United States District Court, N.D. New York
MARC S. EHRLICH, Trustee for Hoffmans Trade Group LLC, Appellant,
MCLANE GLOBAL, et al., Appellees.
MEMORANDUM-DECISION AND ORDER
Lawrence E. Kahn U.S. District Judge.
Marc S. Ehrlich, acting as trustee for Hoffmans Trade Group
LLC (“HTG”), appeals a decision by U.S.
Bankruptcy Judge Robert E. Littlefield, Jr., granting summary
judgment for Appellees McLane Global, Jordan Laccetti, and
Michael Coakley (“M. Coakley”) and dismissing the
Adversary Complaint. Dkt. Nos. 1 (“Notice of
Appeal”), 5-8 (“Bankruptcy Judgment”), 6-1
(“Bankruptcy Order”), 4 (“Designation of
Record on Appeal”), 8 (“Memorandum”).
Appellees filed a Response, Dkt. No. 12
(“Response”), and the Trustee submitted a Reply,
Dkt. No. 14 (“Reply”). For the reasons that
follow, the Bankruptcy Order is affirmed.
a New York limited liability company whose sole member and
owner is Gael Coakley (“G. Coakley”), M.
Coakley's father and a resident of Latham, New York. Dkt.
No. 4-9, at 10-21 (“Trustee's Statement of Material
Facts”) ¶¶ 2-3; Dkt. No. 4-6, at 56-66
(“Appellees' Statement of Material Facts”)
¶¶ 3-4. McLane is a Texas corporation headquartered
in Houston. Trustee's SMF ¶ 4; Appellees' SMF
¶ 5. Laccetti and M. Coakley previously worked for HTG,
Trustee's SMF ¶¶ 28, 32; Appellees' SMF
¶¶ 27, 40, and began working for McLane in May
2013, Trustee's SMF ¶ 46; Dkt. No. 4-12
(“Appellees' Response Statement of Material
Facts”) ¶ 46. HTG entered bankruptcy on June 28,
2013, and Ehrlich was appointed Chapter 7 Trustee on August
2, 2013. Trustee's SMF ¶ 1; Appellees' SMF
primarily engaged in the business of selling non-perishable
food products to food banks throughout the United States.
Trustee's SMF ¶ 15; Appellees' SMF ¶ 12.
The company was a “food broker, ” meaning it
purchased canned food from suppliers which it then resold to
food banks. Trustee's SMF ¶ 17; Appellees' SMF
¶ 14. HTG maintained customer information in electronic
and physical files in its Latham office. Trustee's SMF
¶¶ 20-21; Appellees' SMF ¶¶ 20-21.
HTG's customer information included contact information
for food bank clients, as well as order history and
preferences, pricing information, annual consumption data,
and rates paid by customers. Trustee's SMF ¶ 36;
Appellees' Response SMF ¶ 36; Bankr. Order at
In general, food banks' purchasing habits are
unpredictable because their need for particular types of food
items changes frequently. Appellees' SMF ¶ 26.
the period relevant to this action, HTG had up to five full
time employees, including two salespeople. Id.
¶ 16. Laccetti and M. Coakley began working for HTG in
2010. Trustee's SMF ¶¶ 28, 32; Appellees'
SMF ¶¶ 27, 40. Both Laccetti and M. Coakley were
“at will” employees of HTG, and not subject to
any employment, non-compete, restrictive covenant, or
non-solicitation agreements. Trustee's SMF ¶¶
29, 34; Appellees' SMF ¶¶ 28, 45. Laccetti and
M. Coakley's duties primarily consisted of selling food
products to HTG's food bank customers. Trustee's SMF
¶¶ 31, 33; Appellees' SMF ¶¶ 30, 43.
In this capacity, they maintained frequent contact with
HTG's clients, were aware of food banks' purchasing
practices, and had access to HTG's customer information.
Trustee's SMF ¶¶ 33, 35-36; Appellees' SMF
¶¶ 34, 43.
2010, HTG did not sell directly to food banks. Appellees'
SMF ¶¶ 31-32. Because HTG did not have strong
relationships with food bank customers, Laccetti identified
potential food bank clients through public online sources.
Id. ¶¶ 32-33. Laccetti obtained contact
information for key food bank employees, as well as
purchasing information, through public websites. Id.
HTG, McLane's Hunger Relief Distribution Network
(“HRDN”) division is a food broker, and sells
food products to food banks nationwide. Id. ¶
23. In 2012 and early 2013, McLane's HRDN division had
only one or two employees selling to food banks. Id.
¶ 25. McLane was also one of HTG's suppliers.
Id. ¶ 50. It sold canned food products to HTG,
which then resold them to food bank customers. Id.
and 2013, HTG's accounts receivables with McLane began to
grow. Id. ¶ 51. When HTG filed for bankruptcy
in June 2013, it owed McLane $234, 718.11 in unpaid invoices.
Id. ¶ 52. In early 2013, Todd Frease,
McLane's Chief Financial Officer, traveled to HTG's
office to discuss the unpaid invoices, and other topics.
Id. ¶ 54. During this meeting, Frease and G.
Coakley discussed the possibility of McLane acquiring HTG.
Trustee's SMF ¶ 38; Appellees' SMF ¶ 53. G.
Coakley proposed an acquisition price of $1, 500, 000.00,
Trustee's SMF ¶ 39;Appellees' SMF ¶ 58,
which McLane rejected, Trustee's SMF ¶ 40;
Appellees' SMF ¶ 61, 63. As part of the
negotiations, McLane offered to hire Laccetti and M. Coakley
as employees and to engage G. Coakley as a consultant.
Trustee's SMF ¶ 43; Appellees' SMF ¶
Ultimately, HTG and McLane were unable to reach an agreement,
and McLane withdrew its offer when it learned that HTG was
significantly in debt. Appellees' SMF ¶ 63.
Unbeknownst to McLane at this time, G. Coakley was engaged in
a fraudulent scheme of artificially inflating HTG's
revenue, which would eventually lead to his arrest and
prosecution. Id. ¶ 57.
about April 29, 2013, G. Coakley entered a rehabilitation
facility for alcohol abuse. Trustee's SMF ¶ 45;
Appellees' SMF ¶ 64. Upon entering rehabilitation,
G. Coakley stopped operating HTG, and the company's
computers and files were delivered to a family attorney.
Appellees' SMF ¶¶ 67, 69. Following G.
Coakley's admission to rehabilitation, Laccetti and M.
Coakley contacted Frease to notify him that G. Coakley was
leaving the business and they were seeking employment.
Id. ¶ 71. Frease offered them positions at
McLane on the condition that they resign from HTG, which they
promptly did. Id. ¶¶ 72-73. On May 6,
2013, Laccetti and M. Coakley began working for McLane in an
office adjacent to HTG's office. Id. ¶
entered bankruptcy on June 28, 2013. Trustee's SMF ¶
1; Appellees' SMF ¶ 1. On January 15, 2014, McLane
filed a proof of claim, seeking $234, 718.11. Trustee's
SMF ¶ 12. On or about July 31, 2015, the Trustee filed
an Adversary Complaint against Appellees, “seeking,
among other things, monetary damages for causes of action
related to the misappropriation of trade secrets.”
Id. ¶ 7; Appellees' SMF ¶ 8.
Trustee and Appellees contemporaneously moved for summary
judgment. Bankr. Order at 3. On December 22, 2016, the
Bankruptcy Court denied the Trustee's motion, granted
Appellees' motion, and dismissed the Adversary Complaint.
Id. at 18. On January 19, 2017, the Trustee filed a
timely notice of appeal of Judge Littlefield's ruling.
Notice of Appeal.
appeal, a district court reviews a bankruptcy court's
legal conclusions de novo. County of Clinton v. Warehouse
at Van Buren St., Inc., No. 12-CV-1636, 2013 WL 2145656,
at *1 (N.D.N.Y. May 15, 2013) (citing R2 Invs., LDC v.
Charter Commc'ns, Inc., 691 F.3d 476, 483 (2d Cir.
2012)). Here, “there are no bankruptcy court findings
of fact to which deference should be accorded, because
‘[o]n a motion for summary judgment the court cannot
try issues of fact; it can only determine whether there are
issues of fact to be tried.'” In re T.R.
Acquisition Corp., 309 B.R. 830, 835 (S.D.N.Y. 2003)
(alteration in original) (quoting Heyman v. Commerce
& Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir.
1975)). Thus, a district court reviews a bankruptcy
court's grant of summary judgment de novo. Verna v.
U.S. Bank Nat'l Ass'n, No. 15-CV-1127, 2016 WL
5107115, at *2 (N.D.N.Y. Sept. 20, 2016) (Kahn, J.) (citing
Schackner v. Breslin Realty Dev. Corp., No.
11-CV-2734, 2012 WL 32624, at *3 (E.D.N.Y. Jan. 5, 2012)).
Following review, a district court “may affirm, modify,
or reverse a bankruptcy judge's judgment, order, or
decree or remand with instructions for further
of the Federal Rules of Civil Procedure governs summary
judgment motions in adversary bankruptcy proceedings.
Fed.R.Bankr.P. 7056. Rule 56 instructs courts to grant
summary judgment if “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). Although
“[f]actual disputes that are irrelevant or
unnecessary” will not preclude summary judgment,
“summary judgment will not lie if . . . the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986); see also Taggart v.
Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991)
(“Only when no reasonable trier of fact could find in
favor of the nonmoving party should summary judgment be
party seeking summary judgment bears the burden of informing
the court of the basis for the motion and of identifying
those portions of the record that the moving party claims
will demonstrate the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Similarly, a party is entitled to summary judgment
when the nonmoving party carries the ultimate burden of proof
and has failed “to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial.”
Id. at 322.
attempting to repel a motion for summary judgment after the
moving party has met its initial burden, the nonmoving party
“must do more than simply show that there is some
metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986). Likewise, it is insufficient for a
party opposing summary judgment “merely to assert a
conclusion without supplying supporting arguments or
facts.” Bell South Telecomms., Inc. v. W.R. Grace
& Co., 77 F.3d 603, 615 (2d Cir. 1996) (quoting
SEC v. Research Automation Corp., 585 F.2d 31, 33
(2d Cir. 1978)). At the same time, a court must resolve all
ambiguities and draw all reasonable inferences in favor of
the nonmoving party. Reeves v. Sanderson Plumbing Prods.,
Inc., 530 U.S. 133, 150 (2000); Nora Beverages, Inc.
v. Perrier Grp. of Am., Inc., 164 F.3d 736, 742 (2d Cir.
1998). Thus, a court's duty in reviewing a motion for
summary judgment is “carefully limited” to
identifying genuine disputes of fact, “not to deciding
them.” Gallo v. Prudential Residential Servs., Ltd.
P'ship, 22 F.3d 1219, 1224 (2d Cir. 1994).
Adversary Complaint states eleven causes of action against
Appellees: equitable subordination, misappropriation of trade
secrets, breach of the duty of loyalty, unfair competition,
unjust enrichment, turnover and accounting, conversion, and
four counts of fraudulent transfer under federal and New York
law. Dkt. 4-1 (“Adversary Complaint”)
¶¶ 52-120. Each of the eleven claims is premised on
the allegation that McLane improperly acquired HTG's
customer information,  which he describes as a trade secret under
New York law. Mem. at 6, 17. Therefore, a failure to establish
that Appellees improperly obtained HTG's customer
information from HTG is fatal to each of the Trustee's
claims. Appellees are likewise entitled to summary judgment
on the misappropriation count if the Trustee fails to present
evidence that would allow a reasonable jury to find that
HTG's customer information constituted a trade secret.
Bankruptcy Court concluded “as a matter of fact”
that HTG's customer information was not a trade secret
under New York law and therefore granted Appellees's
motion for summary judgment. Bankr. Order at 18. The court
held that its factual finding foreclosed the ten additional
claims because the Trustee “admitted at oral argument
that each of his causes of action are premised upon an
alleged misappropriation of trade secrets.”
Id. at 4. The Trustee disputes the court's
recollection that he made such an admission. Mem. at
15-16. The court also found that the Trustee
presented “no evidence that [confidential customer
information] was conveyed to McLane.” Bankr. Order at
Trustee argues the Bankruptcy Court applied an incorrect
summary judgment standard because it did not construe the
facts in the light most favorable to the Trustee and failed
to draw all reasonable inferences in the Trustee's favor.
Mem. at 12. The Trustee further argues that the court
improperly held that the failure to demonstrate a trade
secret doomed its remaining ten claims. Id. at 16.
As the Bankruptcy Court correctly noted, “whether the
customer [information] and opportunity buy are trade secrets
is a question of fact for the determination of the trier of
fact.” Bankr. Order at 10. The court nonetheless held
that, “[d]rawing all permissible factual inferences in
favor of the Trustee, [it could not] conclude as a matter of
fact that the customer [information] and opportunity buy
process are trade secrets protectable under New York State
Law.” Id. at 18.
the Bankruptcy Court appears to have made a factual finding
when it concluded “as a matter of fact” that
HTG's customer information was not a trade secret under
New York law, Bankr. Order at 18, the court correctly granted
summary judgment for Appellees. As the Bankruptcy Court
explained, the Trustee presented “no evidence”
that HTG's customer information was a trade secret, or
that it was conveyed to McLane. Id. at 14-16.
Contrary to the Trustee's contention, the court did
“draw all permissible factual inferences in favor of
the Trustee.” Id. at 18. But drawing
inferences in the Trustee's favor does not mean inventing