Scory LLC v Maroney

[*1] Scory LLC v Maroney 2007 NY Slip Op 51064(U) [15 Misc 3d 1140(A)] Decided on May 22, 2007 Supreme Court, Nassau County Austin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 22, 2007
Supreme Court, Nassau County

Scory LLC d/b/a the Intelligent Office, Plaintiff,

against

Matthew J. Maroney, Gustavo Sawicki, Richard H. Petersen, Robert Scheingold, Christina Prietopmaroney, Georgetown Funding, LLC, R&R Group LLC, Infinity Property Group, LLC, Melvo, LLC, ABC Company, and XYZ Company, the names of last two, defendants being fictitious, Defendants.



13251-06



Counsel for Plaintiff

Moses & Singer, LLP

405 Lexington Avenue

New York, New York 10174

Counsel for Defendant

Barnes & Barnes, P. C.

1461 Franklin Avenue

Garden City, New York 11530

Leonard B. Austin, J.

The following papers were read on Plaintiff's motion for leave to add Gustavo Sawicki as [*2]a party defendant and for leave to file and serve a supplemental summons and amended complaint:

Notice of Motion dated March 2, 2007;

Affirmation of Robert D. Lillienstein, Esq. dated March 2, 2007;

Affidavit of Roger L. Kahn sworn to on March 2, 2007;

Plaintiff's Memorandum of Law;

Affirmation of Leo K. Barnes, Esq. dated March 16, 2007;

Affidavit of Matthew J. Maroney sworn to on March 16, 2007;

Affidavit of Cristina Prieto-Maroney sworn to on March 16, 2007;

Affidavit of Richard H. Petersen, Esq. dated March 15, 2007;

Affidavit of Robert Scheingold sworn to on March 15, 2007;

Defendant's Memorandum of Law;

Affidavit of Robert H. Kahn sworn to on March 26, 2007;

Plaintiff's Reply Memorandum of Law.

Plaintiff moves to add Gustavo Sawicki ("Sawicki") as a party defendant and to file and serve a supplemental summons and amended complaint.

BACKGROUND

Plaintiff, Scory LLC ("Scory"), is a franchisee of The Intelligent Office System, LLC. The Intelligent Office ("TIO") is a nationwide franchisor of "virtual offices".

Scory provides traditional and virtual office space and office services including remote reception, mail service, telephone and fax services and business support services on a short and long term basis from its offices in Garden City.

Scory employed Sawicki as the manager and operator of its Garden City operations. In connection with his employment, Sawicki had access to information which Scory alleges is confidential and/or proprietary. Sawicki signed a confidentiality agreement in connection with his employment which prohibited him from using or disclosing Scory's confidential and proprietary information.

In or about June 2006, Sawicki left his employment with Scory and went to work for companies that operated competing TIO centers in Melville and White Plains. Scory alleges these TIO centers were formed by Defendants Richard H. Petersen, Robert Scheingold, Maroney and Prieto.

Scory seeks to add Sawicki as a Defendant. Scory alleges that after Sawicki left its employ, he remotely accessed Scory's computer and telephone system and redirected two of Scory's toll free numbers to telephones unrelated to Scory's business. Scory further alleges that Sawicki remotely accessed its computers to obtain Scory's confidential information. Scory further alleges Sawicki had its confidential and proprietary information such as it customer lists and financials which he is now using in his present employment to compete with Scory.

The original complaint alleged causes of action for breach of contract and tortious interference with contract and unfair competition. Plaintiff seeks to add Sawicki as a party defendant. Plaintiff also seeks to serve an amended complaint which will allege in addition to the causes of action alleged in the original complaint causes of action for civil conspiracy, misappropriation of trade secrets, and violation of the Computer Fraud and Abuse Act, 18 U.S.C. [*3]§1030(g) ("CFAA").

DISCUSSION

CPLR 1003 permits the court to add parties to the litigation at any stage of the proceedings. It is to be liberally construed and grants the court wide latitude in determining whether parties are to be added. Gross v. BFH Co., Inc., 151 AD2d 452 (2nd Dept. 1989); and Micucci v. Franklin General Hospital, 136 AD2d 528 (2nd Dept. 1988).

The motion to add a new party should be granted unless adding the new party will cause unnecessary delay or prejudice the rights the original parties to the action. 82 N Y Jur 2d Parties § 142; and 1 New York Civil Practice: CPLR ¶ 1003.06.

"Leave to serve amended pleadings shall be freely given' absent prejudice and surprise resulting from the delay. (CPLR 3025[b]; see Fahey v. County of Ontario, 44 NY2d 934; Faracy v. McGraw Edison Corp. 463)." Northbay Construction Co., Inc. v. Bauco Construction Corp., 275 AD2d 310, 311 (2nd Dept. 2000). See also Nikac v. Rujak, 276 AD2d 443 (2nd Dept. 2000) and Goldstein v. St. John's Episcopal Hosp.,

267 AD2d 426 (2nd Dept. 1999).

The determination of whether to deny or permit an amendment to the pleadings is one addressed to the discretion of the court. Liendo v. Long Island Jewish Med. Ctr., 273 AD2d 445, (2nd Dept. 2000); and Henderson v. Gulati, 270 AD2d 308 (2nd Dept. 2000)

The party seeking leave to serve an amended pleading must make an evidentiary showing establishing merit to the proposed amendment. Joyce v. McKenna Assoc., Inc., 2 AD3d 592 (2nd Dept. 2003); and Morgan v. Prospect Park Associates Holdings, L.P., 251 AD2d 306 (2nd Dept. 1998). The evidentiary showing establishing merit must be made by one with actual knowledge of the facts surrounding the proposed amendment. Id; and Frost v. Monter, 202 AD2d 632 (2nd Dept. 1994).

The court will not consider the merits of the proposed amendment unless the proposed amendment is insufficient as a matter of law or totally devoid of merit. Sunrise Plaza Assoc., L.P. v. International Summit Equities Corp., 288 AD2d 300 (2nd Dept. 2001); and Norman v. Ferrara, 107 AD2d 739 (2nd Dept. 1985); See also, Siegel, New York Practice 4th §237.

Sawicki should be added as a party defendant. There are sufficient allegations that Sawicki possesses, and is using in his present employment with Defendants, information he obtained through his employment with Scory which may be proprietary and/or confidential.

The proposed fourth cause of action alleges that Defendants including Sawicki engaged in a conspiracy to damage Scory. New York does not recognize a separate cause of action for civil conspiracy. Ward v. City of New York, 15 AD3d 592 (2nd Dept. 2005). Therefore, the proposed fourth cause of action is insufficient as a matter of law. Leave to serve an amended complaint alleging this cause of action must be denied.

The proposed sixth cause of action seeks civil damages for violation of CFAA,;18 U.S.C. §1030. 18 U.S.C.§1030(g) permits one who suffers damage or loss as a result of the violation of the statute to maintain a civil action for compensatory damages and injunctive relief.

Scory alleges that Sawicki violated 18 U.S.C. §1030(a)(2)(C) and 18 U.S.C. § 1030(a)(2)(4).[FN1] 18 U.S.C. §1030(a)(2)(C) prohibits one from intentionally accessing a protected [*4]computer without authorization and obtaining information if the conduct involved an interstate or foreign communication. 18 U.S.C. §1030(a)(4) prohibits one from knowingly, and with intent to defraud, access a protected computer without authorization and obtain anything of value.

One may maintain a civil action only if the conduct involved one of the factors set forth in 18 U.S.C. § 1030 (a)(5)(B)(i)-(v). The only relevant section is 18 U.S.C. §1030(a)(5)(B)(i) which permits an action where there is a loss to one or more persons in a one year period aggregating $5,000 in value.

Damage is defined as "...impairment to the integrity or availability of data, a program, a system or information." 18 U.S.C. §1030(e)(8).

Loss is defined as "...any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred or other consequential damages incurred because of interruption of service." 18 U.S.C. §1030(e)(11).

To plead this cause of action, Scory must establish that Defendants violated 18 U.S.C. §1030(a)(2)(C) or 18 U.S.C. §1030(a)(4) and sustained loss during a one year period aggregating at least $5,000 in value. Fiber Systems International, Inc. v. Roehrs, 470 F.3d 1150 (5th Cir. 2006); and P.C. Yonkers, Inc. v. Celebrations the Party and Seasonal Superstore, LLC, 428 F.3d 504 (3rd Cir. 2005).

To establish a claim under the CFAA, a plaintiff must establish that, as a result of the unauthorized access to a protected computer with intent to defraud, the defendant obtained anything of value. Id. Plaintiff must also establish that it sustained statutorily defined damages or loss in any one year aggregating at least $5,000. Nexans Wire S.A. v. Sark-USA, Inc., 319 F. Supp. 2d 468 (S.D.NY 2004), aff'd., 166 Fed. Appx. 559 (2nd Cir. 2006). Plaintiff's proposed amended complaint and the affidavit of merit submitted in support of the motion fail to establish these criteria. Scory alleges Sawicki attempted to access its computers without authority. Scory does not allege that Sawicki obtained access to the computers. Nor does Scory provide any evidence that Sawicki obtained anything of value. Scory has also failed to provide proof that it sustained any loss or damage as defined by the statute let alone damage aggregating in excess of $5,000 in one year.

The CFAA applies only to unauthorized access to protected computers. The CFAA defines a computer as "...an electronic, magnetic, optical, electrochemical, or other high speed data processing device performing logical, arithmetic, or storage functions, and includes any data storage facility or communications facility directly related to or operating in conjunction with such device, but such term does not include an automated typewriter or typesetter, a portable hand held calculator or other similar device." 18 U.S.C. §1030(e)(1). The CFAA defines a protected computer as one used in interstate or foreign commerce or communication. 18 U.S.C. §1030(e)(2)(B). The CFAA does not apply to telephones. Thus, the allegations that Sawicki hacked into Scory's password protected telephone system and rerouted telephone numbers does not constitute a violation of the CFAA .

Scory has failed to place before the Court evidentiary facts sufficient to support a cause of action under the CFAA . Thus, the proposed amendment is legally insufficient and leave to amend to assert a cause of action alleging a violation of CFAA is denied. See, Zabas v. Kard, [*5]194 AD2d 784 (2nd Dept. 1993).

Paragraphs 57 through 72 of the proposed amended complaint allege the facts that give rise to the CFAA cause of action. Since the Court is denying Plaintiff leave to amend the complaint to assert a cause of action pursuant to CFAA , ¶¶ 57 through 72 of the proposed amended complaint are irrelevant and should be stricken from the proposed amended complaint.

The proposed fifth cause of action alleges that Defendants misappropriated Scory's confidential and proprietary information. Leave to amend to assert this cause of action must be granted.

A trade secret or confidential information includes a compilation of information which is used in one's business and which gives the possessor of the information a competitive advantage over one's competitors who do not possess this information. Ashland Management Inc. v. Janien, 82 NY2d 395 (1993); and Eagle Comtronics, Inc. v. Pico, Inc., 89 AD2d 803, (4th Dept. 1982). The proposed amended complaint alleges that Sawicki had Scory's customer list, customer contacts and financial information such as advertising budget, marketing plans and pricing information. Scory asserts this information is proprietary and/or confidential.

A customer list and customer contact information may be confidential. A customer list will be treated as a trade secret when the names and addresses of the customers are not known in the trade or can be obtained only through extraordinary effort. Stanley Tulchin Assoc., Inc. v. Vignola, 186 AD2d 183 (2nd Dept. 1992); and Greenwich Mills Co. Inc. v. Barrie House Coffee Co., 91 AD2d 398 (2nd Dept. 1983). This is especially true where the customer's patronage has been secured through years of effort and advertising involving a substantial expenditure of time and money. Leo Silfen, Inc. v. Cream, 29 NY2d 387 (1972); and WMW Machinery Co. Inc. v. Koerber AG, 240 AD2d 400 (2nd Dept. 1997). Similarly, financial and marketing information may be confidential. See, Ashland Management Inc. v. Janien, supra.

Whether the Defendants have this information and whether this information is proprietary or confidential addresses the merits of the proposed amendment, not its sufficiency. Therefore, Defendants should be granted leave to allege this cause of action.

Accordingly, it is,

ORDERED, the Plaintiff's motion for leave to add Gustavo Sawicki as a party defendant is granted; and it is further,

ORDERED, that Plaintiff's motion for leave to file a supplemental summons and amended complaint is granted to the extent of permitting Plaintiff to file a supplemental summons adding Gustavo Sawicki as a party defendant and to the extend of permitting

Plaintiff to add a cause of action for misappropriation of trade secrets, the fifth cause of action in the proposed amended complaint, and is in all other respects denied; and it is further,

ORDERED, that a copy of this order with notice of entry shall be served upon Gustavo Sawicki together with the supplemental summons and amended complaint pursuant to CPLR 308(1) or (2); and it is further,

ORDERED, that counsel for the parties, including Gustavo Sawicki, should he appear by counsel or pro se, shall appear for a preliminary conference on July 11, 2007 at 9:30 a.m.

This constitutes the decision and Order of the Court. [*6]

Dated: Mineola, NY_____________________________

May 22, 2007Hon. Leonard B. Austin, J.S.C. Footnotes

Footnote 1:There is no section 18 U.S.C. §1030(a)(2)(4). From a reading of the statute, the Court believes Scory meant to allege a violation of 18 U.S.C. §1030(a)(4) and will treat the motion for leave to amend as having alleged a violation of this subsection.