J. PAUL OETKEN, District Judge.
Plaintiff Judy Poller brought this declaratory judgment action against her former employer, BioScrip, Inc. ("BioScrip"), seeking a judgment declaring invalid and unenforceable a certain portion of the Restrictive Covenant Agreement ("RCA") between the parties. BioScrip counterclaimed, asserting eleven claims against Poller and her new employer, third-party defendant American Outcomes Management, Inc. ("AOM"). AOM also asserts a counterclaim against BioScrip. Before the Court are Poller's motion for summary judgment on her declaratory judgment claim, Poller and AOM's motion for summary judgment on BioScrip's counterclaims, and BioScrip's motion for summary judgment on Poller's claim, three of its own counterclaims, and AOM's counterclaim. For the reasons that follow, the motions are granted in part and denied in part.
BioScrip is a company that provides pharmaceutical products and services across the United States. One such service is so-called "chronic care," whereby patients receive various long-term treatments, often administered in their homes. BioScrip's chronic care business centers on intravenous immunoglobulin therapy ("IVIG"). IVIG is a blood product, containing immunoglobulin antibody, which is administered intravenously or subcutaneously, and is generally used in the treatment of patients suffering from neurological or immune deficiencies, or those receiving organ transplants. Poller was a salesperson for the chronic care aspect of BioScrip's business, and the bulk of her work involved IVIG.
AOM, a private company run by oncology physician Samuel Jampolis, also provides home infusion services, meaning the intravenous injection of medications, and primarily serves patients in New York, New Jersey, and Connecticut. AOM's home infusion services also focus on chronic care, and the principal home infusion service provided by AOM is IVIG, comprising 84% of AOM's business. Both AOM and BioScrip rely on salespersons, like Poller, to develop referral sources — primarily doctors — who, in turn, refer patients for chronic care.
Poller, currently a salesperson at AOM, has worked in the home infusion industry for over 18 years, and has been involved in pharmaceutical sales for over 24 years. Throughout her career, Poller has developed relationships with referral sources, primarily doctors, in the IVIG therapy industry. And while Poller asserts that she formed many of these relationships prior to joining BioScrip, BioScrip contends that no fewer than 85% of Poller's referral
In April 2002, Poller began work with ADIMA Scrip Solutions, whose then-parent — MIM Corporation — changed its name to BioScrip in 2005. Prior to her resignation in March 2011, Poller had worked for BioScrip as a salesperson for nine years, as an at-will employee. As a salesperson, she received commissions based on patient numbers and therapy sessions. BioScrip's Strategic Business Units President, Michael Saracco, notes that "[a]s a long-term Sales Representative[,] Poller represented over $12 million in revenue to BioScrip in the geographic region of New York and Long Island." Saracco also contends that this revenue was generated by service to fewer than 200 patients. Accordingly, given the small number of patients and limited number of prescribing physicians, all parties agree that successful chronic care representatives, such as Poller, tend to be familiar with the treating doctors and nurses.
As a chronic care sales representative for BioScrip, Poller reached out to physicians who had patients requiring home infusion services and then would relay to BioScrip information obtained from doctors regarding to patients for whom IVIG would be provided in the home. While Poller claims that she identified all of her referral sources through publicly available information, such as medical directories in the New York City area, phone books, and internet searches, BioScrip contends that referral source information is identified through a variety of channels, some public and others not.
In January 2009, BioScrip provided Poller with the RCA, which conditioned future employment with BioScrip on acceptance of its terms. (Ex. B-2
The RCA included, inter alia, a Covenant Against Competition, which provided, in pertinent part: (1) a restriction on competition prohibiting Poller from participating in any "competing activities" in her territory for a period of one year with "competing activities" defined as "any activities that are the same as or similar in function or purpose to those you performed or supervised performance of on behalf of [BioScrip] in the two year period preceding your termination if such activities are being undertaken for the benefit of a business ... that provides a product or service that would disclose one or more of [BioScrip's] business opportunities...."; and (2) a restriction on customer and employee solicitation, barring Poller from soliciting BioScrip customers, clients, or referral sources, during a period of two years following termination, "for the purpose of inducing or helping the Covered Customer to cease or reducing doing business for [BioScrip] or for the purpose of diverting business opportunities away from [BioScrip]." (Ex. 3 at ¶ 3.) The RCA also included a provision relating to confidential information, prohibiting Poller from using
(Id.)
In February 2011, Poller met with AOM director, Dr. Jampolis, to discuss joining AOM. At that meeting, Poller told Dr. Jampolis that she planned to leave BioScrip, and engaged in a negotiation concerning her level of compensation. All parties agree that Dr. Jampolis told Poller that he thought AOM could address Plaintiff's compensation needs. On Thursday, March 4, 2011, AOM's attorneys, on Poller's behalf, filed — but did not serve on BioScrip — her declaratory judgment action against BioScrip in New York state court. (Ex. 1.) Also on March 4, Poller signed an employment agreement with AOM, although the "effective" date of the agreement was listed as March 7, 2011. (Ex. E-3.) This agreement includes an indemnification provision, by which AOM agrees to indemnify and hold harmless Poller for all liabilities arising from her "immediately preceding employer, BioScrip, Inc." (Id. at ¶ 9.) These obligations are wholly associated with Poller's "non-competition agreement and/or claims relating to the solicitation of clients, employees or business from Employee's immediately preceding employer." (Id.) Additionally, the AOM-Poller employment agreement includes a provision entitling Poller to her base salary of $160,000, even in the event of an injunction barring Poller from working for AOM. (See id.; id. at ¶ 3.)
Poller prepared and signed a resignation letter to BioScrip on March 4, 2011, and she sent the letter to BioScrip by Federal Express on March 5, for delivery on Monday, March 7. Poller told one individual at BioScrip — the employee who handled her intake — about her departure on Sunday, March 6, 2011, but other than that, no one at BioScrip was aware of her departure until receiving her resignation letter on Monday, March 7.
It is undisputed that, over the course of the weekend of March 4-6, 2011, and during the week prior, Poller sent various work-related documents to her personal email account. While BioScrip asserts that this correspondence was for the purpose of utilizing the information in her new position at AOM, Poller contends that she frequently sent information to her personal email, as it was easier to work on her home computer, as opposed to her BioScrip-issued laptop. Poller notes that her direct supervisor, Sal Ralinelli, in fact had authorized the routine transfer of work-related documents to her home computer to facilitate printing.
BioScrip also contends that, in addition to the transfer of BioScrip-related information to her personal email, Poller downloaded
Poller filed this action in New York County Supreme Court on March 4, 2011, and BioScrip removed the case to the Southern District of New York on March 10. (Dkt. No. 1.) BioScrip next filed an Order to Show Cause, seeking to enjoin Poller from competing directly or indirectly with BioScrip's business. (Dkt. No. 3.) After briefing and argument, Judge Deborah Batts denied BioScrip's motion for a preliminary injunction. (Minute Entry, Mar. 22, 2011.)
On April 22, 2011, BioScrip filed a Third-Party Complaint against AOM (Dkt. No. 25), and, on April 27, 2011, BioScrip answered Poller's Complaint, asserting 11 counterclaims against Poller and AOM (Dkt. No. 24). BioScrip amended its counterclaims on May 12, 2011 (Dkt. No. 26), and Poller and AOM answered BioScrip's amended counterclaims on June 16, 2011 (Dkt. Nos. 31, 32). Also on June 16, AOM counterclaimed against BioScrip. (Dkt. No. 31.) BioScrip answered AOM's counterclaim on July 5, 2011. (Dkt. No. 33.) After pursuing settlement with Magistrate Judge Cott, Poller and AOM filed a motion for summary judgment on January 11, 2013. (Dkt. No. 66.) BioScrip opposed this motion and cross-moved for summary judgment on February 8, 2013. (Dkt. Nos. 74-75.) Poller and AOM filed a joint opposition and reply on March 7, 2013 (Dkt. No. 80), and BioScrip did the same on April 5, 2013 (Dkt. No. 84.)
A court may grant a motion for summary judgment only when all of the parties' submissions, read together, reveal that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(a); Wright v. Goord, 554 F.3d 255, 266 (2d Cir.2009). "The moving party bears the burden of proving that there is no genuine [dispute] of material fact." Read v. Town of Suffern Police Dep't, No. 10 Civ. 9042(JPO), 2013 WL 3193413, at *3 (S.D.N.Y. June 25, 2013) (citing Zalaski v. City of Bridgeport Police Dep't., 613 F.3d 336, 340 (2d Cir.2010)). The court must construe all facts, and resolve all ambiguities, in the non-movant's favor. Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir. 2011). A fact is "material" only if it will affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where no facts exist "from which a reasonable inference could be drawn in favor of the non-moving party on a material issue of fact," summary judgment is appropriate. Catlin v. Sobol, 93 F.3d 1112, 1116 (2d Cir.1996).
Courts are required to deny a motion for summary judgment "where reasonable jurors could disagree as to the proper result." Read, 2013 WL 3193413, at *3. Nevertheless, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252, 106 S.Ct. 2505.
In its Answer (Dkt. Nos. 24, 26), BioScrip asserted the following counterclaims:
Poller and AOM have moved for summary judgment on Poller's original declaratory judgment claim, as well as on all of BioScrip's counterclaims. BioScrip has cross-moved for summary judgment on Poller's declaratory judgment claim, Counts I, II, and VI, and has moved for summary judgment on AOM's counterclaim.
The Court addresses each claim in turn.
Poller's declaratory judgment action and BioScrip's counterclaims for breach of contract derive from the terms of the RCA. Central to these claims is the enforceability of the RCA's restrictions. Poller argues that the RCA is unenforceable because it fails to reasonably protect BioScrip's legitimate interests when applied to Poller, as required by law. In response, BioScrip contends that the agreement is narrowly tailored to protect its valid business interests and fails to impose an undue hardship on Poller. Additionally, BioScrip argues that the undisputed facts demonstrate that Poller violated the terms of the RCA.
As discussed, the RCA includes non-compete, non-solicitation, and non-disclosure provisions. These provisions present distinct issues.
As a general rule, "New York courts adhere to a strict approach to enforcement of restrictive covenants because their enforcement conflicts with the general public policy favoring robust and uninhibited competition, and powerful considerations of public policy which militate against sanctioning the loss of a man's livelihood." Kelly v. Evolution Markets, Inc., 626 F.Supp.2d 364, 371 (S.D.N.Y. 2009) (citation omitted). Accordingly, "[a]n employee agreement not to compete will be enforced only if `it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.'" Scott, Stackrow & Co., C.P.A.'s, P.C. v.
With respect to the first prong of this reasonableness analysis, an employer's "legitimate" interests include: (1) the protection of trade secrets; (2) where the employer is exposed to "special harm" due to the "unique" nature of an employee's services; or (3) the goodwill of an employer's business. See Ken J. Pezrow Corp. v. Seifert, 197 A.D.2d 856-57, 602 N.Y.S.2d 468 (4th Dep't 1993).
"[A] trade secret is `any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.'" Softel, Inc. v. Dragon Med. & Scientific Commc'ns, Inc., 118 F.3d 955, 968 (2d Cir.1997) (applying New York law) (quoting Restatement of Torts § 757 cmt. b, at 5 (1939)). Courts examine several factors in determining whether information rises to the level of a trade secret, including:
Unisource Worldwide, Inc. v. Valenti, 196 F.Supp.2d 269, 278 (E.D.N.Y.2002) (citing N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 44 (2d Cir.1999)). With respect to customer lists and information associated with customer preferences, even where some of that information may be publicly available, courts have held that "where a company's customers are not readily ascertainable, but must be cultivated with great effort and secured through the expenditure of considerable time and money, the names of those customers are [protectable] trade secrets." Tactica Int'l, Inc. v. Atl. Horizon Int'l, Inc., 154 F.Supp.2d 586, 606 (S.D.N.Y.2001) (quotations and citations omitted). Nevertheless, "a former employee may not be enjoined from soliciting his or her former employer's customers where the names and addresses of potential customers are readily discoverable through public sources." Ivy Mar Co. v. C.R. Seasons Ltd., 907 F.Supp. 547, 557 (E.D.N.Y.1995) (citations omitted); but see Haber, 188 F.3d at 46 ("Numerous cases applying New York law have held that where, as here, it would be difficult to duplicate a customer list because it reflected individual customer preferences, trade secret protection should apply." (citations omitted)). In parsing the customer list issue, courts examine whether the solicitation of an employer's customers constitutes the "product of casual memory" or coincidence, as opposed to "a physical taking or studied copying," characterizing the
With regard to the second way in which an employer's interests may legitimately sustain a non-compete clause, such as the one at issue here, courts recognize employers' viable interests in protecting themselves from "competition by a former employee whose services are unique or extraordinary." BDO Seidman, 93 N.Y.2d at 389, 690 N.Y.S.2d 854, 712 N.E.2d 1220 (citation omitted). "[T]he question of whether one's services are unique is case-specific," USI Ins. Servs. LLC v. Miner, 801 F.Supp.2d 175, 189 (S.D.N.Y.2011), and the crux of the inquiry is whether the services rendered by a given employee are "not simply of value to the employer, but [] may also truly be said to be special, unique or extraordinary," Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 70 (2d Cir.1999). Such unique services tend to be found in "categories of employment where the services are dependent on an employee's special talents," such as "musicians, professional athletes, actors and the like." Id. The Ticor court went on to discuss cases where unique services had previously been found, such as where an acrobat performed a specific act or where a journalist wrote feature articles for the daily press. Id. at 71. And while it is not required that an employee "should be the only `star' of his employer, or that the business will grind to a halt if the employee leaves," id., being of key import or value will not automatically render one's services unique within the meaning of this limited exception. See, e.g., DataType Int'l, Inc. v. Puzia, 797 F.Supp. 274, 283 (S.D.N.Y. 1992) ("It cannot be said that DataType is exposed to special harm because of the unique nature of Puzia's services. Puzia is a salesman. To be sure, he is a very good salesman; but there is nothing unique about the nature of his services.").
Finally, "[e]ven where ... there is no showing that a former employee has obtained a competitive advantage through the misappropriation of confidential customer information or that the employee possessed unique or extraordinary abilities, the employer retains `a legitimate interest in preventing former employees from exploiting ... the goodwill of a client or customer, which had been created and maintained at the employer's expense, to
Here, BioScrip asserts that all three of the aforementioned legitimate interests are met, contending that (1) the information Poller sent to her personal email account constituted trade secrets; (2) Poller's qualities as a salesperson rendered her services unique; and (3) Poller absconded with BioScrip's goodwill, exploiting it on behalf of her new company, AOM. By contrast, AOM argues that (1) the information obtained by Poller was not protectable as a trade secret; (2) Poller is not a "unique" employee in the legal sense; and (3) the overbreadth of the agreement nullifies any legitimate interest it may have in protecting BioScrip's customer goodwill.
As noted, in determining whether material warrants trade secret protection, New York courts examine several factors, including the way in which the information was treated, compiled, and accessed within a given business. And while customer lists do not necessarily trigger trade secret protection, where information is procured at great expense and effort by an employer, and includes non-public aspects that are not easily replicated, trade secret protection may attach. See, e.g., Ivy Mar Co., 907 F.Supp. at 556-57 ("[W]here a company's customers are not readily ascertainable, but must be cultivated with great effort and secured through the expenditure of considerable time and money, the names of those customers are protectible trade secrets." (citations omitted)).
BioScrip has raised an issue of material fact as to whether compilations of its referral sources (generally, doctors or nurses), together with corresponding patient names, treatments, dosages, insurance information, hospitals, and territory area are protectable as trade secrets. Poller and AOM highlight the publicly available nature of doctors' names in defending the accessible nature of the materials at issue, contending that such availability eliminates the possibility of trade secret protection. See, e.g., Haber, 188 F.3d at 44 ("The Magistrate Judge concluded that the list of companies to whom North Atlantic's TMI division sold was not a trade secret. In this respect, the Magistrate Judge found that North Atlantic had not proven that such a list `could not have been developed by reviewing, among other public sources, trade publications available to anyone who availed himself or herself [of] such reference.'"); see also Gemmy Indus. Corp. v. Chrisha Creations Ltd., No. 04 Civ.1074 (RWS), 2004 WL 1406075, at *12 (S.D.N.Y. June 23, 2004), vacated and remanded, 452 F.3d 1353 (Fed.Cir.2006) ("Price lists, product samples and `marketing plans' are all items that are not, as a matter of law, protected as trade secrets." (citations omitted)). While practitioner information is certainly publicly available, the onerous compilation of that information, through the expenditure of time, money, and labor, and subsequent pairing of that information with patient records, preferences, and needs could indeed rise to the level of a trade secret. See Haber, 188 F.3d at 45 ("By contrast, the Magistrate Judge determined that the identities of individual contact people with whom Haber dealt while at North Atlantic or TMI were protectable
Here, BioScrip has raised a triable issue of fact as to the manner in which records of referral sources and patients were obtained, developed, and maintained — and, consequently, as to the effort expended in doing so. For example, Saracco explained in his deposition that BioScrip would help its salespersons "identify the specialists in a territory, because there's a very narrow group of specialty kinds of doctors that would prescribe these therapies." (Ex. 41, at 81:11-14.) Saracco also noted that BioScrip itself would sometimes purchase information on specialties, purchase physician lists, or pay to attend national meetings or conferences as a way in which to contact practitioners. (Id. at 81:18-82:19.) Moreover, even though such conferences or physician lists might be available to BioScrip's competitors through similar avenues, BioScrip expended time, money, and effort in obtaining those lists, cultivating relationships with given doctors, and creating databases that listed information such as "customer files, customer referrals, revenue, profitability, margin analysis, therapy — specific reports for drug — prescribed type of access — in the case of IVIG, whether it's intravenous IVIG or subcutaneous — the names of the referral sources, the managed care contract that applies to each of the patients, our pricing." (Id. at 77:18-78:4 (Saracco discussing his conception of the meaning of "confidential information" as defined in the RCA).) Poller herself admits that on a given compilation of a sales commission report that includes — in addition to a doctor or nurse's name as a referral source — a patient's name, when a patient started, was billed, and began service, together with a doctor revenue code, therapy type, revenue class, nursing type, and total associated revenue, nothing other than the referring practitioner's name is public. (See Ex. 37, 278:3-21 (discussing Ex. 15).)
AOM and Poller argue that since all of the confidential patient information could have been gleaned from approaching doctors or other practitioners through publicly available sources, it is, a fortiori, non-protectable as a trade secret. Moreover, they add that to the extent that such compilations reflect patient preferences or statuses, such information could constitute "remembered information," which, even where it reflects "specific needs and business habits of particular customers[,] is not confidential." Tactica Int'l, 154 F.Supp.2d at 607 (quoting Catalogue Serv. of Westchester, Inc. v. Henry, 107 A.D.2d 783, 784, 484 N.Y.S.2d 615 (2d Dep't 1985) (quotations and citations omitted)); see also Levine v. Bochner, 132 A.D.2d 532, 533, 517 N.Y.S.2d 270 (2d Dep't 1987) ("The use of information about an employer's customers which is based on casual memory is not actionable." (citation omitted)). BioScrip, however, has raised a triable issue of fact on the manner in which such information was gathered, the effort expended in doing so, and the resultant value of the compilation thereof. See Defiance Button Machine Co. v. C & C Metal Products Corp., 759 F.2d 1053, 1063 (2d Cir.1985) ("A customer list developed by a business through substantial effort and kept in confidence may be treated as a trade secret and protected at the owner's instance against disclosure to a competitor, provided the information it contains is not otherwise readily
Thus, BioScrip has raised a genuine issue of material fact as to whether its information concerning patients, referral sources, and treatments, constitutes a trade secret, as the record reflects that (1) the compilation of the information is largely specific to the home infusion business; (2) only certain employees have access to the customer files, records, and insurance information cited by Saracco as confidential; (3) BioScrip secured said information on a password-protected database; (4) the information, as compiled, in the hands of competitors very well may constitute a expeditious, surefire way to target referral sources; (5) BioScrip expended time, labor, and money in developing the compilation of referral sources; and (6) the information, while in some ways publicly available in the sense that practitioner names are public, is not necessarily easily duplicable or attainable in the form that BioScrip maintains it. See, e.g., DoubleClick Inc. v. Henderson, No. 116914/97, 1997 WL 731413, at *4-5 (N.Y.Sup.Ct. Nov. 7, 1997) (discussing the Restatement of Torts, § 757, comment b factors applied by New York courts in determining whether information is worthy of trade secret protection). And while AOM and Poller argue that if the information is proprietary or confidential, it is confidential to the HIPAA-protected patients, but not to BioScrip, these two categories are not necessarily mutually exclusive. While the information concerning patient treatment and insurance information is surely confidential to those patients implicated, this fact does not negate the potential proprietary interest BioScrip may have "in safeguarding that which has made [its] business successful and to protect [itself] against deliberate surreptitious commercial piracy." Reed, Roberts Associates, Inc. v. Strauman, 40 N.Y.2d 303, 308, 386 N.Y.S.2d 677, 353 N.E.2d 590 (Ct. App.1976). Accordingly, BioScrip may have a legitimate interest in maintaining its trade secrets, which may in turn justify the RCA.
BioScrip also advances alternative justifications for the RCA: namely, (1) that Poller is a "unique" employee, who, as a professional, provides extraordinary services and (2) the protection of the goodwill of BioScrip's business, which is inextricably tied to its relationships with its referral sources and patients. As for the first of these additional justifications, while Poller is clearly a highly successful salesperson, her services are not unique or extraordinary in the way in which an artisan's or performer's services may be; instead, they are merely of "high value" to her employer. See Quandt's Wholesale Distributors, Inc. v. Giardino, 87 A.D.2d 684, 684, 448 N.Y.S.2d 809 (3d Dep't 1982) ("Nothing more is claimed by plaintiff than that defendant Giardino was a very effective and well-trained salesman, familiar with plaintiff's customers and business methods.
In sum, although Poller's success as a salesperson does not render her "unique" in the sense that her value could justify the non-compete and non-solicitation aspects of the RCA, BioScrip's interest in maintaining what are potentially protectable trade secrets and its customer goodwill are both legitimate. It is axiomatic, however, that non-compete clauses and non-solicitation provisions, even where protecting legitimate interests, must be reasonably limited both temporally and geographically in order to withstand judicial scrutiny, as reasonableness will not be found where restrictive covenants act to unreasonably limit trade and burden an individual's livelihood. See Employment Law, Practitioner Treatise Series, Vol. 2, § 8.9 (2009 4th Ed.) ("A covenant not to compete must be reasonable in duration, activity, and geographic limits in order to be enforceable.").
Here, the non-compete portion of the RCA purported to limit Poller from selling or participating in the sale of IVIG products for one year in her "Territory," with that territory defined as the New York Metropolitan Area, including Bronx, Kings, New York, Queens, and Richmond counties, and Long Island, constituting Nassau and Suffolk counties. This restriction was to remain in place for one year. Courts have routinely held that limitations of one year, when coupled with corresponding geographic limitations, can be reasonable. See, e.g., BDO Seidman, 93 N.Y.2d at 393, 690 N.Y.S.2d 854, 712 N.E.2d 1220 (upholding a restraint limiting Defendant from serving BDO clients for 18 months in the limited geographic area of Buffalo as reasonable); Battenkill Veterinary Equine v. Cangelosi, 1 A.D.3d 856, 858, 768 N.Y.S.2d 504 (3d Dep't 2003) (upholding three-year, 35-mile restriction on practicing equine veterinary medicine where the geographical restriction was narrower than veterinarian's service area and the covenant only prohibited her from practicing her specialty, rather than from practicing at all); Mattern & Associates, L.L.C. v. Seidel, 678 F.Supp.2d 256, 266 (D.Del.2010) ("The court notes at the outset the reasonable nature of the 100-mile geographic limitation and two-year duration imposed upon Seidel by this provision." (footnote omitted)). Here, as BioScrip points out, Poller is not prohibited by the non-compete clause from working in a similar capacity for AOM as she did for
Second, the RCA also purports to limit Poller's ability to solicit any employee or contractor from leaving BioScrip, or engage in any business-related communication or solicitation for the purpose of inducing a BioScrip customer to cease doing business with BioScrip or displacing BioScrip as a service provider. While courts have recognized the legitimate interest that companies maintain in safeguarding their good will — an interest that may properly be safeguarded through a reasonable non-solicitation provision in an RCA — such provisions will be "considered overbroad if the former employee had not personally served those customers before and if the individual had never represented the firm's goodwill to those customers." Employment Law, Practitioner Treatise Series, § 8.10 (footnotes omitted). Moreover, "[a] restriction also may not include customers who were served outside the employee's period of employment." Id.; accord Scott, Stackrow & Co., 9 A.D.3d at 806, 780 N.Y.S.2d 675 ("A covenant will be rejected as overly broad, however, if it seeks to bar the employee from soliciting or providing services to clients with whom the employee never acquired a relationship through his or her employment or if the covenant extends to personal clients recruited through the employee's independent efforts." (citation omitted)). Here, though limited temporally to 24 months, the non-solicitation aspect of the agreement purports to prohibit Poller from soliciting any BioScrip client or referral source, regardless of whether her relationship with that client predates her employment with BioScrip. This type of overbreadth is disfavored by courts, especially given the vital employee interests associated with establishing a livelihood. Where courts find restrictions to be unreasonable, however, they may "blue pencil the covenant to restrict the term to a reasonable [] limitation, and grant partial enforcement for the overly broad restrictive covenant." Unisource, 196 F.Supp.2d at 277 (quotations and citation omitted); see also BDO, 93 N.Y.2d at 395, 690 N.Y.S.2d 854, 712 N.E.2d 1220 ("The time and geographical limitations on the covenant remain intact. The only change is to narrow the class of BDO clients to which the covenant applies. Moreover, to reject partial enforcement based solely on the extent of necessary revision of the contract resembles the now-discredited doctrine that invalidation of an entire restrictive covenant is required unless the invalid portion was so divisible that it could be mechanically severed, as with a `judicial blue pencil.' The Restatement (Second) of Contracts rejected that rigid requirement of strict divisibility before a covenant could be partially enforced. Thus, we conclude that severance is appropriate, rendering the restrictive covenant partially enforceable." (internal citations omitted)).
Here, in light of BioScrip's aforementioned interest in maintaining client goodwill, the 24-month non-solicitation restriction may indeed be valid, if limited to those client-relationships that Poller developed while in BioScrip's employ. See, e.g., USI Ins. Servs., 801 F.Supp.2d at 188 (rejecting argument that 24-month non-solicitation provision for insurance salesman was unreasonable and citing similar cases
Even where a company's interests are legitimate and reasonably protected by a restrictive covenant, courts will decline to enforce restrictive covenants where they impose an undue hardship or are deleterious to public policy — facts which Poller and AOM contend militate against enforcement here.
Poller argues that because she is a 63-year-old woman who "has spent the majority of her professional life as an IVIG salesperson in the metropolitan New York area," the RCA imposes an undue hardship. The Court disagrees. With the non-solicitation clause limited to those clients that Poller developed during her employment with BioScrip and the non-compete clause limited to the New York metropolitan area and temporally by one year, Poller is not unduly burdened. Even under the terms of the agreement, she is not precluded from selling IVIG in New Jersey, Massachusetts, Connecticut, Rhode Island, and other neighboring states. Moreover, Poller could presumably solicit non-IVIG clients, provided that those clients were not those that she developed relationships with solely during her employment with BioScrip. Additionally, Poller repeatedly stated that many of the relationships with doctors she solicited at BioScrip predated her employment there. Accordingly the RCA's solicitation limitations, so long as they are only applicable to those clients or referral sources developed exclusively at BioScrip, would not work to preclude Poller from earning a living. It is also undisputed that Poller's current employment agreement with AOM includes a provision entitling Poller to her base salary of $160,000, even in the event of an injunction barring Poller from working for AOM at all. (Ex. E-3, at ¶ 9). Compare USI, 801 F.Supp.2d at 190 ("Although the parties do not specifically focus on undue hardship, as noted above, USI is not seeking to preclude Miner from working as an insurance producer for IOA. USI instead seeks only to preclude Miner from soliciting or servicing former USI clients. USI does note, however, that Miner's employment agreement with IOA guarantees him a salary and an equity stake in the business. Accordingly, the Court finds that this prong favors USI."), with Elite Cleaning, 2006 WL 1565161, at *8-9 (finding a two-year noncompetition agreement unenforceable where it restricted an "unskilled" worker's ability to earn a living, despite the fact that his former employer's interest in "disintermediation" was "minor" and the former employee had received "no specialized training," was not "highly compensated," and had "not been shown to have been trying to take business away from [his former employer] or to have caused that effect" (footnote omitted)). Thus, given its reasonable temporal limitations, Poller's ability to sell IVIG in neighboring geographic areas, and the Court's reading of the non-solicitation clause as limited to those clients with which Poller developed a relationship exclusively during her time at BioScrip, the RCA does not impose an undue hardship on Poller.
AOM and Poller also assert that the RCA's restraints are "injurious to the public given the nature of the business at issue," namely, "the provision of home infusion therapy to patients with chronic illnesses." (Pl.'s Mem. at 16.) According to
Finally, Poller and AOM present several additional arguments against enforceability, including the supposed "drastic reduction" in compensation that Poller suffered in the wake of the RCA's imposition. Poller argues that changes to the conditions of her employment, in concert with the unilateral imposition of the RCA, constituted an exploitative action on BioScrip's part, which took advantage of Poller's lack of bargaining power as compared to that of her employer. First, Poller argues that BioScrip "dressed up" the RCA "with claims that it was offering continued employment and an additional week of severance in the event of termination," a "sales pitch [that] was belied by the fact that BioScrip was simultaneously imposing a new compensation plan that drastically reduced Poller's earnings." (Pl.'s Mem. at 15.) Second, Poller argues that "changes in the terms and conditions of Poller's employment after her execution of the RCA further militate against enforcement," citing the aforementioned reduction in compensation, the introduction of a cross-selling initiative that Poller believed jeopardized her relationships with her referral sources, the discontinuance of employer matching within employees' 401k plans, and an increase in healthcare premiums. In response, BioScrip notes that Poller was given months to review the RCA with her attorney — a time during which she interviewed for another job — and continued working for BioScrip for two years in the wake of the RCA's imposition, constituting sufficient consideration for the agreement. (Memorandum of Law in Support of BioScrip, Inc.'s Cross Motion for Summary Judgment, Dkt. No. 71 ("Def.'s Mem."), at 22.)
First, the fact that a restrictive covenant agreement is a condition of future employment with a given company does not automatically render such an agreement coercive and unenforceable. See Ecolab, 656 F.Supp. at 898 ("The other defenses fail. The fact that the employment agreement with Ecolab was a condition of employment with Ecolab does not mean that those were coerced, unenforceable agreements."). Moreover, an at-will employee's continued employment can constitute sufficient consideration to support an enforceable contract. See, e.g., Zellner v. Stephen D. Conrad, M.D.P.C., 183 A.D.2d 250, 256, 589 N.Y.S.2d 903 (2d Dep't 1992) ("Because in at-will employment the employer has the right to discharge the employee (or, as here, an independent contractor providing services under a similar arrangement), without cause, and without being subject to inquiry as to his or her motives forbearance of that right is a legal detriment which can stand as consideration for a restrictive covenant." (citation omitted)); see also Gazzola-Kraenzlin v. Westchester
In support of her position that the totality of circumstances, including Poller's "drastic reduction in compensation" in the wake of the RCA, counsels against enforceability, Poller cites Iron Mountain Info. Mgmt. v. Taddeo, where a court in the Eastern District of New York, applying Massachusetts law, held that "[i]t is well-settled under Massachusetts law that `[e]ach time an employee's employment relationship with the employer changes materially such that they have entered into a new employment relationship a new restrictive covenant must be signed.'" 455 F.Supp.2d 124, 132-33 (E.D.N.Y.2006) (citations omitted) (alteration in original). On that basis, the Taddeo court declined to issue a preliminary injunction enforcing a restrictive covenant, noting that significant changes to an employee's rate of compensation or sales area imposed subsequent to the signing of a restrictive covenant agreement, when "far reaching," tend to "suggest that the parties ha[ve] abandoned their old arrangement and ha[ve] entered into a new relationship." Id. at 133 (quotations and citation omitted). Even if the Court were to adopt this aspect of Massachusetts law, it does not appear from the factual record that the RCA was imposed as a bullying tactic to force Poller into accepting lower compensation. See Renaissance Nutrition, Inc. v. Jarrett, No. 08 Civ. 800S, 2012 WL 42171, at *5-6 (W.D.N.Y. Jan. 9, 2012) ("Defendants argue that the agreement is invalid because it was procured through coercion and overreaching. In support of this argument, they point to several facts: it was presented to them after an all-day meeting; their roles, responsibilities, and compensation did not change after the agreement was signed; they were provided only one day notice; and they risked demotion if they did not sign.... With no legal authority on point, this Court is not prepared to rule, as a matter of law, that Renaissance's actions were so inappropriate as to warrant invalidating the contract, especially
Accordingly, the RCA is not unenforceable as a matter of law, as the circumstances do not suggest that Poller, as a victim of unequal bargaining power and limited other employment prospects, was forced into an RCA and later subjected to a drastic alteration of her rights as an employee. On the contrary, Poller took months to sign the agreement, consulted with her attorney over its terms, and remained as an employee for nearly two years in its wake.
Having determined that (1) there is an issue of material fact as to whether BioScrip's referral and patient compilations merit trade secret protection; (2) BioScrip has a legitimate interest in protecting its customer goodwill; (3) the non-compete and modified non-solicitation clauses of the RCA are reasonable in duration and scope; and (4) public policy concerns, undue hardship, and the conditions surrounding the RCA's imposition do not render it unenforceable as a matter of law, the Court now turns to BioScrip's argument that summary judgment in its favor on its two breach of contract claims deriving from the RCA is warranted at this stage.
First, with respect to the non-compete provision, if BioScrip ultimately is found to possess a legitimate trade secret interest in its patient and referral list compilations, Poller will have breached its terms, having worked as an IVIG salesperson for a competitor in the same territory where she worked as a representative for BioScrip. Second, with respect to the non-solicitation aspect of the RCA, even recognizing BioScrip's legitimate interest in its customer goodwill, there remains an issue of material fact as to whether Poller breached this provision, as the record presents conflicting narratives with respect to Poller's knowledge and development of referral sources prior to and during her time at BioScrip. As noted, Poller has been in the chronic care industry for many years, and some of her referral sources predate her time at BioScrip. It is axiomatic that BioScrip cannot legitimately prevent Poller from cultivating and maintaining referral sources that predate her relationship with it. Accordingly, there remains an issue of material fact as to whether Poller breached the non-solicitation clause, as modified by the Court, in soliciting various sources, as there is a
Finally, as noted, BioScrip also advances a breach of the non-disclosure portion of the RCA (Count II), which provides, in pertinent part, that Poller was to "keep secret and retain in strictest confidence, and shall not use for [her] benefit or the benefit of others, except in connection with [BioScrip's business] and the affairs of [BioScrip], all confidential and proprietary matters relating to [BioScrip] and [its business] learned by [Poller] ... from [BioScrip]." (Ex. 3 at 2.) Such confidential information is defined as, inter alia, "customers, clients, suppliers, sources of supply and customer lists," and "sales figures, contracts, agreements, and undertakings with or with respect to customers." (Id.) Here, it is undisputed that Poller sent some of the aforementioned information to her personal email account from her BioScrip account during the weekend of March 4-6, 2011. However, the extent to which she used this information for her own benefit, or for the benefit of AOM, as proscribed by the provision, remains a genuinely disputed issue of material fact. (See, e.g., Ex. C at 241:5-242:14 ("The reason I have this was that so I just know the patients and know how they should, you know, be taken care of. And I have never used this; I have never shared information with anybody."); Ex. D at 115:9-116:8 (Dr. Jampolis noting in his deposition that AOM looked at Poller's revenue as a salesperson before hiring her but not her customer or patient records, noting that he "would have heard if Judy or Ann [referring to Ann Martens, AOM's director of sales] took BioScrip information"); Ex. E at 154:16-23 (Sherri Benson, Executive Vice President of AOM, noting that she never knew of Poller utilizing anything at AOM from her time at BioScrip except her commission report); Ex. F at 131:5-23 (Ann Martens noting that she was unaware of Poller taking any BioScrip information for use at AOM and stating that she knew Poller had returned her phone and laptop upon her resignation from BioScrip).)
Accordingly, Poller's motion for summary judgment and BioScrip's cross-motion on Poller's declaratory judgment act claim and on Counts I and II are denied.
BioScrip asserts breach of fiduciary duty and breach of the duty of loyalty counterclaims against Poller, alleging that Poller, while a BioScrip employee, misappropriated confidential and proprietary information from BioScrip, failed to disclose various sales opportunities to BioScrip, securing them on behalf of AOM, wiped her computer with the aid of AOM's Director of Sales, and attempted to divert business opportunities from BioScrip to AOM. Poller has moved for summary judgment on these counterclaims, arguing that BioScrip's allegations involve actions taken after she had already resigned from BioScrip.
A breach of fiduciary duty, and generally in tandem, of loyalty, "occurs when a fiduciary commits an unfair, fraudulent, or wrongful act, including misappropriation of trade secrets, misuse of confidential information, solicitation of employer's customers before cessation of employment, conspiracy to bring about mass resignation of an employer's key employees, or usurpation of the employer's business opportunity." Beard Research, 8 A.3d at 602 (footnote omitted). Notably, these duties are "not dependent upon an express contractual relationship, but exists even where the employment relationship is at-will." Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F.Supp.2d 489, 521 (S.D.N.Y.2011) (citations omitted). While these duties, as a general rule, apply only to an employee's performance of her job as an agent of her employer, the Second Circuit, and New York, both recognize that "an employee's fiduciary duty may continue after termination of the employment relationship." Am. Fed. Grp., 2003 WL 22349673, at *13 (citing cases). This duty may include "the specific duty not to divert business in which a former employer has the requisite `tangible expectancy,' and the duty not to
Given the nebulous nature of an industry based primarily on personal relationships that develop between chronic care sales representatives and their referral sources, it cannot be said that BioScrip had an "ongoing," "indefinite," or "tangible expectancy" in the "business of its existing customer base." See, e.g., Am. Fed. Grp., Ltd., 2003 WL 22349673, at *15. Thus, any successful breach of fiduciary duty or duty of loyalty claims will necessarily derive from Poller's alleged pilfering of confidential, proprietary information obtained in the course of her BioScrip employment for her own and AOM's benefit. Accordingly, the Court first examines the documents Poller took from her BioScrip account and laptop. The information Poller forwarded herself is as follows:
As discussed, Poller's resignation letter is dated March 4, 2011, but she did not place that resignation in the mail, via FedEx, until March 5, 2011. No one at BioScrip, save her intake employee, learned of her resignation until March 7. (Ex. A at 77:19-78:21.) Thus, up until she mailed her resignation on Saturday, March 5, 2011, Poller was subject to all the standard fiduciary duties and duties of loyalty owed to an employer by an employee. Accordingly, Emails 1-4 were all sent to Poller's personal account before her resignation. With respect to Emails 1 and 2, the commission report and patient list, Poller's position is that BioScrip employees often worked from their personal computers, and that such lists were routinely exchanged and were not treated as confidential. Additionally. Poller contends that she never had any intention of sharing confidential patient information with AOM. (See Ex. C at 241:5-242:14 ("The reason I have this was that so I just know the patients and know how they should, you know, be taken care of. And I have never used this; I have never shared information with anybody.").) She also adds that the forwarding of these four emails did not constitute an active effort to undermine BioScrip while working with AOM. Yet, the record does suggest that Poller intended to utilize the information to some extent in her new capacity as an AOM employee. For example, in describing Email 3, Poller, during the preliminary injunction hearing, explained that she sent the information to her personal email because "I wanted to
Thus, despite Poller's protestations to the contrary, there is at least an issue of material fact as to whether she utilized some of the information in Emails 1-4 — information, some of it confidential, which she procured solely as a result of her employment with BioScrip and sent to herself in the week leading up to her departure, arguably in preparation for her new position at AOM. For example, all parties agree that the patient mentioned in Email 3 became an AOM patient in September 2011. Moreover, the record reflects that at least some patients were switched from BioScrip to AOM in the wake of Poller's resignation, and that those patients were initially unaware of the provider change or confused by it, suggesting that some of Poller's referral sources, perhaps referral sources whose information was memorialized in Emails 1-4, may have moved with her to AOM. For example, in an email sent from Poller to Margaret Clarke, an AOM Patient Care Manager, on March 21, 2011, Poller wrote, concerning recent referrals from three doctors whose names appear on the list in Email 3: "It is very important not to call the patients until you speak with me. Many of my referrals are being transitioned from BioScrip. These MDs trust me to handle these patients. However, most of them are not aware the MDs are changing companies." (Ex. 26.) Similarly, in a March 22, 2011 email, Yvonne Coble, an AOM team manager, wrote: "Judy asked me to send this e-mail requesting her patient's [sic] not be contacted until she give [sic] the ok. Her patient's [sic] are in the process of transferring to AOM and most have not been notified yet." (Ex. 27.) In that same vein, Coble wrote that same day that "Judy is requesting someone from Team C contact [redacted patient name] and notify him of the transfer to AOM. Judy ask [sic] that you call her before contacting [redacted patient name]." (Id.) Moreover, on April 15, 2011, Poller sent an email to Bo Sanderson, an AOM case manager, regarding a patient of one Dr. Bronfin — a physician whose information appears in Email 3 — and that patient's switch to AOM. (See Ex. 28 ("I just came from the clinic and spoke to Dr. Bronfin. Lilac, RN, will call pt. Around 2pm to tell her the MD wants her to go with AOM! I old [sic] MD we went out of our way to hire [redacted nurse name] and she still does not want to change. I also told MD that Bioscrip ignored her DC orders and most likely serviced her in April.").)
Finally, it appears that there was some controversy at AOM with regard to the transitioning of BioScrip patients to AOM and Poller's approach towards informing patients of that transition. For example, Poller wrote to Sanderson concerning an angry doctor whose patient was transitioned to AOM before the physician had discussed the potential change in chronic care servicer, stating:
(Ex. 29.) In response to this email, Sanderson noted the existence of miscommunication regarding patient transitions, writing:
(Id.) In sum, the record reflects a dispute of material fact as to the extent to which information Poller sent to herself from her BioScrip account in preparation for her departure to AOM was intended for use in direct competition with BioScrip's business, thus constituting a breach of Poller's duty of loyalty to BioScrip while in its employ. Cf. Delville v. Firmenich Inc., 920 F.Supp.2d 446, 469 (S.D.N.Y.2013) ("Defendant, however, has presented no evidence that Firmenich's confidential or proprietary information was used by Delville to benefit his subsequent employers. Thus, Defendant's duty of loyalty claim fails as a matter of law." (citations and footnote omitted)).
As for Emails 5 and 6, the correspondence does not appear to implicate confidential information that Poller obtained through her employ with BioScrip, as required to trigger a continuing fiduciary duty that survives resignation or termination. Accordingly, any potential use by AOM of information gleaned from the correspondence in Emails 5 and 6 cannot be said to have been procured in breach of Poller's fiduciary duties or duty of loyalty. Therefore, any claims BioScrip may have deriving from those duties will necessarily stem from Emails 1-4, with respect to which there remains an issue of material fact.
Therefore, Poller's motion for summary judgment on Counts III and IV is denied.
BioScrip also asserts a claim under the Computer Fraud and Abuse Act ("CFAA") against Poller, alleging that she began work for AOM on March 4, 2011, and, without authorization, utilized her BioScrip laptop and email throughout the weekend in contravention of the CFAA. This claim lacks merit.
"The CFAA penalizes, inter alia, unauthorized access to protected computers with intent to defraud or cause damage." Nexans Wires S.A. v. Sark-USA, Inc., 166 Fed.Appx. 559, 561-62 (2d Cir. 2006) (footnote omitted) (citing 18 U.S.C. § 1030(a)). Some courts have construed "unauthorized access" to extend to access by employees to their work computers and emails after they have been terminated or resigned. See, e.g., LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1136 (9th Cir. 2009) ("There is no dispute that if Brekka accessed LVRC's information on the LOAD website after he left the company in September 2003, Brekka would have accessed a protected computer `without authorization' for purposes of the CFAA."); Univ. Sports Pub. Co. v. Playmakers Media Co., 725 F.Supp.2d 378, 385-86 (S.D.N.Y.2010) ("All parties agree that if Pitta accessed the database after he left USP's employ in 2006, he did so `without authorization.'"); Hat World, Inc. v. Kelly,
While the CFAA is primarily a criminal statute designed to combat hacking, it includes a limited private right of action. See 18 U.S.C. § 1030(g) ("Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief."). The applicable statutory factor under which BioScrip asserts is claim is that delineated in § 1030(c)(4)(A)(i)(I): "loss to 1 or more persons during any 1-year period ... aggregating at least $5,000 in value." The statute defines "loss" as follows:
18 U.S.C. § 1030(e). Courts have interpreted this provision to limit lost revenue to those losses attributable to an interruption of service. See, e.g., Nexans, 166 Fed.Appx. at 562 ("As the district court correctly recognized, the plain language of the statute treats lost revenue as a different concept from incurred costs, and permits recovery of the former only where connected to an `interruption in service.'" (citations omitted)); accord Civic Ctr. Motors, Ltd. v. Mason Street Import Cars, Ltd., 387 F.Supp.2d 378, 382 (S.D.N.Y. 2005) ("In the instant case, Plaintiffs are seeking compensation for lost profits resulting from Defendant's unfair competitive edge and for their now wasted investment in the development and compilation of the database information. However, neither of these kinds of losses are the result of computer impairment or computer damage. Therefore, they are not compensable `losses' under the CFAA."); Register.com, Inc. v. Verio, Inc., 126 F.Supp.2d 238, 252 n. 12 (S.D.N.Y.2000) ("Although lost good will or business could provide the loss figure required under § 1030(a)(5)(C), it could only do so if it resulted from the impairment or unavailability
Here, BioScrip alleges two kinds of damages stemming from Poller's alleged unauthorized access of her BioScrip laptop: (1) the March 5 use of Poller's computer to access her BioScrip email to send BioScrip information reportedly pertaining to two new patient referrals (Emails 3 and 4, mentioned above); and (2) the monetary expenditures incurred by BioScrip in hiring a forensic expert to examine Poller's laptop after she purportedly "wiped" it of all information. With respect to Emails 3 and 4, even assuming that Poller's use was "unauthorized" within the meaning of the statute, the supposed lost revenue or business associated with the two potential referrals in those emails cannot be said to have been caused by an interruption of service, as required by the plain language of the CFAA. There is nothing about the forwarding of Emails 3 and 4 that constitutes the "impairment or unavailability of data or systems." Register.com, 126 F.Supp.2d at 252 n. 12. Second, "under the case law interpreting [the CFAA] from within this circuit, the costs of investigating security breaches constitute recoverable `losses,' even if it turns out that no actual data damage or interruption of service resulted from the breach," Univ. Sports Pub. Co., 725 F.Supp.2d at 387 (citations omitted), and it is clear that BioScrip has provided evidence that it spent approximately $6,000.00 in its retention of UHY Advisors FLVS. Inc., a company specializing in digital forensics and eDiscovery, to "assist in analyzing the laptop that Ms. Poller returned on March 7, 2011." (Saracco Decl. at ¶ 3; id. at Ex. 1.) BioScrip contends that over the course of the weekend from March 4 through March 7, Poller "wiped" her computer of tens of thousands of BioScrip documents, in addition to forwarding BioScrip information to herself. (Pl.'s CSMF at ¶ 113; see also Ex. 37 at 222:6-226:1.) The reported "wiping" of Poller's computer, scrubbing it of what BioScrip contends constituted 30,000 documents, is presumably the "damage assessment" or data restoration BioScrip advances as a "reasonable cost," collectable under the CFAA. The circumstances surrounding the transfer and deletion of this information, however, raise questions as to whether it fits within the ambit of the CFAA.
As noted, the CFAA only encompasses damages or loss associated with unauthorized access of a computer. However, where an employee has certain access to a computer or system associated with her job, that access will be construed as unauthorized within the meaning of the CFAA only where it occurs after the employee is terminated or resigns. See, e.g., Orbit One Commc'ns, Inc. v. Numerex Corp., 692 F.Supp.2d 373, 385 (S.D.N.Y. 2010) ("[R]eading the phrases `access without authorization' and `exceeds authorized access' to encompass an employee's misuse or misappropriation of information to which the employee freely was given access and which the employee lawfully obtained would depart from the plain meaning of the statute."); accord JBCHoldings, 931 F.Supp.2d at 522-23 ("This Court finds the narrow approach to be considerably more persuasive: When an employee who has been granted access to an employer's computer misuses that access, either by violating the terms of use or by breaching a duty of loyalty to the employer, the employee does not `exceed authorized access' or act `without authorization.'").
Here, Poller's last day of work at BioScrip was March 4, 2011. She originally attempted to resign from BioScrip that
Accordingly, Poller's motion for summary judgment on BioScrip CFAA claim is granted.
BioScrip asserts an unfair competition counterclaim against Poller and AOM, contending that Poller and AOM "misappropriated BioScrip's labors, expenditures and good will." (Def.'s Rep. 26.) The parties have cross-moved for summary judgment on this counterclaim.
"Common law unfair competition is `a broad and flexible doctrine ... [that] is adaptable and capacious.'" Barbagallo v. Marcum LLP, 820 F.Supp.2d 429, 446 (E.D.N.Y.2011) (quoting Roy Export Co. Establishment v. Columbia Broad. Sys. Inc., 672 F.2d 1095, 1105 (2d Cir.1982) (alteration in original)). "The law of unfair competition in New York encompasses a broad range of unfair practices." CA, Inc. v. Simple.com, Inc., 621 F.Supp.2d 45, 52 (E.D.N.Y.2009) (citations omitted). And while the doctrine is flexible, it is not "limitless," with its "essence" being that the "defendant misappropriated the fruit of plaintiff's labors and expenditures by obtaining access to plaintiff's business idea either through fraud or deception, or an abuse of a fiduciary or confidential relationship." Telecom Intern. Am., Ltd. v. AT & T Corp., 280 F.3d 175, 197 (2d Cir.2001) (quotations and citations omitted); see also Delville, 920 F.Supp.2d at 470-71 (citing cases). Even where a party benefits from another's research, development, and labor, however, "absent some appropriation of an idea or knowledge in which [the laboring party] had a property interest or a contractual arrangement creating such an interest," an unfair competition claim will not lie. Telecom, 280 F.3d at 198.
First, the claim fails as to AOM, as there is no record evidence that AOM misappropriated — or wrongfully took —
AOM also asserts an unfair competition counterclaim against BioScrip (Dkt. No. 31 at ¶¶ 154-56), contending that "BioScrip has engaged in unfair competition, violated industry standards and violated HIPAA by unlawfully using [patient health information] that was provided by treating physicians solely for the purpose of patient care." (Id. at ¶ 155.) However, there is no evidence in the record to support this claim, nor does AOM oppose BioScrip's motion for summary judgment on these grounds. Thus, BioScrip's motion for summary judgment on AOM's unfair competition claim is granted.
BioScrip contends that Poller misappropriated BioScrip's trade secrets, imparting AOM with a competitive advantage that it exploited upon Poller's hiring. Poller and AOM have moved for summary judgment on this claim.
"A plaintiff claiming misappropriation of a trade secret must prove that: (1) it possessed a trade secret, and (2) defendant is using that trade secret in breach of an agreement, confidence, or duty, or as a result of discovery by improper means." Delville, 920 F.Supp.2d at 470 (quotations and citations omitted). With respect to AOM, BioScrip's claim suffers from the same infirmity as Count VI — namely, there is no indication from the record that AOM misappropriated any of BioScrip's proprietary information. Accordingly, Poller and AOM's motion for summary judgment on Count VII is granted as to AOM. Regarding Poller, as discussed, there is an issue of material fact as to whether the information Poller took from her BioScrip laptop was protectable as a trade secret. Similarly, there remains a dispute as to whether and to what extent she used this information once at AOM. Therefore, Poller and AOM's motion for summary judgment on BioScrip's misappropriation claim is granted as to AOM, but denied as to Poller.
BioScrip contends that Poller's misappropriation of BioScrip's proprietary information unjustly enriched both herself and AOM, her new employer, at BioScrip's expense. AOM and Poller have moved for summary judgment, arguing that (1) the claim is too attenuated with respect to AOM; and (2) BioScrip's breach of contract claims preclude such equitable relief.
Here, AOM and Poller contend that the RCA, which BioScrip asserts is valid, explicitly encompasses the core of BioScrip's unjust enrichment counterclaim, and as such, bars a claim in quasi-contract. However, there remain issues of material fact as to the existence of a remedy at law for Poller's actions. For example, if the information acquired by AOM is deemed unworthy of trade secret protection, the non-compete provision of the RCA would be unenforceable, as it would lack the requisite "legitimate interest." Regardless of whether the information warrants trade secret protection, however, it is possible that Poller and AOM benefited, at BioScrip's expense, from the use of the information, and that equity and good conscience might require restitution. Accordingly, BioScrip's unjust enrichment claim may stand in the alternative to its contractual claims. Thus, AOM and Poller's motion with respect to this counterclaim is denied.
BioScrip asserts claims for tortious interference with contractual relations and prospective business advantage against Poller and AOM, contending that Poller and AOM used unfair or improper means in soliciting Poller's former referral sources and patients. Poller and AOM have moved for summary judgment on both the tortious interference with prospective business interference claim and the interference with contractual relations claim, the latter of which BioScrip has not contested.
To state a claim for tortious interference with prospective business advantage in New York, "four conditions must be met: (1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts injured the relationship." Catskill Dev., L.L.C. v. Park Place Entm't Corp.,
Here, Poller and AOM contend that BioScrip has failed to adduce any record evidence that points to improper means and the requisite causation. The Court disagrees. As previously discussed, there is an issue of material fact as to whether Poller breached her fiduciary duty to BioScrip in the appropriation of certain information around the time of her departure from work there. Moreover, there is an issue of material fact with respect to whether AOM and Poller utilized this information to gain a business advantage, causing BioScrip to lose referral sources and patients. Since a knowing breach of fiduciary duty may constitute the wrongful means contemplated by a New York tortious interference with prospective economic advantage claim, and given the issues of material fact surrounding AOM's subsequent use of the information procured by Poller from her time at BioScrip, the cross-motions on this claim are denied.
BioScrip contends that Poller and AOM's actions have violated New York General Business Law § 349, arguing that Poller and AOM have misled patients into changing their IVIG service from BioScrip to AOM. In response, Poller and AOM have moved for summary judgment, asserting that New York's General Business Law ("GBL") does not apply to private, contractual disputes such as the one at issue here.
"Section 349(a) of the General Business Law declares as unlawful `[d]eceptive acts and practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state....'" Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 24, 623 N.Y.S.2d 529, 647 N.E.2d 741 (Ct.App.1995). Section 349 provides a private right of action for "`any person who has been injured by reason of any violation of this section,' allowing injunctive relief and damages, as
Here, BioScrip cites Poller and AOM's "repeated unsolicited telephone calls" as the "deceptive means" that have caused BioScrip's IVIG patients to switch their chronic care provider to AOM. (Def.'s Mem. at 38.) BioScrip adds that the fact that it is not a "consumer" does not bar it from recovery under the GBL, as "[b]usinesses indirectly injured by deceptive conduct, as well as consumers, are afforded a private right of action against fraudulent businesses." (Id.) While BioScrip is correct that a GBL plaintiff need not be a consumer in order to bring a legitimate § 349 claim, it ignores the requisite consumer-oriented element of a successful action under this statute. At its core, § 349 is a consumer protection statute, which means the conduct at issue must be directed at consumers at large. See, e.g., Wiener v. Unumprovident Corp., 202 F.Supp.2d 116, 120 (S.D.N.Y.2002) ("The sale of a standard form insurance policy has been held to constitute such consumer oriented conduct under this statute." (citations omitted)). The type of harm alleged here is not one that fits within the ambit of § 349. First and foremost, there is no record evidence that suggests that AOM's alleged solicitation of BioScrip's patients constituted conduct directed at the consuming public at large. If anything, the alleged contact with patients was highly individualized and specific. Similarly, there is no suggestion that AOM had a standard approach to the consuming patient public at large. Additionally, while BioScrip alleges in a blanket assertion that AOM and Poller contacted patients in a deceptive manner, engaging in unsolicited phone calls that involved misinformation, there is no record evidence of such activity or patient contact. Accordingly, this claim fails and Poller and AOM's motion for summary judgment on the § 349 counterclaim is granted.
In its initial Answer, BioScrip asserted a counterclaim for permanent injunctive relief. However, at this juncture, all parties appear to concede that as Poller has been working for AOM since 2011, the case now encompasses damages rather than injunctive relief. (See Pl.'s Rep. at 29; Def.'s Mem. at 24 ("Finally, at this stage of the proceedings, BioScrip is not seeking to prevent Poller from working for AOM — it is seeking only monetary damages.").)
Accordingly, Poller and AOM's motion for summary judgment on this claim is granted.
Finally, BioScrip asserts that punitive damages are warranted in this case, contending that Poller and AOM's conduct may justify such a finding. Poller and AOM have moved for summary judgment on this claim, asserting that no reasonable jury could find that their conduct was "gross, wanton, or willful," as required under New York law.
It is well settled that "[t]o obtain punitive damages in ordinary tort actions, a New York plaintiff must show that the defendant committed a tort under `circumstances of aggravation or outrage, such as spite or `malice,' or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called wilful or wanton.'" Barbagallo, 820 F.Supp.2d at 448 (quoting Prozeralik v. Capital Cities Commc'ns, Inc., 82 N.Y.2d 466, 479, 605 N.Y.S.2d 218, 626 N.E.2d 34 (Ct.App.1993)). Punitive damages are designed to "punish the tortfeasor and to deter th[e] wrongdoer and others similarly situated from indulging in the same conduct in the future." Id. (quoting Ross v. Louise Wise Servs., Inc., 8 N.Y.3d 478, 489, 836 N.Y.S.2d 509, 868 N.E.2d 189 (Ct.App.2007) (quotations omitted)). "It is not essential that the plaintiff allege a pattern of conduct directed at the public in general to assert a claim for punitive damages." Pure Power, 813 F.Supp.2d at 526 (citations omitted). However, it is "necessary to allege fraud that is founded upon such moral indifference as to be `aggravated by evil' or to be demonstrative of a criminal indifference to civil obligations." Rush v. Oppenheimer & Co., Inc., 596 F.Supp. 1529, 1532 (S.D.N.Y.1984). In sum, "[t]he conduct for which courts generally award punitive damages is that which is `close to criminality,' being variously described as `utter recklessness,' `reckless and of a criminal nature,' "wanton or malicious,' and `gross and outrageous.'" Dubai Bank, Ltd., New York Branch v. Joshi, No. 85 Civ. 5005(MJL), 1989 WL 168088, at *4 (S.D.N.Y. Aug. 29, 1989) (citations omitted).
Here, even if BioScrip ultimately prevails on all of its remaining counterclaims, there is no record evidence from which a jury could reasonably find that Poller's or AOM's actions exhibited such utter recklessness as to warrant punitive damages. At most, Poller has breached her fiduciary obligations to her former employer, permitting her new employer to unfairly and unjustly benefit from BioScrip's labors. And while Poller violated her HIPAA obligations if she indeed shared patient information with AOM, as alleged by BioScrip, there is no evidence to suggest that patients were harmed, received deficient care, or had their information circulated or published beyond their chronic care providers. Poller's conduct may have been questionable and harmful to BioScrip's business; nevertheless, punitive damages are limited to the most egregious of cases. And here, at most, BioScrip has suffered the ill effects of several
Accordingly, Poller and AOM's motion for summary judgment on the remedy of punitive damages is granted.
For the foregoing reasons, the parties' motions for summary judgment are granted in part and denied in part:
Poller's motion for summary judgment and BioScrip's cross-motion on Poller's declaratory judgment claim are DENIED.
Poller's motion for summary judgment on the enforceability of the RCA; breach of contract (Counts I and II); breach of fiduciary duty and the duty of loyalty (Counts III and IV); unfair competition (Count VI); misappropriation of trade secrets (Count VII); and unjust enrichment (Count VIII) claims is DENIED.
AOM's motion for summary judgment on the unfair competition (Count VI) and misappropriation (Count VII) claims is GRANTED; and AOM's motion for summary judgment on the unjust enrichment claim (Count VIII) is DENIED.
Poller and AOM's motion for summary judgment on BioScrip's tortious interference with business relations claim (Count IX) is DENIED; Poller and AOM's unopposed motion for summary judgment on BioScrip's tortious interference with contractual relations claim is GRANTED.
Poller and AOM's motion for summary judgment on BioScrip's Computer Fraud and Abuse Act (Count V) and New York General Business Law (Count X) counterclaims is GRANTED.
Poller and AOM's motion for summary judgment on BioScrip's request for punitive damages and for permanent injunctive relief is GRANTED.
BioScrip's motion for summary judgment on Poller's declaratory judgment claim, and on its breach of contract (Counts I and II) and unfair competition (Count VI) claims, is DENIED.
BioScrip's motion for summary judgment on AOM's unfair competition claim is GRANTED.
The Clerk of Court is directed to close the motions at docket entry numbers 66 and 74.
SO ORDERED.
