Vogel v. Takeone Network Corp.

Background

Michael Scott Vogel sued TakeOne Network Corp., doing business as Wrapbook, and its founders Patrick Ali Javid, Naysawn Naji, Hesham El-Nahhas, and Cameron Woodward. Vogel alleged that he and Naji agreed to work together on Tradekraft, software intended to manage hiring, payroll, budgeting, and expenses in the television and film industries. He alleged that El-Nahhas later joined them as an equal partner. According to Vogel, the partners shared information, including business plans, marketing materials, industry contacts, and source code, while taking steps to keep that information confidential.

Vogel alleged that Naji and El-Nahhas later changed the Tradekraft pitch deck to make Vogel an advisor rather than a co-founder, denied him access to the source code, and proposed dissolving the partnership. Vogel further alleged that Naji, El-Nahhas, Javid, and Woodward founded Wrapbook and that Wrapbook used Tradekraft’s source code and other information.

The defendants moved to dismiss Vogel’s second amended complaint under Rule 12(b)(6), which asks whether the complaint adequately alleges a legally plausible claim. The court treated the complaint’s well-pleaded factual allegations as true for this stage of the case.

Partnership-related claims

The court denied the motion to dismiss Vogel’s partnership-breach, fiduciary-duty, and implied-covenant claims against Naji and El-Nahhas. Vogel alleged that he, Naji, and El-Nahhas agreed to work as equal partners, share decision-making authority and interests, share profits and expenses, and share losses and liabilities. The court held that these allegations sufficiently pleaded the existence of a partnership between Vogel, Naji, and El-Nahhas, or alternatively between Vogel and Naji.

The court rejected the defendants’ arguments that Vogel’s statements during the January 2018 call disproved the partnership or that inconsistencies in the amended complaints required dismissal. It also stated that factual questions about the parties’ arrangements and obligations could be addressed through discovery.

The court granted the motion to dismiss these partnership-related claims against Wrapbook. Vogel did not allege that Wrapbook was a party to the partnership agreements, which were formed before Wrapbook existed, and he did not provide facts supporting Wrapbook’s alleged liability for the founders’ actions.

Accounting claim

The court granted the motion to dismiss Vogel’s accounting claim. An accounting is an equitable request for a formal accounting of money or property. The court held that Vogel had not shown that he lacked an adequate legal remedy because his other claims covered the same subject matter. The court also noted that Vogel sought an accounting extending beyond the partnership’s dissolution and encompassing the current value of the dissolved partnership.

Trade-secret claims

Vogel asserted claims under the federal Defend Trade Secrets Act and New York law. He identified alleged trade secrets including business plans, marketing materials, source code, industry contacts, and the idea for a payroll platform. The court held that Vogel adequately alleged that the information could be trade secrets, that the partnership took reasonable steps to protect it, and that Naji and El-Nahhas disclosed or used it without permission.

The court held that Vogel’s general Tradekraft product idea was not protected as a trade secret under New York law because a product idea that becomes publicly visible once marketed generally cannot qualify as a New York trade secret. The motion was therefore granted as to Vogel’s New York trade-secret claims based on that product idea. The court declined to dismiss the federal claim based on the idea at this stage because the federal statute may protect a confidential product idea that has independent economic value from not being generally known.

The court also identified possible statute-of-limitations issues. Vogel alleged that the misappropriation occurred in 2018. The court stated that the New York limitations period appeared to have expired by the end of 2021 and questioned whether Vogel discovered, or should have discovered, the alleged federal misappropriation more than three years before filing suit in May 2022. The court directed Vogel, within 14 days, to determine whether he had a good-faith basis to continue pursuing the federal and New York trade-secret claims and to notify the defendants and the court whether he would proceed or withdraw them.

Other claims

The court denied the motion to dismiss Vogel’s claim for misappropriation of a business idea. It declined to decide at the pleading stage whether the idea was sufficiently novel and would not consider websites outside the complaint to resolve that issue.

The court denied the motion to dismiss Vogel’s unjust-enrichment claim because he plausibly alleged that the defendants improperly acquired and benefited from valuable proprietary information belonging to him or Tradekraft. The court also denied the motion as to unfair competition, holding that Vogel alleged enough based on the alleged use of the payroll-platform idea, industry contacts, and marketing materials. The court stated that issues about what the facts ultimately show and how damages should be measured could not be resolved on the motion to dismiss.

The court denied the motion to dismiss Vogel’s aiding-and-abetting claim against Wrapbook, Javid, and Woodward. Vogel alleged facts permitting an inference that Javid and Woodward knew about the partnership and the fiduciary duties owed to Vogel, and that Wrapbook knew of those relationships through Naji and El-Nahhas. The court stated that the defendants could renew their arguments at summary judgment if discovery did not support those allegations.

Claims brought for Tradekraft

The court allowed Vogel, at this stage, to bring claims on behalf of Tradekraft. The parties appeared to agree that the partnership was dissolved in January 2018, which ordinarily limits a partner’s authority to act for the partnership. But the court held that Vogel’s claims sought recovery of partnership assets and therefore related to winding up the partnership. The court stated that the defendants could renew this argument if discovery showed that no partnership agreement existed or that Tradekraft had no assets.

Disposition

Judge Arun Subramanian concluded that the defendants’ motion to dismiss was granted as to Vogel’s accounting claim, his New York trade-secret claims based on the product idea, and his claims against Wrapbook for breach of a partnership agreement, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing. The motion was denied in all other respects.