Non-Compete | First Amendment | Broker

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So-Called Fashion Industry Trade Secrets Open To The Public Are Fair Game

So-Called Fashion Industry Trade Secret s Open To The Public Are Fair Game
In S.A.S.C.O. Trading, Inc. v. Pamnani, the plaintiffs, two men’s clothing companies, requested a temporary restraining order enjoining the defendants, a number of former employees and the companies to which they migrated, from using plaintiffs’ confidential information to divert plaintiffs’ suppliers and manufacturers of boys’ and men’s leisure clothing, and their customer retailers. The Court granted the plaintiffs’ application for a temporary restraining order, and the matter was set down for a hearing on the preliminary injunction.

According to plaintiffs, a number of the former employee defendants conspired with the remaining defendants to form a competing company and to “(i) steal plaintiffs’ designs, confidential pricing, manufacturing and buyer information, (ii) leverage plaintiffs’ relationships with manufacturers for the purposes of creating and/or obtaining identical or nearly identical merchandise, (iii) sell ‘knockoff’ versions of plaintiffs’ trademarked clothing to plaintiffs’ customers, and (iv) destroy plaintiffs’ documents in an attempt to hide their plans and to disrupt plaintiffs’ business.” The plaintiffs claimed that they learned of defendants’ plans through e-mails of the former employee defendants that they had meant to send or receive through new e-mail accounts, but were inadvertently sent through e-mail accounts maintained by the plaintiffs. Plaintiffs also allege that while still employed by plaintiffs, one defendant downloaded and sent plaintiffs’ full client account list to his own personal e-mail account, and that another defendant repeatedly downloaded and sent copies of computer-aided design (“CAD”) drawings of plaintiffs’ trademarked merchandise to his own personal e-mail account, which he then later circulated amongst the former employee defendants. Defendants denied plaintiffs’ allegations, and noted none of them were a party to any confidentiality, non-compete or employment agreements, and asserted clothing designs could not be protected from copying.

To receive injunctive relief, the Court reasoned that the “factors to be considered in evaluating a trade secret claim include 1) the extent to which the information is known outside of the business; 2) the extent to which it is known by employees and others involved in the business; 3) the extent of measures taken by the business to guard the secrecy of the information; 4) the value of the information to the business and its competitors; 5) the amount of effort or money extended by the business in developing the information; 6) the ease or difficulty with which the information could be properly acquired or duplicated by others.” The Court concluded that “few if any of these tests have been met.”

“The information which plaintiffs claim is proprietary trade secrets is not. That information falls into of three main categories — overseas manufacturers who make clothing for plaintiffs, discount retail stores that buy the clothing for sale to consumers and designs of the discount clothing that plaintiffs sell — are matters of public record, in the public domain, has not been protected by plaintiffs or is information defendants collected before becoming employed by plaintiffs. Retailers often publish manufacturer names, factory locations and other supplier information. The Defendants who are involved with sales had relationships with manufacturers that pre-dated their employment with plaintiffs. Detailed information, including buyer contract information and type of merchandise, offered for sale by clothing retailers is available on several websites. Further clothing size specifications are posted online and clothing design software is available for purchase. Plaintiffs’ designs were created to be marketed. They are not secret. Their suppliers and buyers are well known in the industry and to the Former Employee Defendants, most of whom have been in the industry for many years. Trade secret protection does not attach to customer lists where such customers are readily ascertainable from sources outside plaintiffs’ businesses unless the former employees stole the customer list. Further, in order to prevail on a claim for misappropriation of trade secrets, plaintiffs must show that they employed precautionary measures to preserve its secrets. These requirements have not been met.”

“Assuming that defendants copied designs created by plaintiffs, such designs appear not to be protected unless the copying extends to a trademarked brand, label or logo associated with the garment. Plaintiffs have not shown that their logo, ‘Straight Faded,’ is trademark protected and that the trademarked product was used by defendants to market its products to customers.”

Village Law Encroached Upon First Amendment Right To Report A Crime

Village Law Encroached Upon First Amendment Right To Report A Crime

In Pirro v. Williams, the Third Department concluded a village nuisance law was facially unconstitutional and could not be enforced against the owner of several properties which rented out single rooms.

According to the decision, in April 2014, the Village of Groton passed Local Law No. 4 (2014), entitled the “Property and Building Nuisance Law.” This law established multiple methods by which a property may be identified as a public nuisance, and included a system by which points are assigned for various forms of proscribed conduct, ranging from two points for minor offenses to 12 points for a broad variety of Penal Law violations. A property accumulating 12 or more points within six months or 18 or more points within one year, or upon which specified offenses occur, is deemed to be a public nuisance. Upon such a determination, the owner was to be given written notice and an opportunity to abate the nuisance within specified time limits, and upon failure to do so, the Village may authorize a civil action for relief including a permanent injunction, a temporary closing order or a penalty of up to $1,000 per day. The law also established administrative remedies available to the Village, such as ordering the property’s closure or suspending its certificate of use.

In the fall of 2014, plaintiff Norfe J. Pirro, owner and manager of several residential rental properties in Groton, was notified by the Village that certain properties had accumulated enough points to constitute public nuisances pursuant to the Nuisance Law. In September 2015, the Board commenced an action under the Nuisance Law, alleging that four properties constituted unabated public nuisances and sought relief in the form of penalties, injunctive relief and either temporary closure or temporary receivership. In their answer, defendants set forth affirmative defenses alleging, as pertinent here, that the Nuisance Law conflicted with State law and violated the tenants’ rights to seek redress of grievances from law enforcement, and further asserted a counterclaim.

On appeal from the defendants’ motion for summary judgment seeking a declaration that the Village Nuisance Law was unconstitutionally over broad “in that it deters tenants from seeking assistance from police by placing them at risk of losing their homes,” the Court noted that “the right to petition the government for redress of grievances is ‘one of the most precious of the liberties safeguarded by the Bill of Rights.’ This protection includes the right to make criminal complaints to the police. As the right to petition protects ‘a particular freedom of expression,’ it is analyzed according to the same constitutional principles that apply to the right of free speech.

The Court found that “nothing in the Nuisance Law precludes the assessment of points against a property for police involvement resulting from a tenant’s exercise of the right to petition the government for redress by summoning police. Moreover, as the Nuisance Law assigns 12 points for a single occurrence of certain serious crimes, and deems a property to be a public nuisance upon accumulating 12 points within six months, it permits a property to be declared a public nuisance as the result of a report to police of a single offense. Critically, there is no distinction between crimes committed by tenants and those committed against tenants; the Nuisance Law thus permits a determination that a property is a public nuisance solely because a tenant is a victim of a crime.”

The Court also noted that because the The Nuisance Law’s provisions remedies (e.g., the eviction of tenants and the temporary closure of property) demonstrate that the loss of a tenant’s home may result directly from the designation of a property as a public nuisance, “all tenants and occupants of a property where illegal activity occurs — not just those who actually commit a violation — are at risk of losing their homes upon a declaration that the property is a public nuisance. The plain language of the law therefore tends to discourage tenants from seeking help from police” which “may have a particularly severe impact upon victims of domestic violence. If a tenant who has an order of protection against an individual because of prior domestic violence calls police for assistance in enforcing the order, points may be assessed against the property.”

Village Law Encroached Upon First Amendment Right To Report A Crime

Broker Had A Duty Not To Hide Tena nt’s Poor History From Landlord

In Omabegho v. The Corcoran Group, Ruth Omabegho sued her broker Laura Hildreth, an employee of Corcoran Group, asserting claims for breaches of fiduciary duty of due care, and undivided loyalty. Hildreth leased Omabegho’s Southampton property to Mr. And Mrs. Harte, attesting to their reputable nature and assuring Omabegho that defendants performed a background check. However, Omabegho never received one rent payment, obtained a warrant of eviction, and later learned of Harte’s criminal past. On the broker’s motion to dismiss, the Court granted dismissal of Omabegho’s claim alleging defendants violated their fiduciary duty by failing to provide a thorough background check of the tenants, noting there was no specific contract detailing any duties to perform such background check by defendants. But it denied dismissal of Omabegho’s second cause of action for breach of fiduciary duty of undivided loyalty for failing to inform plaintiff of tenants’ criminal record, noting the defendants specifically alleged they performed a background check on tenants, and Omabegho relied on assurances they were reputable tenants.

As regards to dismissal of the cause of action for breach of fiduciary duty, the Court noted that New York Real Property Law §443 details a real estate broker’s duties to a seller or landlord. It provides “a landlord’s agent has, without limitation, the following fiduciary duties to the landlord: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account. ‘In New York, it is well settled that a real estate broker is a fiduciary with a duty of loyalty and an obligation to act in the best interests of the principal.’ A real estate broker therefore has ‘an affirmative duty not to act for a party with adverse interests unless consent is obtained from the principal after being provided with full knowledge of the facts.’ However, these duties are qualified and have limitations. When analyzing the existence of a fiduciary’s duties and its relationship with the principal, courts must review the communications and agreements made between the parties.”

The Court recited the elements of breach of such a fiduciary duty between a real estate agent and landlord as follows “1) the existence of a fiduciary duty; 2) breach of that duty through misconduct; and, 3) actual damages resulting.” Again, the first cause of action alleged that defendants violated their fiduciary duty by failing to provide a thorough background check of the tenants, but there was no specific contract between the parties detailing the duties and specifying an obligation to perform a background check. “A real estate broker’s duties to its client are satisfied ‘when they produce ready, willing, and able tenants with whom the plaintiff executed a rental agreement.’ It has a ‘duty not to conceal or misrepresent known facts, but it has no duty to investigate unknown facts.’ A real estate broker also has ‘no duty to investigate the prospective tenants to ascertain their suit ability’ under municipal codes. Moreover, although plaintiff alleges that there is a duty for a real estate broker to perform a background check, plaintiff does not cite to any authority for this claim. Here, as there was no fiduciary duty for defendants to perform a background check, nor any contractual duty, the first cause of action is dismissed.”

As for the cause of action for breach of fiduciary duty of undivided loyalty for failing to inform Omabegho of tenant’s criminal record, the Court reasoned that in the Complaint, Omabegho specifically alleged that the defendants informed her that they had performed a background check on tenants and described them as reputable and reasonably relied upon that information for the transaction, and “if true, and the Court must take all allegations as such, defendants had a duty to inform plaintiff of the result of such background check and not hide any poor history. Although defendants had no duty to investigate the suitability of the perspective tenants or corresponding legal details, if they had knowledge materially affecting the transaction, in this case, such as the Harte’s criminal history, a duty to fully and truthfully disclose existed.”

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