Addison Hospitality Group LLC v Kaciupski
Annotate this CaseDecided on June 6, 2018
Supreme Court, New York County
Addison Hospitality Group LLC and 35th Street Ventures LLC d/b/a Monarch, Plaintiffs,
against
Jason Kaciupski, Heather Conover, and Event Venues NYC LLC, Defendants.
650475/2018
For Plaintiffs:
Messner Reeves LLP
805 Third Ave, 18th Floor
New York, NY 10022
By: Mohammad B. Shihabi, Esq.
For Defendants:
The Law Offices of Luc Ulmet
417 Grand Street #1804
New York, NY 10002
By: Luc Ulmet, Esq.
Robert R. Reed, J.
Plaintiffs Addison Hospitality Group LLC (AHG) and 35th Street Ventures LLC, d/b/a Monarch (Monarch) move for a preliminary injunction against defendants Jason Kaciupski (Kaciupski), Heather Conover (Conover) and Event Venues NYC LLC (Event Venues), enjoining defendants from: (a) violating the Nondisclosure-Confidentiality Agreement; (b) misappropriating, using, and/or disclosing plaintiffs' trade secrets and confidential and proprietary information; (c) raiding and soliciting plaintiffs' clients and/or providing services to plaintiffs' clients who have been solicited by using plaintiffs' trade secrets, and confidential or proprietary information; and (d) returning to plaintiffs all of their trade secrets and confidential and proprietary information misappropriated from plaintiffs.
On February 14, 2018, this court signed a temporary restraining order, restraining defendants from: a) violating the Nondisclosure-Confidentiality agreement; (b) misappropriating, using, and/or disclosing plaintiffs' trade secrets and confidential and proprietary information; and (c) raiding and soliciting plaintiffs' clients and/or providing services to plaintiffs' clients who [*2]have been solicited by using plaintiffs' trade secrets and confidential and propriety information misappropriated from plaintiffs.
The complaint asserts causes of action for breach of contract; tortious interference with contract, prospective economic advantage and business relations; breach of fiduciary duty of loyalty; misappropriation of trade secrets; and unfair competition.[FN1]
Plaintiffs allege that AHG is a premiere hospitality, restaurant, rooftop and lounge company with multiple venues in New York. During some of the events alleged in the complaint AHG operated and managed Monarch, an event venue, along with two other venues, 346 W. 40th Street LLC d/b/a Craven (Craven) and 8th & 9th Ventures LLC d/b/a Lovage (Lovage).
Defendants Kaciupski and Conover were employed by AHG, as Director of Events and Event Manager, respectively.
The complaint alleges that, on June 13, 2016, Kaciupski signed an acknowledgment that he had been given a Monarch employee handbook. That handbook states, among other things:
"The protection of confidential business information and trade secrets is vital to the interests and the success of [Monarch/Lovage]. Such confidential information includes but is not limited to, the following examples: compensation dates, computer programs and codes, customer lists, financial information, marketing strategies, new material research, pending projects and proposals, proprietary production processes, research and development strategies, technological prototypes. As a condition of employment, employees who are exposed to confidential information are required to maintain all such information confidential and not disclose it to any third party."Affirmation of William F. Fitzgerald, exhibit A (Complaint), ¶ 37.
In addition, on September 22, 2017, Kaciupski signed a Nondisclosure Agreement (NDA) which required him to:
"Hold and maintain the Confidential Information in the strictest confidence for the sole and exclusive benefit of the Disclosing Party. Receiving Party shall carefully restrict access to Confidential Information to employees, contractors, and third parties as is reasonably required and shall require those persons to sign nondisclosure restrictions at least as protective as those in this Agreement. Receiving Party shall not, without prior written approval of Disclosing Party, use for Receiving Party's own benefit, publish, copy, or otherwise disclose to others, or permit the use by others for their benefit or to the detriment of Disclosing Party, any Confidential Information. Receiving Party shall return to Disclosing Party any and all records, notes, and other written, printed, or tangible material in its possession pertaining to Confidential Information immediately if Disclosing Party requests in writing."Id., ¶ 40.
The complaint alleges, on information and belief, that Conover signed an employee acknowledgment of the Lovage employee handbook. It further alleges that she signed an NDA [*3]on September 22, 2017. According to plaintiffs' memorandum of law, Kaciupski and Conover willingly entered into the NDA and were duly compensated for doing so.
The complaint alleges, on information and belief, that while they were still employed by AHG, Kaciupski and Conover created Event Venues "by using misappropriated and stolen marketing strategies, methods of operations, business relationships, client and vendor lists, and clientele of AHG," (id. ¶ 43), and engaged in activities in violation of the employee handbook and nondisclosure agreements, and collaborated to steer plaintiffs' clients to their new business. The complaint alleges that in December 2017 defendants stole at least $300,000 worth of plaintiffs' business and client events through their booking system and by placing the events outside of plaintiffs' venues.
Plaintiffs submit the affidavit of Richard Addison (Addison), the owner and member of AHG and Monarch. Addison states that Kaciupski signed the Employee Acknowledgment of Monarch Employee Handbook upon his hire on June 13, 2016, and that, it is his understanding, Conover signed the Employee Acknowledgment of the Lovage Employee Handbook upon her hire. Addison further states that, during their respective periods of employment, Kaciupski and Cover were responsible for managing events, booking, and client accounts, among other duties, at AHG's various venues, including Monarch, Craven and Lovage.
Addison states that, in October 2017, while Kaciupski was still employed by AHG, he and Conover created "a competing events booking business, Event Venues NYC." Addison aff, ¶ 19.
Addison contends that Kaciupski and Conover steered clients of AHG to their own new company by contacting AHG clients through their personal email accounts and personal phones. According to Addison, on October 6, 2017, while Kaciupski was still employed by AHG, he used his AHG email to contact "an outside caterer to prepare food and beverage for stolen events for diverted clients as the 'Co-Founder' of defendant Event Venues NYC." Addison aff, ¶ 21. The email contained a list of nine separate event bookings scheduled for dates between December 6, 2017 and December 15, 2017.
Addison further states that, on October 19, 2017, Kaciupski took screen shots of AHG's "client list, leads, and other confidential and proprietary information directly from Plaintiffs' computers" and, using his "eventvenuesnyc" email address, sent them to Conover, who was no longer employed by AHG. Addison aff, ¶ 22. Conover responded "'Holy F. I really want to get TS up and running so I can attack these in an organized manner. Right now I am using pen and paper and its making me nuts.'" Id. According to Addison, TS refers to Tripleseat, a digital platform that AHG uses for its current and prospective client inquiries and bookings. The court notes, however, that Tripleseat appears to be merely a commercially available computer marketing program sold for use by the hospitality industry — and not the confidential property of AHG.
According to Addison, in October 2017, the month that Kaciupski and Conover created Event Venues, AHG's event sales were down 121.73%, or $91,493.85, as compared to October 2016.
Finally, Addison contends that in January 2018, defendants sent marketing and email blasts "to an unknown number of Plaintiffs' current and potential clients." Id., ¶ 29.
On December 12, 2017, counsel for plaintiffs sent cease and desist letters to Kaciupski [*4]and Conover demanding, among other things, that they immediately cease using AHG's trade secrets and confidential and proprietary information, "including but not limited to, customer and vendor lists, any and all information relating to event planning and operations, and pricing, and cease and desist from all other activities in violation of their contractual obligations with AHG." Id., ¶ 26. In response, counsel for Kaciupski denied that Kaciupski had improperly disclosed any confidential information, and stated that Kaciupski had returned his AHG laptop and cell phone, where all client lists and other information were stored, when he left the company's employment. Counsel further stated that, while Kaciupski still had a few AHG receipts and invoices, he would return them at AHG's convenience. Counsel for Conover responded that she was not in possession of any of the information specified in the cease and desist letter, was never provided with an employee handbook, and that she had complied with the obligations in the NDA.
Plaintiffs seek a preliminary injunction against Kaciupski, Conover, and Event Venues to prevent them from violating the NDA and employee handbooks, and from using AHG's allegedly confidential information to steal its customers.
In response to plaintiffs' motion for a preliminary injunction, defendants submit the affidavits of both Conover and Kaciupski, who present a substantially different version of the events in question.
Conover states that she was hired in May 2017 and was fired on September 23, 2017, less than 24 hours after she was required to sign the non-disclosure/confidentiality agreement, and that "they paid me no money and no severance. They did not even pay me the money that I was owed as commissions, for the events I booked." Conover aff, ¶ 10. According to Conover, she was never given an employee handbook and never signed an acknowledgment of receipt of such a handbook. Conover submits a letter, dated April 30, 2017, offering her employment with AHG with "a $50K salary and 8% commission on events bookings at Magnolia Restaurant, Lovage Rooftop, and Monarch Rooftop & Lounge." Conover aff, exhibit A. Conover accepted the offer.
Conover states that her duties at AHG were to contact various companies by phone and email, and to inquire whether they were interested in booking the spaces operated by AHG, and to respond to such inquiries from companies and individuals. Conover states that she focused on booking for Craven and Lovage.
In his affidavit, Kaciupski states that his job at AHG was to sell the event space at Monarch to various clients. He would contact companies and would respond to inquiries from companies and individual about whether they were interested in booking the space operated by AHG, would show the space to potentially interested clients, and then present them with a contract to execute.
Kaciupski states that, prior to his employment at AHG, he was an event planner for a large New York hospitality group, that he has been in the hospitality business since 2006, and that he had no written employment contract with AHG during his period of employment.
Kaciupski states that, after AHG fired Conover without paying her, he and Conover filed a lawsuit against AHG in the United States District Court for the Southern District of New York alleging failure to pay wages in violation of federal and state laws.
Kaciupski further states that, in October 2017, Addison told him that AHG was no longer operating Lovage and Craven and that they needed to find alternative venues for events planned [*5]for those spaces during November and December. According to Kaciupski, Addison asked him to contact, Ally Viyella (Viyella), the owner of a catering company used by AHG for its events, to enlist that company's assistance in locating alternative venues. Kaciupski states that he asked Addison if he could contact Conover for her help with locating venues, because she needed employment. According to Kaciupski, Addison said that he could.
Kaciupski states that New York Presbyterian Hospital was one of AHG's clients that was contacted by Conover and Viyella at Addison's request. According to Kaciupski, a woman from the hospital named Miriam then contacted Addison by email complaining about the change in venue location and about Addison's lack of involvement. Addison showed Kaciupski the email and asked whether he was working with Viyella and Conover. When Kaciupski said that he was, Addison told him "that New York Presbyterian Hospital is the hospital where he and his family go for any necessary doctor's visits or treatment, and he wants to make sure they are happy." Kaciupski aff, ¶ 18. Kaciupski further states that, despite the fact that he contacted Conover using his non-AHG email to seek her assistance in finding alternate venues for the events previously booked at Lovage or Craven, his action was not a violation of the NDA. Rather, according to Kaciupski, while at AHG, the lines between use of work and personal email accounts and phone numbers were always blurred. Further, Kaciupski stated that he contacted Conover with Addison's knowledge and approval.
In response to Addison's allegation that, after leaving AHG, Kaciupski was sending marketing emails "'to an unknown number of Plaintiff's current and potential clients'" (id., ¶ 25), Kaciupski states, "That is simply not true. We sent those email blasts to our contacts, friends and acquaintances that were acquired independently of Plaintiff." Id., ¶ 25. According to Kaciupski, he had been in the event planning business since 2006, and had his own contacts.
With respect to whether plaintiffs' list of clients is a trade secret, Kaciupski states that, while he was employed at AHG, "[p]laintiffs never made any efforts to safeguard any lists of former clients ... [and] never precluded any employees including hostesses and bartenders from accessing these lists of clients." Id., ¶ 30. Kaciupski states that he personally compiled lists of potential contacts from publicly available information. He further notes that, on their website, addisongroupnyc.com, AHG lists 30 of their clients. See Kaciupski aff, exhibit C.
Kaciupski also states that the business of Event Venues is to plan events and assist companies and individuals in finding space for those events, in contrast with AHG, which operates a bar. Therefore, according to Kuciupski, the two companies are not even competitors. In any case, Kaciupski states that he never signed a non-compete agreement while employed by AHG, and, indeed, plaintiffs do not assert that he did sign such an agreement.
The court notes that the marketing materials for Event Venues submitted by plaintiffs states "we will plan your event" (see Fitzgerald affirmation, exhibit N), in contrast with the description of AHG in the complaint, which states that AHG "operated and managed Monarch, together with other venues including ... Craven and ... Lovage." Complaint, ¶ 2.
STANDARDS FOR A PRELIMINARY INJUNCTION
It is well established that in order to obtain a preliminary injunction the party seeking relief "must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor." Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 NY3d 839, 840 (2005), citing Doe v Axelrod, 73 NY2d 748, 750 (1988).
Here, to establish a probability of success on the merits plaintiffs must first show that the customer lists that they seek to protect under the NDA indeed constitute trade secrets or confidential customer information. Although the NDA does not define confidential information, the Monarch employee handbook which Kaciupski received [FN2] does include customer lists within the definition of confidential information. However, merely indentifying a category of information as "confidential" does not, in and of itself, bestow upon it the status of a trade secret or confidential customer information.
"[C]ustomer lists are generally not considered confidential information." H. Meer Dental Supply Co. v Commisso, 269 AD2d 662, 664 (3d Dept 2000). Nevertheless, where customers names are not generally known and can only be discoverable through extraordinary effort, and their "patronage had been secured by years of effort and advertising effected by the expenditure of substantial time and money," customer lists will be protected. Leo Silfen, Inc. v Cream, 29 NY2d 387, 393 (1972). "[I]n order to establish . . . confidential customer information status, it [is] incumbent upon plaintiff to demonstrate that its customers are not known in the trade and are discoverable only by extraordinary efforts." H. Meer Dental Supply Co. v Commisso, 269 AD2d at 664 (internal quotation marks and citations omitted). For this reason, where a plaintiff produces no evidence that its customer list is known only to it, and the defendant shows that the identity of many of the customers on the list is publicly available, a preliminary injunction should be denied. See, e.g., Amana Express Intl., Inc. v Pier-Air Intl., 211 AD2d 606, 607 (2d Dept 1995).
Here, plaintiffs have not indicated just how they created or how they protected their client lists, other than through the NDAs. The court notes that Kaciupski and Conover were employed by AHG for approximately 18 months and six months, respectively, before being required to sign the NDA, and Conover was fired within, at most, a few days after she signed the NDA.[FN3] Moreover, according to Kaciupski, the client lists were readily available to all employees, including hostesses and bartenders. Finally, it appears that AHG posts the names of at least 30 of its clients on its website. See Kaciupski aff, exhibit C.
If true, these factors raise substantial questions regarding plaintiffs' likelihood of success in establishing that the customers lists actually constitute trade secrets.
With respect to plaintiffs' claim that while still at AHG Kaciupski sought to steal a series of events from AHG by diverting them to Event Venues, according to Kaciupski, those were the very events for which Addison had asked him to obtain alternative venues when AHG ceased [*6]operating Craven and Lovage.
Although plaintiffs have alleged that defendants sent email blasts using plaintiffs' confidential customer lists, they have not provided the names of any of their customers to whom the email blasts allegedly were sent. Rather, they submit a copy of the email that appears to have been sent to Conover herself, at her former AHG email address (heather@addisongroupnyc.com). See Fitzgerald affirmation, exhibit N. While that would suggest some degree of sloppiness by defendants, it is not sufficient evidence for the court to conclude at this point that the email blast went to plaintiffs' customer list.
Plaintiffs have produced a list of events and the screen shots of eight customer names sent by Kaciupski to Conover while he was still employed at AHG. According to Kaciupski, he sent the list of events and company names to Conover at Addison's request, in an effort to obtain alternate venues for the events after AHG ceased booking events at Craven and Lovage.
On the basis of the above, this court concludes, as did the Appellate Division in Samuel-Rozenbaum USA v Felcher (292 AD2d 214, 215 [1st Dept 2002]): "It is not possible properly to conclude from these conflicting allegations that plaintiff will likely demonstrate defendant's appropriation and misuse of any information deserving the law's protection." Thus, plaintiffs have failed to establish their likelihood of success on the merits necessary for a preliminary injunction.
With respect to defendant Conover, given that she was fired nearly immediately after she signed the NDA,[FN4] and in light of her allegation that she did not receive payment for signing or was even paid the commissions that she was owed, there are substantial questions of whether the NDA she signed could even be enforced against her.
IRREPARABLE HARM
Plaintiffs contend that, in October 2017, after Kaciupski and Conover created Event Venues, AHG's sales went down by 121.73%, or approximately $92,000, and that, if a preliminary injunction is denied, ADH will be irreparably harmed. However, if, as Kaciupski contends and plaintiffs appeared to confirm at oral argument, during that period of time, ADH ceased operating two of its three venues, substantial questions exist regarding whether the alleged loss of revenues resulted from the loss of the two venues, rather than from any alleged actions of Kaciupski and Conover.
BALANCE OF EQUITIES
Finally, with respect to the balance of equities, as noted above, plaintiffs' claim that they will be irreparably harmed without a preliminary injunction is, at best, questionable. On the other hand, it is unclear to the court whether plaintiffs' purported list of clients contains 30, 300 or even more names. It is also unclear the extent to which those names overlap the names of individuals or entities that defendants gathered through their prior experience in the hospitality industry. It is, essentially, impossible for defendants to know just who they can contact without plaintiffs claiming that the company or individual is on plaintiffs' customer lists and therefore protected. Thus, should the court grant a preliminary injunction, defendants could effectively be [*7]precluded from operating their business at all, despite the fact that they never signed a non-compete agreement.
Finally, defendants contend that they are not even in the same business as AHG, since defendants are in the business of event planning and plaintiffs merely market bar facilities which they manage for events.
For all of these reasons, the court concludes that the balance of equities tips in defendants' favor, rather than in plaintiffs' favor.
As a result, plaintiffs' request for a preliminary injunction must be denied.
Accordingly, it is hereby
ORDERED that the motion of plaintiffs Addison Hospitality Group LLC and 35th Street Ventures LLC d/b/a Monarch for a preliminary injunction is denied, and it is further
ORDERED that the temporary restraining order issued by this court on February 14, 2018 is hereby dissolved.
Dated: June 6, 2018
HON. ROBERT R. REED
J.S.C. Footnotes
Footnote 1:The court notes that the complaint also asserts a cause of action for a temporary restraining order and a preliminary and permanent injunction; however, they are properly stated as requests for relief and do not constitute a cause of action. See Smile Corp v Forman Fifth LLC, 2005 WL 5872218 (Sup Ct, NY County 2005).
Footnote 2: Conover contends that she never received an employee handbook. Plaintiffs fail to submit a signed acknowledgment of receipt from Conover, and Addison merely states that it is his understanding that she received such a handbook.
Footnote 3: A restrictive covenant will be upheld without consideration where an at-will-employee remained with the employer for a substantial amount of time after the covenant was signed (see Zellner v Stephen D. Conrad, M.D., P.C., 183 AD2d 250, 256 (2d Dept 1992). Here, however, where Conover was fired, at most, a few days after she was required to sign the NDA, and she contends that she was not given any termination pay or paid her previously earned commissions, there is a very real question about whether the NDA could be enforced against her.
Footnote 4: While Conover states that she was fired the next day, during oral argument, counsel for plaintiffs contends that she was fired within a three-day period after she signed the document. That difference of two days would appear, however, to be of no consequence.
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