Ritani, LLC v. Aghjayan (970 F. Supp. 2d 232, 2013)

OPINION

SWEET, District Judge.

There are several motions currently pending in this action between plaintiff Ritani, LLC (“Ritani” or the “Plaintiff’) and defendants Harout Aghjayan (“Aghjayan” or the “Defendant”), Shawndria Aghjayan (“Mrs. Aghjayan”), Harout R, LLC (“Harout R”), H. Ritani, Inc. (“HR Inc.”), H. Ritani, LLC (“HR LLC”), H. Ritani, Corp. (“HR Corp.”) and Amazing Settings, LLP (“Amazing Settings”) (collectively, the “Defendants”).

Ritani and counter-claim defendants Julius Klein Diamonds, LLC (“JKD”), Joseph Manber (“Manber”), and Abraham D. Klein (“Klein”) (collectively, the “Counter-Defendants”) have moved to dismiss certain counter-claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, including: (1) defendant and counter-claim plaintiff HR Corp.’s counterclaims for fraud, negligent misrepresentation, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty; (2) defendant and counter-claim plaintiff Mrs. Aghjayan counterclaim for aiding and abetting a breach of fiduciary duty; (3) defendants and counter-claim plaintiffs Amazing Settings and Harout R’s counterclaim for conversion.

Individual defendants then moved to dismiss certain counts from Plaintiffs first amended complaint (the “First Amended Complaint” or “FAC”) including: (1) Aghjayan’s motion to dismiss Plaintiffs claims for tortious interference with prospective advantage (Count IX) and misappropriation of trade secrets (Count VII) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; (2) Mrs. Aghjayan’s motion to dismiss the aiding and abetting claims (Counts VII and XI) pursuant to Rule 9(b) and 12(c) of the Federal Rules of Civil Procedure; (3) Amazing Settings and Harout R’s motion to dismiss the misappropriation of trade secrets claim (Count VIII) pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.

While those motions to dismiss were sub judice, Defendants Aghjayan, Harout R and Amazing Settings filed a motion for attorney’s fees as the prevailing party on the copyright infringement claim.

Upon the facts and conclusions set forth below, (1) the Counter-Defendants’ motions to dismiss are granted; (2) Defendants’ motions to dismiss are denied in part and granted in part; and (3) Defendants’ motion for attorney’s fees is denied.

I. Prior Proceedings

The Plaintiff filed its initial complaint on December 7, 2011 against the Defendant and his companies (the “Defendants Companies”), alleging (1) federal copyright infringement pursuant to 17 U.S.C. §§ 101 and 501 et seq.; (2) federal trademark infringement under the Lanham Act, 15 U.S.C. § 1114(l)(a); (3) unfair competition, false designation of origin and false and misleading representations in commerce under the Lanham Act, 15 U.S.C. § 1125(a); (4) false advertising under the Lanham Act, 15 U.S.C. § 1125(a); (5) state false advertising under N.Y.G.B.L. § 350; (6) common law trademark infringement under state law; (7) state unfair competition; (8) state trademark dilution under N.Y.G.B.L. § 360-1; (9) deceptive practices under N.Y.G.B.L § 349; (10) common law misappropriation of trade secrets; (11) tortious interference with business relationships under state law; (12) breach of implied covenant not to solicit business and reduce goodwill under state law; (13) breach of contract and common law non-competition; (14) unjust enrichment; (15) common law breach of the duty of loyalty and breach of fiduciary duty; (16) breach of the implied duty of good faith and fair dealing; and (17) imposition of a constructive trust (the “Initial Complaint” or “IC”).

Invoking Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, the Defendants moved to dismiss the entirety of the Initial Complaint on February 6, 2012. That motion was heard and marked fully submitted on March 15, 2012.

On May 30, 2012, Plaintiff filed a motion seeking preliminary injunctive relief due to the alleged irreparable harm caused by the culmination of the Defendants’ conduct. On June 11, 2012, the Court issued an opinion from the bench, denying the Plaintiffs motion for a preliminary injunction for failure to establish a prima facie case.

On May 30, 2012, Plaintiff concurrently made a motion to amend the Initial Complaint and for leave to file the proposed amended complaint (the “PAC” or “Proposed Amended Complaint”). The PAC sought to add certain factual details, to add a new Defendant, Aghjayan’s wife, “Mrs. Aghjayan”, and to remove certain state causes of action. The PAC alleged the following causes of action against all Defendants, unless otherwise specified: (1) federal copyright infringement pursuant to 17 U.S.C. §§ 101 and 501 et seq., against Aghjayan, Amazing Settings and Harout R (Count I); (2) federal trademark infringement under the Lanham Act, 15 U.S.C. § 1114(l)(a) (Count II); (3) unfair competition, false designation of origin and false and misleading representations in commerce under the Lanham Act, 15 U.S.C. § 1125(a) (Count III); (4) false advertising under the Lanham Act, 15 U.S.C. § 1125(a) (Count IV); (5) state false advertising under N.Y.G.B.L. § 350 (Count V); (6) common law trademark infringement under state law (Count VI); (7) state unfair competition (Count VII); (8) state trademark dilution under N.Y.G.B.L. § 360-1 (Count VIII); (9) common law misappropriation of trade secrets (Count IX); (10) tortious interference with business relationships under state law against Aghjayan and his companies (Count X); (11) breach of implied covenant not to solicit business and reduce goodwill under state law against Aghjayan and HR Corp. (Count XI); (12) breach of contract and common law non-competition against Aghjayan, Mrs. Aghjayan and HR Corp. (Count XII); and (13) common law breach of the duty of loyalty and breach of fiduciary duty against Aghjayan and Mrs. Aghjayan (Count XIII).

Defendants’ counsel requested an extension of time to respond to Plaintiffs motion to amend, which was granted. (Dkt. No. 33). On June 27, 2012, Defendants submitted a response to Defendants’ motion to amend referring the Court to “Defendants’ motion to dismiss the original complaint (Docket Nos. 10-12 and 15) and the transcripts of the hearing on Plaintiffs motion for a preliminary injunction (Docket Nos. 40, 42, and 44) and the Court’s decision of June 11, 2012.” (Dkt. No. 47).

By opinion, dated July 18, 2012, this Court granted the Defendant’s motion to dismiss the claims in Counts I, V, X and XI, denied Counts II-IV, VI-VII and VIII as to Aghjayan, HR LLC, HR Corp. and Harout R; denied Counts IX and XIII as to Aghjayan and Mrs. Aghjayan; and denied Count XII as to Aghjayan. See Ritani v. Aghjayan, 880 F.Supp.2d 425, 455 (S.D.N.Y.2012) (the “July 18 Opinion”). The Plaintiffs motion to amend was granted. Id. However, due to the unusual procedural posture of the case and because Defendants referred the Court to their previous arguments, the motion to amend was granted subject to the causes of action dismissed in the July 18 Opinion. Plaintiff was also granted leave to replead with 20 days.

On August 9, 2012, Plaintiff filed its first amended complaint (the “FAC” or “First Amended Complaint”) (Dkt. No. 54). On August 27, 2012, individual defendants Harout R. Amazing Settings, HR Corp., and HR LLC submitted their answers to the First Amended Complaint and asserted certain counterclaims. (See Dkt. Nos. 59, 60, 61, 62).

On October 1, 2012, Plaintiff and Counter-Defendants filed three motions to dismiss, including (1) a motion to dismiss the counterclaims of HR Corp.; (2) a motion to dismiss the counterclaims of Mrs. Aghjayan; and (3) a motion to dismiss the counterclaims of Amazing Settings and Harout R (the “Plaintiffs Motions to Dismiss”) (Dkt. Nos. 77, 79, 81). The Plaintiffs Motions to Dismiss were heard and marked fully submitted on November 28, 2012.

On November 7, 2012, certain individual defendants moved to dismiss claims from the First Amended Complaint, including: (1) Aghjayan’s motion to dismiss Plaintiffs claims for tortious interference with prospective advantage (Count IX) and misappropriation of trade secrets (Count VII); (2) Mrs. Aghjayan’s motion to dismiss the aiding and abetting claims (Counts VII and XI); (3) Amazing Settings and Harout R’s motion to dismiss the misappropriation of trade secrets claim (Count VIII) (the “Defendants’ Motions to Dismiss”) (Dkt. Nos. 96, 98, 100). The Defendants’ Motions to Dismiss were originally scheduled to be heard on January 16, 2013.

The parties, however, stipulated to adjourn the adjudication of Plaintiffs’ Motions to Dismiss and Defendants’ Motions to Dismiss pending the outcome of settlement conferences held before Magistrate Judge Gabriel Gorenstein. After settlement talks failed, the Defendants’ Motions to Dismiss were heard and marked fully submitted on March 27, 2013.

On March 19, 2013, Plaintiff Ritani and Counter-Defendants JKD, Manber, and Klein substituted their counsel from the law firm of Edwards Wildman Palmer LLP to their current counsel, Leason Ellis LLP.

On April 1, 2013, Defendants made a motion for attorneys’ fees as the prevailing party on the copyright infringement claim (the “Defendants’ Motion for Fees”) (Dkt. No. 136). The Defendants’ Motion for Fees was fully submitted and heard on May 1, 2013.

II. Facts

The facts underlying this action were previously set forth in this Court’s July 18 Opinion. See Ritani, 880 F.Supp.2d 425. Accordingly, the general background of this case and prior litigation between the parties is assumed, and any additional facts related to the counterclaims may be found in the relevant “Discussion” sections below.

Ritani is corporation of the State of New York and a successful designer, manufacturer and distributor of high-end designer jewelry. (FAC ¶ 2).

Aghjayan and Mrs. Aghjayan are individuals residing in the State of New Jersey. (Id. ¶¶ 3, 4). The Amended Complaint alleges that the following companies are wholly owned by Aghjayan: (1) Harout R is a corporation of the State of New Jersey with offices in that state and is a designer, manufacturer and distributor of jewelry; (2) HR LLC is a corporation of the State of Delaware and is now listed as inactive by the Secretary of the State of Delaware. HR LLC is presently listed by Hoovers as incorporated in the State of New York and has a principal place of business in the State of New Jersey; (3) HR Corp. is a corporation of the State of New York which has offices in New Jersey; and (4) Amazing Settings is a corporations of the State of New Jersey with offices in that state and is a designer, manufacturer and distributor of jewelry. (Id. ¶¶ 5-8). The Amended Complaint alleges that Aghjayan had an “intimate personal involvement and domination over each of the Defendant Companies, and played an active and conscious role, on behalf of these Defendants.” (Id. ¶ 12).

In 1996, Aghjayan founded and wholly owned HR Corp., which manufactured and distributed high-end jewelry under the trademark Ritani. (Id. ¶ 11). By March 2002, Aghjayan, needing an infusion of cash and managerial support, entered into negotiations with JKD and For Kruneh, LLC (“Kruneh”) for the sale of all of HR Corp.’s assets. (Id. ¶ 14).

On March 26, 2002, Aghjayan, HR Corp., JKD and Kruneh executed a series of five agreements. (Id. ¶ 15). By these agreements, Aghjayan and HR Corp. agreed to sell the business consisting of all of the rights, titles and interests in and the assets of HR Corp., including all of its copyrights, trademark rights, and all other intellectual property rights, as well as good will, to the newly formed entity, Ritani. (Id.). Ritani was to be owned jointly by Aghjayan, HR Corp., JKD and Kruneh. (Id.).

The first agreement entered into by the parties was a “Membership Interest Purchase Agreement” dated March 26, 2002. (Id. ¶ 16). Under this contract, Aghjayan sold his 44% membership interest in Ritani, as well as all rights, titles and interests in and to the intellectual property of HR Corp., the trademark Ritani and other trademarks, copyrighted Ritani jewelry designs, the “[d]esign, concept and content of the Ritani website” and “all of the good will associated with the business of [HR Corp.]” to Ritani for the aggregate purchase price of $2,628,000. (Id.).

The second agreement was a “Contribution Agreement” whereby HR Corp. and Aghjayan confirmed their sale of the “Contributed Assets” to Ritani in exchange for HR Corp.’s receipt of a membership interest in the newly formed company. As with the Membership Agreement, the Contribution Agreement similarly recited the Defendants’ assignment of intellectual property to Ritani. (Id. ¶ 17).

The third agreement was an “Assignment and Assumption Agreement” confirming HR Corp.’s sale, transfer and assignment of all of its right, title and interest in and to the properties listed in the Contribution Agreement to Ritani for Ritani’s “own use and benefit forever from the date hereof.” (Id. ¶ 18).

JKD, Kruneh, HR Corp., and Aghjayan also entered into an Operating Agreement (the “2002 Operating Agreement”) which recited the profit/loss percentages for each of the members of the newly formed company, as follows: JKD 10%; Krunch 5%; Aghjayan 44%; and HR Corp. 41%. (Id. ¶ 19). In addition, JKD and HR Corp. each possessed 50% voting rights. (Id.).

The terms of the 2002 Operating Agreement required Aghjayan to concurrently execute an employment agreement (the “2002 Employment Agreement”) appointing him Chief Executive Officer (“CEO”) and President of Ritani. (Id. ¶ 20). Aghjayan entered into the 2002 Employment Agreement, which states that he had a duty to render “exclusive services as Chief Executive Officer” for Ritani and to perform such services “to further the business and affairs of Employer.” (Id.). The 2002 Employment Agreement also precluded Aghjayan from disclosing any confidential information, including but not limited to, trade secret information, even if it was “conceived, originated, discovered or developed” by Aghjayan. (Id. ¶ 21). It also stated that Aghjayan could not “use, license, sell, convey or otherwise exploit any Confidential Information, or any portion thereof, during the Employment Term hereof and at all times thereafter for any purpose other than solely for the benefit of Employer.”- (Id.). As part of the 2002 Employment Agreement, Aghjayan was also prevented from competing with Ritani during his employment term for one year thereafter. (Id.).

On December 16, 2002, the 2002 Operating Agreement was amended to reflect a change in voting power. (Id. ¶ 22). In addition, a Second Amendment was entered into on May 30, 2003 to show a change in the profit/loss percentages, as follows: HR Corp. 41%; JKD 40%; and Krunch 19%, (Id.).

On November 1, 2004, JKD, Krunch and HR Corp., by Aghjayan, entered into an “Amended and Restated Operating Agreement” (the “2004 Operating Agreement”), which reflected, among other things, a change in the profitAoss percentages of JKD and HR Corp., changes in the management of Ritani, and changes to the business agreement of the members since the 2002 Operating Agreement. (Id. ¶ 23).

That day, Aghjayan also entered into a new employment agreement (“2004 Employment Agreement”) and a consulting agreement (the “Consulting Agreement”) with Ritani. (Id. ¶ 24). By the terms of the 2004 Employment Agreement, Aghjayan agreed to continue to render “exclusive business services” to Ritani as its CEO and President, to take on additional responsibilities as Ritani’s Chief Operating Officer (“COO”) and to supervise and assist Ritani in product design and marketing until October 31, 2009. (Id.). Aghjayan was also obligated to “actively and aggressively pursue overseas manufacturing opportunities” on behalf of Ritani, “in order to reduce its costs and increase its capacity.” In addition, the 2004 Employment Agreement included a non-compete clause which prevented Aghjayan from “tak[ing] a position where such Confidential Information may be used adversely” to Ritani’s best interests and from “seeking] to divert the Company’s business or opportunity to a third party.” (Id. ¶ 26).

With respect to the Consulting Agreement, HR Corp., through Aghjayan, agreed to act as a consultant for Ritani, and to provide such services including designs for Ritani’s jewelry line. (Id. ¶ 25). The Consulting Agreement was to remain in effect through August 31, 2009 with an automatic one year renewal provision that would continue until Aghjayan was no longer with Ritani or until the agreement was terminated with written notice. (Id.).

On August 29, 2007, HR Corp., by its owner Aghjayan, assigned via an assignment agreement (the “Assignment Agreement”), its entire remaining membership interest in Ritani to JKD, including all of its right, title, and interest in the capital and profits of Ritani. (Id. ¶ 27). The same day, the 2002 Membership Interest Purchase Agreement was also amended to confirm JKD’s purchase of all of HR Corp.’s membership interest in Ritani. (Id. ¶ 28). The 2007 amendment to the agreement included a section entitled “Rights to the ‘Ritani’ Name,” which stated that Ritani “shall maintain all right, title and interest in the name ‘Ritani,’ or any other similar name, together with the goodwill of the business connected with and symbolized by such name.” (Id.).

In addition, on October 15, 2007, Aghjayan signed a letter addendum to his 2004 Employment Agreement agreeing to keep confidential Ritani’s business relationship with a company named “Blue Nile.” (Id. ¶ 24).

Upon formation of the partnership, Ritani transitioned from HR Corp.’s prior use of the H. Ritani brand to the Ritani brand alone which is alleged to be synonymous with luxury and high-quality craftsmanship and to which consumers and the trade identify as the source of all jewelry bearing the Ritani name and marks. (Id. ¶ 36). Ritani has a number of Registered Copyrights, including but not limited to, Registration Nos. VA 1-774-361, VA 1-774,363, VA 1-774-364, VA 1-774-362 and VAu 1-074-079 (the representative copyrighted designs attached to the Initial and Amended Complaints), as well as a number of trademarks, including the trademark Ritani and a distinctive three-leaf design (the “Three-Leaf Trademark”) (collectively the “Ritani Trademarks”). (Id. ¶¶ 39^4).

According to Ritani, the Ritani Trademarks are intimately associated with its goods and services and its exclusive designs are essential to Ritani. (Id. ¶40). Thus, the company has instituted procedures to maintain the secrecy of all of its confidential, proprietary and trade secret designs, drawings and product development files. For example, Ritani uses computer-aided design (“CAD”) and computer-aided manufacturing (“CAM”) files containing confidential, proprietary, and trade secret information to design, create, modify and produce wax models of new jewelry designs. (Id. ¶ 46). These CAD/CAM drawings contain numerous confidential designs, including, but not limited to, “Perfect Match,” a design element used by Ritani to create and enable the engagement ring and wedding band to fit or flush up against each other without a gap. (Id.). Ritani compels all employees and contractors to sign confidentiality agreements, instills log off measures on employees’ computers, keeps its hard copies under lock and key and stores all electronic design files on a secure server designated for design only, which is accessible with its own key only. (Id. ¶ 47).

On November 1, 2009, after several months of unsuccessful contract negotiations, Aghjayan resigned from his employment at Ritani. Pursuant to the 2004 Employment Agreement, Aghjayan was obligated not to compete with Ritani in the jewelry industry until October 31, 2010. (Id. ¶ 31).

Aghjayan allegedly began a scheme to compete with Ritani within a few years after the transfer of all interest and goodwill to Ritani and while he was working as an officer of Ritani. (Id. ¶ 49). Specifically, Aghjayan allegedly improperly transferred Ritani’s files outside the company by copying them and transferring them onto a flash drive and ultimately to his home computer. (Id.). Aghjayan also was allegedly privy to Ritani’s confidential financial and customer files, including information about specific customer accounts, costs associated with Plaintiffs products, pricing information and Ritani’s profit margins. (Id.).

According to the Plaintiff, during the last two months of Aghjayan’s employment with Ritani, he disclosed trade secrets and sent confidential design files to his new business partner Alex Khatchadorian (“Khatchadorian”) in order to create ring designs and produce them as wax models for Ritani, without the knowledge or consent of Ritani. Aghjayan allegedly used Mrs. Aghjayan as an alter ego to send Ritani’s confidential and trade secret CAD/ CAM drawings to Khatchadorian and set up his new company. (Id. ¶ 60). More specifically, until his resignation, Aghjayan allegedly improperly transferred Ritani files outside the company by making copies to a flash drive or by emailing the files to his home computer, to Mrs. Aghjayan’s computer or to other third parties. (Id. ¶ 49). These removed files included confidential and trade secret design files belonging to Ritani, which Plaintiff contends Aghjayan “tweaked” to save time and money, rather than undertake the slow process of building jewelry designs from scratch. (Id. ¶¶ 56, 72, 193, 196).

In addition, according to Ritani, in late 2008, Aghjayan purchased a 3-Dimension-al (“3D”) printing machine which Aghjayan claimed to use to go into the business of making doorknobs but was actually used to make jewelry. (Id. ¶ 62). In February 2009, Aghjayan and Khatchadorian purchased a factory in China (the “Chinese Factory”) to produce jewelry products. Ritani contends that the scheme involved Aghjayan first emailing Khatchadorian designs in the form of CAD/CAM drawings that Aghjayan created while he was employed at Ritani. (Id. ¶ 63). Next, the Chinese Factory designers would change the size and shape of the center stones and email the finished drawings back to Aghjayan in the U.S. (Id.). Aghjayan would then use the 3D printing machine to print a wax model of the jewelry pieces and email Khatchadorian with any additional design changes. (Id.). Finally, once all the required changes were made, the file was returned to Aghjayan in the U.S. so that he could re-print the wax model for final design. (Id.).

More specifically, the FAC alleges that Aghjayan, either personally or under Mrs. Aghjayan’s name, emailed Khatchadorian CAD/CAM files for 84 designs and that swapping the design features allowed Aghjayan to create more than 200 styles. (Id. ¶ 64). Between September 4, 2009 and September 26, 2009, Aghjayan, while employed at Ritani, allegedly sent Khatchadorian five separate emails with the subject names “R,” “R Styles,” “R Rings,” “For R No 6 Rit” and “RIT 12,” and emails entitled “RIT” and “95D-H For Ritani” on October 20 and 22, 2009. (Id. ¶¶ 68-69, 72). These emails contained .jcd drawings of Ritani LLC designs, including designs incorporating the Ritani Three-Leaf Trademark. (Id. ¶ 72).

In addition, Aghjayan sent Khatchadorian a file of Ritanf s “Perfect Match” design and had verbal exchanges about the precise measurements and details necessary to create the design feature. (Id. ¶ 68). According to Ritani, the concept behind “Perfect Match,” a registered trademark of Ritani, was unique at the time of Aghjayan’s disclosure, as were the measurements and techniques needed to be used in order to enable the two rings to match up perfectly, which Ritani considered proprietary and confidential. (Id.). Ritani also contends that the Chinese Factory manufactured a silver samples jewelry line, which was to be used as a representative sample for sale in the U.S. (Id. ¶ 84). After February 2010, the Chinese Factory allegedly made weekly shipments of the silver sample line to Aghjayan’s New Jersey residence. (Id. ¶ 66).

Prior to the expiration of his non-compete term, Aghjayan approached Ritani seeking an amendment to the provision of his 2004 Employment Agreement. According to Ritani, Aghjayan was anxious to end his competitive restriction so that he could deliver finished jewelry products, which he allegedly already manufactured and offered for sale or sold to a number of U.S. companies during the non-compete period, including Helzberg Diamonds (“Helzberg”). (Id. ¶¶ 82-86). In addition, Aghjayan began negotiations with Tiffany & Co. (“Tiffany”), a former customer of HR Corp., in July of 2008. (Id. ¶87). According to Aghjayan, the negotiations were for his wife, Mrs. Aghjayan, who hoped to leave Ritani’s graphics department to form her own company designing and manufacturing bridal jewelry. (Id. ¶ 54). Ritani contends, however, that Mrs, Aghjayan acted as a cover and alter ego for Aghjayan during the negotiations with Tiffany, so that he and Khatchadorian could compete with Ritani, while Aghjayan was still employed in a position of trust at Ritani. (Id. ¶ 54).

Aghjayan established two companies, Amazing Settings on November 9, 2009 and Harout R on September 13, 2010 for the purposes of selling jewelry. (Id. ¶ 75). According to the FAC, on May 20, 2010, the Amazing Settings website went up, which contained a number of the 84 designs from the CAD/CAM drawings emailed between Aghjayan and Khatchadorian. (Id.). Harout R was formed to be the public face of the newly formed company because the trade knew Aghjayan as Harout Ritani. (Id. ¶ 80). According to Ritani, Harout R shares the same factory, employees, and designs as Amazing Settings in China and the U.S. (Id.).

Harout R and Amazing Settings’ websites similarly have a number of the 84 designs emailed between Aghjayan and Khatchadorian. (Id. ¶¶ 199-200). The Amended Complaint also alleges that, pri- or to his departure from Ritani, Aghjayan provided Ritani with a box of the wax models that he created, which Ritani never commercialized. (Id. ¶ 72). Aghjayan improperly took these Ritani confidential and trade secret design files, and created either identical or slightly “tweaked” rings for sale to U.S. customers through Defendants Amazing Settings and Harout R. (Id.).

On October 20, 2010, Aghjayan entered in a letter agreement (“Letter Agreement”) with Ritani amending the blanket non-compete provision to end two weeks earlier, on October 14, 2010. (Id. ¶ 34). Ritani agreed to the modification of the non-compete portion of the agreement to end the partnership with Aghjayan on good terms and in return for Aghjayan’s agreement not to sell jewelry to any current Ritani customer through December 31, 2010 and to refrain from attending a January/February 2011 trade show, the Centurion Show. (Id.). While Ritani understood that Aghjayan had engaged in casual conversation with a few potential non-Ritani customers, Ritani understood from Aghjayan that these discussions pertained to non-competing products, such as castings and findings. (Id.).

Plaintiff alleges, however, that Amazing Settings and Harout R further violated Aghjayan’s non-compete provision by engaging in business negotiations and targeting companies such as Helzberg, Tiffany, QVC, Blue Nile, Robbins Bros, and Michael Hill for business. (Id. ¶ 82). For example, Aghjayan met with Helzberg on multiple occasions to show them catalogs, pictures, and his silver samples to try to get Helzberg to place an order, during Aghjayan’s non-compete period. (Id. ¶ 88). Ritani had accounts with Blue Nile and Robbins Bros, in several states, which Aghjayan solicited. (Id. ¶ 90). Plaintiff also alleges Aghjayan’s improper solicitation caused Ritani significant financial harm. (Id. ¶ 91). For example, according to Ritani, Aghjayan knew that Blue Nile and Robbins Bros, were two of Ritani’s biggest customers when Aghjayan sold the remainder of his membership interest in Ritani to JKD. (Id.). Thereafter, he solicited them, and as a result of Aghjayan’s targeted solicitation of Blue Nile, Ritani’s 2011 sales to Blue Nile were down $1.1 million from 2010 and the six month sales projections for 2012 show a drop in sales of $1.9 million from 2011 Similarly, with respect to Robbins Brothers, Ritani’s 2011 sales were down $447,197 or $76.0% from 2010. (Id.). In total, Ritani’s sales to retail customers that Defendant Aghjayan now sells to, declined 37.17% between 2010 and 2011 and an additional 30.63% when you take into account January through April of 2012 sales figures. (Id.).

Plaintiff alleges that the Defendants were involved in further acts of solicitation in 2011. (Id. ¶ 92). Aghjayan allegedly mailed out around 7,000 competitive flyers and catalogs directly to all of Ritani’s customers announcing the formation of Harout R. (Id.). Ritani contends that the Harout R flyers and catalogs also contained information that is likely to cause confusion as to Aghjayan and Harout R’s association with the Ritani brand. (Id. ¶ 95). For example, the Harout R brochures associate Aghjayan with Ritani, by emphasizing that the “R” in Harout R stands for Ritani, as well as the inclusion of a statement whereby Aghjayan claims that he was “previously known as Harout Ritani.” (Id.). Ritani alleges that specific statements were also made to customers and potential customers that Aghjayan is the real “Harout Ritani.” (Id. ¶ 96). The Amended Complaint also states that, in February 2011, Mrs. Aghjayan referred to herself as Shawndria Ritani, and posted on her Flickr page, a picture of Aghjayan selling jewelry, along with a question asking “Where is Harout Ritani now?” (Id. ¶ 98).

In addition, Ritani alleges that, in 2011, Aghjayan, through the Defendant Companies, began to use a reproduction, copy, and colorable imitation of the Three-Leaf Trademark in his Harout R jewelry line in a manner likely to cause confusion to consumers as to the origin of the goods. (Id. ¶ 99). In April of 2011, Harout R’s jewelry line began selling on an online store of Helzberg’s. (Id. ¶ 100). Ritani contends that current Harout R Style Nos. Irl09 and lpcl09 were virtual copies of Ritani’s styles and designs. (Id.). In May 2011, Harout R’s online catalogs also allegedly included pieces of jewelry that were virtual copies of and substantially similar to Ritani’s copyrighted jewelry designs as well as other designs created by Aghjayan through the use of Ritani’s confidential and trade secret CAD files. (Id. ¶¶ 101-03). Lastly, Ritani contends that after using its’ copyrighted designs, the Defendants sought copyright registrations on several of the allegedly copied works. (Id. ¶ 103).

III. The Relevant Standards

Rule 12(b)(6)

In considering a motion to dismiss pursuant to Rule 12(b)(6), the Court construes the complaint liberally, accepting all factual allegations as true and drawing all reasonable inferences in the plaintiffs favor. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). The issue “is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir.1995) (quoting Scheuer v. Rhodes, 416 U.S. 232, 235-36, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

To survive dismissal, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Plaintiffs must allege sufficient facts to “nudge[] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Cohen v. Stevanovich, 722 F.Supp.2d 416, 423 (S.D.N.Y.2010). Though the court must accept the factual allegations of a complaint as true, it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

Furthermore, allegations in a complaint must be complete enough to enable a reader to understand how each defendant was personally involved in the wrongdoing plaintiff is alleging. Onwuka v. NYC Taxi Limousine Comm’n, No. 10 Civ. 5399(SLT)(LB), 2012 WL 34090, at *4-5 (E.D.N.Y. Jan. 6, 2012). “It is well-settled that ‘where the complaint names a defendant in the caption but contains no allegations indicating how the defendant violated the law or injured the plaintiff, a motion to dismiss the complaint in regard to that defendant should be granted.’ ” Dove v. Fordham Univ., 56 F.Supp.2d 330, 335 (S.D.N.Y.1999) (quoting Morabito v. Blum, 528 F.Supp. 252, 262 (S.D.N.Y.1981)).

Rule 9(b)

Rule 9(b) requires that the plaintiff “state with particularity the circumstances constituting the fraud.” Fed.R.Civ.P. 9(b). “Allegations that are conclusory or unsupported by factual assertions are insufficient” to satisfy Rule 9(b). ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir.2007). Thus, to satisfy this requirement, the complaint must: “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Rombach v. Chang, 355 F.3d 164, 170 (2d Cir.2004) (internal quotation marks and citation omitted). While “intent, knowledge, and other conditions of mind may be averred generally,” a plaintiff must allege sufficient facts to create a “strong inference” of scienter. Kalnit v. Eichler, 264 F.3d 131, 137-38 (2d Cir.2001).

Rule 12(c)

Rule 12(c) provides that “[a]fter the pleadings are closed — but early enough not to delay trial — a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). The legal standard used to decide a motion for judgment on the pleadings made pursuant to Rule 12(c) is identical those governing a Rule 12(b)(6) motion to dismiss. See e.g. Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001) (collecting cases).

IV. Discussion

A) The Plaintiff’s Motions to Dismiss HR Corp.’s Counterclaims is Granted

In its Answer, HR Corp. has filed several counterclaims against JKD, Manber and Klein for fraud, negligent misrepresentation, breach of fiduciary duty, and aiding and abetting a breach of fiduciary duty. (See Dkt. No. 61).

Relevant Facts

According to the Defendants, as of August 2007, HR Corp. and JKD were both members of Ritani. (Dkt. No. 61 ¶ 137). At that time, Klein was an owner and in control of JKD as well as the Chairman of Ritani. (Id. ¶ 106). Manber, a Certified Public Accountant (“CPA”), was the Chief Financial Officer (“CFO”) of Ritani, and also Ritani’s manager (Id. ¶ 109-110). Defendants contend that once JKD became the majority member of Ritani, it was no longer privy to financial information regarding Ritani, and relied exclusively on Manber to provide that information. (Id. ¶¶ 134-35,181, 241-42). Thus, Defendants maintain that Manber, as the CFO and Manager of Ritani, and Klein, as Ritani’s Chairman of the Board, both owed a fiduciary duty to HR Corp., the minority member. (Id. ¶¶ 107, 110-11, 142, 161). In addition, by August 2007, Klein’s son, Joel Klein (“Joel”), who had been employed by JKD, left JKD and was installed by his father at Ritani to give JKD more day-today control. (Id. ¶¶ 143-44). According to the Defendants, once Joel was employed by Ritani and effectively took over its management, he also owed a fiduciary duty to HR Corp. (Id. ¶ 145).

According to the Defendants, as of August 2007, Blue Nile had been a customer of JKD for approximately seven years, but had never done business with Ritani. (Id. at ¶¶ 149-50). While still employed at JKD, Joel allegedly began soliciting Blue Nile to become a Ritani customer. (Id. ¶ 151). At a Las Vegas jewelry show in May or June 2007, Joel allegedly met with Sue. Bell, Senior Vice President of Blue Nile, and while still working at JKD, Joel continued to actively solicit Blue Nile’s business for Ritani. (Id. ¶ 152). Defendants contend that these solicitation activities were known to JKD, Klein, Joel, and Manber, but actively kept secret from Aghajayan and HR Corp. during the spring and summer of 2007. (Id. ¶¶ 153-54,182).

Defendants maintain that when Blue Nile became a customer of Ritani’s in the fall of 2007, that fact was kept secret from Aghjayan, even though he was asked to sign a Non-Disclosure Agreement (“NDA”) on October 15, 2007. (Id. ¶ 196-99; FAC ¶ 24, Ex. 9) (stating that Aghjayan was instructed “to keep in strict trust and confidence any and all information relating to the Company’s business relationship with Blue Nile.”).

According to Aghjayan, to hide the business arrangement between Ritani and Blue Nile from him, and thus HR Corp., Ritani and JKD, created phony order forms and invoices that did not bear the Blue Nile name. (Dkt. No. 61 ¶¶ 183,198). Simultaneously with Ritani’s discussions with Blue Nile, Ritani was negotiating with HR Corp. to acquire its remaining minority membership interest in Ritani. (Id. ¶ 155). Aghjayan allegedly, on behalf of HR Corp., decided that, instead of selling HR Corp.’s remaining interest to JKD, it would make a bid for Ritani and obtained financing to buy back the company. Manber was allegedly present at the meeting between Aghjayan and HSBC Bank (“HSBC”) at which HSBC promised financing to HR Corp. (Id. ¶¶ 157-58).

According to the Defendants, in July 2007, Aghjayan announced to Manber and certain Ritani employees that he intended to buy back Ritani. (Id. ¶ 159). When he made this announcement, Aghjayan, and thus HR Corp., allegedly did not know that Ritani was soliciting Blue Nile and that it was going to become a Ritani customer. (Id. ¶¶ 154, 160). In addition, Defendants allege that JKD, Klein and Joel directed Manber not to disclose to Aghjayan anything about the business opportunity with Blue Nile, and the potential positive effects it might have on Ritani, and also directed Manber to use his status as CFO and Manager of Ritani, to dissuade HR Corp. from buying Ritani. (Id. ¶¶ 167-69). Thus, Manber allegedly, at the direction of the other Counterclaim Defendants, took Harout aside, and told him that, instead of buying Ritani, Corp. should sell its remaining interest in Ritani to JKD. (Id. ¶¶ 156, 159, 170). Specifically, Manber allegedly said, “Harout, why would you want to buy out JKD and become the sole owner of Ritani? Don’t you know that Ritani is going to have declining revenue in 2008, and lose money in 2008? You shouldn’t buy the company, you should sell the stake,” or words to that effect. (Id. ¶ 171).

According to the Defendants, to induce HR Corp. to sell rather than buy, Manber showed Aghjayan sales projections for Ritani that Manber had prepared in his capacity as Ritani’s CFO and Manager in July 2007, and, upon information and belief, in concert with JKD, Klein, and Joel, which represented Ritani’s 2007 revenues and other financial information and projections for 2008, specifically, that Ritani would suffer a decline in revenue in 2008 as compared to 2007. (Id. ¶¶ 172-73, 239). This sales projection allegedly failed to disclose and concealed material facts concerning the prospects of Ritani and the material fact that Ritani was gaining Blue Nile as a customer. (Id. ¶¶ 176, 239-40). HR Corp. Has Failed to Plead Sufficient Facts to Establish Fraud

In its second counterclaim, HR Corp. has alleged common law fraud against the Counter-Defendants. (See Dkt. No. 61, ¶¶ 238-45). HR Corp. contends that “in over 150 paragraphs ... the very nature of the alleged fraud, including the time, place, speaker, and the allegedly false misrepresentation” is adequately described and contains “the requisite, plausible factual allegations.” (HR Corp. Opp. at 12). Specifically, that the “time and place is in July 2007 outside Ritani’s conference room after Harout [Aghjayan] announced his intention to have [HR] Corp. buy back Ritani, the speaker is Manber (at the behest and direction of JKD and A.D. Klein) and the allegedly false misrepresentation is that [HR] Corp. should not buy back the company, but rather sell its interest because it was projected that Ritani’s revenue would decrease in 2008 (supported by false projections that did not take the Blue Nile business into account.)”. (Id. at 12-13).

To state claim for common law fraud under New York law, a plaintiff must demonstrate “(1) a misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3) which the defendant made with the intention of inducing reliance; (4) upon which plaintiff reasonably relied; and (5) which caused injury to plaintiff.” In re Optimal U.S. Litigation, 813 F.Supp.2d 351, 381 (S.D.N.Y.2011). “The elements of fraud under New York law are essentially the same as those for a claim of securities fraud under Section 10(b) and Rule 10b-5.” Serova v. Teplen, No. 05 Civ. 6748(HB), 2006 WL 349624, at *8 (S.D.N.Y. Feb. 16, 2006).

Thus, in addition to the pleading requirements laid out in Twombly and Iqbal, HR Corp.’s claims must also satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b). As discussed above, in this Circuit, “allegations of fraud [must] adequately specify the statements made that were false or misleading, give particulars as to the respect in which it is contended that the statements were fraudulent, and state the time and place the statements were made and the identity of the person who made them.” Red Ball Interior Demolition Corp. v. Palmadessa, 874 F.Supp. 576, 584 (S.D.N.Y.1995). This heightened pleading standard also applies to “claims that do rely upon averments of fraud [and sound in fraud].” Rombach, 355 F.3d at 171-72.

The facts cited by HR Corp. fail to satisfy the heightened pleading standard of Rule 9(b). HR Corp. alleges that;

239. By the acts described herein, Manber, at the direction of A.D. Klein, Joel Klein and JKD, knowingly provided Corp. with false, incomplete, and misleading material financial information regarding Blue Nile, sales projections and the financial condition of LLC, and the value of Corp.’s interest therein, as well as its future worth and viability, in the 2007 Financial Projection, and made false statements to induce Corp. to sell its interest in LLC rather than buyout JKD.

240. JKD, A.D. Klein, Joel Klein and Manber knew that the 2007 Financial Projection and Manber’s statements provided to Corp. was false, and provided such to Corp., intending that Corp. rely on it and be convinced by such to decide to sell its stake in LLC, rather than buy-out JKD.

241. It was reasonable for Corp. to rely upon the 2007 Financial Projection and Manber’s statements. Corp. reasonably relied upon CFO Manber’s projections as he was CFO of LLC, its Manager and a CPA (not knowing that Manber was, in fact, on JKD’s payroll, which fact, Manber, A.D. Klein, Joel Klein and JKD intentionally failed to disclose to Harout so that Harout, on behalf of Corp., would trust Manber),

242. Corp. had no independent means to find out about LLC’s relationship with Blue Nile given the affirmative steps taken (as set forth above) to hide the relationship, including by having LLC use phony names on invoices and bags and production, and failing to disclose the existence of the relationship until October 15, 2007, after Corp. sold its stake in LLC.

(Dkt. No. 61 ¶¶ 239^42).

To begin with, Rule 9(b) is not satisfied by a complaint in which “defendants are clumped together in vague allegations.” Three Crown Ltd. Partnership v. Caxton Corp., 817 F.Supp. 1033, 1044 (S.D.N.Y.1993) (stating that “[s]uch wide-scale clumping is unacceptable.”). “To this end, the complaint may not rely upon blanket references to acts or omissions by all of the defendants, for each defendant named in the complaint is entitled to be appraised of the circumstances surrounding the fraudulent conduct with which he individually stands charged.” Red Ball Interior Demolition Corp., 874 F.Supp. at 584. HR Corp. contends that unlike in cases like Three Crown, where the respective pleadings identified the alleged fraudulent actors as “defendants,” its pleadings identify the name and title of those “who acted on behalf of the Corporate Defendants.” (HR Corp. Opp. at 17). However, “even if [plaintiffs] language is somewhat more exact than in Three Crown, Plaintiffs do not distinguish the allegedly illegal acts of the [defendants] from one another.” See e.g., In re Blech Secs. Litig., 928 F.Supp. 1279, 1294 (S.D.N.Y.1996).

Here, HR Corp. conflates the acts of JKD, Klein, and Ritani, such that that particular acts with which they are charged cannot be determined. Such pleadings fail because each allegedly illegal act of each Counter-Defendant must “specify their respective roles in the manipulation.” Three Crown, 817 F.Supp. at 1040 (holding that when “defendants are charged with fraud, the complaint must be specific as to the nature of each defendant’s alleged participation in the fraud.”) (emphasis added); see also Ellison v. American Image Motor Co., 36 F.Supp.2d 628, 641 (S.D.N.Y.1999) (“Because the complaint fails to separate these defendants with specific allegations of wrongdoing as to each one of them, the complaint does not pass muster under Rule 9(b),”).

Manber is the only remaining counter-defendant to whom allegations, of any specificity, are alleged. HR Corp. alleges that Manber attempted to convince Aghjayan not to buy Ritani back from JKD, but to sell HR Corp.’s interest in Ritani instead. (Dkt. No. ¶ 169). Specifically, in July 2007, Manber allegedly told Aghjayan that “Ritani is going to have declining revenue in 2008, and lose money in 2008 ...” and that Aghjayan should therefore “sell the stake.” (Id. ¶ 171). According to the Plaintiff and Counter-Defendants, “[tjhese are statements of opinion and speculation of uncertain, future events, not representations of material fact.” (PI. Memo, at 10).

Accepting all of HR Corp.’s allegations as true, there is no actionable fraud or misrepresentation because HR Corp. fails to show not only that Aghjayan reasonably believed Manber’s description of Ritani’s financial status, including any omissions of Ritani’s relationship with Blue Nile, but also that Aghjayan was justified in taking acting in reliance thereon. See Red Ball Interior, 874 F.Supp. at 588. HR Corp.’s Answer merely states that “[i]t was reasonable for Corp. to rely upon the 2007 Financial Projection and Manber’s statements. Corp. reasonably relied upon CFO Manber’s projections as he was CFO of LLC, its Manager and a CPA....” (Dkt. No. 61 ¶ 241; see also id. ¶¶ 178-79). There are no allegations that HR Corp., through Aghjayan, knew about or even read the 2007 Financial Projection when it chose to sell its shares rather than buy out JKD. See Am. Fin. Int’l Group-Asia, LLC v. Bennett, No. 05 Civ. 8988, 2007 WL 1732427, at *9 (S.D.N.Y. June 14, 2007) (finding no reliance where “plaintiffs have not alleged that they read any of the financial statements at issue, much less that they actually relied on them.”).

Even assuming HR Corp. had pled actual reliance, such an allegation would be insufficient because the reliance must also be reasonable and justifiable. See Crigger v. Fahnestock & Co., Inc., 443 F.3d 230, 234 (2d Cir.2006). HR Corp. could not have reasonably relied on the 2007 Financial Projection because, on its face, the document is incomplete, in that the 2006 figures are represented by “########” for the majority of the months, and does not show the alleged basis of HR Corp.’s decision to sell its shares, the decline in Ritani’s revenue in 2008 as compared to 2007.

Moreover, even assuming HR Corp. has sufficient pled common law fraud as to each Counter-Defendant, it has not alleged damages that are actionable under fraud. HR Corp. alleges that it is entitled to damages resulting from; (1) gains it hypothetically would have realized had it not sold its interest in Ritani in August 2007, measured by future Ritani profits or the amount that may have been paid by Cantor Fitzgerald in 2012 for shares of Ritani (Dkt. No. 61 ¶¶ 207, 243, 244); and (2) the difference between the price HR Corp. received for the sale of its Ritani shares and the price that it would have received but for the alleged fraud. (Id. ¶¶ 205, 243).

In essence, HR Corp. seeks to recover the benefit of what it claims would have been two alternative contracts. (See id. ¶¶207, 243, 244). However, in New York, “the loss of an alternative contractual bargain ... cannot serve as a basis for fraud or misrepresentation damages because the loss of the bargain was undeterminable and speculative.” Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 422, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (N.Y.1996) (internal quotation marks omitted); see also Rather v. CBS Corp., 68 A.D.3d 49, 886 N.Y.S.2d 121, 127-28 (1st Dept.2009) (dismissing as speculative fraud claim seeking to recover damages for lost opportunity and future earnings); Alpert v. Shea Gould Climenko & Casey, 160 A.D.2d 67, 559 N.Y.S.2d 312, 315 (1st Dept. 1990) (stating that “[ijt is also well settled that the victim of fraud may not recover the benefit of an alternative agreement overlooked in favor of the fraudulent one.”) (citation omitted). HR Corp. seeks to recover undeterminable and speculative damages resulting from such alternative contractual arrangements, which are not actionable under New York law.

In addition, HR Corp. maintains that the statements concerning expected losses and reduced revenue allowed JKD to purchase Corp.’s interest at a lower price. (Dkt. No. 61 ¶ 187). However, HR Corp.’s sale of Ritani’s shares in August 2007 was made in accordance with the 2004 Operating Agreement, which defined the formula that determined the price of the selling member’s interest. The 2007 Purchase Agreement, executed by Aghjayan for HR Corp. on August 29, 2007, states that “pursuant to Section 6.7.1 of the [2004] Operating Agreement, upon a declaration of a deadlock, JKD has the option to purchase the membership interest held by [Corp.] in [Ritani].” (Dkt. 54, Ex. 11 at 1). Section 6.7.1 of the 2004 Operating Agreement provides the right to purchase Corp.’s interest at a purchase price equal to its “Fair Value.” (Id., Ex. 8). “Fair Value” equals HR Corp.’s proportional interest in (i) Ritani’s “good will” plus (ii) Ritani’s “Book Value,” both as measured on December 31 of the prior year, i.e., December 21, 2006.

Under the 2007 Purchase Agreement, HR Corp. was paid the following “Fair Value” for Ritani shares:

(i) $1,625,951 (representing the value of [ ] Corp.’s Capital Account and amounts remaining in the capital account of former member [Harout], each as of December 31, 2006 [i.e., Book Value], plus (iii) [sic] $65,000 (representing [] Corp.’s proportionate share of the value of [Ritani’s] good will as of December 31, 2006 [i.e., Good will],

(Id., Ex. 11 at 2).

Thus, the possibility that Blue Nile might become a customer in 2008 was immaterial to the valuation of HR Corp.’s shares. Even if the speculative future business with Blue Nile were somehow included in the 2007 Financial Statement, the price that HR Corp. received upon the sale of its Ritani shares would have remained the same.

Taken together, HR Corp. has failed to establish a claim for fraud against the Counter-Defendants. The Plaintiff and Counter-Defendants’ motion to dismiss the claim is therefore granted.

HR Corp. Has Failed to Plead Sufficient Facts to Establish A Claim for Negligent Misrepresentation

To assert a claim of negligent misrepresentation, a plaintiff must allege that (1) the defendant had a duty as a result of a special relationship to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the defendant knew that the plaintiff desired the information for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment. Hydro Investors, Inc. v. Trafalgar Power Inc., 227 F.3d 8, 20 (2d Cir.2000). In this Circuit, negligent misrepresentation claims that “sound in fraud” are subject to the heightened pleading requirements under Rule 9(b). See BNP Paribas Mortg. Corp. v. Bank of Am., N.A., 949 F.Supp.2d 486, 507-09, 2013 WL 2452169, at *14 (S.D.N.Y.2013) (citing cases).

Here, HR Corp.’s negligent misrepresentation claim fails for the same reason as the fraud claim, namely, HR Corp. has alleged no reliance and no injury suffered as a result of any reasonable reliance on anything Counter-Defendants said or did. In addition, as discussed above, in New York, “the loss of an alternative contractual bargain ... cannot serve as a basis for fraud or misrepresentation damages because the loss of the bargain was undeterminable and speculative.” Lama Holding, 88 N.Y.2d at 422, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (emphasis added). Accordingly, Plaintiff and Counter-Defendants’ motion to dismiss HR Corp.’s negligent misrepresentation claim is granted.

HR Corp. Has Failed to Plead Sufficient Facts to Establish A Claim for Breach of Fiduciary Duty and Aiding and Abetting a Breach of Fiduciary Duty

To state a claim for breach of fiduciary duty under New York law, a plaintiff must plead “breach by a fiduciary of a duty owed to plaintiff; defendant’s knowing participation in that breach; and damages.” SCS Commc’ns, Inc. v. Herrick Co., 360 F.3d 329, 342 (2d Cir.2004). While lost profits are available on breach of fiduciary duty claims, see Am. Federal Group, Ltd. v. Rothenberg, 136 F.3d 897, 907 (2d Cir.1998), a plaintiff must prove that those losses are not merely speculative but prove the losses with reasonable certainty. Id. (noting that “to recover damages for lost earnings or profits one must prove with certainty that the loss was caused by a breach....”). In New York, to recover damages for lost revenue or profits, “it must be shown that: (1) the damages were caused by the breach; (2) the alleged loss must be capable of proof with reasonable certainty, and (3) the particular damages were within the contemplation of the parties to the contract at the time it was made.” Ashland Mgmt., Inc. v. Janien, 82 N.Y.2d 395, 404, 604 N.Y.S.2d 912, 624 N.E.2d 1007 (N.Y.1993).

As discussed above, HR Corp.’s sale of Ritani’s shares in August 2007 was made in accordance with the 2004 Operating Agreement, which defined the formula that determined the price of the selling member’s interest. Thus, considering that the price that HR Corp. received upon the sale of its Ritani shares would have remained the same regardless of its relationship with Blue Nile, even assuming HR Corp. has properly pled the first two elements of a breach of fiduciary duty, the damages requirement has not been met. See e.g., Stoeckel v. Block, 170 A.D.2d 417, 417, 566 N.Y.S.2d 625 (1st Dept.1991).

Accordingly, for the reasons stated above, Plaintiff and Counter-Defendants’ motion to dismiss HR Corp.’s counterclaims is granted.

B) The Plaintiffs Motion to Dismiss Mrs. Aghjayan’s Counterclaims is Granted

In her Answer, Mrs. Aghjayan has filed a counterclaim for aiding and abetting a breach of fiduciary duty against Ritani and JKD. (See Dkt. No. 68).

Relevant Facts

Mrs. Aghjayan was formerly employed by Ritani as a CAD-CAM designer. (Id. ¶ 133). According to Mrs. Aghjayan, she left Ritani’s employ in August 2008 to pursue designing on her own, which led to the creation of the 84 bridal jewelry designs that are the subject of Ritani’s claims. (Id. ¶ 137). In connection with those designs, Mrs. Aghjayan allegedly emailed designs and CAD-CAM files to Khatchadorian in China. (Id. ¶ 138).

According to Mrs. Aghjayan, Khatchadorian was her partner, not Aghjayan’s, in the Chinese company, and therefore owed her a fiduciary duty. (Id. ¶¶ 150, 171). Among the duties allegedly owed by Khatchadorian was to maintain the confidentiality of proprietary information, including design files. (Id. ¶ 171). She alleges that the Counter-Defendants approached Khatchadorian in April 2012, who informed them that he was partners with Aghjayan and/or Mrs. Aghjayan in one or more companies outside the United States. (Id. ¶¶ 150, 151, 171, 172). Notwithstanding knowing that Khatchadorian owed a fiduciary duty to Mrs. Aghjayan, the Answer alleges that the Counter-Defendants accepted and knowingly took possession of Mrs. Aghjayan’s property that did not belong to them, without disclosing to Mrs. Aghjayan that they were doing so or that Khatchadorian had approached them. (Id. ¶ 173).

According to Plaintiff and Counter-Defendants, in the Spring of 2012, Khatchadorian contacted them and provided new evidence of Aghjayan’s alleged misconduct. Khatchadorian allegedly informed Ritani that he was a former partner of Aghjayan in the Chinese company. Specifically, Khatchadorian allegedly informed Ritani that Aghjayan, while he was still employed by Ritani and during his non compete period, had (a) partnered with Khatchadorian to manufacture custom bridal engagement rings and wedding bands in China for the sole purpose of maintaining a competing business to sell such jewelry in the United States; (b) diverted Ritani’s business opportunities to a third party by providing Khatchadorian with jewelry designs prepared by Aghjayan while working for Ritani for the use and benefit of the competing business; (c) pursued overseas manufacturing opportunities in China to further the business affairs of another; (d) disclosed Ritani’s confidential and/or trade secret CAD-CAM drawings and design files to third parties, including Khatchadorian; and (e) used Ritani’s confidential and/or trade secret designs to form a business and create jewelry styles to compete directly with Ritani in the United States market.

According to Ritani, Khatchadorian, of his own volition, provided Counter-Defendants with numerous emails showing that Aghjayan, while President, CEO, and chief designer at Ritani and continuing thereafter, took advantage of his position of trust and confidence at Ritani to allegedly create his own business to directly compete with Ritani through the use of Ritani’s trade secrets and confidential design files. Mrs. Aghjayan’s Aiding and Abetting Breach of Fiduciary Duty Claim, is Dismissed For Failure of Proof

The Answer contends that, upon information and belief, the Counter-Defendants and their employees, attorneys, and agents have been examining Mrs. Aghjayan’s property which is allegedly proprietary, including files which are for designs that have not yet been sold or marketed, and have given unlawful access to same to the jewelry designers, agents and employees of the Counter-Defendants, who have been copying and studying these designs. (Dkt. No. 68 ¶¶ 159, 161, 174). By reason of the Counter-Defendants’ alleged aiding and abetting Khatchadorian breach of fiduciary duty, Mrs. Aghjayan seeks both compensatory and punitive damages from the Counter-Defendants. (Id. ¶ 176).

To state a claim for aiding and abetting breach of fiduciary duty under New York law, a plaintiff must prove “(1) the existence of a violation committed by the primary (as opposed to the aiding and abetting) party; (2) “knowledge” of this violation on the part of the aider and abettor; and (3) “substantial assistance” by the aider and abettor in achievement of the violation.” Briarpatch Ltd., L.P. v. Geisler Roberdeau, Inc., No. 99 Civ. 9623(RWS), 2007 WL 1040809, at *21 (S.D.N.Y. Apr. 4, 2007) (citing Moll v. U.S. Life Title Ins. Co., 654 F.Supp. 1012, 1030 (S.D.N.Y.1987)). In addition, under New York law, courts have also sometimes discussed the tort of “participating” in or “inducing” a breach of fiduciary duty. The elements of this tort are similar to the tort of aiding and abetting a