Rich Products Corporation v. Bluemke et al

Filing 73

DECISION AND ORDER DENYING Plaintiff's 54 Motion for Partial Summary Judgment; GRANTING Defendants' 64 Motion for Summary Judgment; DISMISSING the Complaint; DIRECTING the Clerk of the Court to close this case. Signed by William M. Skretny, Chief Judge on 1/10/2015. (MEAL) -CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
RICH PRODUCTS CORPORATION,
Plaintiff,
v.

DECISION AND ORDER
13-CV-30S

DAVID BLUEMKE and
DARIFAIR FOODS, INC.,
Defendants.

I. INTRODUCTION
Plaintiff Rich Products Corporation commenced this diversity action in January 2013
seeking damages and injunctive relief for, among other things, intentional interference with
contract and unfair competition allegedly resulting from Defendant Darifair Foods, Inc.
(“Darifair”) employing Plaintiff’s former employee, Defendant David Bluemke. Presently
before this Court are Plaintiff’s motion for partial summary judgment on its first and fifth
causes of action and Defendants’ cross-motion for summary judgment dismissing the
Complaint. The Court finds these matters fully briefed and oral argument unnecessary. For
the reasons that follow, Plaintiff’s motion is denied and Defendants’ cross-motion is
granted.
II. BACKGROUND
In 1993, Defendant Bluemke was an investor and owner of Ultra Cream Products,
LLC, a joint venture between Cream Products, a company owned by Bluemke’s family, and
Ultra Products, LLC, for the manufacture, promotion, and marketing of aseptic dairy and
nondairy coffee creamers. (Defs’ Statement of Facts ¶¶ 4, 6, Docket No. 65 (“Defs’ Stmt”),
Pl’s Responding Statement of Facts ¶¶ 4, 6 (“Pl’s Res’g Stmt”).) Cream Products was

acquired by Morningstar Foods, Inc. (“Morningstar”), in 1996, at which time Bluemke
became a consultant for the latter corporation. (Defs’ Stmt ¶ 7; Pl’s Res’g Stmt ¶ 7.)
Plaintiff entered into a licensing agreement with Morningstar in September 1998 which
granted Plaintiff the right to utilize Morningstar’s technology, intellectual property rights, and
confidential information. (Defs’ Stmt ¶ 8; Pl’s Res’g Stmt ¶ 8.)
Plaintiff hired Defendant David Bluemke in November 1998, at which time Bluemke
signed an agreement that contained the following confidentiality provision:
6.

I recognize that in my position with [Plaintiff], I will be exposed to
information which Rich considers to be confidential and proprietary.
To protect [Plaintiff’s] interest in this information, I agree as follows:
(a)

All knowledge and information which I have obtained, or
which I may hereafter obtain, during the course of my
employment with [Plaintiff], with respect to the business,
equipment, products, methods of manufacture,
specifications, or research and development projects of
[Plaintiff], are secret and confidential.

(b)

I will not, either directly or indirectly, during my
employment or at any time after my employment with
Rich, use for myself or other or divulge or convey to
others any confidential information, knowledge, or data
of [Plaintiff] or that of third parties obtained by me
during the period of employment with [Plaintiff].

(Compl Ex A, Docket No. 1 at 21; Defs’ Stmt ¶ 11; Pl’s Res’g Stmt ¶ 11.)
In June 2003, while Defendant Bluemke was still employed by Plaintiff, Plaintiff
entered into an Asset Purchase Agreement with Morningstar. (Defs’ Stmt ¶ 13; Pl’s Res’g
Stmt ¶ 13.) As listed in that agreement, the intellectual property assets sold to Plaintiff
consisted of a single trademark and the licenses contained in the prior licensing agreement
between Plaintiff and Morningstar “to the extent that it relates” to a single, different
trademark. (Joseph Aff Ex G, Docket No. 71 at 13 (Schedule 2.18, filed under seal).)
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In August 2012, Defendant Bluemke applied for a sales manager position with
Defendant Darifair, and upon receiving an offer, he informed Plaintiff of his intention to
leave. (Defs’ Stmt ¶ 13; Pl’s Res’g Stmt ¶ 13.) Plaintiff sent correspondence to both
Bluemke and Darifair notifying each of Plaintiff’s intent to enforce the confidentiality and
non-compete provisions contained in the Confidentiality Agreement, and expressing the
belief that it would not be possible for Bluemke to work for Darifair without violating these
provisions. (Defs’ Stmt ¶¶ 20-21; Pl’s Res’g Stmt ¶ 20-21.) Defendants disagreed, and
Bluemke began his employment with Darifair. (Compl Ex D.)
Plaintiff commenced the instant action in January 2013. Seven causes of action are
asserted in the Complaint: (1) intentional interference with contract against Defendant
Darifair; (2) intentional interference with ongoing and prospective business relations
against Defendant Darifair; (3) a claim for damages under a quantum meruit theory against
Defendant Darifair; (4) unfair competition against both Defendants; (5) breach of contract
against Defendant Bluemke; (6) breach of restrictive covenant against Defendant Bluemke;
and (7) breach of fiduciary duty against Defendant Bluemke. Following this Court’s denial
of Defendants’ motion to dismiss the Complaint for lack of personal jurisdiction or transfer
the action, the parties’ filed their respective motions for summary judgment. Plaintiff has
moved for summary judgment in its favor with respect to only two causes of action, and
does not oppose Defendants’ motion to the extent it seeks dismissal of the second, third
and sixth causes of action. (Pl’s Mem in Opp’n at 2 n. 1, Docket No. 70.)
III. DISCUSSION
“A motion for summary judgment may properly be granted . . . only where there is
no genuine issue of material fact to be tried, and the facts as to which there is no such
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issue warrant the entry of judgment for the moving party as a matter of law.” Kaytor v. Elec.
Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010). A court’s function on a summary judgment
motion “is not to resolve disputed questions of fact but only to determine whether, as to any
material issue, a genuine factual dispute exists.” Kaytor, 609 F.3d at 545 (citing Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). “A
dispute regarding a material fact is genuine ‘if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.’ ” Weinstock v. Columbia Univ., 224 F.3d
33, 41 (2d Cir. 2000) (quoting Anderson, 477 U.S. at 248), cert denied, 540 U.S. 811
(2003). A court must also “construe the facts in the light most favorable to the non-moving
party and must resolve all ambiguities and draw all reasonable inferences against the
movant.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003).
Further, where, as here, both parties move for summary judgment, “each party's motion
must be examined on its own merits, and in each case all reasonable inferences must be
drawn against the party whose motion is under consideration.” Morales v. Quintel Entm’t,
249 F.3d 115, 121 (2d Cir. 2001).
A.

Breach of and Tortious Interference with the Confidentiality Agreement
Plaintiff argues that it is entitled to partial summary judgment with respect to its fifth

cause of action for Bluemke’s breach of the Confidentiality Agreement and its first cause
of action for Darifair’s interference with that agreement. Plaintiff argues that resolution of
these claims, as well as its causes of action for breach of fiduciary duty and unfair
competition, “turn on the question of whether or not – when [Plaintiff] acquired the Cream
Products’ confidential information – it obtained a protectable interest in that information.”
(Pl’s Mem in Opp’n at 2-3.) At issue is the “confidential/proprietary information of Cream
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Products Inc., and/or Ultra Products (‘hereinafter ‘the Cream Products’) that were
previously owned by Defendant Bluemke’s family and acquired by [Plaintiff] through
Morningstar Foods, Inc.” (Pl’s Mem of Law at 2, Docket No. 54-6.) Plaintiff asserts that this
confidential information encompasses “methods, know-how, formula, compositions,
processes and discoveries, methods of manufacture and specification” that had been the
subject of a 1998 licensing agreement between Plaintiff and Morningstar. (Retelny Aff ¶¶
9, 13 Ex A, Docket Nos. 54-4, 55.)
With respect to the breach of contract claim, Plaintiff asserts that:
given [Plaintiff’s] indisputable ownership of this intellectual
property and its protection under the Confidentiality Agreement
. . . , the Court can easily determine that there has been a
breach of the contract as to the “Cream Products’ confidential
proprietary information by reason of Defendants’ position that
they are free to use and disclose this confidential technical
information for which Rich Products paid million of dollars.
(Pl’s Mem of Law at 12-13.)
Initially, Plaintiff’s assertion of “indisputable ownership” turns on its interpretation of
the Confidentiality Agreement as encompassing Cream Products proprietary information
of which Bluemke had knowledge prior to his employment, but which was subsequently
purchased by Plaintiff. (Pl’s Mem in Opp’n at 4.) Defendants dispute this interpretation,
arguing that interpreting the Confidentiality Agreement to include industry knowledge and
information that was not obtained by Bluemke “during the course of [his] employment” with
Plaintiff would be impermissibly overbroad. (Defs’ Mem in Opp’n at 17-18, Docket no. 62.)
Defendants further argue that, in any event, resolution of this contractual
interpretation issue is unnecessary in order to resolve the current motions, and this Court
agrees. “It is well settled that the elements of a breach of contract cause of action are ‘the
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existence of a contract, the plaintiff's performance under the contract, the defendant's
breach of that contract, and resulting damages’ ” Resetarits Const. Corp. v. Olmsted, 118
A.D.3d 1454, 1455, 988 N.Y.S.2d 797 (N.Y.A.D. 4th Dep’t 2014)(quoting Niagara Foods,
Inc. v. Ferguson Elec. Serv. Co., Inc., 111 A.D.3d 1374, 1376, 975 N.Y.S.2d 280 (N.Y.A.D.
4th Dep’t 2013), lv denied, 22 N.Y.3d 864 (2014) (emphasis added)).1 Similarly, a claim
for tortious interference with contract cannot stand absent an actual contractual breach.
Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424-25, 668 N.E.2d 1370 (1996);
NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, 87 N.Y.2d 614, 620-21, 664 N.E.2d 492
(1996).
Here, Defendants rely on the deposition testimony of Plaintiff’s representatives who
testified that they had no knowledge that Darifair had become privy to any confidential or
proprietary knowledge belonging to Plaintiff. (Ferranti Dep at 50-52, Docket No. 65-1 at 2224; Retelny Dep at 35-36, Docket No. 65-1 at 101-02; Burke Dep at 51-53, Docket No. 651 at 50-52.) In other words, Plaintiff has no evidence that there has in fact been a breach
of the Confidentiality Agreement regardless of how that document is interpreted. Defendant
Bluemke further avers that:
I have not had any communications or discussions with Darifair pertaining
to any technology I learned before I joined or during the course of my
employment with Rich Products. Darifair did not ask me and I did not
disclose any technology or confidential information that I acquired before I
joined or during the course of my employment with Rich Products.
(Bluemke Aff ¶ 10, Docket No. 65-1 at 38 (emphasis added).)
Plaintiff neither disputes nor addresses Defendants’ argument that there is no

1

The parties do not dispute that New York law controls in this diversity action. See Krumme v.
WestPoint Stevens Inc., 238 F.3d 133, 138 (2d Cir. 2000).

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evidence of an actual breach of the confidentiality agreement, but instead relies on
Bluemke’s perceived intent to breach the confidentiality agreement and his purported ability
to do so. (Pl’s Mem of Law at 13; Pl’s Mem in Opp’n at 11-12; see Retelny Aff ¶¶ 16-17,
Docket No. 54-4; Retelny Dep at 29-30, Docket No. 61 at 16-17; Retelny Dep at 35-36,
Docket No. 61 at 19-20; Burke Dep at 44-45, Docket No. 61 at 64-65.) What Plaintiff is
therefore describing, albeit unclearly, is at best an anticipatory breach (or anticipatory
repudiation) of contract, which is actionable when “a party has indicated an unequivocal
intent to forego performance of his obligations under a contract.” Rachmani Corp. v. 9 East
96th Street Apt. Corp., 211 A.D.2d 262, 266, 629 N.Y.S.2d 382 (N.Y.A.D. 1st Dep’t 1995).
Even assuming arguendo that such liability would be applicable here, a conclusion this
Court does not reach, such a theory has not been clearly stated, and it cannot be
concluded that Defendant had an opportunity to appropriately respond to such an
argument. Summary judgment in Plaintiff’s favor under an anticipatory breach theory would
therefore be inappropriate.
Finally, because Plaintiff does not dispute that there is no evidence of an actual
breach of the Confidentiality Agreement, Defendants have established their entitlement to
summary judgment on both the breach of contract and tortious interference with contract
claims regardless of how the Confidentiality Agreement is interpreted. NBT Bancorp Inc.,
87 N.Y.2d at 620-21; Resetarits Const. Corp., 118 A.D.3d at 1454; see Aetna Cas. & Sur.
Co. v. Aniero Concret Co., 404 F.3d 566, 589 (2d Cir. 2005).
B.

Breach of Fiduciary Duty
The seventh cause of action alleges that Defendant Bluemke breached his fiduciary

duty and duty of loyalty to Plaintiff. A breach of fiduciary duty or loyalty may occur as a
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result of an employee’s misappropriation of an employer’s confidential information. Poller
v. BioScrip, Inc., 974 F. Supp. 2d 204, 227 (S.D.N.Y. 2013); Chemfab Corp. v. Interated
Liner Tech., 263 A.D.2d 788, 789, 693 N.Y.S.2d 752 (N.Y.A.D. 3d Dep’t 752).
Nonetheless, in addition to the existence of a fiduciary relationship, a viable claim requires
a showing of misconduct by the defendant and damages resulting from the defendant’s
misconduct. McGuire v. Huntress, 83 A.D.3d 1418, 1420, 920 N.Y.S.2d 531 (N.Y.A.D. 4th
Dep’t 2011), lv denied, 85 A.D.3d 1657 (2011). Because Plaintiff does not dispute
Defendant’s contention that there is no evidence that Bluemke has in fact disclosed or
misappropriated any claimed proprietary and confidential information, Defendants are
entitled to summary judgment on the seventh cause of action.
C.

Unfair Competition
The misappropriation of confidential information may also form the basis of an unfair

competition claim. See generally Redf Organic Recovery v. Rainbow Disposal Co., 116
A.D.3d 621, 622, 985 N.Y.S.2d 10 (N.Y.A.D. 1st Dep’t 2014) (a valid unfair competition
claim requires a showing that a defendant acted in bad faith in misappropriating a
commercial advantage belonging to plaintiff). Defendants are correct that the absence of
evidence that any of Plaintiff’s confidential information – “Cream Products” or otherwise –
has in fact been disclosed by Defendant Bluemke and used by Defendant Darifair warrants
summary judgment in Defendants’ favor. (Def’s Mem at 23-24).
D.

Declaratory Judgment
To the extent that Plaintiff is implicitly requesting a declaratory judgment with respect

to its interpretation of the Confidentiality Agreement, in addition to its express request for

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a permanent injunction, that request is denied.

Generally, in determining whether

declaratory judgment is appropriate, a court should consider “(1) whether the judgment will
serve a useful purpose in clarifying or settling the legal issues involved and (2) whether a
judgment would finalize the controversy and offer relief from uncertainty.” Niagara Mohawk
Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 105 (2d Cir. 2012)
(internal quotation marks omitted).

As explained above, even if the Confidentiality

Agreement is interpreted as Plaintiff requests, dismissal of the Complaint is unwarranted.
Further, the parties dispute whether the “Cream Products” proprietary information at issue
has been sufficiently defined. (Defs’ Mem in Opp’n at 5-6; Retelny Aff ¶ 9; Pl’s Reply Mem
of Law at 7 n. 3.) To that end, Plaintiff asserts that the “Cream Products” proprietary
information is included in“the intellectual property and confidential information previously
licensed by [Plaintiff] under the [1998] Licensing Agreement,” (Pl’s Mem in Opp’n at 7;
Retelny Aff ¶ 9); however, the actual intellectual property licenses incorporated into the
asset agreement are only those related to a single named trademark and are not further
defined. (Joseph Aff Ex G, Docket No. 71 at 13 (Schedule 2.18, filed under seal).) For this
Court to be able to render a ruling that would actually “finalize the controversy and offer
relief from uncertainty,” more specific information regarding the confidential information at
issue would be required. Niagara Mohawk Power Corp., 673 F.3d at 105.
IV. CONCLUSION
Plaintiff failed to establish its entitlement to summary judgment with respect to the
breach of contract and intentional interference with contract, and its motion is therefore
denied. Further, because Plaintiff failed to raise a triable issue of fact in opposition to
Defendants’ showing that there has in fact been no disclosure or misappropriation of
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confidential or proprietary information, Defendants’ motion for summary judgment
dismissing the Complaint is granted.

V. ORDERS
IT HEREBY IS ORDERED that Plaintiff’s Motion for Partial Summary Judgment
(Docket No. 54) is DENIED;
FURTHER, that Defendants’ Motion for Summary Judgment (Docket No. 64) is
GRANTED and the Complaint is dismissed;
FURTHER, that the Clerk of the Court shall close this case.
SO ORDERED.

Dated: January 10, 2015
Buffalo, New York
/s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Court

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