Prestolite further asserts that even if its December 20 letter
was not sufficient, BBS itself terminated the agreement by means
of its January 23, 1997 letter to Prestolite. Prestolite notes
BBS's statement that it had ordered "all effort on the . . .
program [to] be terminated as of January 27, 1997." (Emphasis
BBS contends that none of these writings constituted written
notice of termination as required by the contract. BBS asserts
that its January 23 letter was simply a demand for adequate
assurance under U.C.C. § 2-609.*fn1 According to BBS, then, the
contract remained in effect for the full three years called for
by the terms of the contract.
After reviewing the record, I find that there are issues of
fact concerning whether and when the contract was effectively
terminated. Both sides correctly state the law in this regard.
Plaintiff is correct that under New York law, failure to observe
the notice requirements of a termination clause will render an
attempted termination invalid. See Solieri v. Ferrovie Dello
Stato Spa, No. 97 CIV. 8844, 1998 WL 419013 *3 (S.D.N.Y. July
23, 1998); Joseph Victori Wines, Inc. v. Vina Santa Carolina
S.A., 933 F. Supp. 347, 352 (S.D.N.Y. 1996). Defendant is
likewise correct that when a contract is expressly made
terminable at will upon notice by either party, a party's
termination of the contract cannot give rise to a cause of action
for breach of contract on the theory that the party has failed to
perform its obligations under the contract. See American Food &
Vending Corp. v. International Business Machines Corp.,
245 A.D.2d 1089, 667 N.Y.S.2d 545 (4th Dep't 1997), leave to appeal
dismissed, 91 N.Y.2d 956, 671 N.Y.S.2d 716, 694 N.E.2d 885
(1998); Hampton Navigation, Inc. v. Pinpoint Sys. Int'l,
245 A.D.2d 485, 486, 666 N.Y.S.2d 705 (2d Dep't 1997).
In the case at bar, however, I cannot determine as a matter of
law whether Prestolite's December 20 letter or BBS's January 23
letter constituted written notices of termination as required by
the contract. Certainly they both indicated that the parties'
relationship was in jeopardy, but neither expressly stated that
the sender was exercising its right to terminate the contract.
Although BBS's letter did use the word "terminated," that was in
reference to BBS's "effort on the . . . program," and the fact
that the parties continued to negotiate is at least some evidence
that they did not consider their contractual relationship to be
completely dead at that point. It is possible that they did, of
course, but these are factual matters relating to the parties'
intent that are not resolvable on motions for summary judgment.
See McCabe v. Allstate Ins. Co., 260 A.D.2d 850, 688 N.Y.S.2d 764,
766 (3d Dep't 1999) ("the dispositive issue is whether the
contract was terminated. This issue, which is clearly in dispute,
constitutes a material question of fact precluding summary
judgment in either party's favor"); Boston Concessions Group v.
Criterion Ctr. Corp., 250 A.D.2d 435, 673 N.Y.S.2d 111 (1st
Dep't 1998) ("Concerning the breach of contract cause of action,
numerous issues of fact exist, including . . . the validity of
defendant's termination . . .").*fn2
II. Claims Relating to BBS's Alleged Proprietary Interest
Counts 2, 4, 5 and 9 all relate to defendants' alleged use of
BBS's proprietary information, processes and inventions,
particularly the GelTek gasket and the dome cap. Here, too, I
find that factual issues exist precluding summary judgment in
either party's favor.
Before turning to the merits of these causes of action, I note
that in its brief, plaintiff states that it is withdrawing the
second cause of action as to Prestolite, and withdrawing the
reference in Count 2 to N.Y.Gen.B.L. § 349, thus leaving this
claim as a claim against Apsco for unfair business practices
based on Apsco's alleged unfair competition and tortious
interference with BBS's contractual relations with Prestolite. It
also states that "[t]his cause of action raises questions of fact
vis-a-vis APSCO, which has not moved for summary judgment
herein." Plaintiff's Memorandum of Law ¶ 84. Plaintiff does not
discuss the merits of this cause of action any further.
I do not agree with BBS that Apsco has not moved for summary
judgment, however. Both Prestolite and Apsco are represented by
the same counsel, and defendants' notice of motion and other
motion papers clearly state that the motion is brought of behalf
of defendants. It is true that defendants' papers contain little
discussion of Apsco's role in the underlying events, but that is
likely because Prestolite was the main player. In general, if
Prestolite did nothing wrong, such as misappropriate BBS's
proprietary information, Apsco could not be held liable either,
since it allegedly obtained that information from Prestolite.
I am also not persuaded that BBS can simply turn this cause of
action into a claim for tortious interference with contract. It
is not pleaded as such, but is based on defendants' joint use of
BBS's proprietary information.
A common-law claim for unfair business practices or unfair
competition and a claim for tortious interference with contract
are two different things. Under New York law, "the gravamen of a
claim of unfair competition is the bad faith misappropriation of
a commercial advantage belonging to another by infringement or
dilution of a trademark or trade name or by exploitation of
proprietary information or trade secrets." Eagle Comtronics,
Inc. v. Pico Products, Inc., 256 A.D.2d 1202, 1204, 682 N.Y.S.2d 505
(4th Dep't 1998), leave to appeal denied, 688 N.Y.S.2d 372
(4th Dep't 1999); see Forschner Group, Inc. v. Arrow Trading
Co., 124 F.3d 402, 408 (2d Cir. 1997). In contrast, the elements
of a claim for tortious interference with contract are: the
existence of a valid contract; the tortfeasor's knowledge of the
contract and intentional interference with it; the resulting
breach; and damages. Hoag v. Chancellor, Inc., 246 A.D.2d 224,
228, 677 N.Y.S.2d 531 (1st Dep't 1998). Plaintiff cannot plead
one claim and then, in response to a motion for summary judgment,
declare that it is an entirely different claim from the one
Misappropriation of trade secrets, however, is one type of
unfair competition. Eagle Comtronics, 256 A.D.2d at 1204,
682 N.Y.S.2d 505; see also 2 New York Pattern Jury Instructions,
1999 Cumulative Supplement at 373 (outlining six categories of
unfair competition, including trade secrets and
misappropriation). To the extent that Count 2 is based on Apsco's
alleged misappropriation of BBS's trade secrets, therefore, it
does state a claim on its face. That claim and Count 4 may be
duplicative of each other, but Apsco will not be prejudiced if
both of them are allowed to proceed.
Although the complaint does not use the term "trade secret," in
effect BBS is alleging that defendants have misappropriated its
trade secrets, and indeed both parties discuss the claims with
reference to New York law as it relates to trade secret claims.
In determining whether information
qualifies as a trade secret, courts generally consider the
(1) the extent to which the information is known
outside of [the] business; (2) the extent to which it
is known by employees and others involved in [the]
business; (3) the extent of measures taken by [the
business] to guard the secrecy of the information;
(4) the value of the information to [the business]
and [its] competitors; (5) the amount of effort or
money expended by [the business] in developing the
information; (6) the ease or difficulty with which
the information could be properly acquired or
duplicated by others.
Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 123,
672 N.Y.S.2d 8, 15 (1st Dep't 1998) (quoting Restatement of Torts, §
757, comment b).
In the case at bar, I find that questions of fact exist
regarding whether the information in question did constitute
trade secrets. One issue is the novelty of the inventions
themselves. BBS contends that its development of the gasket and
dome cap were rather ingenious, whereas defendants assert that
these were obvious solutions. In addition, although these are
tort claims, there are also issues here related to the contract
between BBS and Prestolite. In particular, it is not clear what
their intent was concerning what if any proprietary rights BBS
would have in any information or inventions relating to the
regulators. Both sides point to the contract's provision that BBS
would have a very limited right to use information supplied to it
by Prestolite, but they draw very different inferences from that
provision. BBS argues that since it deals only with Prestolite's
proprietary interests, the contract is simply silent concerning
BBS's rights with respect to its own proprietary information.
Defendants, on the other hand, contend that this provision
demonstrates that all information, inventions, or processes
developed during the project were intended to be the sole
property of Prestolite.
These are clearly issues of fact that cannot be resolved on a
motion for summary judgment. Accordingly, both sides' motions for
summary judgment on these claims are denied. See Ashland Mgmt.
Inc. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912,
624 N.E.2d 1007 (1993) ("a trade secret must first of all be a secret;
whether it is [is] generally a question of fact"); U.S.
Reinsurance Corp. v. Humphreys, 240 A.D.2d 264, 667 N.Y.S.2d 2
(1st Dep't 1979) (defendant's motion for summary judgment was
properly denied, because there were issues of fact relevant to
whether information plaintiff sought to enjoin defendant from
disclosing constituted trade secrets); Engleman v. David McKay
Co., 73 A.D.2d 511, 422 N.Y.S.2d 95 (1st Dep't 1979) (motion for
summary judgment on misappropriation of trade secrets claim was
properly denied, since issue of fact was presented as to whether
certain disclosures by plaintiffs "contained specific and
concrete information sufficient to constitute a property right
warranting judicial protection").
III. Fraud Claims
Counts 6 and 7 both allege fraud on the part of Prestolite.
Count 6 is based on Prestolite's refusal to agree to pay
increased costs during the project. BBS alleges that Prestolite
had fraudulently represented to BBS that it would pay a price
that would be sufficient to completely cover BBS's costs. Count 7
alleges that Prestolite misrepresented to BBS that it would use
BBS as its sole manufacturer and supplier of the regulators for
To establish a cause of action for fraud under New York law, a
plaintiff must establish four elements: (1) misrepresentation of
a material fact; (2) scienter; (3) justifiable reliance; and (4)
injury or damages. Matter of Garvin, 210 A.D.2d 332, 333,
620 N.Y.S.2d 400 (2d Dep't 1994). I find that questions of fact exist
with respect to several of these elements.
First, the existence of a misrepresentation is itself at issue.
The parties present diametrically opposed versions of what
promises, if any, Prestolite gave to BBS regarding costs and the
exclusivity of their arrangement. In addition, the states of mind
of both Prestolite and BBS are at issue: whether Prestolite acted
with fraudulent intent, and whether BBS relied on Prestolite's
misrepresentations. Summary judgment is frequently inappropriate
on claims involving a party's state of mind, and it is
inappropriate here. See On Ling Lam v. Wing Woh Lung Co., Inc.,
181 A.D.2d 495, 496-97, 581 N.Y.S.2d 308 (1st Dep't 1992)
(defendants were not entitled to summary judgment dismissing
causes of action sounding in fraud, since record clearly
established that there were material issues of fact, particularly
with respect to scienter and reliance); Neydavood v. Zorzy,
123 A.D.2d 847, 849, 507 N.Y.S.2d 461 (2d Dep't 1986) (same); 10B
Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure § 2730 at 7 (3d ed. 1998) ("Inasmuch as a
determination of someone's state of mind usually entails the
drawing of factual inferences as to which reasonable people might
differ — a function traditionally left to the jury — summary
judgment often will be an inappropriate means of resolving an
issue of this character").
IV. Claim for Breach of Fiduciary Duty
In Count 8 of the complaint, plaintiff alleges that "Prestolite
agreed to share with BBS the profit from the use of the novel
design changes and process changes in the manufacture of
Prestolite Regulators," and that Prestolite "has breached its
fiduciary duty as a co-venturer by sharing such process with the
defendant APSCO, Inc. while still under a contract with BBS and
by further failing to act in the best interests of the BBS
[sic]." Defendants contend that there is no evidence to support
this claim, and that plaintiff cannot show that Prestolite owed
any fiduciary duty to BBS.
"A conventional business relationship does not create a
fiduciary relationship in the absence of additional factors. . .
." RKB Enterprises Inc. v. Ernst & Young, 182 A.D.2d 971, 972,
582 N.Y.S.2d 814 (3d Dep't 1992). Those factors generally relate
to the superior position of one party (typically the defendant),
such that the plaintiff must place its trust and confidence in
the defendant. "A fiduciary relationship generally must arise out
of a relationship of confidence, trust, or superior knowledge or
control, and may exist where one entity `is under a duty to act
for or to give advice for the benefit of another upon matters
within the scope of the relation.'" Broadway Nat. Bank v.
Barton-Russell Corp., 154 Misc.2d 181, 197, 585 N.Y.S.2d 933
(1992) (quoting Mandelblatt v. Devon Stores, Inc., 132 A.D.2d 162,
168, 521 N.Y.S.2d 672 (1st Dep't 1987) (citations omitted)).
In determining whether a fiduciary relationship existed,
"[b]eyond what may be memorialized in writing, a court will look
to whether a party reposed confidence in another and reasonably
relied on the other's superior expertise or knowledge." Wiener,
672 N.Y.S.2d at 14.
In the instant case, I find that plaintiff has failed to allege
facts from which a fiduciary relationship could be inferred. The
fact that some of the information that passed between the parties
may have been considered confidential by one or both parties does
not alter the fact that they had an arm's-length business
relationship. To the extent that Prestolite might have breached
any duty it owed to BBS to maintain the confidentiality of such
information, plaintiff has an adequate remedy through its other
causes of action. Plaintiff's eighth cause of action is therefore
dismissed. See Surge Licensing, Inc. v. Copyright Promotions
Ltd., 258 A.D.2d 257, 685 N.Y.S.2d 175, 176 (1st Dep't 1999)
("The parties' agreement, premised as it was upon a conventional
business relationship and establishing at arms length no
more than routine . . . rights and obligations, did not implicate
or give rise to a fiduciary relationship"); Prestige Foods, Inc.
v. Whale Securities Co., 243 A.D.2d 281, 282, 663 N.Y.S.2d 14
(1st Dep't 1997) ("Nor did this conventional business
relationship give rise to a claim of fiduciary duty such as might
justify a claim of reliance"); V. Ponte and Sons, Inc. v.
American Fibers Int'l, 222 A.D.2d 271, 272, 635 N.Y.S.2d 193
(1st Dep't 1995) ("The counterclaim sounding in breach of
fiduciary duty was properly rejected, as defendants have pleaded
only an arm's length business transaction without special
circumstances which might give rise to a fiduciary
V. Plaintiff's Motion to Preclude Prestolite from Presenting
Additional Evidence of Damages
Plaintiff has also moved to preclude Prestolite from presenting
any proof at trial relating to its damages on Prestolite's
counterclaim for damages allegedly incurred as a result of
defective regulators supplied to Prestolite by BBS, beyond that
already disclosed to BBS in discovery. In response, Prestolite
agrees to be limited to its disclosures in this regard during
discovery, but states that it "reserve[s] the right, as is
customary, to update the information as necessary prior to trial
upon reasonable notice to plaintiff's counsel." Defendants' Reply
Memorandum of Law at 21. Plaintiff objects to this, stating that
discovery is closed and that there is no need to "update"
anything with respect to damages, since whatever damages
Prestolite has suffered lie entirely in the past.
While I harbor some doubts about whether there could be any
need to "update" the information concerning damages, I will not
absolutely foreclose Prestolite from at least offering further
evidence of damages in the future. If Prestolite does so, I can
certainly address any objections that BBS has in terms of
prejudice or admissibility at that time. I will therefore deny
BBS's motion, but without prejudice to future objections by BBS
to any offers of additional evidence of damages that Prestolite
may make in the future.
Defendants' motion for summary judgment (Docket Item 29) is
granted in part and denied in part. Plaintiff's Eighth Cause of
Action is dismissed. In all other respects, defendants' motion is
Plaintiff's cross-motion for summary judgment (Docket Item 31)
is denied. Plaintiff's motion to preclude BBS from offering
evidence of damages on Prestolite's counterclaim, beyond what
Prestolite has already turned over to BBS during discovery
(Docket Item 31) is denied without prejudice.
IT IS SO ORDERED.