Knocking Inc. v. Carter

Background

Knocking Inc. sued Candi Carter, Cistus Media Inc., Courtney Spencer, and Ana Pitcher. Knocking alleged that Carter, a former employee who created the competing company Cistus, worked with former or then-current Knocking employees to use Knocking’s confidential information to solicit Knocking’s media and brand partners. The alleged information included partner-related product and cost information, contract terms, revenue and profit data, marketing strategies, and plans for developing online marketplaces.

The complaint asserted a federal claim under the Defend Trade Secrets Act and several New York claims, including trade-secret misappropriation, interference with contract, interference with prospective economic relations, unjust enrichment, breach of contract, breach of the implied covenant of good faith and fair dealing, and attorneys’ fees. Carter, Cistus, and Pitcher moved to dismiss for lack of personal jurisdiction, lack of subject-matter jurisdiction, and failure to state a claim. Spencer answered and did not move to dismiss.

Personal Jurisdiction

The court held that Carter and Cistus were subject to personal jurisdiction in New York. Knocking adequately alleged that they knowingly solicited and entered business agreements with companies operating in New York, and that the alleged trade-secret misappropriation was substantially related to those transactions. The court therefore denied Carter and Cistus’s motion to dismiss for lack of personal jurisdiction.

The court granted the motion to dismiss for lack of personal jurisdiction as to Pitcher. The complaint’s allegations that Pitcher attended a business meeting, traveled to New York, and assisted Carter were too vague and conclusory to show that Pitcher transacted business in New York. The court also found that the allegations did not adequately show that Pitcher knowingly participated in a conspiracy producing effects in New York, benefited from the alleged conduct, or directed or controlled the other defendants’ actions. The court did not decide whether Pitcher could independently be subject to jurisdiction based on her own alleged tortious acts in New York.

Standing and Ownership of Trade Secrets

The court held that Knocking had constitutional standing because it alleged concrete injuries, including violations of confidentiality and non-compete provisions, loss of competitive advantage, and diverted business. The court rejected the argument that Knocking could not be injured because some information came from its brand partners.

The court separately addressed statutory standing under the Defend Trade Secrets Act, which permits an action by an owner of a trade secret. The court granted the motion only insofar as the alleged brand-specific information received from Knocking’s brand partners did not belong to Knocking. It denied the motion as to Knocking’s own strategic plans, negotiated contract terms, and profitability and sales data from its e-commerce work.

Federal Trade-Secret Claim

The court held that Knocking adequately pleaded a claim under the Defend Trade Secrets Act. The complaint described the alleged trade secrets with enough specificity, alleged reasonable protective measures such as password-protected systems, limited information sharing, and confidentiality agreements, and alleged that the information had independent economic value. Knocking also adequately alleged that the information was acquired, disclosed, or used through violations of confidentiality obligations. The court therefore denied the motion to dismiss the federal trade-secret claim.

New York Claims

The court held that Knocking adequately pleaded its common-law trade-secret misappropriation claim and denied the motion to dismiss that claim.

The court also denied the motion to dismiss Knocking’s tortious-interference-with-contract claim. Knocking adequately alleged that Carter knew about employment agreements with Pitcher and Spencer, intentionally induced breaches of their confidentiality and non-compete provisions, and caused financial and goodwill losses. The court noted that if the damages for this claim and the related breach-of-contract claim ultimately prove identical, Knocking may proceed under only one of them.

The court dismissed Knocking’s tortious-interference-with-prospective-economic-relations claim as to Carter and Cistus. Knocking did not adequately allege an existing relationship or ongoing negotiations with BET, that it would have entered a partnership with BET absent the alleged interference, or specific injury to its existing relationships with brand partners.

The court denied the motion to dismiss the unjust-enrichment claim. It held that Knocking adequately alleged that Cistus benefited at Knocking’s expense and that fairness required restitution.

The court denied the motion to dismiss Knocking’s breach-of-contract claim and its claim for breach of the implied covenant of good faith and fair dealing. The court stated, however, that the implied-covenant claim is not a separate cause of action if Knocking ultimately succeeds on its breach-of-contract claim.

The court dismissed Knocking’s standalone attorneys’ fees claim without prejudice. The relevant contract allowed fees to a prevailing party, but no party had yet prevailed, making the claim premature. The dismissal did not prevent Knocking from seeking attorneys’ fees as damages for its breach-of-contract claim.

Disposition

The court granted Defendants’ motion to dismiss in part and denied it in part. It granted leave to Knocking to file an amended complaint addressing the identified deficiencies by August 29, 2025.