Prysm Group, LLC v. Emeritus Institute of Management PTE LTD

Background

Prysm Group, LLC sued Emeritus Institute of Management PTE LTD and Emeritus Institute of Management, Inc. under New York law. Prysm alleged that the defendants violated a confidentiality and nondisclosure agreement by sharing a confidential investment presentation with the University of Pennsylvania’s Wharton business school. Prysm also alleged that Wharton gave the defendants Prysm’s work product and course materials in exchange for the presentation, and that the defendants used those materials for courses involving blockchain technology, green technology, and the metaverse.

Emeritus Institute of Management PTE LTD signed the nondisclosure agreement in October 2022. The agreement allowed the recipient to share Prysm’s confidential information with qualifying employees or affiliates for evaluating a possible transaction, required the recipient to protect the information, and made the recipient responsible for breaches by its representatives. Prysm later alleged that the defendants’ corporate structure had been concealed and that it believed Emeritus was a single entity.

Prysm’s amended complaint asserted nine claims. The defendants did not seek dismissal of the breach-of-contract claim, Count I, or the unjust-enrichment claim, Count VII. They moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, to dismiss the other seven counts.

Court’s analysis

Tortious interference with the nondisclosure agreement. The court dismissed Count II, which was asserted only against Emeritus Institute of Management, Inc. Prysm did not plead facts showing that Emeritus Institute of Management, Inc. intentionally caused Emeritus Institute of Management PTE LTD to breach the agreement. The complaint instead described the two defendants as jointly evaluating and declining a possible transaction. The court also found no actual breach based merely on the defendants’ decision not to acquire or invest in Prysm, because the agreement did not require them to complete a transaction and Prysm did not identify a provision breached by that decision. The court also rejected the alternative theory involving interference with prospective economic advantage because the allegations that Emeritus Institute of Management, Inc. persuaded the other defendant to share the presentation were conclusory, and the complaint did not adequately allege malice or improper means.

Tortious interference with the Wharton contract. The court dismissed Count III. Prysm alleged that the defendants caused Wharton to terminate its contract with Prysm by giving Wharton the confidential presentation. The court found that the complaint showed Wharton was already inclined to dispute Prysm’s fees and avoid its contractual payment obligations before receiving the presentation. Because Wharton was independently predisposed to terminate or breach the contract, Prysm did not adequately plead that the defendants were the necessary cause of the termination.

Fraudulent inducement. The court dismissed Count VI. Prysm alleged that the defendants misrepresented their corporate structure to induce Prysm to sign the nondisclosure agreement. The court rejected Prysm’s allegation that Emeritus Institute of Management PTE LTD was merely pretending to do business in the United States because other allegations showed that it pursued a possible transaction with Prysm and offered courses with Wharton. The court also found that Prysm did not plead facts creating a strong inference that the defendants intended to defraud Prysm. In addition, the allegations did not satisfy Rule 9(b), which requires fraud claims to identify the specific statement, who made it, when and where it was made, and how it was misleading.

Fraudulent concealment. The court dismissed Count V. The court first held that this claim was not automatically duplicative of the breach-of-contract claim because the alleged concealment of the defendants’ corporate structure concerned a fact outside the nondisclosure agreement. But Prysm did not adequately allege that the defendants had a duty to disclose their separate corporate identities, that they knew Prysm was acting on a mistaken belief, or that they acted with fraudulent intent. The claim also failed Rule 9(b) because Prysm did not identify the specific misleading statements or omissions, the speaker responsible for each one, or when and where they occurred.

Conversion. The court dismissed Count VIII. Prysm’s allegations about the course materials and work product were too general to identify a specific item that had been converted or to explain how the defendants’ courses were based on Prysm’s materials. The court also found that the allegations did not show that the materials were property subject to conversion under New York law or that Prysm had been denied access to them. Alleging that both sides offered courses on the same broad subjects was not enough.

Misappropriation of trade secrets. The court dismissed Count IX. To the extent Prysm based this claim on sharing the confidential investment presentation, the claim duplicated the breach-of-contract claim because it arose from the same alleged disclosure. To the extent the claim concerned the course materials, Prysm did not adequately allege that the defendants actually used those materials or that they were trade secrets. The court explained that confidential information is not automatically a trade secret and that Prysm had not provided enough detail about the materials. The fact that some courses were available online also undermined the claim that the materials were secret.

Civil conspiracy. The court dismissed Count IV. Under New York law, civil conspiracy is not an independent tort and must be based on an adequately pleaded underlying tort. Because Prysm’s other tort claims were not adequately pleaded, there was no underlying tort to support the conspiracy claim. The court also stated that the claim would be duplicative of the breach-of-contract claim even if an underlying tort had been adequately pleaded.

Disposition

Judge Victor Marrero granted the defendants’ motion to partially dismiss the amended complaint. Counts II, III, IV, V, VI, VIII, and IX were dismissed without prejudice. The order did not dismiss Counts I or VII, the breach-of-contract and unjust-enrichment claims that the defendants had not challenged in this motion. The court did not decide whether the defendants were alter egos of one another.