Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

INNOVATIVE NETWORKS, INC. v. YOUNG

September 17, 1997

INNOVATIVE NETWORKS, INC., Plaintiff, against ALBERT YOUNG, WILLIAM YOUNG, SATELLITE AIRLINES TICKET CENTER, INC., SATELLITE CENTER OF ORLANDO, INC., PORT AVIATION CENTERS, INC., SATELLITE AIRLINES OF GRAND CENTRAL, INC., EN ROUTE ENTERPRISES, INC., and SATELLITE III AIRLINE TICKET CORP., Defendants and Third-Party Plaintiffs, -against- BERNARD T. BARTON, JR., Third-Party Defendant.


The opinion of the court was delivered by: KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 On January 6, 1997 through January 16, 1997, the Court held a bench trial on these claims. *fn1" As set forth fully in the following findings of fact and conclusions of law, the Court finds in favor of plaintiff INI on the copyright claim and on the participation in the breach of fiduciary duties claim. However, the Court finds that INI is not entitled to an award of damages for either of these claims. The Court finds in favor of the Satellite Defendants on all other counts.

 FINDINGS OF FACT AND CONCLUSIONS OF LAW2

 INI brings this action against the Satellite Defendants, alleging copyright infringemement pursuant to the Copyright Act of 1976, 17 U.S.C. § 101, et. seq. (Count One), trade dress infringement pursuant to § 43(a) of the Trademark Act of 1946, 15 U.S.C. § 1125(a) (Count Two), and common law claims for tortious interference with contract (Count Three), unfair competition (Count Four), and inducing and participating in the breach of fiduciary duties (Count Five). Specifically, INI argues that the Satellite Defendants infringed its copyright in design plans for retail facilities, misappropriated the distinct and unique appearance of the INI facilities, procured the breach of Barton's employment contract with INI, misappropriated INI's internal documents, and participated in the breach of Barton's fiduciary duties to INI as an officer, director and shareholder of INI. The Satellite Defendants assert a third-party claim against Barton for contractual indemnification in the event they are found liable for damages on any of INI's claims.

 FINDINGS OF FACT

 I. The Parties

 INI is a New York corporation with offices in New York City. Leonard Kleiman and his sons, David Kleiman and Steven Kleiman (collectively, the "Kleimans"), are principals of INI. The Kleimans are also involved in several other real estate businesses. Joint Pretrial Order ("JPTO") P 5(c); Trial Tr. at 342-43.

 From 1989 until mid-1992, INI was engaged in the business of owning and operating business retailing facilities in which multiple users occupy a single retail space. The centers owned by INI were travel related and commonly known as airline business centers or city ticket offices ("CTOs"). Airlines and other travel related companies lease counter and office space in a CTO for the purpose of selling tickets and other services to the public. INI was in the business of leasing space and constructing CTO facilities that were then subleased to one or more airlines and other travel related companies. Pl.'s Trial Exh. ("PX") 212 at P 8.

 Defendants Albert Young and William Young are residents of New York. Albert Young is an officer, director and shareholder of defendant Satellite Airlines Ticket Center, Inc. Albert Young is also an officer, director and shareholder of the following defendant companies which owned CTOs: (1) En Route Enterprises; (2) Port Aviation Centers, Inc.; (3) Satellite III Airlines Ticket Corp.; (4) Satellite Airlines Center of Orlando, Inc.; and (5) Satellite Airlines of Grand Central, Inc. JPTO P 5(f). Albert Young has been in the CTO business for approximately twenty-five years and has longstanding relationships with a number of airlines, Trial Tr. at 805-08, including United Airlines, USAir and Continental Airlines, each of who occupied more than one facility owned by Albert Young. Trial Tr. at 808.

 In late 1988 or early 1989, Barton contacted the Kleimans to interest them in going into the CTO business with him and an associate, Phil Godown ("Godown"). Trial Tr. at 273-76. On or about February 24, 1989, Barton and Godown entered into a letter of intent agreement with one of the Kleimans' affiliated entities, Leonard Kleiman Associates, to form a new brokerage operation to engage in the CTO business and other real estate activities. Trial Tr. at 26; PX 88. Prior to working for INI, Barton worked for Phonex, Inc. ("Phonex"), building business retailing centers. Trial Tr. at 24. Barton had minimal experience in developing CTOs and no contacts in the airline industry. Trial Tr. at 30.

 In or about March 1989, Albert Young and the Kleimans met and discussed a joint venture. Later that year, INI first entered into the business of operating airline CTOs. JPTO P 5(l), (m). On August 14, 1989, Barton and INI entered into an employment agreement (the "Employment Agreement"), pursuant to which Barton became a vice-president of INI, and was responsible for identifying prospective sites and occupants for CTOs. Under the terms of the Employment Agreement, Barton's duties consisted of (1) finding potential locations and negotiating the terms of the master leases at such locations; and (2) identifying potential subtenants to occupy counter space and negotiating the terms of the subleases for such space. PX 1 at P 1.

 The initial term of the Employment Agreement was six months, ending January 31, 1990. PX 1 at P 2. Barton continued to work for INI after the expiration of the six month term of the Employment Agreement without entering into a new written agreement. On July 24, 1991 Barton was fired for, inter alia, "forging signatures on corporate checks, diverting funds for personal gain, misrepresenting [his] authority in ultra vires [sic] acts and defrauding persons within and without the company." PX 49; see JPTO P 5(j).

 The Employment Agreement included a restrictive covenant that provided that Barton would not use or disclose any "Privileged Information," defined as "all of the business leads developed during the course of employment with respect to potential master lessors, sublessors, market studies, business plans and any other lists or data generated" by INI. PX 1 P 4. The Employment Agreement also provided that Barton would not compete with INI for a period of one year "from the date of termination of employment." Id.

 On August 14, 1989, Barton and the Kleimans also entered into a shareholders agreement (the "Shareholders Agreement"), which provided that: (1) Barton would own twenty percent of the stock in INI; (2) the Kleimans would own seventy percent of the stock in INI; (3) Barton would be a director of INI; (4) in the event Barton's employment was terminated, his stock would be deemed offered for sale to INI and the offer would be deemed accepted; (5) the purchase price for the stock would be determined by the parties "from time to time"; and (6) Barton could, upon timely notice to INI, elect to defer the date for calculating the purchase price for his stock and the date for concluding the sale for up to three years. PX 2. The Shareholders Agreement superseded the prior letter of intent. See PX 88.

 A. Standard License Agreement

 INI created a standard license agreement for the occupancy of CTOs by INI's clients (the "Standard License Agreement"). The Standard License Agreement allowed the legal departments of INI's customers to "pre-approve" the agreement. PX 212 P 20; Trial Tr. at 84-85. Barton was familiar with the Standard License Agreement and he negotiated Standard License Agreements with United Airlines, USAir, Northwest Airlines, Trans World Airlines, Continental Airlines and Federal Express. PX 212 P 22; Trial Tr. at 93.

 B. 32mm Insert System

 David Kleiman designed a system for the construction of inserts in the cabinets placed in a CTO (the "32mm Insert System"). The 32mm Insert System was designed to hold many different configurations of equipment used by the airlines. PX 12, 68-70, 179-90; Trial Tr. at 205-214.

 The panel components of the 32mm Insert System were manufactured by ViewRite in California and inserted into counter shells. In February 1992, INI obtained copyright registration on the plans for the 32mm Insert System. PX 108-10; Trial Tr. at 215-18.

 C. The Orlando Facility

 Prior to the termination of his employment by INI, Barton worked on a proposed airline CTO that INI was considering opening in Orlando, Florida (the "Orlando Facility"). JPTO P 5(o). At the time it fired Barton, INI had been negotiating the Orlando lease for approximately five months. Trial Tr. at 398-400. During this period, INI had not received commitments from airlines to rent a sufficient number of counters in Orlando to achieve the "critical mass" that would allow it to run the facility at a profit. Trial Tr. at 644.

 INI had also developed a set of plans for the construction of the Orlando Facility, including a floor plan. See Blueprint for the construction of the INI Orlando Center, PX 33 (the "Orlando Floor Plan"). In or about February, 1992, INI filed a copyright registration for the Orlando Floor Plan. In or about mid-September 1991, INI learned that Albert Young was proceeding with the Orlando project. Trial Tr. at 251.

 II. The Falling Out

 During the time that Barton was employed by INI, INI opened and operated two CTOs, one at Water Street in New York and one at Maiden Lane in San Francisco. INI had never made a profit and had cumulative losses of more than $ 340,000. JPTO P 5(n); DX X at 403; DX F. At the time INI fired Barton, he was a key employee of INI's business, and was substantially in charge of its day to day operations. Trial Tr. at 363; Def.'s Trial Exh. ("DX") Z-1 at 35. During the time he was employed by INI, Barton had allegedly embezzled more than $ 60,000 from INI, forged leases for Northwest Airlines and USAir at the Water Street location (leaving INI with only three of seven counters occupied by paying customers), and altered leases of other airlines at both the Water Street and Maiden Lane locations, granting greater concessions than INI was aware of or had agreed to. Trial Tr. at 331-32; DX D-3 at 26. When Barton was fired, the Kleimans stopped funding the operation. DX Z at 6, 13-15; DX Z-1 at 35.

 III. Barton's Time With Albert Young

 A. The Relationship

 On or about August 1, 1991, Barton and Albert Young executed a Consulting Agreement pursuant to which Barton was to act as a consultant in connection with the establishment of CTOs in the United States and Europe. JPTO P 5(p); PX 19. Prior to executing the Consulting Agreement, however, Albert Young received and had the opportunity to read the Shareholders Agreement. JPTO P 5(s); PX 2. Albert Young also received and read the Employment Agreement between Barton and INI. JPTO P 5(t); PX 1. Albert Young paid Barton over $ 37,500 pursuant to the Consulting Agreement, as well as $ 12,500 as a "final" and full payment under the Consulting Agreement. JPTO P 5(u).

 On or about August 22, 1991 Steven Kleiman, David Kleiman, Barton, his attorney Alan Snyder, and two private investigators hired by INI attended a meeting at INI's office. The meeting was videotaped without the knowledge of Barton or his attorney. JPTO PP 5(w), 5(x). At the videotaped meeting, the Kleimans stated several times that Barton had destroyed their business and that they wanted their money back.

 On or about October 1, 1991, Albert Young received a letter from INI's attorney concerning Barton. JPTO P 5(dd); PX 21. On or about October 4, 1991, Albert Young and William Young responded to this letter by having their attorney send a letter to INI's attorney. JPTO P 5(ee); PX 22.

 Albert Young had concerns about Barton's trustworthiness and integrity. JPTO P 5(y). Accordingly, Barton was given an office at 100 East 42nd Street in New York City, that was physically separate from Albert Young's primary office at 110 East 59th Street. Barton was not provided with a secretary, stationery, typewriter or word processor at this office, and was instructed not to correspond directly with any of Albert Young's clients. JPTO P 5(z), (aa), (bb).

 Barton did much of the work in opening the Satellite Orlando Facility. JPTO P 5(cc). The Satellite Defendants opened the Orlando Facility in or about November 1991. Barton also provided Albert Young with a written analysis of prospective CTOs. JPTO P 5(r); PX 29. On or about January 30, 1992, while still employed by the Satellite Defendants, unbeknown to them, Barton formed a new corporation for the purpose of developing and operating CTOs. DX M. Barton continued working under the Consulting Agreement until on or about March 12, 1992, when he was fired. PX 85. After Barton left the Satellite Defendants, Continental Airlines entered into an agreement with the Satellite Defendants for the occupancy of CTOs in Orlando, Paramus, New Jersey and 100 East 42nd Street in New York.

 B. The Orlando Floor Plan

 In or about August, 1991, Satellite of Orlando, Inc. was formed. At some point after the Consulting Agreement was executed, a sticker with the designation "Satellite Airlines Ticket Center, Inc." was placed over the INI title block on the INI Orlando Floor Plan; JPTO P 5(jj); PX 34. William Young made copies of this modified floor plan. Proposed license agreements for the Satellite Orlando Facility, including a copy of the Satellite stickered INI Orlando Floor Plan were sent to: (1) Steve Cossette of Continental Airlines on or about August 8, 1991; (2) Gordon Tolbert of Northwest Airlines on or about August 8, 1991; (3) Joe DiVincenzo of Trans World Airlines on or about August 8, 1991 and October 17, 1991; (4) Virgin Airways, on or about September 3, 1991; (5) Iberia International Airways on or about October 7, 1991; (6) Lufthansa Airlines on or about October 7, 1991; (7) Mears Airport Shuttle Service on or ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.