10A Wright, Miller & Kane, Federal Practice & Procedure: Civil 3d §
2720 at 347–52 (“The weight of authority ... is that summary judgment may be rendered
in favor of the opposing party even though the opponent has made no formal
cross-motion under Rule 56.”). As the defendants have failed to set forth any proof
tending to suggest a violation of the Lanham Act, the court finds it appropriate to
dismiss this counterclaim sua sponte.
F. Electronic Communications Privacy Act
Finally, defendants allege that plaintiff accessed electronic communications
between MHFM and its benefactors, donors, and customers and used the information
to his own advantage in violation of the Electronic Communications Privacy Act, 18
U.S.C. § 2510 et seq.(“ECPA”) (Item 43, ¶ 243). Essentially, defendants allege that
plaintiff used e-mails and other data stored in MHFM’s databases to communicate with
the donors and customers of MHFM.
The ECPA provides a civil cause of action against persons who intentionally
“intercept” electronic communications. Courts addressing the meaning of “intercept”
narrowly define it to include only “acquisitions of communication contemporaneous with
transmission, not storage.” Conte v. Newsday, Inc., 703 F.Supp.2d 126, 139 n. 11
(E.D.N.Y. 2010); see e.g., Fraser v. Nationwide Mut. Ins. Co., 352 F.3d 107, 113–14
(3rd Cir. 2003) (following Fifth, Ninth, and Eleventh Circuits and adopting the narrow
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definition); United States v. Meriweather, 917 F.2d 955, 960 (6th Cir. 1990). Courts
previously employed this narrow definition when interpreting ECPA's predecessor, the
Omnibus Crime Control and Safe Streets Act of 1968, and after reviewing the legislative
history, the Fifth Circuit concluded that Congress intended to retain this definition under
the ECPA. See Steve Jackson Games, Inc. v. U.S. Secret Serv., 36 F.3d 457, 460–62
(5th Cir. 1994); see also Konop v. Hawaiian Airlines, Inc., 302 F.3d 868, 876 (9th Cir.
2002). While the Second Circuit has not addressed this issue, Conte, 703 F.Supp.2d at
139 n. 11, the Southern District in Snyder v. Fantasy Interactive, Inc., 2012 WL 569185,
*2 (S.D.N.Y. February 9, 2012), adopted the Fifth Circuit's reasoning. For the same
reasons, this court will likewise adopt the narrow definition of “intercept” under the
ECPA. Because defendants have failed to plead or prove any facts suggesting that
plaintiff wrongfully acquired the communications during transmission, they have failed to
state a viable claim under the ECPA. Despite the fact that plaintiff made no formal
cross motion for summary judgment, see MyPlayCity, Inc., supra, the court has
searched the record and concludes that it is appropriate to dismiss defendants’ ECPA
counterclaim.
CONCLUSION
Defendants’ motion for summary judgment on their counterclaims is denied with
respect to defendants’ counterclaims for defamation, conversion, misappropriation of
trade secrets, and breach of fiduciary duty. The court sua sponte grants summary
judgment to plaintiff dismissing defendants’ counterclaims alleging violations of the
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Lanham Act and the ECPA.
The parties will participate in a telephone conference on April 24, 2013 at 1:30
p.m. to schedule further proceedings.
So ordered.
________\s\ John T. Curtin__________
JOHN T. CURTIN
United States District Judge
Dated: March 14, 2013
p:\pending\2008\08-347.feb112013
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