Dept. 1987) (insurance broker's use of information concerning clients of a former employer does not constitute misappropriation where the information could be obtained by any agent reviewing the clients' policies); Zurich Depository Corp. v. Gilenson, 121 A.D.2d 443, 445, 503 N.Y.S.2d 415, 417 (2d Dept. 1986) (use of information concerning a former employer's customer list which is based on casual memory is not actionable). Moreover, not only do defendants fail to establish that plaintiffs appropriated a list of dentists, defendants fail to proffer evidence that such a list ever existed, as no such purported list is part of the record in this case. Defendants failure to proffer evidence of a list or its misappropriation therefore establishes defendants failure to establish appropriation by "unfair or improper means." See Copy-Data v. Toshiba America, Inc., 582 F. Supp at 234.
Second, defendants neither proffer evidence of profits realized directly in connection with the list (the Fund is not a healthcare provider), nor allege that plaintiffs disclosed the contents of any such list to another healthcare provider, nor explain how plaintiffs would profit from such disclosure. In sum, defendants proffer no evidence of wrongful activity that might be the basis of an unfair competition claim.
b. Trade Secrets
Defendants' allegations are similarly insufficient to support a claim for misappropriation of trade secrets. Under New York law, a claim based on misappropriation of trade secrets requires (1) a confidential relationship between the parties, (2) disclosure of what amounts to a trade secret from one party to the other, and (3) use of the information by the party receiving the disclosure. Heyman v. AR. Winarick, Inc., 325 F.2d 584, 586, 140 U.S.P.Q. (BNA) 403 (2nd Cir. 1963); Sublime Products, Inc. v. Gerber Products, Inc., 579 F. Supp. 248, 251, 223 U.S.P.Q. (BNA) 383 (S.D.N.Y. 1984). As set forth above, defendants have presented no evidence concerning the misappropriation and use of the panel list. This failure is fatal to defendants' claim.
Moreover, beyond defendants' bald allegations of confidentiality, there is no evidence of a relation of trust with respect to alleged confidential information or that defendants made reasonable efforts to protect the security of the list and did not disclose the confidential material themselves. See Defiance Button Machine Co. v C & C Metal Products Corp., 759 F.2d 1053, 1063, 225 U.S.P.Q. (BNA) 797 (2d Cir. 1985), cert. denied, 474 U.S. 844, 88 L. Ed. 2d 108, 106 S. Ct. 131 (1985) (if owner of trade secret discloses secret, even inadvertently or accidentally, or if the owner fails to take reasonable precautions to protect the information, information loses the protection of trade secret law).
Defendants admit that plaintiffs could have easily discerned the identities of the dentists on NHP's panel from claims forms and correspondence. In addition, the NHP Contract contains no provision precluding plaintiffs' or Fund participants' use of information concerning NHP's panel of dentists. Thus, under New York law, defendants' counterclaim fails as a claim based upon wrongful misappropriation of a trade secret.
Accordingly, as defendant's have failed to adduce evidence sufficient to establish a prima facie claim based upon misappropriation of proprietary information, plaintiff's motion for summary judgment dismissing the first counterclaim is granted.
2. Injury to Business and Reputation
The second counterclaim alleges that plaintiffs' acquisition of the June 20th TRO (enjoining defendants from writing checks against the Fund's account) prevented defendants from paying claims that had been properly pre-authorized according to the NHP Contract prior to its termination, resulting in injury to defendants' business and reputation. Defendants also allege that plaintiffs' stoppage of payment on checks drawn against the account had similar results.
This counterclaim, like the first counterclaim, is without foundation in law. In granting the June 20th TRO, this Court determined that plaintiffs had established a strong likelihood of success on the merits of their ERISA claim, as well as the other elements establishing their entitlement to injunctive relief. The TRO itself compelled the defendants to forward any present or future claims by Fund participants to the Fund's administrator for payment. Defendants have proffered no evidence that the Fund has failed to satisfy any outstanding claims for pre-authorized procedures. Additionally, defendants admit that the checkbook was within plaintiffs' sole discretion, yet refused to return the checks at the Fund's request. These factors conclusively establish that any harm inuring to defendants in connection with the issuance of the June 20th TRO resulted from their own unlawful conduct. Consequently, defendants' fail to establish injury to business or reputation as a matter of law. Accordingly, plaintiffs' motion for summary judgment dismissing the second counterclaim is granted.
A. The PPS Action
ERISA confers broad remedial powers upon the courts. See Schoenholtz v. Doniger, 657 F. Supp. 899, 902 (S.D.N.Y. 1987). ERISA Section 409 provides in part:
Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from such breach, and to restore to such plan any profits of such fiduciary which have been made through the use of such assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate. . . .
29 U.S.C. § 1109(a).
In the PPS Action, defendants may clearly be made to respond in money damages for the $ 150,000 cash reserve wrongfully retained, including pre-judgment interest from March 15, 1990. Although Section 409 permits the Court to award plaintiffs any profits made by defendants through their wrongful use of the cash reserve, plaintiffs have neither alleged the existence of any such profits, nor presented any evidence on the issue. Under the circumstances, an award of profits would therefore be an appropriate. Additionally, since the $ 150,000 in dispute is presently being held in escrow by defendants' attorney in an interest-bearing account, an accounting would serve no purpose and so would be inappropriate under the circumstances.
B. The NHP Action
Based upon the Court's finding that defendants breached their fiduciary duty to plaintiffs in connection with their wrongful use of the Fund's checking account, plaintiffs are entitled to a permanent injunction against defendants' use of checks bearing the Fund's account number.
Plaintiffs are also entitled to recover any increased administrative costs incurred by the Fund that resulted from defendants' wrongful use of the Fund checkbook. See Donovan v. Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985).
Finally, to the extent necessary to assess damages in connection with defendant's use ofthe Fund's checkbook, plaintiffs shall be entitled to an accounting of the checks issued by NHP and Alvin Konigsberg against the Fund's account.
B. Attorney's Fees Under ERISA
ERISA § 502(g), 29 U.S.C. § 1132(g) sanctions an award of reasonable attorney's fees and costs in an ERISA action.
District courts have broad discretion in this area, and may grant such an award in whole or in part. See American Communications Ass'n v. Retirement Plan for Employees of RCA Corp., 507 F. Supp. 922, 923 (S.D.N.Y. (1981). Under the standard set by the Court of Appeals for this Circuit, five factors are ordinarily considered in determining whether to award attorney's fees under ERISA:
(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending parties to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons acting similarly under similar circumstances, (4) the relative merits of the parities' positions, and (5) whether the action sought to confer a common benefit on a group of pension plan participants.
Miles v. New York State Teamsters Conference Pension and Retirement Fund Employee Pension Ben. Plan, 698 F.2d 593, 602 n.9 (2d Cir.), cert. denied, 464 U.S. 829, 78 L. Ed. 2d 108, 104 S. Ct. 105 (1983). "No one of these factors is necessarily decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address in applying section 502(g)." Iron Workers Local #272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980). Finally, attorney's fees may be awarded to the prevailing party in an ERISA action if there is no particular justification for not doing so. Birmingham v. SoGen-Swiss International Corp. Retirement Plan, 718 F.2d 515, 523 (2d Cir. 1983).
Applying these factors to the present case, the Court finds that plaintiffs are entitled to reasonable attorneys fees and costs in both actions. Defendants in each action were highly culpable in breaching their fiduciary obligations and have failed to offer cogent justification for their conduct. In addition, the respective merits of the parties' positions are not comparable. Abuse of authority and control over plan assets should be strongly discouraged, and if defendants "face the prospect of paying attorneys' fees for successful plaintiffs, they will have added incentive to comply with ERISA." Schoenholtz, 657 F. Supp. at 911 (quoting Carpenters Southern California Administration Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir. 1984)). In addition, as this action was brought to benefit Fund beneficiaries as a group, the strong policy consideration of ensuring the ability of the Fund to properly manage its resources so as to benefit all plan participants further supports an award of attorneys' fees under the circumstances. Given the weight of several factors in this case, and the absence of any reason to the contrary, this Court finds that an award of reasonable attorney's fees and costs should issue in favor of the plaintiffs.
V. Rule 11 Sanctions
Plaintiffs also move for sanctions under Rule 11 of the Federal Rules of Civil Procedure. Rule 11 provides in relevant part:
every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record. . . . The signature of an attorney . . . constitutes that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well founded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not imposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court . . . shall impose upon the person who signed it, a represented party, or both, an appropriate sanction. . . .