Pop Intl. Galleries Inc. v Swarts

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Pop Intl. Galleries Inc. v Swarts 2012 NY Slip Op 30551(U) March 6, 2012 Supreme Court, New York County Docket Number: 113294/11 Judge: Joan A. Madden Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] UED ON 31712012 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PART PRESENT: // Justice MOTION CAL. NO. I(fi.lW were read on this motion to/for - & u y v . h /1+ ! l l - The followlng papers, numbered 1 to PAPERS NUMBERED Notice of Motion/ Order to Show Cause Answering Affidavits - - Affidevits - Exhibits ... Exhibits Replying Affidavits Cross-Motion: Yes @,No MAR 0% 2012 bIEbY YOtik C(JUN"lY CLkHKS OFFICE bated: :heck one: FINAL DISPOSITION i h e c k if appropriate: 0 DO C SUBMIT ORDER/ JUDG. I -FINAL DISPOSITION NOT POST n REFERENCE SETTLE ORDER/ JUDG. fi- [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK : PART 11 X POP INTERNATIONAL GALLERIES INC., Plaintiff , _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ - - _ _ _ _ _ _ _ _ _ _ _ I _ _ _ _ _ Index No. 113294/11 -againstBRAIN SWARTS, DJT FINE ART INTERNATIONAL, LLC d/b/a TAGIALATELLA GALLERIES and DOMINIC TAGIALATELLA, Defendants. X Joan A. Madden, J.: Plaintiff Pop International Galleries, Inc. ( Pop ) moves, FlcF by order to show c a u s e , for an order granting a temporary restraining order and a preli.minary injunction enjoining defendants from making any further use of [Pop S I confidenti.al and proprietary customer and client contact list. Defendants oppose the motion. Pop is a N e w York corporation engaged in the business of purchasing, selling and exhibiting pop-art. Defendant Brain Swacts ( Swarts ) was employed by Fop as an art consultant and salesman from November, 2006 to April, 2011. Defendant DJT Fine Art lnternational d/b/a Tayl.ialatel,laGalleries ( DJT ) is a limited liability company engaged in the purchase, sale and exhibition of substantially the same pop-art as Fop. Defendant Dominic Taglialatella ( Taglial.atella ) is the founder of Taglialatella Galleries. In this action, Fop alleges that Swarts misappropriated Pop s proprietary information from its database, including its [* 3] confidential customer, artist, distributor and vendor lists to u n f a i r l y compete with Pop, interfere with Pop s business activities and usurp Pop s customer relationships. It is further alleged that Swarts and his new employers, defendants DJT and Taglialatella, used Pop s proprietary information to solicit Pop s customers, artists, vendors and distributors to market defendants competing pop-art. The complaint asserts causes of action against Swarts for breach of contract, and against all the defendants for breach of duty of good faith and loyalty, conversion, for a temporary and permanent injunction, and f o r an accounting. Defendants answered the complaint, a n d asserted t h e affirmative defenses of l a c k of proper service and failure to state a cause of action. pop now moves for a preliminary injunction, enjoining defendants from using proprietary information which Pop alleges Swarts improperly took when he left Fop s employ. In support of its motion, Fop submits the affidavit of Jeffrey Jaffe ( J a f f e ) , its President and sole shareholder. According to Jaffe, the extensive customer list is Pop s primary asset and is guarded a n d protected on Pop s computers (Jaffe Aff. ¶4). Among the measures taken to protect the confidentiality of the lists is the requirement that at the commencement of their employment, all employees sign an acknowledgment that they received an Employment Handbook indicating the proprietary nature of the Pop s customer, 2 [* 4] artist, prospective customer and v e n d o r lists, and agreeing that the lists are the sole and exclusive property of Pop and c a n n o t be removed from Pop in any form. In support of its motion, Pop attaches the relevant pages from the Personal Code of Conduct and Summary of thc Work Rules sections of the Employee Handbook. Personal Code of Conduct states, that \ Section B1 o f the [a]11 visitors, prospects, clients and collectors of the gallery a r e proprietary to Pop.. .Further, all client lists, client information, clj.ent index cards, sales materials and employee training materials are property of Pop . . . This material shall never leave the premises at any time whatsoever. Section B2 o ¬ the Personal Code of Conduct provides that [ a l l 1 sales information . . . is confidential and shall not be shared with anyone . . . It further provides that disregard of these policies will result in termination and Pop reserves the right to employ any and a l l legal remedies at its disposal to protect its rights in this regard. The Summary of Work Rules section includes in its description o ¬ unacceptable behavior and conduct of employees, .inter alia, [u]unauthorized divulgence of the Company business records (including client lists) and \ [r]emoving from the property any Company records, including client 1 . i s t s . J a f f e states that Swarts was hired by Pop in late 2006, and that on June 7, 2007, he executed two acknowledgments that he had 3 [* 5] r e a d and agreed to abide by the rules of the Employee Handbook, including the Personal Code of Conduct and attaches copies of these acknowledgments. In addition, according to Jaffe, at the time of his resignation in April 2011, Swarts represented to him that he had fully complied with the Employee Handbook and had returned all property belonging to Pop ( J a f f e Aff. ¶ 11). However, Jaffe states that in July 2011, he became suspicious of Swarts conduct when an established customer of Pop s, Mr. Frank Warzecha, visited the gallery and informed Jaffe ,that he had received an cmail from Swarts indicating that Swarts was currently affiliated with Taglialatella Galleries and soliciting Mr. Warzecha s business. According to Jaffe, Swarts had no independent relationship with Warzecha. By letter dated August 8, 2011, to the defendants, counsel for Pop advised t h a t they cease and desist from using Pop s proprietary and confidential information to directly solicit Pop s customers, and that Swarts was in violatj-on of certain sections of the Employee Handbook prohibiting such conduct. The letter warned that if the conduct continued, legal action would be taken (Order to Show Cause, Exhibit F). Jaffe states that despite the letter, in November 2011, Jaffe received information that S w a r t s h a d solicited one of Pop s former employees who was on a customer l i s t belonging to Pop. 4 [* 6] Thereafter, J a f f e conducted a search of Pop s ernail b a c k - u p system and discovered that \ [ o ] September 1, 2009, . . . [Swarts] n created a vcf (vCard) backup of the company address book from the computer he used while employed at Pop arid emailed a copy of t.he proprietary electronic file to his personal ernail address. (Jaffe Aff. ¶I 17). In opposition, defendants submit the affidavit of Swarts. Swarts denies that the customer list referred to by J a f f e is proprietary and asserts that the list was not a customer list but rather a contact list that was not created by Pop b u t rather b y Pop s employees. Swarts also states that the list he downloaded in September 2009 was his own contact list and not the list of any other employee of Pop. In addition, while Swarts admits that he signed the acknowledgements that he received the Employee Handbook he states that he did not believe and was nevcr advised that this Handbook constituted a contract (Swarts Aff. ¶ 7). I-le points out that the Handbook provides that it may be altered without notice and that not a11 policies are in the Handbook, and that such provisions indicate that the Handbook is not a contract. Swarts.further states that he did not believe that the provisions in the Handbook applied to him after he left Pop s employ. Swarts also states that he was never directed not to download the contact list on his personal email and that, .in 5 [* 7] fact, the information was on his personal email account with Fop s knowledge. Swarts explains that: due to problems with Pop s email system, he sent emails to customers from his own gmail account and copied the emails to Pop. Thus, Swarts states that he downloaded the contact lists to his own computer so as to email. them from his personal email and not to steal the information. In reply, Jaffe states that the u s e of personal email accounts to communicate with customers is immaterial as to whether the information was proprietary. As f o r Swarts contention that in September 2009, he o n l y downloaded his own contact: list, Jaffe states that such list was only a subset of Pop s central client list, and notes that Mr. Warzecha, who S w a r t s solicited was not on the September 2009 list. In a n y event, Jaffe contends that neither list belonged to Swarts who was in b r e a c h of t h e agreement contained in the Employment Handbook. A preliminary injunction is a drastic remedy, and thus should not be granted unless the movant demonstrates a clear right to s u c h relief. Citv of New Y o r k v 330 Continental, LLC, 60 AD3d 226, 234 (1. Dept 2009) ; Peterson v Corbin, 275 AD2d 35 [ 2 d Dept], lv dismissed, 95 NY2d 919 (2000). Entitlement to a preliminary injunction requires a showing of (1) the likelihood of success on t h e merits, (2) irreparable injury absent the 6 [* 8] granting of preliminary injunctive relief, and (3) a balancing of the equities in the movant's favor. C P L R 6301; Nobu Next Door, LLC v Fine Arts Hous., Tnc., 4 N Y 3 d 839 (2005); Aetna Ins. Co. v Capasso, 75 N Y 2 d 860 [1990]). If any one of these three requirements is not satisfied, the motion must be denied. Faberqe Intern., Inc. v Di Pino, 109 A D 2 d 235 ( l g tDept 1985). Moreover, \\ [ p ] roof cstabl.ishing these [requirements] must be by affidavit and other competent p r o o f with evidentiary detail." Scott v. Mei, 219 AD2d 181, 182 (1" Dept 1996). As f o r t h e first prong, whether Pop is likely to succeed on t h e merits, the court must examine whether Pop has shown that Swarts breached the Handbook's restrictions regarding Pop's proprietary information and whether defendants misappropriated such information, and therefore breached a fiduciary duty or duty of loyalty owed to Pop.' In connection with these issues, it must be determined whether the information allegedly taken by defendants constitutes a trade secret or confidential information entitled to protection. Ashland Manasement Inc. v. Altair Investments, N.A., 59 A D 3 d 97, 102 (1" Dept 2 0 0 8 ) ; NCN Co., Inc. v. Cavanaqh, 215 A D 2 d 737, 737 (2d Dept 1995). \\Atrade secret is any formula, pattern, device or 'While Swarts maintains that any duty he owed to Pop ended when he left Pop's employ, to the extent it can be shown that Swarts misappropriated trade secrets during his employment with Pop, Pop would have a viable claim against hj,m. Smallwood Estates v. Nik~l-a, 163 AD2d 763, 764 (3d Dept 1990) 7 [* 9] compilation of information which is used in one s business, and which gives him an opportunity to gain an advantage over competitors who do not know or use i t . Ashland Mat-. v . Janian, 82 N.Y.2d 39S, 407 (1993), c i t i r i g Restatement of Torts S e c t i o n 757, comment b. In deciding a trade secret claim, the court should consider the following factors: 1) the extent to which t h e 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 g u a r d 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 o t h e r s . I . [A] d trade secret must f i r s t of all be secret: whether it is is generally a question of fact. I. d Here, a preliminary injunction is not p r o p e r l y issued in light of the considerable factual disputes concerning whether the information at issue constitutes a trade secret. O Hara v. Corporate Audi-t Co, Inc., 161 AD2d 309 (1, Dept 1990)(preliminary injunction not warranted where conflicting affidavits present s h a r p issues of fact); NCN Co., Inc. v. Cavanaqh, 215 A D 2 d at 737 (same). While Fop provides evidence, including t-he affidavit of 8 [* 10] Jaffe and the Employee Handbook, tending to show that the information at issue was valuable to Pop, was intended to remain confidential, and therefore should be entitled to trade secret protection, defendants provide evidence to the contrary, including Swarts' statements that P o p ' s employees had access 1.0 the data base of customer lists, that employees were permitted to download the information on their personal computers, and that names were added to the lists by employees as they made new contacts. Under these circumstances, the record fails to establish steps taken by Fops to guard the secrecy of the lists so as to warrant a determination, at this juncture, of entitlement to trade secret protection. In this connection, it appears that the database and/or lists were accessible to various employees of Fop. In addition, the record d o e s not indicate whether the in ¬ormation in the lists could be obtained from non-confidential sources, or the amount of money or effort expended by Fop to obtain this information. See qenerallv, Starliqht J,imousine Serv. Co. v. Cucinella, 275 A D 2 d 704 (2d Dept 2000); compare U . S . Reins. C o r p . v. Humphreys, 2 0 5 AD2d 187 (1" Dept 1994) (granting a preliminary injunction enjoining defendant from misappropriating reinsurance product he developed with plaintiff where undisputed record showed that plaintiff expended [* 11] considerable effort in developing the product). With respect to the breach of contract claim against Swarts based on his alleged breach of the policies in the Employee Handbook prohibiting, inter alia, the taking of Pop s confidential information, including client lists, Fop has not shown that it is likely to succeed on the merits. The Court. of Appeals has held that [r]outinely issued employee manuals, handbooks and pol.icy statements should not lightly be converted to employment agreements Lpbosco v . New York Tel. Co./NYNEX, 96 NY2d 312, 317 (2001) - Here, issues exist as to whether the Employment Handbook is a binding contract, particularly since it states that it is \\an excellent and helpful guide to the [Pop s] policies and benefits and that [nlo attempt has been made to include all of [ F o p s ] policies and that [Plop reserve[s] full discretion to add to modify or delete provisions of this Handbook or the policies 0.r procedures on which they may be based, at any time without advance notice. Thus, while the policies in the Handbook restrict the use of information and property belonging to Pop and provide evidence of Pop s intention to maintain the confidentiality oE its client lists and Swarts knowledge of this intention, even assuming Swarts violated such policies, based on the record before this court, it cannot be said that such proof is sufficient to support a preliminary injunction. As Pop has not shown that it is likely to succeed on the 10 [* 12] . . . I 1 ' . merits, the c o u r t need not reach whether i t has demonstrated irreparable harm or if the equities weigh in its favor. I n v i e w o f t h e above, i t i s ORDERED t h a t Fop's motion for a preliminary i n j u n c t i o n is denied; and it i s further ORDERED that the parties shall appear on March 29, 2012 at 9:30 am for a preli DATED: March 6 2012 : 11 in Part 11, room 351, conference -----

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