United States District Court, Northern District of New York
August 6, 1999
FRINK AMERICA, INC., PLAINTIFF,
CHAMPION ROAD MACHINERY LIMITED, DEFENDANT. CHAMPION ROAD MACHINERY LIMITED, COUNTER-CLAIMANT, V. FRINK AMERICA, INC.; AND DAVID LOWRY, COUNTER-DEFENDANTS. FRINK AMERICA, INC., PLAINTIFF, V. CHAMPION ROAD MACHINERY LIMITED, DEFENDANT.
The opinion of the court was delivered by: McAVOY, Chief Judge.
MEMORANDUM-DECISION & ORDER
Plaintiff Frink America, Inc. ("Frink America") filed its first
action against defendant Champion Road Machinery Ltd.
("Champion") on March 22, 1996 alleging, inter alia, trademark
infringement and dilution. In its Answer, defendant asserted a
single counterclaim against plaintiff,
seeking cancellation of Frink America's registration of the
"Rollover" mark. Plaintiff filed a second action against
defendant on September 25, 1996 alleging: (1) misappropriation of
trade secrets and conversion; (2) tortious interference with
business relations; (3) trade dress infringement; (4) unfair
competition under applicable federal and state law; and (5)
copyright infringement under Canadian law. Plaintiff filed an
Amended Complaint on October 29, 1997, adding an additional claim
for breach of contract. In its Answer, defendant asserted
counterclaims against Frink America and its president, Lowry, for
patent and copyright infringement, misappropriation of trade
secrets, conversion and unfair competition. In an order dated
March 21, 1997, the Magistrate Judge consolidated the two
actions. The Court assumes familiarity with its two prior
decisions in this case. See Frink America, Inc. v. Champion Road
Machinery Ltd., 48 F. Supp.2d 198 (N.D.N.Y. May 11, 1999); Frink
America, Inc. v. Champion Road Machinery Ltd., 961 F. Supp. 398
In a Memorandum-Decision & Order dated May 11, 1999, this Court
granted defendant's motion for summary judgment with respect to
plaintiff's federal and state law trademark infringement, federal
and state trademark dilution, copyright infringement, trade dress
infringement, breach of contract, misappropriation of trade
secrets, tortious interference with business relations and
federal unfair competition claims. Defendant's summary judgment
motion was denied, however, with respect to plaintiff's state
unfair competition and conversion claims on the ground that
defendant failed to address those claims in its Memorandum of Law
in support of its motion for summary judgment. See Frink
America, 48 F. Supp.2d 198, 208-09. Thereafter, defendant
requested, and this Court denied, reconsideration and/or
reargument and leave to file additional briefing regarding that
portion of the Court's May 11, 1999 Memorandum-Decision and Order
which denied defendant's motion to dismiss plaintiff's state
unfair competition and conversion claims. See Letter of
Lawrence K. Kolodney, dated May 18, 1999. The Court, however,
treated defendant's request to file additional briefing as a
motion for leave for an extension of time within which to file
dispositive motions, and extended the period of time during which
the parties may file dispositive motions until July 19, 1999.
Champion presently moves this Court for summary judgment with
respect to Frink America's remaining state law claims sounding in
conversion and unfair competition.
A. The Standard for Summary Judgment
The standard for summary judgment is well-settled. Under
FED.R.CIV.P. 56(c), if there is no genuine issue as to any
material fact, the moving party is entitled to a judgment as a
matter of law "[w]here the record taken as a whole could not lead
a rational trier of fact to find for the non-moving party."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see also
Chertkova v. Connecticut Gen. Life Ins. Co., 92 F.3d 81, 86
(1996). The moving party bears the initial burden of "informing
the . . . court of the basis for its motion, and identifying
those portions of `the pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits, if any,' which it believes demonstrate the absence of
a genuine issue of material fact." Celotex Corp. v. Catrett,
477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting
FED. R.CIV.P. 56(c)). The initial burden is to demonstrate "that
there is an absence of evidence to support the nonmoving party's
case." Id. at 325, 106 S.Ct. 2548.
Once the moving party has met its burden, the non-moving party
must come forward with specific facts showing that there is a
genuine issue for trial. See Celotex
Corp., 477 U.S. at 322, 106 S.Ct. 2548; Matsushita, 475 U.S.
at 585-86, 106 S.Ct. 1348. A dispute regarding a material fact is
genuine if a reasonable jury could return a verdict for the
non-moving party; that is, whether the non-movant's case, if
proved at trial, would be sufficient to survive a motion for
judgment as a matter of law. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250-51, 106 S.Ct. 2505, 91 L.Ed.2d 202
(1986). When reasonable minds, however, could not differ as to
the import of the evidence, then summary judgment is proper.
Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert.
denied, 502 U.S. 849, 112 S.Ct. 152, 116 L.Ed.2d 117 (1991).
Although the trial court must resolve all ambiguities and draw
all inferences in favor of that party against whom summary
judgment is sought, Ramseur v. Chase Manhattan Bank,
865 F.2d 460, 465 (2d Cir. 1989); Eastway Constr. Corp. v. City of New
York, 762 F.2d 243, 249 (2d Cir. 1985), cert. denied,
484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987), the motion will not be
defeated by a non-movant who raises merely a "metaphysical doubt"
concerning the facts or who only offers conjecture or surmise.
Delaware & H.R. Co. v. Consolidated Rail Corp., 902 F.2d 174,
178 (2d Cir. 1990), cert. denied, 500 U.S. 928, 111 S.Ct. 2041,
114 L.Ed.2d 125 (1991) (quoting Matsushita, 475 U.S. at 586,
106 S.Ct. 1348); see also Western World Ins. Co. v. Stack Oil,
Inc., 922 F.2d 118, 121 (2d Cir. 1990). Indeed, the nonmoving
party's opposition may not rest on mere allegations or denials of
the moving party's pleading, but "must set forth specific facts
showing that there is a genuine issue for trial." FED.R.CIV.P.
B. Conversion Claim
In its Amended Complaint, plaintiff bases its conversion claim
on the following allegation:
Champion has converted and misapplied Frink's
INTELLECTUAL PROPERTY and trade secrets, and
wrongfully manufactured products identical to those
of Frink by use of such INTELLECTUAL PROPERTY and
trade secrets. Champion's conduct has been
intentional and malicious.
Amended Compl. at ¶ 36.
A plain reading of the Amended Complaint reveals that its
conversion claim rests on its misappropriation of trade secrets
claim. Essentially, the conversion claim is premised on
defendant's alleged misappropriation of protected trade secrets
consisting of drawings, jigs and fixtures which belonged to Frink
America but were used by Champion to manufacture snowplows in
direct competition with Frink America. See Pl.Mem. of Law at 6.
"[C]onversion is established when one who owns and has a right
to possession of personal property proves that the property is in
the unauthorized possession of another." 23 N.Y.JUR.2D,
Conversion § 1 (1982); see also Songbyrd, Inc. v. Estate of
Grossman, 23 F. Supp.2d 219, 222 (N.D.N.Y. 1998); Bunge Corp. v.
Manufacturers Hanover Trust Co., 37 A.D.2d 409, 325 N.Y.S.2d 983,
988 (1st Dep't 1971), aff'd 31 N.Y.2d 223, 335 N.Y.S.2d 412,
286 N.E.2d 903 (1972). More recently, courts have held that
the plaintiff must prove that the unauthorized possessor has
acted to exclude the rights of the owner. See Songbyrd, Inc.,
23 F. Supp.2d at 222 (quoting Key Bank of N.Y. v. Grossi,
227 A.D.2d 841, 642 N.Y.S.2d 403, 405 (3d Dep't 1996)). Furthermore,
"[i]f possession of the property is originally lawful, a
conversion occurs when the defendant refuses to return the
property after a demand or sooner disposes of the property."
White v. City of Mount Vernon, 221 A.D.2d 345, 633 N.Y.S.2d 369,
370 (2d Dep't 1995) (citing Bernstein v. La Rue,
120 A.D.2d 476, 501 N.Y.S.2d 896, 898 (2d Dep't 1986)).
Under New York law, actions for conversion have been generally
limited to tangible property:
Ordinarily an action for conversion lies only for
personal property which is tangible, or at least
represented by or connected with something tangible,
and not for indefinite, intangible, and incorporeal
species of property.
23 N.Y.JUR.2D Conversion § 11 (1982) (citing Stern v.
Kaufman's Bakery, Inc., 191 N.Y.S.2d 734, 735 (1959)).
However, as plaintiff points out, while "`an action for
conversion will not normally lie when it involves intangible
property, an action involving infringement of property rights by
virtue of misappropriating tangible property . . . should
properly be considered an action to recover for conversion of
that property.'" Pl.Mem. of Law at 7 (quoting Sporn v. MCA
Records, Inc., 58 N.Y.2d 482, 489, 462 N.Y.S.2d 413,
448 N.E.2d 1324 (1983)).
In Sporn, the New York Court of Appeals held that a
conversion claim may properly be brought when based on a song's
master recording, which it classified as tangible property. See
Sporn, 58 N.Y.2d at 489, 462 N.Y.S.2d 413, 448 N.E.2d 1324
("[Although] plaintiff's intangible property rights which flow
from his claimed ownership of the master recording are involved .
. . that is not sufficient to convert a claim for recovery of
losses sustained because a tangible piece of property was sold
into an action involving purely intangible property."). Like
Sporn, the instant case involves a transaction which did not
consist of purely intangible property. Rather, it involved
tangible property — drawings, jigs and fixtures. Accordingly,
plaintiff's claim is properly considered one for conversion. See
1. Property Was in the Public Domain
As previously noted, in its Amended Complaint, plaintiff bases
its conversion claim on a claim of misappropriation of trade
secrets. See Amended Compl. at ¶ 36. In finding that the
intellectual property at issue did not merit trade secrecy
protection, this Court held:
[T]he information contained in plaintiff's
engineering and production drawings, and jigs and
fixtures involve public matters and, therefore, do
not constitute a protectible trade secret.
Additionally, plaintiff did not treat these items in
a manner consistent with a trade secret.
Specifically, plaintiff acknowledges that it readily
shared "technology and exchanged engineering
drawings" with Frink Canada and FEI prior to
Champion's purchase of FEI's assets . . . [and]
failed to safeguard its process and equipment from
public disclosure by "tak[ing] rudimentary
precautions" to prevent its employees or competitors
from acquiring familiarity with the production
designs and equipment for its snowplow equipment.
Frink America, 48 F. Supp.2d 198, 207-08 (quotations omitted).
Because plaintiff premised its conversion claim on a claim of
misappropriation of trade secrets — and that claim was dismissed
— it naturally follows that its conversion claim cannot be
maintained. See Blank v. Pollack, 916 F. Supp. 165, 175
(N.D.N.Y. 1996) (dismissing conversion claim where a related
misappropriation of trade secrets claim was dismissed).
Furthermore, the Court notes that the drawings, jigs and
fixtures at issue were sold by Ernst & Young, Ltd., the
court-appointed receiver for Frink Environmental, Inc. ("FEI"),
an entity which held the assets of Frink America. Significantly,
plaintiff does not allege that he informed Ernst & Young that the
disputed property belonged to Frink America. As a result,
Champion acquired Frink America's assets through a court approved
2. Demand and Refusal
It is well established that, where defendant has gained
possession of items through legal means, as in the case of a
court approved bankruptcy sale, the plaintiff alleging conversion
must show it demanded the return of such items and that the
defendant refused to do so. See White, 633 N.Y.S.2d at 370;
Trading Corp. v. Mayer Malbin Co., 37 A.D.2d 946, 325 N.Y.S.2d 757,
757-58 (1st Dep't 1971); Apex Ribbon Co. v. Knitwear
Supplies, Inc., 22 A.D.2d 766, 253 N.Y.S.2d 643, 644 (1st Dep't
1964) ("The rule that one who comes lawfully into possession of
property cannot be charged with conversion thereof, until after a
demand and refusal, is too well established to justify extended
discussion.") (citations omitted); Cutler-Hammer, Inc. v. Troy,
283 A.D. 123, 126 N.Y.S.2d 452, 454 (1st Dep't 1953).
In Agawam Trading, the defendant gained possession of goods
through legal means — a levy made by the Sheriff. The court then
dismissed plaintiff's conversion claim because the record was
"barren of any facts to show a refusal to return the property."
325 N.Y.S.2d at 757. Similar to the plaintiff in Agawam
Trading, Frink America fails to show that any demand for the
return of property was made, let alone refused. Rather, much of
plaintiff's memorandum of law focuses on the distinction, if any,
between intellectual property and intellectual property rights.
Plaintiff stops short, however, of showing a demand was made and
refused, stating only that Lowry (Frink America's President)
informed Church (Champion's President) that "intellectual
property belonging to Frink America was in the possession of
Frink Environmental." Pl.Mem. of Law at 10. Accordingly, with no
showing by plaintiff of any refusal by defendant to return
property in legal possession of defendant, plaintiff's conversion
claim must be dismissed.
C. Unfair Competition Claim
Champion next moves for summary judgment with respect to
plaintiff's state law claim of unfair competition. Specifically,
in its Amended Complaint, plaintiff alleges that:
Champion's conversion and misappropriation of Frink's
INTELLECTUAL PROPERTY and machine tools, tortious
interference with Frink's business relations, its
infringing use of the Frink trade dress and material
misrepresentations regarding Frink constitute unfair
competition. . . .
Amended Compl. at ¶¶ 54-56.
A plain reading of plaintiff's allegations reveals that its
unfair competition claim is based on its federal trade dress
infringement claim and state law claims of conversion,
misappropriation of trade secrets and tortious interference with
business relations. Significantly, plaintiff conceded its trade
dress infringement claim, see Frink America, 48 F. Supp.2d 198,
204-05, and this Court dismissed plaintiff's misappropriation of
trade secrets and tortious interference with business relations
claims, see id. at 206-07, 208-09. Similarly, plaintiff's
conversion claim was addressed and dismissed earlier in this
decision. See supra, at 209-210. Thus, based solely on the
allegations raised in the Amended Complaint, plaintiff's unfair
competition claim cannot be maintained. An analysis of the
elements of an unfair competition claims yields the same
"`Although at one time the law of unfair competition was
limited to claims that one party had attempted to pass off his
goods as those of another party, unfair competition is now held
to encompass a broader range of unfair practices which may be
generally described as a misappropriation of the skill,
expenditures, and labor of another.'" Anacomp, Inc. v. Shell
Knob Servs., Inc., 1994 WL 9681, at * 13 (S.D.N.Y. Jan.10, 1994)
(quoting American Footwear Corp. v. General Footwear Co.,
609 F.2d 655, 662 (2d Cir. 1979), cert. denied, 445 U.S. 951, 100
S.Ct. 1601, 63 L.Ed.2d 787 (1980)). New York courts have also
held that a claim of unfair competition may be maintained where a
party misappropriates a property right belonging to another for
one's own commercial advantage. See Anacomp, 1994 WL 9681, at
*13 (citing Roy Export Co. Estab. of Vaduz v. Columbia Broad.
Sys., Inc., 672 F.2d 1095, 1105 (2d Cir.), cert. denied,
459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982)).
"[T]he gravamen of a claim of unfair competition is a bad faith
misappropriation of a commercial advantage belonging to another
by infringement or dilution of trademark or trade name or by
exploitation of proprietary information or trade secrets." Eagle
Comtronics, Inc. v. Pico Prods., Inc., 256 A.D.2d 1202,
682 N.Y.S.2d 505, 506 (4th Dep't 1998); see also Capitaland Heating
and Cooling Inc. v. Capitol Refrigeration Co., 134 A.D.2d 721,
521 N.Y.S.2d 202, 203 (3d Dep't 1987). In addition to bad faith,
plaintiff must show proof of public confusion or the likelihood
of confusion in distinguishing between defendant's and
plaintiff's products. See Diversified Mktg., Inc. v. Estee
Lauder, Inc., 705 F. Supp. 128, 131 (S.D.N.Y. 1988).
1. Bad Faith Misappropriation
Plaintiff contends that defendant unlawfully retained and used
plaintiff's engineering drawings, jigs and fixtures to
manufacture snowplows identical to Frink America's snowplows.
See Pl.Mem. of Law at 2. This contention, standing alone, is
insufficient to support a claim of a bad faith misappropriation
on the part of Champion. Specifically, Champion purchased FEI's
assets (which allegedly included the drawings, jigs and fixtures
at issue) from Ernst & Young, FEI's receiver, in a court approved
bankruptcy sale. Moreover, the record does not reflect that
plaintiff communicated to FEI's receiver its purported claim of
ownership to these assets. Plaintiff maintains, however, that in
a conversation between Lowry and Church, it was "understood" that
"Frink America's intellectual property included engineering
drawings and manufacturing jigs and fixtures used to manufacture
snow plows." Pl.Mem. of Law at 10. Assuming, arguendo, that
such a conversation had in fact taken place, it remains that
Lowry never actually demanded the return of these assets
regardless of what Champion understood or acknowledged.
In alleging bad faith misappropriation by defendant, plaintiff
contends that "[h]ad Champion designed its own products for the
unique U.S. market, or even reverse engineered Frink America's
products, it would have been more than a year before Champion
could have entered the market and directly competed with Frink
America." Pl.Mem. of Law at 5. Plaintiff's mere conjecture on how
long it should take a company to enter a new market falls far
short of "specific facts showing that there is a genuine issue
for trial." FED.R.CIV.P. 56(e); see also Kerzer v. Kingly,
Mfg., 156 F.3d 396, 400 (2d Cir. 1998) ("Conclusory allegations,
conjecture and speculation, however, are insufficient to create a
genuine issue of fact."); Scotto v. Almenas, 143 F.3d 105, 114
(2d Cir. 1998) ("The nonmoving party may not rely on conclusory
allegations or unsubstantiated speculation."). The Court further
notes that plaintiff appears to suggest with this conclusory
statement that its rights to these drawings, jigs and fixtures
are entitled to protection. However, this Court, in dismissing
plaintiff's earlier misappropriation of trade secret claim, found
that the drawings, jigs and fixtures involved public matters and
did not constitute a trade secret. See Frink America,
48 F. Supp.2d 198, 206. Therefore, plaintiff has failed to provide
sufficient evidence to support a claim of bad faith
2. Likelihood of Confusion
Plaintiff also fails to satisfy the likelihood of confusion
element of an unfair competition claim. The Court addressed this
issue in connection with its dismissal of plaintiff's trademark
infringement claim. See Frink America, 48 F. Supp.2d 198,
211-12. In applying the well-established Polaroid factors, the
Court found that "[a]t most, plaintiff has shown the possibility,
rather than the probability of confusion." Id. The Court also
found no likelihood of confusion because the snowplows produced
by defendant "are targeted for a specialized class of consumers
who possess a high level of sophistication and who are not likely
to be confused by the different snowplows marketed by the
at 212-13. Because plaintiff has failed to provide sufficient
evidence demonstrating bad faith and confusion, the Court grants
defendant's motion for a summary judgment with regard to the
unfair competition claim.
For all of the foregoing reasons, defendant's motion for
summary judgment is GRANTED, dismissing plaintiff's state unfair
competition and conversion claims.
IT IS SO ORDERED.
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