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DESIGN STRATEGIES, INC. v. DAVIS

June 22, 2004.

DESIGN STRATEGIES, INC., Plaintiff,
v.
MARC E. DAVIS, INFOTECHNOLOGIES, INC., INFOTECHNOLOGIES WEB SOLUTIONS, INC., and JOHN GOULLET, Defendants.



The opinion of the court was delivered by: VICTOR MARRERO, District Judge

DECISION AND ORDER

Plaintiff Design Strategies, Inc. ("Design") brings this action under the Court's diversity jurisdiction against its former employee, Marc E. Davis ("Davis"); two corporate entities, Info Technologies, Inc., ("Infotech") and Info Technologies Web Solutions ("ITWB"); and John Goullet ("Goullet"), Chief Executive Officer of both InfoTech and ITWB (collectively the "IT Defendants," and together with Davis, "Defendants"). Design alleges that Davis wrongfully diverted a lucrative business opportunity from Design to the IT Defendants while still employed at Design. Design further alleges that the IT Defendants were aware of Davis's actions and colluded with Davis to divert this business opportunity away from Design and to ultimately hire Davis. Defendants deny Design's salient allegations. All the parties have moved for summary judgment. For the reasons discussed below, the Court denies Design's motion and grants-in-part and denies-inpart Defendants' motions.

I. BACKGROUND*fn1

  Design is a corporation in the business of providing highly trained personnel to large companies for technical services on specific industrial and business projects requiring complex computer applications. Design hired Davis in 1987 as a senior marketing representative at an annual salary of $35,000 plus commissions. Davis was hired with no written agreement governing his employment. Davis worked with Design for approximately 13 years and was earning an annual salary of over $500,000 at the time of his departure from Design.

  The crux of Design's causes of action lies with the alleged diversion of a contract with Microsoft, Inc. ("Microsoft"), worth approximately $1 to $2 million, for a project known as Contentville.com ("Contentville"). Contentville entailed establishing a major high-profile website for an electronic bookseller that would use Microsoft's software and compete directly with well-known websites such as amazon.com and barnesandnoble.com. According to John Gomez ("Gomez"), a Microsoft managing consultant who was the contact person at Microsoft for Contentville, the company to be awarded the Contentville project would have to have previous experience in providing web solutions and maintain a pre-existing development lab.

  Design alleges that sometime between October and December 1999, Davis actively solicited and procured the Contentville contract for the IT Defendants while still an employee of Design and without giving Design an opportunity to compete for the contract. More specifically, Design alleges that Davis colluded with Goullet; Michael Largey ("Largey"), President of ITWB; and John Kalli ("Kalli"), the Executive Vice-President of InfoTech, to secure Contentville for the IT Defendants.

  Design also contends that the diversion of Contentville thwarted the impending sale of Design to a third-party for approximately $37.5 to $50 million. Davis resigned from Design shortly before the alleged sale was supposed to occur and was hired by ITWB as a marketing representative shortly thereafter. Davis offers a different explanation regarding his involvement with Contentville. Microsoft was an existing client of Design to whom Design provided staffing services. According to Davis, he came to learn of Contentville only when he approached Microsoft to better assess its current needs as one of Design's clients. Davis contends that although he knew that Design did not have the required infrastructure in place to meet the requirements of Contentville, he nevertheless spoke with Marsh Newark ("Newmark"), the President of Design, to inquire whether Design would be interested in the project because it was Davis's practice to discuss such matters with Newmark. (See Davis Dep. at 96.) Davis asserts that in earlier discussions, Newmark repeatedly refused to make the investment necessary to expand into and compete for an E-commerce solutions type of business that Contentville would require, even for Design's biggest client, Merrill Lynch. Thus, Davis alleges that when he subsequently presented Contentville to Newmark, Newmark declined the project again on the same basis, namely, because Newmark wanted an executed contract up front before committing resources to establishing the required infrastructure to undertake Contentville. (See Davis Dep. at 69.) Davis asserts that this impasse essentially was a rejection by Design of the Contentville project. Design counters these allegations by asserting that Davis never formally presented Contentville to Newmark, but rather, he spoke to him merely in generalities.*fn2 With regard to meeting the requirements of the Contentville project, Newmark maintains that Design did in fact have previous website development experience from several sites Design developed for another client, Goldman Sachs. Although Newmark does not contest that at the time Microsoft was seeking to begin Contentville in late 1999 or early 2000, Design did not have the existing development lab that Microsoft was seeking for the project, he asserts that if Davis had approached him specifically about Contentville, including its particular specifications, Design would have fulfilled the requirements. According to Newmark, Design could have established the necessary technical infrastructure for Contentville in approximately two weeks.

  Davis responds that Design's two-week lead time took Design out of contention for Contentville as evidenced by Gomez's statements that the project had not been awarded to another company due to a five-day lead-time that the other company required to get the proper infrastructure in place. (See Gomez Dep. at 140.) According to Davis, after Design rejected Contentville, he was frustrated and felt that if Design would not take on the project, then at least Davis, acting on behalf of Design, could help its client Microsoft achieve its objectives. Davis states with regard to Contentville that "the next best option [after the alleged rejection by Newmark] was to have somebody do it who at least I would have some relationship with or Design would have some relationship with, rather than having Microsoft go to somebody we didn't know, award the project to some other company that we had no influence in or part in."*fn3 (Davis Dep. at 104.) Davis thus contacted Goullet and Largey regarding the project, explaining its requirements and adding that he (Davis) had already offered Contentville to Design and that it was declined. Davis also contacted Gomez to inform him that ITWB could meet Contentville's requirements.

  Davis alleges that based upon the conversation he had with Newmark regarding Microsoft, and his (Davis's) familiarity with Contentville, it was evident that Design could not have been awarded the project because Contentville was to require more complex web solution services beyond the mere staffing support that Design had been providing. According to Davis, "Design was then incapable of providing the required services and did not (and, more importantly, chose not to try to) meet the technical requirements that Contentville itself had established for its E-commerce provider." (Davis Motion at 4.)

  The IT Defendants argue that although Davis did in fact refer Contentville to ITWB,*fn4 it was ultimately awarded the project solely through its own efforts and with no assistance from Davis. The IT Defendants further argue that it did not collude with Davis to obtain Contentville and that it hired Davis only after it was awarded the contract. In fact, the IT Defendants disavow any role in Davis's resignation from Design. The IT Defendants agree with Davis that Design was not considered qualified for the Contentville contract because Design was not in the business of website development or solutions and did not have the required offsite development facility, equipment, expertise or experience for the project, although it is not clear from the record how the IT Defendants are in a position to make such an assessment.

  In its complaint, Design sets forth nine causes of action all related to Design's allegations that Davis wrongfully diverted Contentville and that the IT Defendants colluded with Davis in the process, among them, breach of employment agreement; breach of fiduciary duty; unfair competition; civil conspiracy; and aiding and abetting the breach of fiduciary duties. As remedies, Design seeks a forfeiture of Davis's salary from Design during the alleged collusion with the IT Defendants; an award against the Defendants for the losses sustained by Design, including the profits lost from the Contentville project and the alleged aborted sale of Design; and punitive damages. All the parties have moved for summary judgment, claiming that the record fails to raise any genuine issues of material fact on Design's various causes of action.

  II. DISCUSSION

  A. STANDARD FOR SUMMARY JUDGMENT

  The Court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must first look to the substantive law of the action to determine which facts are material; "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Even if the parties dispute material facts, summary judgment will be granted unless the dispute is "genuine," i.e., "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249.

  The moving party bears the initial burden of demonstrating that the evidence contained in the record fails to raise a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). After such a showing, the non-moving party must respond with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). To this end, "[t]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). In other words, "[w]hen the moving party has carried its burden under Rule 56(c), its ...


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