United States District Court, S.D. New York
BRIDGET MARKS, as PERSONAL REPRESENTATIVE OF THE ESTATE OF ALVIN M. MARKS, Plaintiff,
ENERGY MATERIALS CORPORATION and RACHEL SCALABRINI, Defendants.
MEMORANDUM OPINION AND ORDER
GREGORY H. WOODS, District Judge.
Plaintiff Bridget Marks, as the Personal Representative of the Estate of Alvin Marks ("Plaintiff" or "the Estate"), brought this diversity action raising state law claims of conversion, misappropriation of trade secrets, and unjust enrichment against defendant Energy Materials Corporation ("EMC"), as well as a claim of conversion against defendant Rachel Scalabrini. EMC moves to dismiss Plaintiff's claims against it for failure to state a cause of action pursuant to Federal Rule of Civil Procedure 12(b)(6). Ms. Scalabrini separately moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the following reasons, the Court concludes that Plaintiff has failed to adequately plead a claim of conversion, misappropriation of trade secrets, or unjust enrichment against EMC. The Court further concludes that Ms. Scalabrini is not entitled to judgment on the pleadings. Accordingly, EMC's motion to dismiss is granted and Ms. Scalabrini's motion for judgment on the pleadings is denied.
According to the allegations in Plaintiff's amended complaint, Dr. Alvin Marks was an inventor who, among other things, developed and patented "Lumeloid" and "Quensor" energy conversion and storage technologies. See Dkt. No. 24 (First Amended Complaint ("FAC")), ¶¶ 16-20. Dr. Marks documented his work on those technologies in laboratory notebooks to which the public did not have access. Id. ¶ 21.
Dr. Marks passed away in May 2008, at which point his property became part of the Estate. Id. ¶¶ 22-23. Dr. Marks's will was filed with the Worcester County Probate and Family Court in October 2008, but was not probated. See In the Matter of Alvin M. Marks, Worcester County Probate and Family Court, Case No. WO07P0197WF1, 10/21/2008 Dkt. Entry. The will named Gerard J. Aitken IV, Dr. Marks's third wife's son from a subsequent marriage, as the Executor of the Estate. FAC ¶¶ 2, 9.
On January 12, 2010, Aitken, in his individual capacity, entered into a Technology Purchase Agreement ("TPA") with defendant EMC, a Delaware corporation formed to develop and commercialize solar conversion and energy storage products based on technologies invented by Dr. Marks. Id. ¶¶ 10-11, 24. Pursuant to the TPA, Aitken purported to sell to EMC "all rights in intellectual property relating to Lumeloid, " "an option to purchase all rights in intellectual property relating to Quensor, " and all "tangible embodiments" of the intellectual property relating to those technologies, including Dr. Marks's laboratory notebooks (collectively, the "Estate Property"). Id. ¶¶ 25-27. In exchange, EMC issued Aiken 2, 500, 000 shares of its common stock. Id. ¶ 30.
Aitken explicitly represented and warranted in the TPA that he "exclusively own[ed] all right, title and interest in and to the [Estate Property]... free and clear of all liens, security interests or any other encumbrances." See Dkt. No. 36, Ex. B ("TPA"), ¶ 4.2(b). Nonetheless, according to Plaintiff, "EMC knew or should have known that Aitken had no authority to transact with respect to the Estate Property." FAC ¶ 39. In support of this assertion, Plaintiff alleges that, "given EMC's knowledge that Aitken was not biologically related to the Decedent and that the purported will left nothing to the Decedent's kin, EMC was on notice of the need to conduct commercially reasonable due diligence into Aitken's purported authority to transact with respect to the Estate Property." Id. ¶ 41. Plaintiff further alleges that "[t]he exercise of commercially reasonable due diligence would have revealed that Aitken had not been appointed the Executor of Dr. Marks Estate as of January 12, 2010, and that the Estate's property had not been distributed to the heirs." Id. ¶ 40; see also id. ¶ 5 ("Whether a will has been admitted to probate in Massachusetts, or an executor or personal representative appointed, is easily obtainable public information."). Plaintiff claims that "EMC's failure to conduct commercially reasonable due diligence amounts to willful blindness and reflects its bad faith interest in obtaining the Estate Property without regard to Aitken's authority to transact with respect to that property." Id. ¶ 42.
After entering into the TPA, EMC took possession of several of Dr. Marks's laboratory notebooks. Id. ¶ 28. According to Plaintiff, "[t]he information contained in Dr. Marks' laboratory notebooks relating to Dr. Marks' continuing efforts and research with respect to the technology was a trade secret in that it was valuable, was not available to the public, and had always been kept secret by Dr. Marks during his lifetime and through the time of EMC's purported purchase of the laboratory notebooks." Id. ¶ 45. Plaintiff alleges that "EMC derived commercial advantage from the trade secret information in Dr. Marks' laboratory notebooks relating to [his] continuing efforts and research with respect to the technology." Id. ¶ 47. Relatedly, Plaintiff alleges that "EMC reaped significant benefits from [its] transaction with Aitken, both in terms of the actual Estate Property [it] received, and in terms of the enhancement of [its] ability to raise funds on the basis of its purported relationship with Dr. Marks and purported rights to his technology." Id. ¶ 50.
In April 2011, Aitken filed a petition to appoint himself Executor of the Estate and to probate Dr. Marks's will. See In the Matter of Alvin M. Marks, Worcester County Probate and Family Court, Case No. WO07P0197EP1, 4/4/2011 Dkt. Entry. Bridget Marks, Dr. Marks's daughter and Aitken's half-sister, subsequently challenged the validity of both the will and Aitken's petition. Id. at 8/15/2011 Dkt. Entry. In a January 2013 summary judgment decision, the Probate Court determined that there was a significant question as to whether Aitken exercised improper influence over Dr. Marks in drafting his will. Id. at 1/15/2013 Dkt. Entry. Aitken thereafter abandoned his request to be appointed Executor of the Estate. Bridget Marks filed a Petition for Formal Probate and was appointed Personal Representative of the Estate in February 2014. Id. at 12/30/2013 and 3/3/2014 Dkt. Entries.
Meanwhile, in January 2012, defendant Rachel Scalabrini, Aitken's ex-wife, entered into a marital separation agreement ("MSA") with Aitken pursuant to which Aitken agreed to transfer to Ms. Scalabrini half of his shares of EMC, see Dkt. No. 30 (Scalabrini Answer), attached MSA at 5,  which included at least some of the shares he had obtained through the TPA, FAC ¶ 35. In March 2013, the New York Supreme Court, Westchester County, issued a judgment of divorce (the "Divorce Decree") finalizing Ms. Scalabrini's divorce from Aitken, which explicitly incorporated but did not merge the MSA. See Dkt. No. 30, attached Judgment of Divorce at 2. On December 29, 2014, Plaintiff demanded that Ms. Scalabrini return to the Estate the shares of EMC that Aitken had obtained through the TPA. FAC ¶ 36. Ms. Scalabrini refused to do so on the same date. Id.
II. Procedural History
In October 2014, Plaintiff filed a complaint in New York state court raising claims of conversion, misappropriation of trade secrets, and unjust enrichment against EMC only. See Dkt. No. 2, Ex. C. EMC timely removed the action to this Court, invoking the Court's diversity jurisdiction. See Dkt. No. 2.
EMC moved to dismiss Plaintiff's complaint under Rule 12(b)(6) in December 2014, raising arguments substantially similar to the arguments described below. See Doc. 20. In response to EMC's motion, Plaintiff filed an amended complaint that attempted to cure the deficiencies identified by EMC and that added a conversion claim against Ms. Scalabrini. See FAC. Ms. Scalabrini subsequently appeared pro se and answered the amended complaint. See Dkt. No. 30.
EMC now moves to dismiss the amended complaint as to Plaintiff's claims against it under Rule 12(b)(6), while Ms. Scalabrini moves for judgment on the pleadings under Rule 12(c). EMC argues, inter alia, that, because Plaintiff did not sufficiently allege that EMC was anything other than an innocent purchaser of the purportedly converted property, Plaintiff was required to and did not allege that the Estate demanded the return of that property. See Dkt. No. 37 ("EMC Mot.") at 21-24. EMC further argues that Plaintiff's misappropriation of trade secrets claim must be dismissed because she failed to sufficiently allege that EMC acquired a trade secret in bad faith or by improper means. Id. at 14-19; Dkt. No. 51 ...