Shred-It USA, Inc. v. Mobile Data Shred, Inc.

92 F. App'x 812
CourtCourt of Appeals for the Second Circuit
DecidedFebruary 25, 2004
DocketNos. 03-7633(L), 03-7655
StatusPublished
Cited by5 cases

This text of 92 F. App'x 812 (Shred-It USA, Inc. v. Mobile Data Shred, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shred-It USA, Inc. v. Mobile Data Shred, Inc., 92 F. App'x 812 (2d Cir. 2004).

Opinion

SUMMARY ORDER

In this consolidated appeal, Defendants-Counter-Claimants-Appellants Mobile Data Shred, Inc. (“MDS”) and Michael Bohbot (“Bohbot”) appeal from the judgment of the United States District Court for the Southern District of New York (Marrero, J.), entered following a four-day bench trial, that they are hable to Plaintiffs-Counter-Defendants-Appellees Shred-It USA, Inc. and Shred-It Canada, Inc. (collectively, “Shred-It”) for breach of contract and fraud. Shred-It USA, Inc. v. Mobile Data Shred, Inc., 228 F.Supp.2d 455, 462-64 (S.D.N.Y.2002). Bohbot also appeals the district court’s September 16, 2002 Order dismissing Bohbot’s counterclaims for breach of contract, fraud, tortious interference with prospective economic advantage, defamation, and conversion. Shred-It USA, Inc. v. Mobile Data Shred, Inc., 222 F.Supp.2d 376, 378 (S.D.N.Y.2002). Defendants-Appellants Nitza I. Cruz (“Cruz”) and Executive Mobile Shredding (“EMS”) appeal the district court’s judgment that Cruz and EMS were liable to Shred-It for unfair competition. Shred-It USA, Inc., 228 F.Supp.2d at 465. MDS, Bohbot, Cruz, and EMS all appeal the damages calculation in the district court’s December 27, 2002 Decision and Order. Shred-It USA, Inc. v. Mobile Data Shred, Inc., 238 F.Supp.2d 604 (S.D.N.Y.2002).

All of these claims in this diversity action arise under New York law from (i) Shred-It’s purchase of most of the operating assets of MDS in a merger agreement effective in January 2002, (ii) subsequent business conduct by MDS and Bohbot, and (iii) business practices of Cruz (a former MDS employee) and EMS, the shredding company that she founded. Familiarity is assumed with the facts of this transaction and of events subsequent to it.

Dismissal of Bohdot’s Counterclaims Against Shred-It

In a September 16, 2002 Order the district court dismissed Bohbot’s nine counterclaims against Shred-It. 222 F.Supp.2d at 378. In a statement made on the record on September 9, 2002, as best as the court could make out, Bohbot’s confused pleadings “appear[ed]” to allege breach of contract, fraud, tortious interference with prospective economic advantage, defamation, and conversion. The district court concluded that these counterclaims were “nothing more than conclusory assertions and scattered references to unsupported, self-serving statements made during his deposition.”

Bohbot argues on appeal that, by granting Shred-It’s motion to dismiss his coun[814]*814terclaims, the district court violated Federal Rule of Civil Procedure 56(c) and drew “every inference against the defendants in assessing whether the factual record supports the counterclaims.” Brief for Appellants at 14. We review Bohbot’s appeal from the district court’s grant of summary judgment de novo, see Young v. County of Fulton, 160 F.3d 899, 902 (2d Cir.1998), construing the evidence in the light most favorable to Bohbot and drawing all reasonable inferences in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Maguire v. Citicorp Retail Servs., Inc., 147 F.3d 232, 235 (2d Cir.1998). Summary judgment is appropriate only where “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c).

We see no error in the ruling that Bohbot’s breach of contract claim was legally precluded by the integration clause contained in the merger agreement between Shred-It and MDS. We also agree with the district court that Bohbot produced no evidence (other than his conclusory assertions and affidavits) to support his other counterclaims of fraud, tortious interference with prospective economic advantage, defamation, and conversion. See Gottlieb v. County of Orange, 84 F.3d 511, 518 (2d Cir.1996) (“[Plaintiff] cannot defeat [a summary judgment motion] by relying on the allegations in his pleading or on conclusory statements, or on mere assertions that affidavits supporting the motion are not credible.” (citations omitted)). Bohbot’s appeal from the district court’s award of summary judgment to Shred-It is without merit.

Liability of Cruz and EMS for Unfair Competition

The district court found that Cruz and EMS (1) through a number of actions had given MDS customers the impression “via some sort of fraud or deception” that EMS was an authorized affiliate of MDS and (2) by acquiring several MDS customers had “deprived the plaintiff of the opportunity to reap its due profits on [its] idea or product.” 228 F.Supp.2d at 465.

Findings entered after a bench trial are reviewed for “clear error.” AUSA Life Ins. Co. v. Ernst & Young, 206 F.3d 202, 229 (2d Cir.2000). The district court’s legal conclusions are reviewed de novo as are mixed conclusions of law and fact. Id.

Although New York law typically disfavors claims of unfair competition by former employers, this protection is inapplicable when “there [is] any allegation or evidence of other wrongful or fraudulent tactics employed by [a former employee] in connection with the solicitation of [an employer’s] customers.” Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 392, 328 N.Y.S.2d 423, 278 N.E.2d 636, 639 (1972). New York law has long recognized that misrepresentation of the trade name or trademark of another (often called a “palm off’ by New York courts or a “pass off’ by federal courts) is a classic example of unfair competition. Diversified Marketing, Inc. v. Estee Lauder, Inc., 705 F.Supp. 128, 131 n. 2 (S.D.N.Y.1988). There is ample evidence that Cruz and EMS had engaged in such a “pass off’ in their communications to MDS customers.

Cruz and EMS argue that solicitation of MDS customers did not misuse confidential customer lists and did not satisfy the very particular elements of a cause of action for deceptive trade practices under New York General Business Law Section 349. However, the activities of Cruz and EMS did in fact misappropriate Shred-It property- — the MDS brand and the goodwill associated with it — and lent itself to characterization as unfair competition. See id. at 131 (“Despite ... attempts at categorization, unfair competition is an [815]*815‘adaptable and capacious’ tort.”) (citations omitted) Given the breadth of this tort and the fairly damning factual findings by the district court about the conduct of Cruz and EMS, the finding of unfair competition by these two Appellants is not erroneous. District Court’s Damages Calculation

The district court granted injunctive relief and, in addition to other damages, held MDS, Bohbot, EMS, and Cruz jointly liable to Shred-It for one year of annualized lost profits ($143,960) attributable to the seven customers lost by Shred-It in early 2002. Shred-It USA, Inc., 238 F.Supp.2d at 612.

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Bluebook (online)
92 F. App'x 812, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shred-it-usa-inc-v-mobile-data-shred-inc-ca2-2004.