The opinion of the court was delivered by: Theodore H. Katz, United States Magistrate Judge.
Plaintiffs Pure Power Boot Camp, Inc., Pure Power Boot Camp Franchising Corporation, Pure Power Camp Jericho Inc., and Lauren Brenner (collectively "Plaintiffs" or "Pure Power"), brought this action against Defendants Warrior Fitness Boot Camp, LLC, Alexander Kenneth Fell, Ruben Dario Belliard, Jennifer J. Lee, and Nancy Baynard (collectively "Defendants" or "Warrior Fitness"), accusing Defendants of stealing their business model, customers, and confidential and commercially sensitive documents, breaching contractual and employee fiduciary duties, and infringing Plaintiffs' trade-dress. Defendants filed counterclaims asserting violations of the New York Labor Law, violations of the Stored Communications Act, and unauthorized use of Defendants' images in violation of New York Civil Rights Law. The Court's jurisdiction is derived from Plaintiffs' federal statutory trade dress claims, under 28 U.S.C. § 1338(a) and (b).
The parties consented to trial before this Court, pursuant to 28 U.S.C. § 636(c). The Court presided over a bench trial from January 24 to February 4, and March 14-18, 2011. The following Opinion constitutes the Court's findings of fact and conclusions of law.
While working as a trader on Wall Street in 2002, Plaintiff Lauren Brenner ("Brenner") decided to start her own physical fitness business, based upon the concept of a military boot camp. Investing substantial time and all of her savings, on or about December 17, 2003, Brenner opened Pure Power Boot Camp, Inc. ("Pure Power Boot Camp"), a facility located at 38 West 21st Street in Manhattan. Pure Power Boot Camp is modeled, in part, after United States Marine Corps training facilities. It is designed in military camouflage colors and decor and, unlike traditional gyms, does not have a membership fee; instead, clients sign renewable contracts for "tours of duty," meaning that "recruits" - as Pure Power clients are called - sign up for a program to attend a certain number of sessions per week for a set number of weeks. If a recruit does not show up for a scheduled class, Pure Power personnel contacts them directly.
An important part of Brenner's concept is to use physical objects as part of an indoor obstacle course, modeled after a Marine Corps outdoor obstacle course at Fort Knox, to build confidence, physical fitness, and self-empowerment in her clients. To construct this obstacle course, Brenner contacted a company that built high rope courses. The owner of that company arranged for Brenner to visit Fort Knox and inspect the outdoor obstacle course there, in order to assess whether any of the individual obstacles were suitable for use in a smaller, indoor facility to be used by civilians. Brenner did so and adapted some of the Marine Corps' obstacles to her concept. She designed the facility decor as well as the arrangement of the obstacles, using a flooring made of a crushed rubber tire material designed to look like outdoor dirt. The obstacles are surrounded by a running track, separated by a border of dark sand bags. One of Brenner's insights was that people will stick to an exercise regime if they work out in a group. She thus concluded that classes should be limited to 16 people who go through "training" together, and are called "recruits." The recruits wear a Pure Power Boot Camp T-shirt and camouflage pants. Another important component of her plan is to use the physical obstacles to build self-confidence. In addition, Brenner designed fitness routines involving the obstacles in order to develop various body muscles and muscle strength, as well as cardiovascular health.
Brenner employed former marines as "drill instructors," viewing it as an opportunity to provide jobs to veterans returning from combat in Iraq. In addition, Brenner felt that the hiring of military personnel would lead to good press coverage for her business. Because Pure Power's training techniques were not developed or taught in the United States military, when new drill instructors are hired, they are required to observe and participate in the Pure Power Program, and teach alongside an experienced instructor, before being allowed to teach on their own. All drill instructors are required to obtain certification as a fitness instructor.
After the Pure Power facility was constructed according to her design, Brenner traveled to the Marines' Garden City Reserve Base to make a presentation to marines who had recently returned from combat service. Shortly following that presentation, a number of marines came to Pure Power to experience the program. One of those marines was Defendant Ruben Dario Belliard ("Belliard").
Belliard started working at Pure Power Boot Camp as an independent contractor in April 2005, and was hired as a full-time Pure Power drill instructor in or about July 2006. On Belliard's recommendation, Brenner hired Defendant Alexander Kenneth Fell ("Fell"), another marine, in or about August 2005. Fell started working as a full-time Pure Power drill instructor in or about September 2006. Both Belliard and Fell were well-liked and sought-after instructors. Indeed, Belliard eventually became Pure Power's head drill instructor. Belliard was paid more than the other Pure Power drill instructors and when Brenner was not around, Belliard was left in charge. Brenner placed great trust in Belliard and, at least from her perspective, came to view him as a close friend.
Pure Power was a unique concept and unlike most other exercise facilities. It was an immediate success, garnering attention from a variety of media outlets, including MSNBC and Inside Edition. Brenner personally appeared on a variety of television shows, including NBC's The Today Show, the Donny Deutsch Show, and the Anderson Cooper Show on CNN. Brenner's intent when she created Pure Power was not to have one location, but to develop a business plan that could be rolled out as a national franchise. In 2006, she took steps to franchise the Pure Power concept. She hired a franchise attorney, with whom she developed a business plan, as well as a start-up manual and an operations manual, which described how to open and operate a Pure Power facility. Brenner also participated in the Franchise Expo show in California, and took Belliard along to assist her. Pure Power had a booth at the show and a USA Today reporter featured Pure Power as a top new franchise in 2006. (See Pls.' Ex. 211.) The publicity that Pure Power received led to numerous inquiries from potential franchisees.
In preparation for Pure Power's franchising roll-out, Brenner had the drill instructors sign an Employment Agreement as a condition of continued employment. With the exception of Fell, every drill instructor, Belliard included, admits to having signed an Employment Agreement. Fell, however, disputes having signed such an Employment Agreement, while Brenner insists that he did.
The Employment Agreement contains a number of contractual provisions, including: (1) a provision that requires employees of Pure Power to devote their "skills and best efforts to the Company" and to work to further the company's best interests; (2) a non-disclosure provision; (3) a provision that precludes Pure Power employees from challenging the validity or enforceability of Pure Power's alleged "Intellectual Property"; (4) a non-compete provision; and (5) a non-solicitation provision. (See Pls.' Ex. 329.) The non-compete provision precludes post-termination employment, anywhere in the world, for a period of ten years, at any business that competes directly with Pure Power, which includes any company that uses "obstacle courses" or "exercises derived from military training" or a "military theme." The non-solicitation provision precludes solicitation, or assisting in the solicitation of, any Pure Power clients.
To assist in the franchising of the Pure Power business, Brenner also hired a trade dress attorney, who recommended that Pure Power register its trade dress. Pure Power's initial application for registration of its trade dress was rejected by the United States Patent and Trademark Office ("USPTO"). After Plaintiffs submitted additional documentation, the USPTO eventually granted Plaintiffs a service mark. In the USPTO registration, the Pure Power trade dress is described as follows:
THE MARK CONSISTS OF A DRAWING OF AN EXERCISE FACILITY, STYLED TO LOOK LIKE A MILITARY BOOT CAMP TRAINING COURSE COMPRISED OF CAMOUFLAGE WALL AND CEILING DECOR, CRUSHED RUBBER FLOORING, A TIRE RUN, CLIMBING WALLS, CLIMBING NETS, AND HURDLES, WITH THE "STRE," "COURAGE," AND "UTY."*fn1
Before actively pursuing franchise opportunities, Brenner decided to open a second fitness facility - Pure Power Boot Camp Jericho Inc. ("Jericho") - located in Jericho, New York. The Jericho location looks somewhat different than the Manhattan location and has more obstacles. Brenner offered Belliard a partnership in the Jericho location, which he refused, stating that he did not have enough money to invest. In the first few months that the Jericho facility was open, Brenner spent the majority of her time there.
Around July 2007, while they were still working at Pure Power, Defendants Belliard and Fell began planning their own military-themed gym - Warrior Fitness Boot Camp, LLC ("Warrior Fitness"). Jennifer J. Lee Fell ("Lee"), who was a Pure Power client from March 2006 until April 2008, and is now Fell's wife, was, at that time, an owner and silent partner in Warrior Fitness. Unbeknownst to Brenner, Fell was then dating Lee in violation of an express Pure Power policy banning social relationships between the drill instructors and Pure Power clients. Defendants Belliard and Fell believed that Lee's business school education and her extensive background in business plan drafting would be useful in raising the capital necessary to open Warrior Fitness. Lee was involved in the lease negotiations for spaces Warrior Fitness considered, and, ultimately, rented at 29 West 35th Street in Manhattan - a mere 15 blocks away from Pure Power. Her name is listed as a tenant on the current Warrior Fitness lease. She hired Warrior Fitness's media company and legal counsel and prepared a cost-benefit analysis for the business. Lee also lent Fell $100,000.00, which Fell used to open Warrior Fitness.
Defendants took a number of steps to promote Warrior Fitness. While still a Pure Power client, Lee sent emails to Pure Power clients and others, promoting Warrior Fitness and providing detailed descriptions of the Warrior Fitness class offerings. The Warrior Fitness class times and promotional language closely mirrored those of Pure Power. Some of these emails were sent while Belliard was still employed at Pure Power. Defendants also organized a cocktail party, at which a number of Pure Power clients were present, where Fell announced that he would be opening Warrior Fitness. Defendant Nancy Baynard ("Baynard"), who was a client of Pure Power's from January 2006 until late 2007, and who was secretly dating Belliard, created the Jen and Nancy Party List ("Party List") - a list of names of people who were to be invited to a party celebrating Belliard's birthday and the grand opening of Warrior Fitness. All of the Defendants contributed names of people whom they believed might be interested in joining Warrior Fitness. As Baynard testified at trial, the Party List was created to obtain a better understanding of the general interest in Warrior Fitness. The party never took place, however, and, according to Defendants, the Party List was never used.
But Defendants' efforts went beyond merely promoting and planning Warrior Fitness. As part of Defendants' combined efforts to open Warrior Fitness, Defendant Belliard stole documents from Brenner's private office and personal computer, included Pure Power's business plan, start-up manual, and operations manual. Belliard also stole a folder with Employment Agreements of Pure Power employees, including his own, and destroyed those agreements. In addition, Belliard, without permission, downloaded a copy of Pure Power's confidential customer list onto a thumb-drive. The theft of the customer list, the theft of the business plan, and the theft of the Pure Power files all took place on different dates and times. Finally, Plaintiffs contend that Belliard also stole and destroyed a draft of a book that Brenner was writing, entitled "Unleash the Warrior Goddess Within."
Belliard shared the stolen materials, including Pure Power's client list, with Defendants Fell and Baynard. Belliard also provided a copy of Pure Power's business plan, operations manual, and start-up manual to Lee, who knew that these materials had been stolen from Pure Power. Plaintiffs contend that Lee relied upon these documents in drafting the Warrior Fitness business plan. During that same period of time, to further promote the success of Warrior Fitness, Lee disparaged Brenner and Pure Power in speaking to other Pure Power clients. Third-party witnesses testified that Lee expressly told them that Brenner treated her employees badly and did not pay them. There was also testimony that Lee told Pure Power clients that Brenner "hated homosexuals" and that she had fired a former Pure Power employee because he was gay. At no time while Lee was enrolled at Pure Power, discussing Belliard's and Fell's plans to open Warrior Fitness and denigrating Brenner and Pure Power more generally, did she ever disclose her significant financial interest in Warrior Fitness or her personal relationship with Fell.
Although Fell was fired from Pure Power, it was of his own doing. Specifically, Fell, while working at Pure Power, refused to comply with several of Brenner's explicit instructions, which led to a heated exchange in which Fell repeatedly screamed at Brenner, daring Brenner to fire him. Left with no choice, Brenner terminated Fell's employment on March 16, 2008. Approximately two weeks later, on April 1, 2008, Belliard quit Pure Power, without providing Brenner with notice. Before Belliard quit Pure Power, at a time when Brenner was spending most of her time at the recently-opened Jericho facility, Belliard informed Brenner of certain alleged problems relating to another Pure Power drill instructor. Belliard recommended that this employee be fired, and Brenner, who placed a great deal of trust in Belliard, took his advice and did so. She did not know at the time that Belliard intended to quit his job at Pure Power. The loss of three senior full-time employees, in such close succession, left Pure Power understaffed and in a vulnerable position.
On April 28, 2008, Brenner found out about Defendants' plan to open Warrior Fitness and the fact that confidential materials had been stolen from her office at Pure Power. Elizabeth Lorenzi ("Lorenzi"), who was an employee of Pure Power, knew that Fell had used the Pure Power computer. She and Cheryl Dumas ("Dumas" and, collectively, "Third Party Defendants"), a close friend of Brenner's and a Pure Power client, were able to access and print e-mails from three of Fell's personal email accounts. While there is no evidence that Brenner herself accessed - or requested that Lorenzi and/or Dumas access Fell's email accounts on her behalf - Brenner read the emails, which provided a detailed picture of Belliard's and Fell's scheme to set up Warrior Fitness and undermine Brenner's and Pure Power's reputations and business, before they left Pure Power, and the work that Lee and Baynard did to support those efforts. The content of these emails provided the basis for much of Plaintiffs' original Complaint.
Belliard and Fell, along with their girlfriends at the time, Lee and Baynard, opened Warrior Fitness on or about May 12, 2008.
II. Procedural Background
Approximately a week after gaining access to Fell's email accounts, Plaintiffs commenced an action in New York State Supreme Court. At that time, Plaintiffs sought a temporary restraining order, seeking, among other things, to prevent Defendants from opening their competing business. The state court determined that Plaintiffs' non-compete agreement was unenforceable as drafted, and allowed Defendants to open Warrior Fitness. (See Transcript, dated May 6, 2008 ("TRO Hr."), attached as Ex. B. to Declaration of Daniel Schnapp, dated Oct. 24, 2008, at 28, 43.) The state court, however, directed Defendants to return certain materials that they had stolen from Pure Power and also instructed Defendants to make alterations in the decor of Warrior Fitness to further distinguish its appearance from that of Pure Power, and, thus, remedy some of the trade dress issues raised by Plaintiffs. (See id. at 41-42.) Defendants then removed this action to this Court and sought an order precluding the use or disclosure of specific emails obtained by Plaintiffs from Fell's email accounts.
In a Report and Recommendation, dated August 22, 2008, this Court found that Plaintiffs' actions in accessing Fell's personal email accounts, without his permission, constituted a violation of the Stored Communications Act, 18 U.S.C. § 2701 et seq. The Court recommended that Plaintiffs be precluded from using in this litigation emails obtained outside normal discovery procedures.*fn2
The Court also recommended that Plaintiffs be required to return or destroy all copies of emails that contained privileged attorney-client communications. No objections to the Report and Recommendation were filed, and on October 23, 2008, United States District Judge John G. Koeltl adopted the Report in its entirety. See Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F. Supp. 2d 548, 551 (S.D.N.Y. 2008) ("Preclusion Decision").
After discovery was complete, the parties submitted cross-motions for partial summary judgment. Plaintiffs sought summary judgment on Defendants' claims under the SCA and the Electronic Communications Privacy Act ("ECPA"). Defendants sought summary judgment on the same SCA and ECPA claims. This Court granted in part Defendants' motion for partial summary judgment, finding that Plaintiffs had accessed Fell's emails in violation of the SCA. See Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 759 F. Supp. 2d 417 (S.D.N.Y. 2010). In particular, the Court concluded that Defendants had established four separate violations of the SCA and, as a result, were entitled to statutory damages in the amount of $4,000. See id. at 428-29. The questions of which of the named Plaintiffs was liable for the SCA violations, and whether punitive damages, attorneys' fees, and costs should be awarded, were left to be determined at trial. See id. at 429-30. The Court also granted Plaintiffs' motion for partial summary judgment, concluding that there had been no violation of the ECPA. See id. at 430-31.
Plaintiffs seek damages and injunctive relief on the following claims: (1) breach of contract against Fell and Belliard; (2) breach of the common law duty of loyalty against Belliard, Fell, Lee, and Baynard; (3) unjust enrichment against all Defendants; (4) common law unfair competition against all Defendants; (5) violation of New York General Business Law § 360 against all Defendants; (6) statutory trade dress infringement; (7) conversion against Fell and Belliard; (8) defamation against Lee; (9) tortious interference with prospective economic advantage against all Defendants; and (10) tortious interference with contract against Lee and Baynard.*fn3
Defendants' Third-Party Complaint asserts the following counterclaims: (1) violation of the New York Labor Law against all Plaintiffs; (2) violations of the SCA against Plaintiffs and Third-Party Defendants; and (3) unauthorized use of imagery in violation of New York Civil Rights Law § 51 against all Plaintiffs.*fn4
The Court will address, in turn, each of these separate thirteen causes of action.
Plaintiffs contend that both Belliard and Fell breached their Employment Agreements: (1) by failing to devote their skill and best efforts to Pure Power, and by disparaging and undermining the reputation of Pure Power; (2) by disclosing confidential and commercially sensitive information; (3) by using Pure Power Intellectual Property (as defined in the Employment Agreement) in a competing business; (4) by competing directly with Pure Power within ten years of being employed by Pure Power; and (5) by soliciting Pure Power's customers.
Defendants respond that certain provisions of the Employment Agreement are unenforceable, under New York law, because they are overbroad and unreasonably restrain Defendants from working in their profession. Defendants further contend that Fell did not sign an Employment Agreement, and that the signature appearing on the agreement produced by Plaintiffs is a forgery.
A. Existence of an Agreement
To establish breach of contract under New York law, Plaintiffs must show: "(1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) a breach of contract by the defendants, and (4) damages." Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004); accord JP Morgan Chase v. J.H. Elec. of New York, Inc., 69 A.D.3d 802, 803, 893 N.Y.S.2d 237, 239 (2d Dep't 2010).
To start, the Court concludes that it is not necessary to resolve, as a factual matter, whether Fell signed an Employment Agreement, because even if the Court were to find that Fell did so, Plaintiffs have failed to prove their breach of contract claims against Fell.
Plaintiffs contend that Defendants Belliard and Fell breached the non-compete provision of the Employment Agreement. The non-compete provision states that an employee of Pure Power, for a period of ten years following employment at Pure Power: shall not, and shall not assist any third party to, conduct any business or be employed by any business that competes directly with the Company. A business that competes directly with the Company shall include, but not be limited to, any physical exercise program, confidence program or gym: (i) that uses obstacles courses; (ii) that uses methods or exercises derived from military training; (iii) that uses a military theme in any way; or (iv) that employs the term "boot camp" in the name or description of the program or gym. (Pls.' Ex. 329.)
New York law subjects contractual non-compete provisions to "an overriding limitation of reasonableness." Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 70 (2d Cir. 1999) (quoting Karpinski v. Ingrasci, 28 N.Y.2d 45, 49, 320 N.Y.S.2d 1 (1971)). Specifically, an agreement not to compete will be enforced only if "it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public, and not unreasonably burdensome to the employee." Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 307, 386 N.Y.S.2d 677 (1976). Such agreements may be justified by the employer's need to protect itself from unfair competition by former employees. See BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 391, 690 N.Y.S.2d 854 (1999).
Here, the non-compete provision is clearly unreasonable in terms of duration and geographic scope. Indeed, Plaintiffs have conceded that the ten-year prohibition is overly broad in terms of duration, and courts have consistently held non-compete provisions of this duration unreasonable and, therefore, unenforceable. See, e.g., Baker's Aid, a Div. of M. Raubvogel Co., Inc. v. Hussmann Foodservice Co., 730 F. Supp. 1209, 1216 (E.D.N.Y. 1990) (concluding that a covenant not to compete for a period of ten years was unenforceable because it was overbroad and not reasonably necessary to prevent the disclosure of the plaintiff's proprietary information or the misuse of the plaintiff's plans and specifications); see also Todd Chem. Co. v. Di Stefano, 30 A.D.2d 879, 292 N.Y.S.2d 811 (2d Dep't 1968) (holding that a restrictive covenant, with a ten-year term, was unenforceable).
In addition, the non-compete provision does not provide for any geographic limitations. Plaintiffs introduced no evidence to support the proposition that a covenant restricting competition of the kind at issue in this case, anywhere in the world, is reasonable in terms of scope; nor have Plaintiffs pointed to any cases in this jurisdiction that would support the Court drawing such a conclusion. Indeed, the case law suggests just the opposite. See, e.g., Silipos, Inc. v. Bickel, No. 06 Civ. 2205 (RCC), 2006 WL 2265055, at *6 (S.D.N.Y. 2006) (holding that a restrictive covenant with worldwide restrictions on competition is not reasonable); Heartland Sec. Corp. v. Gerstenblatt, No. 99 Civ. 3694 (WHP), 2000 WL 303274, at *7 (S.D.N.Y. Mar. 20, 2000) (refusing to fully, or partially, enforce a non-compete with no geographic limitations); see also Good Energy, L.P. v. Kosachuk, 49 A.D.3d 331, 332, 853 N.Y.S.2d 75 (1st Dep't 2008) (holding unenforceable a non-compete covenant that covered the entire United States where employer only operated in eight states); Garfinkle v. Pfizer, Inc., 162 A.D.2d 197, 197, 556 N.Y.S.2d 322, 323 (1st Dep't 1990) (refusing to enforce a restrictive covenant whose geographic scope "encompasses the entire world").
Moreover, a non-compete provision that restricts Defendants Belliard and Fell from accepting any job in the fitness industry that "uses obstacle courses" or "exercises derived from military training" or a "military theme" or "employs the term 'boot camp'" is ambiguous and overly broad. Brenner herself was unclear as to whether the non-compete provision purported to preclude employment at a fitness facility that used military-style push-ups, testifying that she was unsure of the difference between military exercises and exercises conducted in the Army or the Marines. In addition, as Brenner also testified, "everybody is using" the term "boot camp" nowadays. Thus, on the basis of the non-compete provision, Defendants Belliard and Fell would be prohibited from working at any place that calls itself a boot camp (e.g., "boot camp" makeup school). In short, the non-compete provision is unreasonably burdensome to Defendants because its enforcement is likely to result in the loss of Belliard's and Fell's ability to earn a living as fitness instructors.
Accordingly, the Court finds the non-compete provision of the Employment Agreement to be both imprecise and clearly overbroad, as well as unreasonably burdensome. It is, therefore, unenforceable as a matter of law.
1. Severance or Partial Enforcement
Anticipating that the Court might find the non-compete provision overbroad, in the alternative, Plaintiffs ask the Court to "blue-pencil" the Employment Agreement. In particular, Plaintiffs seek partial enforcement of the non-compete provision for a period of three years and limited to the United States.
New York courts have "expressly recognized and applied the judicial power to sever or grant partial enforcement for an overbroad employee restrictive covenant." Estee Lauder Cos. Inc. v. Batra, 430 F. Supp. 2d 158, 180 (S.D.N.Y. 2006) (internal quotation and citations omitted). Partial enforcement may be justified so long as "the employer demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anticompetitive misconduct, but has in good-faith sought to protect a legitimate business interest, consistent with reasonable standards of fair dealing." BDO Seidman, 93 N.Y.2d at 394. The burden lies with the employer to show that a restrictive covenant should be partially enforced. See Spinal Dimensions, Inc. v. Chepenuk, No. 4805-07 (RMP), 2007 WL 2296503, at *11 (N.Y. Sup. Ct. Aug. 9, 2007).
In BDO Seidman, the New York Court of Appeals determined that it could "sever" from a restrictive covenant, which was limited in duration, portions of the contract that the court deemed overbroad, thereby rendering the covenant partially enforceable. BDO Seidman, 93 N.Y.2d at 395. Notably, "[n]o additional substantive terms [were] required. The time and geographic limitations on the covenant remain[ed] intact. The only change [was] to narrow the class of [plaintiff's] clients to which the covenant applied." Id.; see also Karpinski, 28 N.Y.2d at 51-52 (severing the overbroad portion of the restrictive covenant prohibiting the defendant from practicing general dentistry and enforcing only that portion of the covenant prohibiting defendant from practicing oral surgery).
Here, Plaintiffs have not requested that the Court "sever" the non-compete provision of the Employment Agreement in a particular manner. Instead, Plaintiffs have asked the Court to insert or introduce new substantive terms into the non-compete agreement that the contracting parties themselves have not agreed upon. Even in the context of a temporary restraining order, where there is some urgency in addressing contemporaneous conduct that violates a non-compete agreement, New York courts are reluctant to rewrite a contractual non-compete provision by adding time and geographic limitations that the court, and not the parties themselves, has deemed reasonable. See, e.g., Crippen v. United Petroleum Feedstocks, Inc., 245 A.D.2d 152, 153, 666 N.Y.S.2d 156, 156-57 (1st Dep't 1997) (refusing to partially enforce a restrictive covenant by limiting its geographic scope because to do so would "alter the original contract so drastically as to preclude a present finding that plaintiff would have accepted the contract" and stating that "defendant should have drafted the agreement to include such provisions from the start and allowed plaintiff to decide whether to sign").
But, here, Plaintiffs not only seek to have the Court rewrite the contractual non-compete provision, they also seek to have the Court apply it retroactively. Yet, a state court, when presented with the relevant facts in May 2008, when Defendants first opened Warrior Fitness, refused to shut it down. Likewise, the District Court, when asked in June 2008 to close Warrior Fitness, denied Plaintiffs' application for a preliminary injunction. (See Order, dated Oct. 28, 2008.) Now, more than three years later, Plaintiffs again ask the Court to find Defendants liable for breach of the non-compete provision and seek to have the Court close Warrior Fitness, and pay as damages all of the profits earned by Warrior Fitness in the last three years, notwithstanding the Court's conclusion that the restrictive covenant is overbroad and unenforceable. Plaintiffs have failed to cite any cases in this jurisdiction where a court, several years after the alleged violation of a non-compete provision, has rewritten or blue-penciled a restrictive covenant in the manner sought by the Plaintiffs, instead directing the Court's attention to inapposite case law. See, e.g., Omni Consulting Grp., Inc. v. Marina Consulting, Inc., No. 01-CV-511A (RJA), 2007 WL 2693813, at *6 (W.D.N.Y. Sept. 12, 2007) (blue-lining a non-solicitation provision in response to a summary judgment motion where "[t]he provision as a whole [was] not overbroad," and where the restriction applied only to defendant's ability to hire a single individual, who could perform the contracted computer services from anywhere in the United States, and "[did] not impact [defendant's] ability to maintain its business"); Unisource Worldwide, Inc. v. Valenti, 196 F. Supp. 2d 269, 277 (E.D.N.Y. 2003) (blue-lining a non-compete provision in the context of a motion for a preliminary injunction). Moreover, the request to rewrite the geographic scope of the non-compete provision to cover the entire United States is unreasonable and would be unduly onerous to Defendants Belliard and Fell. Pure Power presently operates in two locations in the New York metropolitan area and has no imminent plans to open other facilities in other states. Yet, Plaintiffs seek to prohibit Belliard and Fell from not just operating, but working in, facilities located anywhere in the United States that employ military-style exercises.
Finally, there was a coercive use of "bargaining power" by Plaintiffs that the BDO Seidman court, in a similar context, found unlikely to conform with reasonable standards of fair dealing. Specifically, the non-compete provision was drafted by Pure Power's attorneys, at the request of Brenner, and Belliard was required to sign the Employment Agreement, on the spot, after he had been working at Pure Power for a number of years, as a condition of his continued employment at Pure Power, and not in exchange for a promotion, greater responsibilities, or any other benefit beyond continued employment. See, e.g., Scott, Stackrow & Co., C.P.A.'s, P.C. v. Skavina, 9 A.D.3d 805, 807-08, 780 N.Y.S.2d 675, 678 (3d Dep't 2004) (refusing to partially enforce a restrictive covenant where plaintiff, "from a superior bargaining position," required defendant to sign the employment agreement "as a condition of continued employment" and not in exchange for "a fiduciary relationship, a position of increased responsibility within the firm or any other significant benefit"); Spinal Dimensions, 2007 WL 2296503, at *11 (concluding that plaintiffs failed to meet their burden in justifying partial enforcement, in part, because "[a]s in Scott Stackrow, there has been no showing here that in exchange for agreeing to the . . . restrictive covenant, defendant assumed a position of greater responsibility or trust, or otherwise obtained any benefit beyond the ability to continue to serve as an independent contractor"). Accordingly, Plaintiffs have failed to establish that rewriting and partially enforcing the non-compete provision is warranted.
C. Solicitation of Pure Power Clients
Plaintiffs contend that Defendants Belliard and Fell violated the non-solicitation provision of the Employment Agreement, which states that an employee of Pure Power, for a period of ten years following employment at Pure Power: shall not, and shall not assist any third-party to, solicit any client or customer of [Pure Power] to discontinue his or her use of [Pure Power's] products and services or to use the competing products or services of another business.
A non-solicitation provision is a type of restrictive covenant. As discussed, in order for a restrictive covenant to be enforceable, the employer must show that the restriction is necessary to protect the employer's legitimate business interests. Under New York law, an employer's legitimate business interests are generally limited "to the protection against misappropriation of the employer's trade secrets or of confidential customer lists, or protection from competition by a former employee whose services are unique or extraordinary." BDO Seidman, 93 N.Y.2d at 389. Nevertheless, even where there is no showing that a former employee has obtained a competitive advantage through the misappropriation of confidential customer information, or that the employee provided unique or extraordinary services, the employer retains "a legitimate interest in preventing former employees from exploiting the goodwill of a client or customer, which had been created and maintained at the employer's expense, to the employer's competitive detriment." Id. at 392.
In order to demonstrate that a former employee performed unique or extraordinary services, the employer must show that the employee was irreplaceable and that the employee's departure caused some special harm to the employer. See Ken J. Pezrow Corp. v. Seifert, 197 A.D.2d 856, 857, 602 N.Y.S.2d 468, 469 (4th Dep't 1993). The employee's services must be "truly special, unique or extraordinary, and not merely of high value to his or her employer." H & R Recruiters, Inc. v. Kirkpatrick, 243 A.D.2d 680, 681, 663 N.Y.S.2d 865 (2d Dep't 1997).
With respect to the alleged use of confidential customer lists by a former employee, a restrictive employment covenant will not be enforced unless the plaintiff can demonstrate that the information contained in the lists was not readily available through other sources. See Ken J. Pezrow Corp., 197 A.D.2d at 857, 602 N.Y.S.2d at 469. Indeed, the solicitation of a plaintiff's clients by a former employee through this means is not actionable "unless the customer list could be considered a trade secret or there was wrongful conduct by the employee such as physically taking or copying the employer's files or using confidential information." Amana Express Int'l, Inc. v. Pier-Air Int'l, Ltd., 211 A.D.2d 606, 606-07, 621 N.Y.S.2d 108 (2d Dep't 1995); see also JAD Corp. of Am. v. Lewis, 305 A.D.2d 545, 546, 759 N.Y.S.2d 388 (2d Dep't 2003) (finding restrictive covenant unenforceable because information sought to be protected by restrictive covenant was "readily available from publicly-available sources"); Buhler v Maloney Consulting, 299 A.D.2d 190, 191, 749 N.Y.S.2d 867 (1st Dep't 2002) (finding contact list prepared by former employee was "based on her knowledge of the financial services industry and on information that was publicly available" and did not support enforcement of a restrictive employment covenant). Moreover, former employees can use their recollection of information about customers, and such recollected information is not considered confidential for purposes of enforcing restrictive employment covenants. See Buhler, 299 A.D.2d at 191, 749 N.Y.S.2d 867 ("It is well-settled that an employee's recollection of information pertaining to the needs and habits of particular customers is not actionable.") (citations omitted); accord Natural Organics, Inc. v. Kirkendall, 52 A.D.3d 488, 489, 860 N.Y.S.2d 142, 143 (2d Dep't 2008).
In addition, a non-solicitation provision will be rejected as overly broad if it seeks to bar the employee from soliciting clients of the employer with whom the employee did not acquire a relationship through his or her employment, or if the provision extends to clients recruited through the employee's own independent efforts. BDO Seidman, 93 N.Y.2d at 392; see also Walter Karl, Inc. v. Wood, 137 A.D.2d 22, 28, 528 N.Y.S.2d 94 (2d Dep't 1988) (finding no breach of a non-solicitation provision where the decision of certain of plaintiff's clients to transfer their accounts to a company formed by its former employee "was based upon the defendant's personal familiarity with and knowledge of their needs as well as his outstanding ability in the field").
In certain limited circumstances, the potential adverse effects of exploitation of a close relationship between an employee and an employer's customers are sufficient to support the enforcement of a non-solicitation provision. "An employer has sufficient interest in retaining present customers to support an employee covenant where the employee's relationship with the customers is such that there is a substantial risk that the employee may be able to divert all or part of the business." Serv. Syst. Corp. v. Harris, 41 A.D.2d 20, 23-24, 341 N.Y.S.2d 702, 706 (4th Dep't 1973); see also Scott, Stackrow, 9 A.D.3d at 806, 780 N.Y.S.2d 675 ("An anticompetitive covenant may prevent the competitive use of client relationships that the employer assisted the employee in developing through the employee's performance of services in the course of employment."). "The risk to the employer reaches a maximum in situations in which the employee must work closely with the client or customer over a long period of time, especially when his services are a significant part of the total transaction." BDO Seidman, 93 N.Y.2d at 391-92 (internal quotations and citations omitted).
A close relationship between an employee and an employer's customer alone, however, is not sufficient to invoke the protections of a restrictive employment covenant. See Investor Access Corp. v. Doremus & Co., Inc., 186 A.D.2d 401, 404, 588 N.Y.S.2d 842, 845 (1st Dep't 1992) (citations and internal quotations marks omitted). The enforcement of such covenants on the basis of a close business relationship between the employee and the employer's customers is generally limited to instances where the employee rendered specific substantive services of a confidential nature to the employer's customers. See e.g., BDO Seidman, 93 N.Y.2d at 392 (enforcing restrictive covenant which protected against "defendant's competitive use of client relationships which [plaintiff-firm] enabled him to acquire through his performance of accounting services for the firm's clientele during the course of his employment"); Chernoff Diamond & Co. v. Fitzmaurice, Inc., 234 A.D.2d 200, 202-203, 651 N.Y.S.2d 504 (1st Dep't 1996) (enforcing restrictive covenant where defendant acted as a "trusted professional advisor" and gained "invaluable and otherwise unobtainable information concerning the insurance needs and business practices [of clients] due to his position"); cf. Investor Access Corp., 186 A.D.2d at 402-04, 588 N.Y.S.2d at 842 (finding a restrictive covenant unenforceable because the position of public relations and investor relations professional did not involve the acquisition or use of trade secrets or other confidential information pertaining to either the customer or the employer).
Here, Plaintiffs' breach of the non-solicitation provision claim is based upon the contention that Defendants misappropriated Pure Power's client list and used the confidential information contained therein to solicit at least 147 Pure Power clients. This list of 147 allegedly solicited Pure Power clients includes all customers who signed a contract with Pure Power at any time between 2005 and 2008 and subsequently signed up for fitness classes at Warrior Fitness in 2008 or 2009.
As an initial matter, the Court's factual findings and legal conclusions regarding the non-compete provision, and its unreasonableness in terms of duration and geographic scope, apply with equal force to the non-solicitation provision, which, like the non-compete provision, runs for a period of ten years and has no express geographic limitation. Unlike the non-compete provision, however, Plaintiffs do not seek partial enforcement of the non-solicitation provision (i.e., for a more limited duration than ten years).
In addition, the non-solicitation provision appears to prohibit only the solicitation of current (as opposed to former) clients of Pure Power. In particular, the provision provides, in relevant part, that "you shall not . . . solicit any client or customer of [Pure Power] to discontinue his or her use of [Pure Power's] services or to use the competing products or services of another business." (Pls.' Ex. 329) (emphasis added). Had Plaintiffs intended to include both current and former clients of Pure Power under the non-solicitation provision of the Employment Agreement, it would have been easy enough to so state. See, e.g., ZVUE Corp. v. Bauman, No. 600269--2009 (BJF), 2009 WL 1025744, at *14 (N.Y. Sup. Ct. Apr. 15, 2009) ("The non-compete agreement provides: At no time during or after the term of my employment will I use any Proprietary Information to compete with the Company or to solicit the current or former customers, clients, employees or business contacts of the Company for business or employment.") (emphasis added). They did not do so and any attempt to construe the provision to prohibit the solicitation of former Pure Power clients, which is not tied to the use of proprietary information, would be unreasonable.
Of the 147 clients identified by Plaintiffs as having been improperly solicited, only 20 or so were actually enrolled at Pure Power in 2008, when Defendants' alleged solicitation first took place. (See Pls.' Ex. 474.) Indeed, several of the 147 clients had not been enrolled at Pure Power since 2006. Although Plaintiffs contend that it is common for Pure Power clients to sign up for a set number of classes at Pure Power, to take a break, and then to return to Pure Power to sign up for additional classes, the Court does not accept that individuals who are no longer under contract for classes at Pure Power, nonetheless, remain Pure Power clients indefinitely for purposes of the non-solicitation provision. See, e.g., Leon M. Reimer & Co., P.C. v. Cipolla, 929 F. Supp. 154, 159 (S.D.N.Y. 1996) ("While a relationship with present clients may be an interest that is properly protectable in some fashion . . . to the extent that [the restrictive covenant] can be read broadly to restrain former employees from serving any dormant client without restriction, [it] is overbroad.").
Moreover, Plaintiffs failed to introduce any direct evidence establishing that any one of the 147 clients, who later enrolled at Warrior Fitness, was, in fact, improperly solicited by Defendants Belliard or Fell to join Warrior Fitness. The mere fact that a Warrior Fitness client was, at some point in time, a Pure Power client does not imply that Defendants solicited that client - no less improperly solicited that client. For example, several of the 147 former Pure Power clients joined Pure Power after Belliard and Fell were no longer working at Pure Power, and Plaintiffs failed to show that these clients had ever been in contact with any of the Defendants, or even knew any of the Defendants, before enrolling at Warrior Fitness. Several other clients, whom Plaintiffs alleged had been solicited by Defendants, testified at trial that they were not, in fact, solicited by Defendants, nor had they ever been in contact with any of the Defendants about Warrior Fitness. Other clients testified that they had learned about Warrior Fitness from Brenner herself, or on Facebook. Further, several Pure Power clients stated that they had left Pure Power, not because Defendants encouraged them to do so, but because they valued the instruction provided by drill instructors Belliard and Fell, and wanted them to continue to be their instructors. See, e.g., Deloitte & Touche, L.L.P. v. Chiampou, 222 A.D.2d 1026, 1027, 636 N.Y.S.2d 679, 679 (4th Dep't 1995) (holding that preliminary injunction to enforce covenant not to compete cannot apply to "plaintiff's former clients who had voluntarily and without solicitations sought out defendants after defendants left plaintiff's employ"). Finally, the record shows that some clients had pre-existing personal relationships with Defendants long before becoming clients of Pure Power; for instance, one Pure Power client, who later enrolled in Warrior Fitness, had been friends with Lee in college and was the maid-of-honor at Lee's wedding. For these clients, there could be no claim that the relationship was developed at Pure Power's expense.
There was some evidence, however, that Lee and, to a lesser extent, Baynard, solicited Pure Power clients, by telling Pure Power recruits, with whom they "trained," that Belliard and Fell were planning to open a competing facility, and that they should come train with them. There was no evidence, however, of Belliard or Fell having specifically instructed Lee or Baynard to contact or solicit these Pure Power clients. Indeed, information about Warrior Fitness was often provided by Lee and Baynard in response to inquiries about Belliard or Fell - both of whom, abruptly and without explanation, left Pure Power. Moreover, Plaintiffs have failed to specifically attribute any of the 147 clients, who were allegedly solicited by Lee or Baynard, to the stolen Pure Power client list (or to the Party List). Nor do Plaintiffs argue that Defendants, while at Pure Power, rendered specialized or personal confidential services to any of these clients. In any event, the Court finds that leading fitness classes fails to qualify as such. Thus, even if Plaintiffs could specifically identify clients whom Baynard or Lee solicited on Belliard or Fell's request, Plaintiffs have failed to establish that this solicitation was improper insofar as the name of that client was obtained either from the stolen Pure Power client list or as a consequence of a close relationship formed while Belliard or Fell worked at Pure Power.
In short, as duplicitous as Defendants' conduct was, in the end, Belliard and Fell are fitness instructors, and some of the Pure Power clients whom they trained were more loyal to them than to the Pure Power facility. It is, therefore, not surprising that when the instructors left Pure Power for Warrior Fitness, some of their clients left as well.
For the foregoing reasons, the Court finds that the preponderance of the evidence does not support the conclusion that the 147 Pure Power clients identified by Plaintiffs enrolled at Warrior Fitness as a result of Belliard's or Fell's improper solicitation in breach of their Employment Agreements.
Plaintiffs contend that Defendants Belliard and Fell breached the "Intellectual Property" provision of the Employment Agreement. The Intellectual Property provision states that, as an employee of Pure Power, You acknowledge that [Pure Power's] obstacle-confidence courses and related environments, and the marketing thereof, embody and/or reflect inventions, discoveries, concepts, ideas, developments, improvements, methods, processes, know-how, trade secrets, designs, trademarks, . . . trade dress, textual and graphic material, and a distinctive overall look and feel (collectively, "Intellectual Property"). You agree that all such Intellectual Property, regardless of whether or not it is capable of patent, trademark, trade dress, trade secret or copyright protection, is exclusively owned by [Pure Power]. You shall not, during the course of your employment or any time thereafter, challenge [Pure Power's] ownership of any Intellectual Property or the validity or enforceability thereof, nor shall you use any Intellectual Property in any competing business, or in any other way without [Pure Power's] express written permission, during or after your employment with [Pure Power]. (Pls.' Ex. 329.)
Under New York law, it is well-settled that a contract is valid only if the agreement between the parties is "definite and explicit so [that the Parties'] intention may be ascertained to a reasonable degree of certainty." Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 587 (2d Cir. 1987) (internal quotation marks and citations omitted, alteration in original); accord, e.g., Alter v. Bogoricin, 97 Civ. 0662 (MBM), 1997 WL 691332, at *6 (S.D.N.Y. Nov. 6, 1997) ("Under the definitiveness doctrine, New York courts will not enforce a material contract term if it is impossible to determine what in fact the parties have agreed to . . .") (citations and internal quotations omitted). Even if the parties believe that they are bound by the contract, "if the terms of the agreement are so vague and indefinite that there is no basis or standard for deciding whether the agreement had been kept or broken, or to fashion a remedy, and no means by which such terms may be made certain, then there is no enforceable contract." Best Brands, 842 F.2d at 588 (internal quotations and citations omitted).
"Definiteness as to material matters is of the very essence of contract law, for without it a court could not intervene without imposing its own conception of what the parties should or might have undertaken, rather than confining itself to a bargain to which they have mutually committed themselves." Bernstein v. Felske, 143 A.D.2d 863, 864-65, 533 N.Y.S.2d 538, 540 (2d Dep't 1988); see also Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109, 436 N.Y.S.2d 247, 249 (1981) ("[D]efiniteness as to material matters is of the very essence in contract law. Impenetrable vagueness and uncertainty will not do.").
Here, the intellectual property provision set forth in the Employment Agreement is impermissibly vague, indefinite, and overbroad. To start, the provision does not provide any durational limitations. Defendants Belliard and Fell would be subject to this restriction in perpetuity, even if Pure Power was to shut down tomorrow. Moreover, the provision does not simply prohibit Defendants from challenging the validity or enforceability of Pure Power's alleged "Intellectual Property" or using it in a competing business. Defendants cannot "use any Intellectual Property . . . in any other way." It is impossible for the Court to uphold this provision without imposing its own conception of what exactly is meant by the vague and indefinite phrase: "in any other way."
In addition, the contractual provision purports to apply to Pure Power's "obstacle-confidence courses and related environments." These terms are vague and overbroad, and are nowhere made definite or more explicit elsewhere in the contract; nor are any of these terms clarified or limited by other contractual documents in the case. There is no basis for the Court to determine, for example, whether "obstacle-confidence course" relates to the individual elements - the obstacles themselves - or to the entire obstacle/confidence course itself, as arranged by Pure Power. In addition, "related environments" is impermissibly vague. It is unclear whether this term relates to the overall decor of Pure Power, or to any camouflage material, or to the use of military colors or artifacts or a military theme, or just the obstacle course environment (e.g., a floor covered with crushed rubber).
Moreover, it is not simply the case that, in signing the Employment Agreement, Defendants agreed not to challenge the validity of an existing trademark or patent. Here, the provision applies to Pure Power's alleged "Intellectual Property," even if the alleged intellectual property is not "capable of patent, trademark, trade dress, trade secret, or copyright protection," or even of definition.*fn5 This intellectual property provision, however, is vague and indefinite and cannot be said to promote predictable contractual relationships. Permanently barring an employee from challenging an employer's alleged intellectual property - however vaguely defined - runs contrary to the "important interest in permitting full and free competition in the use of ideas which are in reality a part of public domain." Lear, 395 U.S. at 670, 89 S. Ct. at 1911. Plaintiffs have failed to explain what legitimate business interest they are seeking to protect or promote, through contract, beyond that already covered by state and federal intellectual property law, or why they are entitled to an additional layer of protection substantially restricting Defendants' freedom to use and incorporate ideas and concepts relating to the United States military - ideas and concepts to which Brenner, of course has no special claim.
In short, the Court concludes that the intellectual property provision of the Employment Agreement is vague, overbroad, and unreasonably restricts free competition in the use of ideas, and is, therefore, unenforceable as a matter of law.
E. Best Efforts Provision
Plaintiffs contend that Defendants Belliard and Fell breached the "Commitment to Full Effort" provision of the Employment Agreement, which provides, in relevant part, that an employee of Pure Power: "shall devote [his or her] skills and best efforts to [Pure Power]" and "shall work to further the best interests of [Pure Power]." (Pls.' Ex. 329.)
Under New York law, "when called upon to construe a clause in a contract expressly providing that a party is to apply his best efforts, a clear set of guidelines against which to measure a party's best efforts is essential to the enforcement of such a clause." Mocca Lounge, Inc. v. Misak, 94 A.D.2d 761, 763, 462 N.Y.S.2d 704, 706-07 (2d Dep't 1983) (citations omitted); see Digital Broad. Corp. v. Ladenburg, Thalmann & Co., 63 A.D.3d 647, 648, 883 N.Y.S.2d 186, 187 (1st Dep't 2009); see also Proteus Books Ltd. v. Cherry Lane Music Co., 873 F.2d 502, 508-09 (2d Cir. 1989) (enforcing a clause setting forth a duty to perform services with "due professional skill and competence" because a reference to the managerial and marketing standards of the book publishing and distribution industries was sufficient to make the phrase readily understandable); Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258, 266-267 (S.D.N.Y. 1978), aff'd, 601 F.2d 609 (2d Cir. 1979) (stating that "best efforts" under a distribution contract is measured against the distributor's capabilities and prior merchandising of other similar products). "To imply the terms suggested by plaintiff would be to impermissibly make a new contract for the parties rather than to enforce a bargain the parties themselves had reached." Mocca Lounge, 94 A.D.2d at 763, 462 N.Y.S.2d at 707.
Here, however, no objective criteria or standards against which Defendants Belliard and Fell's efforts can be measured are set forth in the Employment Agreement. For example, it is unclear whether it requires certain conduct in teaching fitness classes, or if it also applies more generally to recruiting new customers to Pure Power or to otherwise promoting the business. Nor may such criteria or standards be implied from the circumstances of this case. Accordingly, the Court finds that the term "best efforts" in the Employment Agreement is a patently subjective standard that is unenforceable.
F. Disclosing Confidential Information
Plaintiffs contend that Defendants Belliard and Fell breached the non-disclosure provision of the Employment Agreement, which provides, in relevant part, that an employee of Pure Power: "shall not disclose, either orally or in writing, to anyone outside [Pure Power] any confidential or commercially sensitive information made known . . . or acquired . . . in the course of . . . employment [at Pure Power]." (Pls.' Ex. 329.)
Pure Power argues, and the Court agrees, that Pure Power's documents, including its business plan, operations manual, start-up manual, and customer contracts are confidential and commercially sensitive business documents. These documents were stored on a computer, equipped with username and password protection, in Brenner's private office at Pure Power. Although Brenner testified that she showed these materials to others, "confidential" does not mean that no one can ever see the documents. Indeed, the documents themselves expressly anticipate that others outside of Pure Power will read them, and they make abundantly clear that the information contained within is confidential and commercially sensitive. In the Acknowledgment of Receipt section of Pure Power's operations manual, for example, it states that recipients of the document "must at all times treat as confidential, and not at any time disclose, copy, duplicate, record" the contents of these documents. (Pls.' Ex. 135.)
The Court further concludes that Pure Power's client list not only contains confidential and commercially sensitive information, but also constitutes a protectable trade secret. Under New York law, a customer list that contains information concerning the identities and preferences of client contacts may be a protectable trade secret. See N. Atl. Instruments v. Haber, 188 F.3d 38, 44 (2d Cir. 1999); C & C Metal Prods. Corp. v. Defiance Button Mach. Co., 759 F.2d 1053, 1063 (2d Cir. 1985), cert. denied, 474 U.S. 844, 106 S. Ct. 131 (1985) ("A customer list developed by a business through substantial effort and kept in confidence may be treated as a trade secret at the owner's instance against disclosure to a competitor, provided the information it contains is not otherwise readily ascertainable."); FMC Corp. v. Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2d Cir. 1984) (per curiam) (reversing, as clearly erroneous, a district court's finding that a client list was not a trade secret, where it would have been difficult to find clients without the employee's help); see also Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 394-95, 328 N.Y.S.2d 423, 430 (1972) ("A trade secret, like any other secret, is nothing more than private matter; something known to only one or a few and kept from the general public; and not susceptible to general knowledge.").
"In determining whether matter is protectable as a trade secret, courts frequently examine the method by which defendant acquired it, e.g., such as by stealing or copying." Paz Sys., Inc. v. Dakota Grp. Corp., 514 F. Supp. 2d 402, 408 (E.D.N.Y. 2007) (internal quotations and citations omitted). "[E]ven if this information did not independently rise to the level of a trade secret, the defendants' wrongful retention of the customer information would justify treating it as a trade secret." Id.; see also B.U.S.A. Corp. v. Ecogloves, Inc., No. 05 Civ. 9988 (SCR), 2006 WL 3302841, at *4 (S.D.N.Y. Jan. 31, 2006) (finding a list of business contacts to be a trade secret where "plaintiffs took appropriate measures, such as locking files and using computer passwords, to protect the contact information").
Here, Pure Power's client list was obviously important to Plaintiffs' business model, which was dependent upon Pure Power building and preserving relationships with its client base. Information on when clients' classes would start and end, for example, was valuable because it would be used to contact clients to encourage re-enlisting. It was obviously valuable to Defendants because they considered such information in assessing who might fruitfully be solicited to switch to Warrior Fitness. Moreover, Pure Power's client list contained confidential information not readily available to its competitors, including, among other data, client names, contact information, the amounts that clients spent on classes, and contract term dates, and it was the product of substantial time, effort, money, and resources expended by Pure Power over the course of several years. Accordingly, Plaintiffs took reasonable measures to protect this information, including, for example, username and password protection. Moreover, there is no dispute that Belliard obtained Pure Power's client list "by improper means" in having downloaded the client list onto a personal thumb-drive, without permission, from a Pure Power computer.
The Court finds that Defendant Belliard is liable for breach of the non-disclosure provision of the Employment Agreement. As discussed, Belliard stole Pure Power's business plan, start-up manual, and operations manual, and provided Lee with these documents. In addition, Belliard concedes having stolen Pure Power's customer list but denies having shared the information on the client list with anyone. The preponderance of the evidence, however, establishes that Belliard stole Pure Power's client list and disclosed the confidential information contained therein to, at a minimum, Baynard, who subsequently incorporated the names on the list into the Party List.
At trial, Belliard testified that the names of Pure Power clients that he contributed to the Party List came from a list Belliard had been developing since he first joined Pure Power, and which he allegedly maintained in his telephone contacts, and in various personal email accounts. It was this other list - not Pure Power's client list - that Belliard claimed to have sent to Baynard by email. Defendants, however, never produced a copy of this purported email exchange between Baynard and Belliard. Nor did Defendants produce a copy of the contact list that Belliard allegedly maintained in his telephone contacts, and in his personal email accounts, despite Plaintiffs' multiple requests to do so. When asked about the missing emails at trial, Belliard testified that, prior to this litigation, he deleted most of his emails after he sent them. His testimony was not credible. Many emails sent by Belliard prior to the commencement of this litigation have been produced in discovery in this case.
Belliard testified that the names of Pure Power clients that he contributed to the Party List were obtained by randomly answering the phone at Pure Power's front-desk and discussing with these clients their contracts and possible refunds - none of which was part of Belliard's official duties as a fitness instructor. Further, there was a great deal of testimony at trial about Pure Power client - Iriselly Arroyo. When she first signed up as a Pure Power client, on March 14, 2008, her name was misspelled (entered into the Pure Power system as Iris Selly Arroyo). Her name was also misspelled in the exact same way on the Party List. When she arrived at Pure Power, two weeks later, on March 25, 2008, for her first class, she noticed the misspelling, and it was corrected later that day. She also testified that she had never met any of the Defendants before the start of trial.
Plaintiffs contend, and the Court agrees, that these facts show that Pure Power's client list was stolen, not in November 2007 as Belliard testified at trial, but at some point between March 14, 2008 and March 25, 2008, and that the client list was sent by Belliard to Baynard, with the intention that the ...