CAREMEX S.A. DE C.V. v. Jayden Star LLC

Background

Caremex sued Jayden Star for breach of contract and account stated, seeking $347,131.75 in alleged unpaid amounts. Jayden Star answered and asserted five counterclaims under New York law: conversion, trade secret misappropriation, unfair competition, breach of contract, and unjust enrichment.

Jayden Star alleged that it contacted Caremex to manufacture lightweight silver jewelry and shared information about its major customer, IBB. Jayden Star alleged that the customer’s identity was secret and was disclosed in confidence. It also alleged that Caremex contacted IBB directly to sell products and create a business relationship without Jayden Star, after the parties had discussed a distribution agreement and Jayden Star had sent Caremex a signed Non-Compete Non-Disclosure Agreement.

Caremex moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). This procedure uses the same legal standard as a motion to dismiss for failure to state a claim: the court accepts well-pleaded factual allegations as true and asks whether they plausibly support legal relief. The court noted that Jayden Star did not properly oppose the motion with a memorandum of law, but it chose to address the counterclaims rather than treat them as abandoned.

Conversion

The court dismissed the conversion counterclaim. Conversion generally involves unauthorized control over specifically identifiable property that interferes with the owner’s possession or rights. The court interpreted Jayden Star’s reference to its customer information as identifying IBB’s name as the property at issue. Even assuming that a customer’s name could qualify as intangible property for conversion purposes, Jayden Star did not allege that Caremex excluded Jayden Star from using the name. At most, the allegations described copying the information, which was insufficient to state a conversion claim.

Trade Secret Misappropriation

The court denied the motion as to trade secret misappropriation. A trade secret is business information that provides a competitive advantage because it is not generally known and is kept confidential. The court found that Jayden Star plausibly alleged that IBB’s identity was a trade secret and that it had provided that information to Caremex in confidence.

The court also found sufficient allegations that Caremex used the information in violation of a confidential relationship identified by the Non-Compete Non-Disclosure Agreement. Jayden Star alleged that Caremex contacted IBB to sell products and form a business relationship without Jayden Star, and that IBB then canceled multiple orders with Jayden Star. Those allegations were sufficient at the pleading stage.

Unfair Competition

The court dismissed the unfair-competition counterclaim as duplicative. Jayden Star based that claim on the same alleged misappropriation of information underlying its trade-secret claim. Under the New York law discussed by the court, an unfair-competition claim based on the same allegations as a trade-secret misappropriation claim is treated as the same cause of action and must be dismissed as duplicative.

Breach of Contract

The court dismissed the breach-of-contract counterclaim. Jayden Star identified a proposed Distribution Agreement and the Non-Compete Non-Disclosure Agreement, but it did not allege that Caremex executed either agreement. It also did not provide sufficient facts about the formation of either agreement, including when the agreements were made or whether Caremex assented to their terms. Without an enforceable contract, the court held that Jayden Star could not plead a breach.

Unjust Enrichment

The court denied the motion as to unjust enrichment. This claim can apply when a defendant receives a benefit at the plaintiff’s expense and it would be unfair for the defendant to keep that benefit. Because Jayden Star had not sufficiently pleaded an enforceable contract, the court allowed it to plead unjust enrichment in the alternative.

The court found sufficient allegations that Jayden Star gave Caremex IBB’s identity in confidence, that Caremex benefited from the information by contacting IBB, and that Jayden Star suffered lost revenue and canceled orders as a result.

Attorney’s Fees and Disposition

Caremex requested the costs of bringing its motion. The court explained that New York generally follows the American Rule, under which each side ordinarily pays its own attorney’s fees unless a contract, statute, or court rule provides otherwise. Because Caremex identified no basis for an award, the court denied that request.

The court granted in part and denied in part Caremex’s motion for judgment on the pleadings. Jayden Star’s counterclaims for conversion, unfair competition, and breach of contract were dismissed with prejudice. The counterclaims for trade secret misappropriation and unjust enrichment were not dismissed, and all other requests for relief were denied.