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IDG USA, LLC v. Schupp

August 15, 2010


The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court



Plaintiff IDG USA, LLC ("IDG"), a Georgia company with its principal place of business in North Carolina, commenced this action on January 29, 2010, against its former employee, Defendant Kevin J. Schupp, a New York resident, alleging breaches of a Non-Compete Agreement, breach of a Confidentiality Agreement, unfair competition, and theft of trade secrets. (Docket No. 1, Compl.)

Currently before the Court is IDG's Motion for a Temporary Restraining Order ("TRO") and Preliminary Injunction, seeking to enjoin Schupp from: (1) working for any competitor within 50 miles of IDG's Amherst, New York office, (2) soliciting orders from certain customers, and (3) disclosing or using confidential information and/or trade secrets. (Docket No. 2.) Schupp opposes IDG's Motion for injunctive relief and, in addition, has filed a Cross-Motion to Dismiss the Complaint pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. (Docket No. 18.)*fn1

Both motions are fully briefed and the Court heard argument on April 5, 2010. For the reasons discussed below, IDG's Motion is granted, and Schupp's Cross-Motion is denied.


A. Factual Allegations

The following facts are drawn from the Complaint and attachments thereto.

IDG is a national distributor and supplier of industrial materials. (Docket No. 1, Compl. ¶ 6.) It has a Northeast Division, with a principal office in York, Pennsylvania. ( Ex. A.) Within the Northeast Division, an office in Amherst, New York is responsible for growing and maintaining the company's customer base in upstate New York and western Pennsylvania. (¶ 9, Ex. A.)

In 1998, IDG acquired Austin Ford Logan, Inc. ("AFL"), a tool cutting company. (¶ 12.) Plaintiff Kevin Schupp was employed by AFL at the time of its acquisition. (¶ 13.) IDG retained most of AFL's employees, including Schupp, and he immediately began working out of IDG's Amherst, New York office as a Sales Associate. (¶¶ 9, 11, 13-14.) He serviced many of IDG's major revenue generating clients. (¶¶ 11, 14.) Most, if not all of these clients were assigned to Schupp by IDG, which had pre-existing relationships with the clients. (¶ 30.)

While employed at IDG's Amherst office, Schupp was given significant leeway in incurring travel, entertainment, and other expenses to develop and maintain good will with IDG clients. (¶¶ 33-34.) IDG fully reimbursed Schupp for such expenses and, in addition, provided him with a company car and fuel credit card. (¶¶ 34-36.)

During the course of his employment, Schupp signed various employment-related documents. On May 27, 2008, Schupp and Edward Gerber, IDG's Northeast Division President, entered into a "Non-Compete Agreement" (the "NCA"), in York, Pennsylvania. (¶ 15, Ex. A.) The NCA sets forth various terms and conditions of Schupp's employment in the position of Account Executive. (Ex. A.) Schupp received "additional compensation in the amount of Three Thousand Dollars ($3,000) in consideration for his execution, delivery, and performance of th[e] [NCA] (specifically including without limitation the non-competition and non-disclosure covenants contained in this paragraph (7))." (¶ 12, Ex. A ¶ 7.) On December 3, 2009, Schupp executed a Confidentiality Agreement. (Ex. B.)

On January 14, 2010, Schupp voluntarily terminated his employment without advance notice. (¶ 38.) Before his departure, Schupp's supervisor, Thomas Lewis, cautioned him about his non-competition obligations and informed him that IDG would seek to enforce those obligations. (¶¶ 39-40.)

Within days after his resignation, Schupp commenced employment as a sales representative with Abrasive-Tool Corp. ("Abrasive"). (¶ 41.) Abrasive sells many of the same products as IDG and offers customers similar services. (¶¶ 42-44.) Schupp works out of Abrasive's Buffalo office, which is within ten miles of IDG's Buffalo office. (¶ 45.) The NCA provides that for a twelve month period from the date of his termination, Schupp will not accept employment from any competitor of IDG for the performance of work similar to the work he performed for IDG within a fifty mile radius of any office to which he was assigned during the twelve months prior to his termination. (Ex. A ¶ 7(a).)

Schupp has solicited orders on behalf of Abrasive from long-standing, major revenue producing clients he was assigned to service and entertain during his employment with IDG. (¶¶48-51, 56.) In addition, Schupp relayed to an IDG customer confidential information regarding its Amherst Office's control over pricing issues. (¶ 54.) IDG believes Schupp is using and/or disclosing his knowledge of IDG pricing policies to solicit orders from IDG customers on behalf of Abrasive. (¶ 57.)

IDG claims that as a result of Schupp's actions, it has suffered an indeterminate economic loss, and that its customer goodwill has been irreparably damaged.

B. Procedural History

IDG's Complaint, filed on January 29, 2010, asserts five causes of action: (1) breach of the NCA's non-competition provision (¶ 7(a)), (2) breach of the NCA's non-solicitation provision (¶ 7(b)), (3) breach of the NCA's non-disclosure provision (¶ 7(d)) and of the Confidentiality Agreement, (4) unfair competition, and (5) theft of trade secrets. Four days after filing the Complaint, IDG moved for a temporary restraining order and preliminary injunction.

At a conference on February 8, 2010, the parties agreed to attempt to resolve the matter and mediation ensued. The matter was not resolved and the Court set a briefing schedule for the motion on February 18, 2010.

On February 23, 2010, Defendant filed an Answer to Complaint and Counterclaim with appended exhibits. (Docket No. 16.) Thereafter, Defendant filed a Cross-Motion to Dismiss.

On April 5, 2010, the Court requested supplemental briefing in connection with Plaintiff's motion. Briefing on both motions is now complete.


A. Choice of Law

Plaintiff is a Georgia company, Defendant resides in New York, the NCA, executed in Pennsylvania, provides that "this Agreement shall be construed under the laws of the State of North Carolina," and, as best this Court can discern, the conduct underlying IDG's claims occurred in New York and Pennsylvania (i.e., within the territory covered by IDG's Amherst, NY office). Nevertheless, both IDG and Schupp assume that New York law applies.

"[S]ince neither party has raised any choice of law issues, it can be said that they have consented to the application of the forum state's law." Mangual v. Pleas, No. 02 Civ. 8311, 2005 U.S. Dist. LEXIS 19785, at *6 n.1 (S.D.N.Y. Sept. 8, 2005); see also, Clarkson Co. Ltd. v. Shaheen, 660 F.2d 506, 512 n.4 (2d Cir. 1981) ("[N]one of the parties claimed the applicability of Canadian law or asserted that it differs from that of New York. Each seems to have assumed that New York law governs. Hence, the district court was not obligated to take judicial notice of Canadian law and correctly applied forum law."); Henneberry v. Sumitomo Corp. of Am., No. 04 Civ. 2128, 2005 U.S. Dist. LEXIS 7475, at *14 n.3 (S.D.N.Y. Apr. 27, 2005) ("[T]he parties have not raised choice of law issues. Instead, the parties' briefs assumed that New York State law applies. Where the parties so assume, the Court need not address choice of law sua sponte."). This Court will proceed, at least with regard to the instant motions, based on the parties' consent to the application of New York State law.

B. Cross-Motion to Dismiss

Defendant moves for judgment on the pleadings, pursuant to Federal Rules of Civil

Procedure 12(c). This motion will be addressed first because, if granted, IDG's motion will be rendered moot.

Schupp bases his motion on the "pleadings and the documents attached to the pleadings," which he claims demonstrate: (1) that the NCA is unenforceable, and (2) that information regarding pricing and customer purchases is not confidential. Thus, Schupp urges, IDG fails to state any claim for relief.

1. Standard of Review

Rule 12(c) of the Federal Rules of Civil Procedure allows for either party to move for judgment on the pleadings, "after the pleadings are closed-but early enough not to delay trial." This is similar to a Rule 12(b)(6) motion to dismiss for failure to state a claim, except that a Rule 12(b)(6) motion comes before the close of pleadings. In either case, the Court applies the same standard. Irish Lesbian & Gay Org. v. Guiliani, 143 F.3d 638, 644 (2d Cir.1998).

For both 12(b)(6) and 12(c) motions, the district court must accept the factual allegations contained in the complaint as true and draw all reasonable inferences in favor of the non-moving party. Id. The factual allegations contained in the complaint must satisfy a flexible plausibility standard, which obliges a pleader to amplify a claim with enough factual allegations to render the claim plausible. Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007). In other words, plaintiff's complaint must raise a right to relief above the speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 1965 (2007).

For purposes of Rules 12(c) and 12(b), the Court must limit itself to the facts alleged in the complaint, which are accepted as true; to any documents attached to the complaint as exhibits or incorporated by reference therein; to matters of which judicial notice may be taken; or to documents upon the terms and effect of which the complaint "relies heavily" and which are, thus, rendered "integral" to the complaint. Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2002); see also, Pifko v. CCB Credit Services, Inc., no. 09-CV-3057, 2010 WL 2771832, at *2 (E.D.N.Y. July 7, 2010). "[A] plaintiff's reliance on the terms and effect of a document in drafting the complaint is a necessary prerequisite to the court's consideration of the document on a dismissal motion; mere notice or possession is not enough." Chambers, 282 F.3d at 153 (emphasis in original).

2. Analysis

With regard to IDG's first and second causes of action, Schupp asks that the Court accept as true the facts alleged in his speaking Answer, and also that it consider the documents appended to his Answer, which are not attached to, referenced in, or integral to IDG's complaint.*fn2 In short, Schupp seeks a ruling on the merits, based upon consideration of matters outside the pleadings.

The purpose of Rules 12(b)(6) and 12(c) is to test, in a streamlined fashion, the sufficiency of the plaintiff's statement of a claim for relief without resolving a contest regarding its substantive merits. These Rules assess the legal feasibility of the complaint, but do not weigh the evidence that might be offered to support or oppose it. Global Network Communs., Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir. N.Y. 2006) (citations omitted).

"The streamlined testing of the substantive merits, on the other hand, is more appropriately reserved for the summary judgment procedure, governed by Rule 56, where both parties may conduct appropriate discovery and submit the additional supporting material contemplated by that rule." Id. (citations and internal quotation marks omitted). Summary judgment is the proper ...

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