New York Business Litigation Lawyer Blog

August 29, 2012

Unjust Enrichment Claim Fails Because of the Lack of a Relationship Among Parties

Even without a written contract, equity and fairness can sometimes provide for an enforceable oral agreement between two parties. One such basis is called “unjust enrichment.” This approach allows for a party’s recovery based on fairness, where one party confers a benefit on another without a written agreement, compensation may be permitted to avoid the recipient from being unjustly enriched.. One of the requirements for this to work is that the parties must have some relationship between them. The extent of that relationship is the subject of a case before New York State’s highest court, the Court of Appeals, which recently decided that even where one party clearly benefits from another, and is aware that it received those benefits from the other, the lack of a direct relationship between the two defeats the provider’s recovery from the recipient.

In Georgia Malone & Co., Inc. v. Rieder, Malone & Co. provided brokerage and property information to parties considering the purchase of real estate in exchange for a set fee plus a percentage of the sales proceeds. In this case, CenterRock Realty hired Malone to investigate a particular property. CenterRock agreed to keep the information provided by Malone confidential. CenterRock opted not to buy the property, but sold Malone’s property and research information to Rosewood Realty Group without informing Malone. Rosewood eventually found a buyer for the property, using and benefitting from Malone’s work, and earned a fee. Malone did not receive its percentage fee from the sale.

Malone sued Rosewood and CenterRock, alleging that they were both unjustly enriched by Malone. The trial court dismissed the unjust enrichment claim, but on appeal to the Appellate Division, the State’s intermediary appellate court, it was reinstated against CenterRock. The Appellate Division, in a split decision, found that the relationship between Malone and Rosewood was “too attenuated” to provide the necessary connection between the two even though Rosewood benefitted from Malone’s information.

August 23, 2012

Court Requires Identification of Trade Secrets

by The Silber Law Firm LLC

Plaintiff sells software to the financial industry. It sued a former employee and his new employer for stealing plaintiff’s secret computer source code. The issue before the court centered on whether or not plaintiff had to specifically identify the secret information that it claimed its former employee had stolen. Defendants maintained that identification was necessary so that the exact information allegedly stolen could be examined to determine whether or not it was a true secret or just general knowledge that the employee had learned. Plaintiff argued that the information was secret and defendant’s employment allowed him to learn those secrets while at plainitff and use that information at his new employer.

The court held that defendants did not need to guess the secrets plaintiff claimed were stolen, so that plaintiff had to identify them. This allowed defendants to examine the information and argue that some or all were not true secrets. Additionally, without this disclosure, it would be impossible to discern which of plaintiff’s secrets the new employer was using and concerning which plaintiff could legitimately object.

August 20, 2012

Trademark Claims for Gripe-Site Falls Flat

by The Silber Law Firm LLC

Despite the uniform reaction of courts, trademark holders insist on filing lawsuits over gripe-sites. As discussed here in the past, websites that are created for the sole reason of complaining about a service or product, and which incorporate a trademark in doing so, are not guilty of trademark infringement. In Devere Group GMBH v. Opinion Corp. d/b/a Pissedconsumer.com, pissedconsumer.com was sued by a Swiss consulting company because the site hosted a number of sub-domains that hosted public complaints about the company. The company sought damages for trademark infringement, among other claims.

Although the court determined that the consulting company had established its trademark, it had failed to establish any infringement by the gripe-site. The court agreed with the gripe-site that no reasonable consumer, “‘even the dimmest Internet user'” would believe that the comments posted to the gripe-site were sponsored by the consulting company. This was especially true here, where the complaints could never be seen as an endorsement of the services protected by the trademark or endorsed by the company, and the gripe-site did not compete with the company’s website for viewers.

For the most part, the court’s outcome should be the same for a complaint website that was less obvious in identifying its purpose. The line is crossed, however, where the complaint website has a commercial purpose or seeks to benefit from the protected trademark. In that case, judges look at the relationship with a more critical eye, to understand the purpose of the complaint website, and are more reluctant to dismiss an infringement complaint.

June 18, 2012

Selling Shareholders’ $900 Million Fraud Claim Dismissed for Failing to Investigate

by The Silber Law Firm LLC

A few months ago, the Court of Appeals highlighted the pitfall of a not uncommon scenario, that of experienced and sophisticated business people relying on the representations of others but which are later found to be less than truthful. In Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., the court dismissed the fraud claims of former shareholders of a Latin American mobile telephone company because those shareholders ignored obvious concerns that arose in the course of the sale of their shares that should have put them on notice of potential problems. Not only were those issues not addressed, but those shareholders released the company and remaining shareholders from liability in connection with the sale. The outcome of this case underlines the fact that experienced and sophisticated parties must do their own due diligence no matter what they are told.

The facts are somewhat complicated but can be summarized as follows: Plaintiffs held a majority interest in an Ecuadorian company which sought funding from a Mexican company, Telemex Mexico, controlled by billionaire Carlos Slim. The funding was provided and a new entity was formed which was owned by the plaintiffs and Telemex. The parties agreed that in the event that there were additional transfers to different entities, plaintiffs could swap their interest from the old entity to the new entity on terms to be agreed. Following a subsequent transfer, plaintiffs tried to negotiate the terms for the transfer of their ownership interest into the new entity. Encountering resistance from Telemex, plaintiffs opted to just sell their interest outright and did not receive any interest in the new entity.

Eight years later, plaintiffs sued claiming to have been defrauded. Plaintiffs claimed that they were given incomplete and bogus information of the new entity’s value. Had they known the true state of affairs, they alleged, they would have forced a transfer or sold their interests at a far higher price. Under the agreement by which plaintiffs sold their interests, they agreed to release the other shareholders and the new entity from any claims in connection with the agreement. The remaining shareholders and their entities also provided plaintiff with no warranties related to the business’ state of affairs.

June 15, 2012

Wrongful Conduct Does Not Allow for Retaliation

by The Silber Law Firm LLC

A recent decision by Suffolk County Commercial Division Judge Emily Pines highlights how critical it is for a party in a dispute to keep his hands clean, even in the face of the other side’s wrongful conduct.

The extensive factual and legal discussions raised over the 11 day trial are nicely explained by Peter A. Mahler, Esq. I reference this case for the limited purpose of highlighting the fact that while nasty conduct and table-pounding litigation make for a good movie script, playing by the rules usually carries the day.

This case involved a dispute within a 12 member medical practice. One doctor alleged that the other doctors were not conducting themselves properly while running the practice, engaging in conduct that did not benefit the entire practice. He also complained that they caused the practice to borrow money without proper consent. And finally, that his partners expelled him from the practice without cause. The other doctors claimed that the complaining doctor went behind the others’ collective back and told the prospective lender that the practice did not have proper authorization to borrow the funds. It turned out that the practice did have the authority to borrow money, as the other doctors had properly voted to obtain the loan, but the complaining doctor’s notice to the bank caused it to cancel the practice’s loan, to the detriment of the other doctors.

May 5, 2012

Do the Names Potenza, Turanza and Milanza Confuse You?

by The Silber Law Firm LLC

An appellate decision from the Federal Circuit finds that the term Milanza is confusing when used in the same class of goods as Potenza and Turanza. Seemingly, these marks sound and feel similar.

Bridgestone Corporation, owns trademark registrations for the marks Potenza and Turanza and conclusively established that it used those marks in connection with popular and successful tires. Federal Corporation sought trademark registration for Milanza, and Bridgestone objected arguing that when used on tires, that mark was confusing. The United States Patent and Trademark Trial Appeal Board (the “TTAB”), finding no confusion between the marks despite Bridgestone’s survey that consumers were confused, refused to block Federal’s application. Bridgestone appealed.

In reversing and finding that market confusion existed sufficient to bar Federal’s application, the court highlighted the standards that a party must meet to establish confusion with an ordinary registered trademark compared with the strength of a famous mark.

March 14, 2012

How Much of Your Information Is Available to the Public?

by The Silber Law Firm LLC

I don’t usually comment on these issues, but a recent article at Findlaw raises red flags. It seems that your smartphone address book and emails may be accessible to others, with no notice to you. Read more here.

March 5, 2012

Incomplete LLC Documents Invite Lawsuits

by The Silber Law Firm LLC

As readers here know, we have discussed, as far back as 2007, the importance of properly drafted documents. In December 2007 we wrote about an Inc. Magazine feature article which described the fallout between friends caused by incomplete or nonexistent incorporating documents. A recent Suffolk County Supreme Court decision highlights that again–to the tune of hundreds of thousands of dollars.

In 2006, Gary Duff and Peter Curto, Jr., formed a LLC to buy property. After Duff spent some $500,000 on the project, it collapsed. Duff sued Curto claiming that Curto was obligated to reimburse Duff half of his costs because the parties had agreed to contribute to the LLC evenly. That may have been true, except that the LLC operating agreement did not exactly say that. The operating agreement provided that each would provide 50% of the capital, but did not detail how much that was. While that alone may have not carried the day, even though Curto denied any agreement to provide anything, that Duff carried his “contributions” to the LLC as loans on his tax returns provided Judge Pines the basis she needed to find that Duff could not maintain a claim against Curto, dismissing them, even though the operating agreement was vague as written.

Would the outcome have been the same had the operating agreement been properly completed?

February 9, 2012

Do You See Starbucks When You Read Charbucks?

by The Silber Law Firm LLC

In an ongoing litigation between Starbucks and an outfit called Black Bear Micro Brewery, the brewer of Mr. Charbucks and Charbucks Blend coffees, a New York Southern District judge found that notwithstanding the similarity in names and the fact that Charbucks was trying to capitalize on the Starbucks name, Charbucks did not violate trademark law.

One of the privileges provided by trademark law is a trademark holder’s right to prevent another’s use of a mark that, while not confusingly similar in a direct way, nevertheless “dilutes” the trademark holder’s registered trademark. One way to dilute a mark is to “blur” it. Blurring is pretty much as it sounds: A competitor’s use of mark that, in the court’s words, “impairs the distinctiveness of the famous mark.” When a mark is blurred, its “distinctiveness,” that element of the mark by which it is known to the public, is weakened.

In this case, the Southern District court was faced with deciding whether the marks “Mr. Charbucks” and “Charbucks Blend” diluted the Starbucks trademark. To reach a conclusion, the court had to review six factors that, while not exclusive, provided guidance in determining dilution: “(i) [t]he degree of similarity between the mark or trade name and the famous mark; (ii) [t]he degree of inherent or acquired distinctiveness of the famous mark; (iii) [t]he extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv) [t]he degree of recognition of the famous mark; (v) [w]hether the user of the mark or trade name intended to create an association with the famous mark; [and] (vi) [a]ny actual association between the mark or trade name and the famous mark.” Because these elements are suggested but not exclusive, the overarching consideration is whether the blurring makes the distinctive registered mark less distinctive.

February 7, 2012

New York State Gyms Are Required to Have a Defibrillator on Site, But Must They Use Them?

by The Silber Law Firm LLC

Gregory Miglino, Sr., passed out at a gym one morning. While 911 was summoned, a gym employee that had been trained on an automated external defibrillator (“AED”) went to assist Miglino. For some reason, perhaps because a doctor and medical student were on the scene, the employee did not attempt to use the AED. Miglino died upon his arrival at the hospital. His Estate sued the gym claiming that it was negligent in not using the AED. The gym sought dismissal arguing that while it was obligated to have an AED on site and someone on staff trained to use it, it had no obligation to use the AED, and because the Good Samaritan law insulates one from liability where medical assistance is voluntarily made, the gym could not be liable.

In an apparent split from the Appellate Division, First Department, the Second Department found the gym to have an affirmative obligation to not just have an AED on site and someone trained to use it, but to actually use it. The Second Department found it inconsistent that a law that would require the on site presence of an AED and someone to use it to assist club members, would not also require its use. Because the law was specifically designed to assist club members, the court found it “illogical to conclude that no duty exists” to use the AED, and refusing to recognize that principal, would “eviscerate the very purpose for which the legislation was enacted.” Rhetorically, the court asked “why statutorily mandate a health club facility to provide the device if there is no concomitant requirement to use it?”