Plaintiff by Order to Show Cause moved for a Preliminary Injunction against the Defendants based upon an employment contract.

Defendants opposed and cross moved for an order striking certain "conspiracy theory" allegations and dismissing the remainder of the complaint.

Defendants Bono, Creath and Kaffenberger worked as account executives for Plaintiff JGUA providing services to JGUA clients. The services provided were "typical" investment advisory services.

On July 15, 2015, Judge Bradstreet implicitly denied Defendants' motion to dismiss Plaintiff's breach of contract claims by issuing a preliminary injunction which provided:

1. Defendants are ENJOINED from offering financial management, investment management and related services within 50 miles of Plaintiff's office at 51 E. Market Street, Corning, NY for a period of two (2) years from May 29, 2015;

2. Defendants are ENJOINED from soliciting Plaintiff's clients to move their financial management, investment management and related business to the Defendants;

3. Defendants are ENJOINED from disclosing to any person, at any point in the future, any information which Plaintiff holds as proprietary and to which the Individual Defendants were exposed during their employment with Plaintiff, and

4. Defendants are DIRECTED to return any information related to Plaintiff's clients that were taken or copied from Plaintiff's files or records, including, but not limited to client names, client addresses, client phone numbers and client e-mail addresses.

Plaintiff's were required to file a bond in the amount of $525,500. Defendants have appealed that determination which is pending in the Appellate Division Fourth Department.

The Parties submit that Judge Bradstreet declined to hear Defendants' cross motion to dismiss the other causes of action.

Defendants cross motion opposed Plaintiff's application for injunctive relief, and sought to dismiss Plaintiff's remaining allegations of a "conspiracy" or "unlawful scheme"; tortious interference with contractual relations (Fourth Cause of Action); tortious interference with Business Relations (Fifth Cause of Action); unfair competition (Sixth Cause of Action); and unjust enrichment (Seventh Cause of Action).

On a motion to dismiss pursuant to CPLR §3211(a)(7) the complaint must be given every favorable inference and the allegations in the complaint are deemed to be true. See Dannasch v. Bifulco, 184 AD2d 415, 417 (1st Dep't 1992). When considering such a motion, it is the task of the court to determine whether, " accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated.'" Campaign for Fiscal Equity, Inc. v. State of New York, 86 NY2d 307, 318 (1995)(citations omitted). If the court determines "that plaintiffs are entitled to relief on any reasonable view of the facts stated," the court's inquiry is complete, and the complaint is deemed legally sufficient. (Id.).

In review of the facts as alleged, and as stated by Plaintiffs, that "The Individual Defendants Conspire to Start Their Own Business to Compete with JGUA,: ..." the individual [*2]Defendants began conspiring to start a new financial management company to compete with JGUA" and "furthered their unlawful scheme by conspiring with Defendant BCK Partners, Inc.," Plaintiffs have not alleged a separate cause of action for "conspiracy". Rather, they have alleged certain facts attempting to tie the three individuals together in a scheme to form an entity competing with their former employer. "Allegations of conspiracy are permitted only to connect the actions of separate defendants with an otherwise actionable tort." (Alexander & Alexander v. Fritzen, 68 NY2d 968, 969(1986); Hoag v. Chancellor, 246 AD2d 224, 230 (1st Dept., 1998).

Unlike the situation in the case cited by the Defendants, here the Defendants were covered under an employment agreement and not at-will employees, which Judge Bradstreet, for injunctive relief purposes found that employment agreement valid. (See Headquarts Buick-Nissan v. Michael Oldsmobile, 149 AD2d 302, 303-304 (1st Dept. 1989). The allegations here do not form a basis for a separate cause of action for conspiracy, but simple attempt to connect the Defendants together for purposes of Plaintiff's claim for tortious interference with contractual relations.

Plaintiff asserts that each Defendant, with knowledge disregarded each others employment contract with JGUA. Despite the admitted knowledge of the restrictive covenants, Defendants "schemed while still JGUA employees to open a competing business right down the street, which business model was premised upon utilizing JGUA's confidential information to steal JGUA's clients." (Complaint; memo pg 12)

"A claim for tortious interference with contract requires, (1) the existence of a valid contract between plaintiff and a third party, (2) defendant's knowledge of the contract, (3) defendant's intentional procurement of a breach of the contract without justification, (4) actual breach of contract, and (5) resulting damages." (Lama Holding v. Smith Barnery, 88 NY2d 413, 424 (1996).

Defendants' contend that the tortious interference claim must be dismissed since the Restrictive Covenants are unenforceable, but if not, then the factual allegations are insufficient to show that each Defendant induced the other to breach his or her contract with JGUA.

Judge Bradstreet in his decision and order did not find that the Restrictive Covenants were unenforceable, rather, he implicitly made a determination by granting the preliminary injunction that the Plaintiff's, by clear and convincing evidence, showed a likelihood of success on the merits that the Restrictive Covenants were valid and enforceable. Further, the allegations, at least for pleading purposes are sufficient as Plaintiff has alleged that Defendants knew of each other's employment agreement, induced the other to leave JGUA and join BCK Partners which occurred and damages resulted.

Accordingly, Defendants motion to dismiss the Fourth Cause of Action is denied.

To establish a claim based on tortious interference with existing business relations, a plaintiff must show "(1) the existence of a contract between plaintiff and a third party, (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible (4) damages to plaintiff" (Kronos v. AVX Corp., 81 NY2d 90, 94(1993); (Fonar Corp. v. Magnetic Resonance Plus, Inc., 957 FSupp 477, 481-482 [SDNY 1997]; M.J. & K. Co., Inc. v. Matthew Bender & Co., Inc., 220 AD2d 488, 490, (2nd Dept., 1995). Similarly, "[t]ortious interference with [prospective] business relations applies to those situations where the third parties would have entered into an extended or contractual relationship with plaintiff but for the wrongful acts of the defendant" and "[i]n such an action the motive for the interference must be solely malicious" (M.J. & K. Co., Inc. v. Matthew Bender & Co., Inc., supra). A necessary allegation for the claim for tortious interference with prospective business relations is " . . . that defendant's conduct was motivated solely by malice or to inflict injury by unlawful means, beyond mere self-interest or other economic considerations" (Shared Communications Servs. of ESR, Inc. v. Goldman Schs & Co., 23 AD3d 162, 163, (1st Dept., 2005). "Wrongful means' includes physical violence, fraud, misrepresentation, civil suits, criminal prosecutions, and some degree of economic pressure, but more than simple persuasion is required" (Snyder v. Sony Music Entertainment, 252 AD2d 294, 300, (1st Dept., 1999).

Plaintiffs allege that defendants have or are steering clients away from Plaintiff through "unfairly and unlawfully utilizing JGUA's confidential and proprietary information." Plaintiff alleges that

throughout its many years in business, with great expenditures of time and money, JGUA compiled confidential and proprietary information, including a client list as well as information related to the assets that they manage. JGUA has developed proprietary techniques used in marketing and managing the comprehensive financial services they provide. This information is unknown to other competitors and provides JGUA with a business advantage over other competitors offering similar services.

Because of the confidential and proprietary information, JGUA has implemented numerous safeguards to protect the information, including a database that can only be accessed with certain login information, and that does not permit information to be printed from a remote location. Further, JGUA requires all employee with access to the confidential and proprietary information to execute an employment agreement containing confidentiality provisions and post-employment restrictive covenants. (¶13,14)

To the extent of these allegations, that Defendants have utilized this allegedly confidential and proprietary information to unlawfully divert clients from Plaintiff, this Court finds that plaintiffs have sufficiently stated their Fifth Cause of Action for pleading purposes. (Silfen, Inc. V. Cream, 29 NY2d 387, 392,393 (1972) ("where the customers are not known in the trade or are discoverable only by extraordinary efforts courts have not hesitated to protect the customer lists and files as trade secrets").

The sixth cause of action alleges unfair competition, alleging that Plaintiff invested time and money in its confidential and proprietary information, mainly client lists, that Defendants acted in concert in misappropriating what belonged to Plaintiff, resulting in a substantial loss of business and clients. It is alleged that Defendants acted in bad faith. (Id. at ¶58,62).

A claim of unfair competition requires that "plaintiffs . . . show that the Defendants misappropriated the plaintiffs' labor, skills, expenditures, or good will and displayed some element of bad faith in doing so." Abe's Rooms, Inc. v. Space Hunters, Inc., 38 AD3d 690, 692 (2d Dept. 2007). A predicate for an unfair competition claim is " the alleged bad faith misappropriation of a commercial advantage belonging to another by exploitation of proprietary information or trade secrets.'" Out of the Box Promotions, LLC v. Koschitzki, 55 AD3d 575, 578 (2d Dept. 2008) (citation omitted).

The allegations in the Complaint are sufficient to state a claim for unfair competition. The motion to dismiss this claim is denied.

Lastly, Plaintiff claims that they spent years developing clients, investment strategies, and methodologies for which services they charge management fees. JGUA claims that it will have to pay back any prorated management fees to those client who are diverted to Defendants, and Defendants will use JGUA's information to generate those fees.

To sustain a claim for unjust enrichment, Plaintiff must allege that 1) Defendant was enriched; 2) at Plaintiff's expense; 3) that it is against equity and good conscience to permit Defendant to retain the gains. (See Mandarin Trading v. Wildenstein, 16 NY3d 173, 180 (2011).

Here, even accepting Plaintiff's allegations as true and providing Plaintiff every favorable inference, Plaintiff's claim for unjust enrichment fails. Plaintiff asserts that they will have to reimburse any prorated fees. Under such scenario, they are only trustees of the fees until such time as the fees are earned, thus the fees are not rightfully theirs. Secondly, it is speculative whether Defendant will be enriched by retaining the client, charging, earning and receiving the fees. (Flag Wharf v. Merrill, 40 AD3d 506, 507 (1st Dept., 2007). Thirdly, the parties are covered by an employment contract, which propriety thereof is pending appeal. (Scavenger, Inc. v. GT Interactive, 289 AD2d 58, (1st Dept., 2001).

Accordingly, Plaintiff's Seventh Cause of Action for unjust enrichment is dismissed.

This constitutes the opinion and decision of the Court pursuant to CPLR 4213. Any relief not otherwise granted is denied. Plaintiff shall submit the order on notice.