DFO Global Performance Commerce Limited v. Nirmel

Background

DFO Global Performance Commerce Limited (Nevada), DFO Global Performance Commerce Limited (Canada), Verve Direct Limited, and Make Great Sales Limited sued Krishna Delahunty Nirmel, Flynn Stevens, Daniel Hughes, the Real Steve Life, Inc., and Scented Geranium Ltd. The plaintiffs alleged that Nirmel, a former DFO USA employee and former chief revenue officer, helped transmit non-public business information to Stevens and Hughes. They alleged that Stevens and Hughes used that information to select profitable products, develop competing products and advertisements, and sell those products through businesses and websites they operated.

The alleged information included product-pipeline information, vendor information, sales data, profit margins, inventory information, pricing strategies, marketing strategies, and related business data. The plaintiffs asserted claims under the Defend Trade Secrets Act, for common-law misappropriation of confidential information, tortious interference with contracts, unjust enrichment, civil conspiracy, breach of Nirmel’s confidentiality agreement, breach of fiduciary duties, aiding and abetting a fiduciary breach, and trademark and unfair-competition violations.

Nirmel and the defendants associated with Stevens and Hughes each moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to support a legally plausible claim. The plaintiffs also moved to seal materials. The court did not consider most of a declaration and five exhibits that the plaintiffs submitted with their opposition because those materials were outside the complaint. The plaintiffs’ amended complaint had made earlier motions to dismiss moot, and those earlier motions were denied on that basis.

Trade-secret and confidential-information claims

The court held that the plaintiffs described their alleged trade secrets with enough specificity to proceed. The alleged information—such as upcoming products, sales and profitability data, e-commerce data, and vendor information—could qualify as trade secrets because the plaintiffs alleged that they had invested substantial effort in developing it, protected it with passwords, access limits, and confidentiality requirements, and gained value from keeping it secret.

The court also found that the plaintiffs plausibly alleged misappropriation. The complaint alleged that Nirmel directly provided information to Stevens and Hughes, that Nirmel coordinated with Employee B and Stevens, and that Real Steve paid Employee B. The court concluded that the plaintiffs plausibly alleged that the defendants knew, or had reason to know, that the information was obtained through improper means. The Defend Trade Secrets Act claim and the common-law misappropriation claim could therefore proceed to discovery.

Claims dismissed

The court dismissed the tortious-interference claims because the complaint did not identify the specific marketing-affiliate contracts or contracting parties. It also dismissed the unjust-enrichment claims because they duplicated the trade-secret and misappropriation claims. The court dismissed the civil-conspiracy claims because New York law does not recognize civil conspiracy as a separate tort and the plaintiffs were using the theory to relabel their other claims.

Claims involving Nirmel’s agreement and fiduciary duties

The court allowed the breach-of-contract claim against Nirmel to proceed. The complaint identified the relevant provisions of the confidentiality and nondisclosure agreement, which required Nirmel to keep covered information confidential and limited disclosure. The plaintiffs also alleged that Nirmel disclosed product-pipeline information covered by the agreement.

The court likewise allowed the fiduciary-breach claim against Nirmel to proceed because the alleged misappropriated information included sales data and vendor information, which the court viewed as potentially broader than the information covered by the agreement. The court also allowed the claims that Stevens and Hughes aided and abetted Nirmel’s fiduciary breach to proceed. It found the allegations sufficient at this stage to support an inference that Stevens and Hughes knew Nirmel was violating fiduciary duties by funneling business information to competitors.

Trademark and unfair-competition claims

The court treated “Blaux” as an inherently distinctive mark that was automatically eligible for protection under the federal trademark statute. The court nevertheless dismissed the trademark and unfair-competition theories based on websites whose addresses included “Blaux.” The complaint did not say that those websites sold, listed, or advertised particular products, so it did not plausibly allege commercial use of the mark. The court also concluded that the complaint did not plausibly allege that consumers were likely to be confused merely because they were directed to those websites. The plaintiffs had separately voluntarily dismissed claims concerning the Mobile Klean brand name.

The court allowed a narrower trademark and unfair-competition theory to proceed. The plaintiffs alleged that Stevens and Hughes bought advertising rights for “Blaux” from Google and Facebook, causing searches for Blaux to direct consumers to a website selling competing products. The court found that this plausibly alleged commercial use and a possibility that consumers looking for a Blaux air conditioner could mistakenly buy a competing product.

Disposition

Judge Oetken granted in part and denied in part Nirmel’s motion to dismiss and granted in part and denied in part the motion filed by Stevens, Hughes, Real Steve, and Scented Geranium. The court granted the plaintiffs’ motion to seal. The defendants were ordered to file answers within 21 days after the opinion and order.