Barber v ActKnowledge, Inc.

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[*1] Barber v ActKnowledge, Inc. 2009 NY Slip Op 51419(U) [24 Misc 3d 1211(A)] Decided on June 30, 2009 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 30, 2009
Supreme Court, Kings County

Christopher Barber a/k/a CHRISTOPHER BARBER ASSOCIATES, Plaintiff,

against

ActKnowledge, Inc., Defendant.



33224/08



Christopher P. Barber Plaintiff Pro Se

138 Hoyt Street, Suite 3

Brooklyn, NY 11217

Attorney for Defendant

Joseph M. Heppt, Esq.

260 Madison Avenue

New York, NY 10016

Carolyn E. Demarest, J.



Defendant ActKnowledge, Inc., moves pursuant to CPLR 3211(b) for dismissal of plaintiff Christopher Barber's first affirmative defense to defendant's counterclaims that plaintiff had breached his fiduciary duty and duty of loyalty as an independent contractor in defendant's employ, had tortiously interfered with both existing and prospective business relationships with third parties, had converted defendant's database and breached his contract with defendant, misappropriated confidential information and unfairly competed, all of which claims are amply supported in defendant's pleading. In response, as a "first defense," plaintiff asserts: "Plaintiff's status as an independent contractor did not constitute the kind of agent relationship in which a fiduciary duty or duty of loyalty is owed, expected, or agreed." Although, as a legal premise, defendant is correct that the rule is not as stated,' defendant's motion must be denied.

BACKGROUND[*2]

Defendant is a consulting firm that provides computer software solutions for nonprofit organizations and government agencies. Defendant retained plaintiff as an independent contractor to create software for defendant and defendant's clients. In July 2008, business relations between defendant and plaintiff became strained and plaintiff terminated his relationship with defendant. Plaintiff alleges that defendant refused to pay him for work performed on various projects, thus leading him to commence this action on May 6, 2009, claiming defendant owes him approximately $210,000.00 in unpaid fees.

Defendant's answer includes several counterclaims. Defendant alleges in his first counterclaim that plaintiff, while working on various projects for defendant, breached his fiduciary duty and duty of loyalty to defendant by using defendant's confidential and proprietary information and diverting defendant's clients for his own benefit. Defendant moves to dismiss plaintiff's defense that his "status as an independent contractor did not constitute the kind of agent relationship" in which a principal is owed a duty of loyalty, pursuant to CPLR 3211(b), arguing that such defense "is legally insufficient" because, as a matter of law, an independent contractor owes a fiduciary duty and duty of loyalty to the entity that retained him or her.

DISCUSSION

On a motion brought pursuant to CPLR 3211(b), "[o]rdinarily the only issue presented . . . is whether there is any legal or factual basis for the assertion of the defense." (Winter v. Leigh-Mannell, 51 AD2d 1012, 1012 [2d Dept 1976].) The movant bears the initial burden of showing that the defense is legally insufficient or factually insufficient (see Town of Hempstead v. Lizza Industries, Inc., 293 AD2d 739, 740 [2d Dept 2002]). Once the movant meets its burden, the burden then shifts to the non-movant to show the existence of a triable factual issue respecting the defense's merit (see Faulkner v. City of New York, 47 AD3d 879, 879 [2d Dept 2008]). "When material issues of fact are not resolved, a court should not strike a defense." (Id.)

Generally, an agent is obligated "to be loyal to his employer and is prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.'" (Western Elec. Co. v. Brenner, 41 NY2d 291, 295 [1977], quoting Lamdin v. Broadway Surface Adver. Corp., 272 NY 133, 138 [1936].) The duty of an agent or employee "not to use confidential information acquired in his employment in competition with his principal is implicit in the relation . . . It is an absolute and not a relative duty." (Byrne v Barrett, 268 NY 199, 206 [1935], citing Kaumagraph Co. v Stampagraph Co., 235 NY 1, 6 [1923].) The Second Department has noted that the faithless agent rule is founded upon this duty: " An agent is held to uberrima fides in his dealings with his principal, and if he acts adversely to his employer in any part of the transaction, or omits to disclose any interest which would naturally influence his conduct in dealing with the subject of his employment, it amounts to such a fraud on the principal as to forfeit any right to compensation for services.'" (G.K. Alan Assoc., Inc. v. Lazzari, 44 AD3d 95, 100-101 [2d Dept 2007], quoting Murray v Beard, 102 NY 505 [1886].) Courts have extended these principles to independent contractors in cases where the agreement between the principal and the independent contractor established an agent-principal relationship (see, e.g., Feiger v. Iral Jewelry, Ltd., 85 Misc 2d 994 [Sup Ct, [*3]New York County 1975], aff'd 41 NY2d 928 [1977]; G.K. Alan; Compsolve, Inc. v. Neighbor, 18 Misc 3d 1104(A) [Sup Ct, Erie County 2007]). However, in each case, the applicability of agency principles in a given dispute depends on the terms on the agreement, as "[a]gency is a personal relationship, in the sense that an agent is an agent only by virtue of the agent's consent to act on behalf of a particular party, the principal, who has also consented that the agent shall act on his or her behalf." (G.K. Alan, 44 AD3dat 101, citing Restatement 2d of Agency, § 1.)

Defendant correctly relies on Feiger, G.K. Alan, and Compsolve for the proposition that an independent contractor is an agent that owes fiduciary and loyalty duties to his or her principal. However, the question presented in the motion at bar is a factual one as to the nature and limits of the agency relationship between the parties. In G.K. Alan, the Court stated that the duties of an agent are defined by the specific terms of the agreement that gave rise to the agency (G.K. Alan, 44 AD3d at 101, citing Restatement 2d of Agency, § 376). Here, this Court cannot determine the precise terms of the relationship between plaintiff and defendant based on the pleadings and the documents submitted, particularly since the alleged breaches of duty occurred subsequent to the expiration of the written contracts. It is noted, however, that the confidentiality provisions of the written contracts survived the expiration of the contracts. An inquiry into the exact nature of plaintiff and defendant's relationship is necessary to determine whether plaintiff breached a fiduciary duty and duty of loyalty to defendant. Giving plaintiff's reply the broad interpretation which must be accorded pleadings, the presence of factual issues preclude the granting of defendant's motion notwithstanding plaintiff's misstatement of the law in general.

Defendant's motion is denied.

This constitutes the order and decision of the Court.

E N T E R

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J.S.C.