Brevet Holdings, LLC v. Enascor, LLC

Background

Brevet Holdings, LLC and three affiliated entities sued Enascor, LLC and Paul Iacovacci. Brevet alleged that Iacovacci, a former managing director who was terminated in 2016, took proprietary and confidential communications and documents from Brevet and later used them in operating Enascor, a competing financial-management and advisory firm.

The Second Amended Complaint asserted five causes of action: unfair competition based on misappropriation, unfair competition based on “palming off” or passing off, misappropriation, unjust enrichment against Enascor, and breach of contract against Iacovacci. The defendants moved to dismiss under Rule 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim.

Copyright Preemption

The court denied dismissal based on copyright preemption. Copyright preemption can require dismissal of a state-law claim when the claim concerns material within copyright law and seeks rights equivalent to copyright rights. The court concluded that Brevet’s claims concerned business information, transaction information, sourcing materials, and confidential relationships rather than protected expression. It also found that the alleged confidentiality duties and misuse of confidential information were additional elements that made the claims different from copyright infringement.

Misappropriation and Unfair Competition

The court held that Brevet sufficiently pleaded claims based on misappropriation of confidential information. Although defendants argued that the materials were public-facing marketing materials, Brevet alleged that the materials carried confidentiality warnings, were sent to selected qualified investors or borrowers, and were not mass-marketed to unknown recipients. Accepting those allegations as true at the dismissal stage, the court found sufficient allegations that the information was confidential and that defendants used it for a competitive advantage.

The court also rejected arguments concerning the investor presentation and the example-transactions document. It noted that Brevet Capital Management, LLC was identified as the manager of the fund discussed in the presentation, and that Brevet alleged Iacovacci had been involved in only some of the transactions listed in the example document.

The court denied dismissal of the passing-off claim. Brevet alleged that defendants held themselves out as providing Brevet’s services by using Brevet’s experience and track record. One email in which Iacovacci identified Enascor as his new firm did not contradict those broader allegations at the pleading stage.

Unjust Enrichment

The court dismissed the unjust-enrichment claim. Under New York law, that claim requires allegations that the defendant received a specific and direct benefit at the plaintiff’s expense. Brevet alleged that Enascor obtained revenues and profits from the alleged conduct, but it did not allege that Brevet lost clients or profits or that Enascor actually secured additional profits. The court therefore found that Brevet had not alleged a specific and direct benefit received by Enascor at Brevet’s expense.

Breach of Contract

The court denied dismissal of the breach-of-contract claim. Brevet alleged that Iacovacci violated provisions of the LLC Agreements requiring members to keep confidential information secret and prohibiting personal use or disclosure of that information.

The court rejected the argument that the claim was untimely. It distinguished the alleged 2016 conduct from the alleged dissemination of confidential materials in 2020 to promote Enascor. Under the law governing the agreements, the court treated the alleged 2020 conduct as a separate breach that began a new limitations period.

The court also declined to dismiss the claim as duplicative of claims in the earlier state-court proceeding. It found that the state-court claims primarily concerned alleged breaches in 2016, while this case concerned a later alleged breach involving Enascor. The court further found that Brevet sufficiently alleged damages and sought equitable relief, including relief addressing continued use of the materials.

Independent Tort Doctrine and Group Pleading

The court denied dismissal of the tort claims as duplicative of the contract claim. Enascor was not a party to the relevant contract. As to Iacovacci, Brevet alleged conduct beyond a mere contract breach, including competing against Brevet, misattributing Brevet’s information, acting in bad faith, and intending to harm Brevet. The court found those allegations sufficient at the pleading stage to support tort claims independent of the contract claim.

The court also denied dismissal based on group pleading. Although the defendants argued that the complaint referred to the four plaintiff entities collectively as “Brevet,” the court found that the allegations gave defendants fair notice of the information allegedly misappropriated and the alleged contract violations.

Motion to Seal

The court denied Brevet’s request to keep certain exhibits under seal. The exhibits contained information about Brevet’s business model, investment strategies, borrowers, transactions, and marketing materials. The court found that the documents were judicial documents because they were submitted in connection with the motion to dismiss and were relevant to the court’s decision.

The court emphasized that the materials had already been made public in the earlier state-court proceeding. It also concluded that, even if they had remained sealed there, Brevet had not shown specific facts sufficient to overcome the strong presumption that judicial records are publicly accessible. A contractual confidentiality obligation was not enough to justify sealing.

Disposition

The court granted in part and denied in part the defendants’ motion to dismiss. The unjust-enrichment claim was dismissed; the claims for misappropriation, unfair competition based on misappropriation, passing off, and breach of contract were not dismissed. The court separately denied Brevet’s request to maintain the specified documents under seal.