[*1]
Weiss v Virdone
2014 NY Slip Op 50798(U) [43 Misc 3d 1227(A)]
Decided on May 23, 2014
District Court of Nassau County, First District
Fairgrieve, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on May 23, 2014
District Court of Nassau County, First District


Thomas Weiss, Plaintiff(s)

against

John Virdone, ESQ., THE VIRDONE LAW FIRM, P.C., Defendant(s)




CV-013202-13



Thomas Weiss & Associates, P.C., Attorney for Plaintiff, 1305 Franklin Avenue, Suite 300, Garden City, New York 11530, 516-746-7452; The Virdone Law Firm, P.C., Attorneys for Defendant, 200 Garden City Plaza, Suite 402, Garden City, New York 11530, 516-570-3875.


Scott Fairgrieve, J.

Plaintiff commenced this breach of contract action by his verified complaint, dated May 9, 2013, against his former employer, defendants John Virdone, Esq. and The Virdone Law Firm, P.C.

Plaintiff alleges that he was hired as an associate at a salary of $70,000.00 annually, plus [*2]20% of the fees generated from clients which he procured for the defendants. In September 2012, plaintiff's salary was raised to $85,000.00 annually. However, plaintiff's employment was terminated on or about February 22, 2013. Plaintiff alleges that the clients that he produced for the defendant generated $90,671.60 and that he was entitled to $18,134.32. Plaintiff was paid $10,852.11, leaving a balance of $7,282.21, which has not been paid although duly demanded. Plaintiff also demands treble damages due to defendants' intentional and malicious actions carried out in bad faith.

Defendants' amended verified answer, dated May 24, 2013, admits that plaintiff was hired on March 9, 2012 at a salary of $70,000.00. Defendant denies that plaintiff was to receive 20% of all fees generated from clients produced by plaintiff while employed by defendants.

Defendants also swear that plaintiff did not generate $90,671.60 from clients for defendants' firm and deny that defendants paid $10,852.11 to plaintiff leaving a balance of $7,282.21. The foregoing is denied in paragraphs 3 and 4 of defendants' verified answer.

In its answer with counterclaims, defendants allege that plaintiff was to receive 20% of fees generated by clients and that starting in September of 2012, defendants paid plaintiff referral fees at a minimum rate of $600.00 per month. Defendant states that plaintiff was provided "access to certain confidential client information of VLF's clients." Retainer agreements were entered into solely between the individual client and defendants.

Defendants allege that starting on March 19, 2012, plaintiff began competing with defendants by conducting his own legal business while working for defendants, by withholding clients from defendants. Defendants claim that plaintiff used its offices and resources to handle independent cases in his personal capacity, as well as under the names of the Law Office of Thomas Weiss, P.C. and Thomas Weiss and Associates, P.C.

Defendants claim that plaintiff used a flash drive on the defendants computer to handle his independent cases and to "misappropriate VLF confidential client information"; see paragraph 22 of counterclaim.

Defendants allege the following inappropriate activities were committed by plaintiff during his employment:



23.Upon information and belief, from March 19, 2012 to February 22, 2013, plaintiff fraudulently directed several of VLF's clients to make payment directly to plaintiff instead of VLF for charges they owed to VLF. These clients believed that their payment to plaintiff would be credited to their account with VLF.



24.Upon information and belief, from March 19, 2012 to February 22, 2013, plaintiff has abused his position as VLF's employee, using VLF's office [*3]and resources, as well as confidential client information, to run his own competing law firm.



25.Upon information and belief, on or about February 2013, plaintiff began soliciting VLF's clients while still employed by VLF to induce them to leave VLF and retain him.



26.Since February 22, 2013, plaintiff has failed and has refused to turn over VLF's confidential client information.



27.Subsequent to February 22, 2013, numerous VLF clients terminated their agreement with VLF and retained plaintiff and his firm, known as Thomas Weiss & Associates, P.C.



28.Many of VLF's clients who left VLF and retained plaintiff and Thomas Weiss & Associates, P.C. owed VLF fees and expenses.

The first counterclaim alleges tortious interference with contractual relationship. In addition to the above allegations, defendants state that they had a valid written retainer agreement with each client. Plaintiff caused several of defendants clients with whom they had a contractual relationship to make payments to plaintiff instead of to defendants and plaintiff misrepresented that their payments would be credited to their account with defendants. Defendants claim damages of no less than $9,000.00.

The second counterclaim alleges a breach of fiduciary duty of loyalty and good faith by plaintiff resulting in damages to defendants of no less than $70,945.05.

The third counterclaim is also predicated upon breach of fiduciary duty of loyalty. It is claimed that plaintiff owed an affirmative duty of utmost good faith and loyalty to defendants while employed. Plaintiff allegedly worked for law firms that directly competed with defendants. Plaintiff solicited and diverted clients, business, and profits to competing law firms while employed by defendants. Plaintiff used defendants' time, facilities and proprietary secrets, including confidential client information, to build a competing law firm. Defendants claim damages of no less than $50,000.00.

The fourth counterclaim is predicated upon misappropriation and conversion of client files. It is alleged that plaintiff, while employed by defendants, copied, converted, and misappropriated confidential client information and client files without defendants permission. These actions allowed former clients of defendants to avoid paying their legal bills to defendants and rendered ineffective defendants' retaining liens on these clients files. Defendants demand no less than $50,000.00 in damages.

The fifth counterclaim seeks no less than $50,000.00 in damages for plaintiff's [*4]misappropriation of office and resources.

Defendants served an extensive Notice of Discovery and Inspection, dated October 10, 2013, running 16 pages in length, with demands numbered 1 through 33.

Applicable Law

In Rosenberg, Minc & Armstrong v. Mallilo & Grossman, 8 Misc 3d 394, 798 NYS2d 322 (Sup Ct, NY 2005), the plaintiff law firm sued its former associate and law firm that employed the former associate for unjust enrichment, tortious and interference, with prospective business and misappropriation. The jury awarded a verdict in favor of the plaintiff for compensatory and punitive damages.

The court in Rosenberg, Minc & Armstrong held that the names of potential clients who called the plaintiff was confidential information. The acts by the plaintiff's former associate in wrongfully obtaining access to the plaintiff's potential clients by surreptitiously retrieving messages left by those potential clients with plaintiff's answering service was a basis for the misappropriation finding. The court also concluded that the defendant's former associate was acting with the scope of his employment with defendant's law firm. In reaching its decision, the court stated:



Mallilo & Grossman now move pursuant to CPLR 4404 to set aside the verdict of liability and damages on the misappropriation cause of action on the grounds that the jury's determination was contrary to the weight of the evidence and contrary to law. Pimsler maintains that the jury's damage award must be set aside, but does not challenge the liability verdicts. At the outset, Mallilo & Grossman contend that misappropriation was an "inappropriate" charge to be submitted to the jury because this action does not involve a claim of unfair competition. However, that is precisely what this case is about. The gravamen of the misappropriation charge is unfair competition. "The principle that one may not misappropriate the results of the skill, expenditures and labors of a competitor is predicated on the concept that no one is entitled to reap where it has not sown.' " (Introductory Statement, 2 NY PJI2d 520 [2005], quoting International News Serv. v. Associated Press, 248 US 215, 239 [1918].)



The evidence at trial showed that Pimsler wrongly obtained access to Rosenberg's potential clients by surreptitiously retrieving messages left by the clients for Rosenberg. The identity of the clients that called Rosenberg about a personal injury claim is analogous to a company's confidential information or trade secrets. In Eastern Bus. Sys. v. Specialty Bus. Solutions (292 AD2d 336, 338 [2d Dept 2002], quoting Ashland Mgt. v. Janien, 82 NY2d 395, 407 [1993]), the Court stated that "[a]lthough [*5]there is generally no accepted definition of a trade secret, one which has been cited with approval by the Court of Appeals is 'any formula, pattern, device or compilation of information which is used in one's business, and which gives one an opportunity to obtain an advantage over competitors who do not know or use it.' " Applying this standard, the Court concludes that the names of the potential clients who called Rosenberg are sufficiently analogous to confidential information so as to support the misappropriation charge. The evidence at trial showed that Rosenberg took steps to protect the information kept by the answering service, and that a password was required to access the messages left by the clients. It took a criminal act of impersonation by Pimsler to obtain this password protected information. In fact, Mallilo & Grossman cites to no case law to support its current claim that the names of the people who called Rosenberg are not a business opportunity that is capable of being misappropriated. The only case to which they cite, Corporate Interiors, Inc. v. Pappas (2 Misc 3d 1009[A], 2004 NY Slip Op 50204[U] [Sup Ct, Queens County 2004]), involves a claim of breach of fiduciary duty, which is not applicable here.

In Bison Commercial Leasing, LLC v. Linkner, et al, 2009 WL 4481548 (Sup Ct NY, Suffolk Cty 2009), the court lays out the principles of law that have special application to the defendants' counterclaims, i.e. - an employee owes utmost faith and loyalty and cannot divert business from his employer while employed:



Similar to the fiduciary duty of an officer or director, but more stringent, is the faithless servant doctrine, which prohibits an employee from acting in any manner inconsistent with his agency or trust and requires him, at all times, to exercise the utmost faith and loyalty in the performance of his duties (Maritime Fish Prods. v. World-Wide Fish Prods., 100 AD2d 81, 88, 474 NYS2d 281). When an employee engages in business that, by its nature, competes with the employer's business, a double breach of duty occurs. Not only is the principal deprived of the services for which he has contracted, but he finds such services turned against himself (id. at 88). Thus, an employee is not free to take business for himself or direct it to a competitor for his profit without the express consent and approval of his employer (id. at 89). It is not enough that the employee merely refrains from harming his employer. He has an affirmative duty to act at all times in his employer's best interests (id. at 89).

In Bison, the court held that the defendant breached his fiduciary duty to the plaintiff by the following activities while still employed:



On that date, however, Linkner deposited a check from Urology Associates, a Bison customer, into the Sterling business checking account that he had opened on November 29, 2006. Linkner testified that Urology Associates was a customer [*6]of Fuchs, who was working as a Bison salesperson at the time. Linkner also testified that he decided to fund the Urology Associates transaction through Sterling without notifying anyone at Bison of his intention. Linkner further testified that there were other transactions on which he began working in the middle of December, while he was still employed at Bison. They included Big Ed's Barbacue, Ocean Bagels, Sono's Country Food Market Corp., Jan Food Corp., and Old Saybrook Doors, among others. Linkner testified that he transferred to Sterling any transaction on which he was working that he did not think would close while he was still employed by Bison. When he left Bison on December 26, 2006, he took with him 40 such transactions. The court finds that Linkner's activities between December 7 and 26, 2006, went beyond mere preliminary steps and that Linkner used Bison's time, facilities, customers, and contacts to build a competing business. Accordingly, the court finds that Linkner breached his fiduciary duty to Bison.

See also Lamdin v. Broadway, 272 NY 133, 138 (NY 1936), the court held that if an employee breaches his fiduciary duty to an employer, then the employee forfeits his right to compensation for services rendered and also must account for all secret profits.

Plaintiff objected to the production of most of the items demanded by defendants' Notice for Discovery and Inspection, dated October 10, 2013. CPLR 3122(A)1 requires the party objecting to state with reasonable particularity the reasons for each objection.

In Anonymous v. High School for Environmental Studies, 32 AD 353, 820 NYS2d 573 (1st Dept 2006), the court set forth the long standing New York rules that:

1.New York favors open and far reaching discovery.

2.There will be full disclosure of all material and necessary items demanded, regardless of the burden of proof.

Against this background, this court shall decide if plaintiff properly responded to defendants' Notice for Discovery and Inspection.

Demand No.1 requests retainer agreements which plaintiff obtained from certain clients (too numerous to list) who consulted with plaintiff from March 19, 2012 to February 22, 2013 while employed.

Plaintiff responded none to this demand.This court finds this demand to be proper. Accordingly, plaintiff shall produce all retainer agreements requested, including for the Perez matter, whether in the name of plaintiff of any other entity with whom plaintiff associated.

Demand #2 requests invoices, bills and demand for payment from certain clients (while plaintiff was employed) who retained or consulted with plaintiff.

Plaintiff responded that this demand is vague and ambiguous.

This court finds the demand is not vague or ambiguous. Plaintiff shall provide all relevant documents including from any entity with whom plaintiff became associated with.

Demand #3 requests records of payments to plaintiff or any firm with whom he was associated to the present for work performed while employed.

Plaintiff objects to this demand as vague and ambiguous.

This court rejects plaintiff's response as not complying with CPLR 3122(A). The material is highly relevant to the counterclaims set forth. Plaintiff shall fully respond.

The balance of the demands, 4 through 33, shall be fully answered by plaintiff to the extent that the documents or records exist. Plaintiff is not required to answer Demand #27 which seeks income tax returns. Also plaintiff is not required to answer Demand #33 because this demand seeks all documents which plaintiff intends to introduce at trial. This is over broad.

Plaintiff shall respond to the Notice for Discovery and Inspection by June 30, 2014.

Defendants shall implead Thomas Weiss, P.C. and Thomas Weiss & Associates, P.C. by June 30, 2014. This court suggests that the parties stipulate to adding these entities.

All parties are directed to complete all depositions by July 30, 2014.

This matter is set down for a status conference on August 1, 2014.

So Ordered:

/s/ Hon. Scott Fairgrieve

DISTRICT COURT JUDGE



Dated:May 23, 2014



cc:The Virdone Law Firm, P.C.