Preview
(FILED: NEW YORK COUNTY CLERK 0470572011) INDEX NO. 651885/2010
NYSCEF DOC. NO. 53 RECEIVED NYSCEF 04/05/2011
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
JMB APPAREL DESIGNER GROUP, INC., Motion #
Plaintiff, Index No. 651885/10
Vv.
ROBERT S. AROCHAS, D-NACH, LTD., and
FAB MILL, INC.,
Defendants.
DEFENDANTS’ REPLY MEMORANDUM OF LAW
IN FURTHER SUPPORT OF THEIR MOTION
TO DISMISS PLAINTIFF’S COMPLAINT
FEDER KASZOVITZ, LLP
Attorneys for the Defendants
845 Third Avenue
New York, NY 10022-6601
(212) 888-8200
TABLE OF CONTENTS
Page
INTRODUCTION
POINT ONE - PLAINTIFF HAS NO PROPRIETARY
RIGHT TO USE THE WORD “ATELIER”
TO THE EXCLUSION OF OTHERS
POINT TWO - PLAINTIFF HAS NO PROPRIETARY RIGHTS
IN THE DESIGNS OF THE NON-DISTINCTIVE
GARMENTS IT SELLS, WHETHER IT COPIED
ALL, OR JUST 99% OF THOSE DESIGNS 10
POINT THREE- PLAINTIFF’S ATTEMPT TO INTRODUCE A NEW
CAUSE OF ACTION FOR THEFT OF CORPORATE
OPPORTUNITY DOES NOT SALVAGE THE LEGAL
INFIRMITIES IN THE EXISTING COMPLAINT : : 11
CONCLUSION 17
TABLE OF AUTHORITIES
Page
Abbott Redmont Thinlite Corp. v. Redmont
475 F.2d 85 (2d Cir. 1973) 14, 15
Alexander and Alexander of New York, Inc. v. Fritzen
147 A.D.2d 241, 542 N.Y.S.2d 530 (1* Dept. 1989) 12
Allied Maintenance Corp. y. Allied Mechanical Trades, Inc.
42. N.Y.2d 538, 399 N.Y.S.2d 628 (1977)
American Federal Group, Ltd. v. Rothenberg
136 F.3d 897 (2d Cir. 1998) 13
Ergotron, Inc. v. Hergo Ergonomic Support Systems, Ind.,
1996 WL 143903, *7 (S.D.N.Y. 1996) 10 Ftnt.
Fifteenth Avenue Food Corp. v. Sibstar Bread, Inc.
16 Misc.3d 1102A, 841 N.Y.S.2d 826, 2007 N.Y. Misc.
Lexis 4313, *3 (Sup.Kings 2007)
Fusha Japanese Restaurant v. Fusha
17 A.D.3d 226, 793 N.Y.S.2d 43 (1* Dept. 2005)
ITC, Ltd. v. Punchgini, Inc.
9N.Y.3d 467, 850 N.Y.S.2d 366 (2007)
Jack Schwartz Shoes, Inc. v. Skechers U.S.A., Inc.
233 F.Supp.2d 512 (S.D.N.Y. 2002) 10 Fint
Maharishi Hardy Blechman Ltd. vy. Abercrombie & Fitch Co.
292 F.Supp.2d 535 (S.D.N.Y. 2003) 10 Ftnt
People v. Rosenthal
6 Misc.3d 1004(A), 800 N.Y.S.2d 354 (Table),
2003 WL 23962174 at *1 (N.Y.City Crim.Ct. 2003) 11 Ftnt
SW. Scott & Co. v. Scott
186 A.D. 518, 174.N.Y.S. 583, (1st Dept.1919) 13, 14, 15, 16
Thomas & Betts Corp. v. Ponduit Corp.
65 F.3d 654 (7th Cir. 1995) 10 Ftnt
Uniflex, Inc. vy. Endurapack, Inc.
319 B.R. 101 (D.Del.Bankry. 2005) 14
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
JMB APPAREL DESIGNER GROUP, INC., Motion #
Plaintiff, Index No. 651885/10
v
ROBERT S. AROCHAS, D-NACH, LTD., and
FAB MILL, INC.,
Defendants.
DEFENDANTS’ REPLY MEMORANDUM OF LAW IN FURTHER
Ss UPPORT OF
E
SUPPORT THEIR
OF TBELR
e MQ 1A TO DISMISS
MOTION e PLAINTIFF’S COMPLAINT
INTRODUCTION
It is most telling that plaintiff attempts to oppose defendants’ motion directed to the
sufficiency of its 21 page complaint without citing to a single specific allegation and barely
making any reference to it at all - as if pretending that its complaint doesn’t exist! Recognizing
that Your Honor denied plaintiff's motion for a preliminary injunction from the bench because it
so obviously lacked any legal merit, plaintiff obviously now feels the need to “run away” from its
complaint, submitting over 100 pages (excluding exhibits), filled with new and contradictory
theories and allegations, in opposition to defendants’ dismissal motion. Plaintiff's strategy is
obvious - to inundate this Court with material (much of it completely irrelevant to this pleadings
motion), hoping that something will “stick”’. Plaintiff's new theories, however, do not cure the
' By submitting multiple voluminous affidavits and affirmations dealing with credibility
and other non-pertinent matters, plaintiff clearly seeks to distract the Court from the sole issue
relevant to this motion - the legal sufficiency of the complaint which plaintiff has served and
filed. Plaintiff's speculative attacks against Arochas have no relevance to these issues, and are
clearly meant to divert the Court from the legal deficiencies of its complaint. Defendants will
patent legal defects in its complaint. The same legal infirmities which the Court recognized in
denying plaintiff's preliminary injunction motion from the bench also compel dismissal of its
complaint. For this reason, plaintiff's suggestion that it be granted leave to replead (Plaintiff's
Brief, p.29) should be denied.
In opposing the within motion to dismiss the complaint, plaintiff has not disputed, nor
even addressed, its fundamental fatal defects:
© the word “Atelier”, in which plaintiff claims proprietary and exclusive rights (while
admitting it is a “weak” mark), is a commonly used descriptive french term meaning “studio”. It
is not only used by hundreds of New York businesses, including many in the garment industry,
but forms a part of at least 16 marks registered with the USPTO’, 12 of which disclaim the
exclusive right to use the word "Atelier" alone, recognizing that “Atelier” itself is merely a
descriptive or generic word. Indeed, an affiliate of the plaintiff (not Arochas) unsuccessfully
attempted to register “Atelier” as a trademark’, and plaintiff itself later expressly disclaimed any
exclusive rights to “Atelier” in its recent application to register a “Bask Atelier” trademark. See
9/28/10 Examiner’s Amendment for “Bask Atelier” mark, annexed as Exhibit 10 to the Skala
Affirmation. Moreover, Arochas has lawfully registered the trademark “Atelier Luxe” used by
defendants with the USPTO, and plaintiff filed no opposition to defendants’ use of that mark. As
endeavor not to “take the bait” by getting bogged down in a mudslinging match. What is at issue
here are the allegations contained in plaintiff's complaint, as amplified by its admissions in the
preliminary injunction papers and other documentary evidence.
2 Terms used herein shall, except as specifically noted, have the same meaning as defined
in defendants memorandum of law in support of their motion to dismiss (“Defendants’ Brief”).
3 See Exhibit 7 to the affirmation of Murray L. Skala in support of defendants’ motion to
dismiss (the “Skala Affirmation”).
Your Honor stated to plaintiff's counsel during the Argument, “[y]ou know what the elements
are for a protectable mark, and J don’t see it in the file at all. I don’t.” See p.24, lines 2-4 of the
transcript of the oral argument (“Tr.24, lines 2-4”) of plaintiff's motion for a preliminary
injunction, which took place on December 15, 2010, annexed as Exhibit 1 to the Skala
Affirmation; and
© as a matter of law, there is no prohibition against copying non-distinctive goods such as
plaintiff's “traditional style garments™, particularly since plaintiff admits that its garments were
“assembled and designed in part ... by our copying, which is how the industry works, and what is
lawfully done by everyone.”* Thus, plaintiff's counsel could formulate no answer when Your
Honor asked, during the Argument, “[w]hat is unique about a pair of pants with two legs?” Tr.,
24, line 17.
Plaintiff's complaint alleges five causes of action®, each (as set forth in defendants’
moving papers) predicated on its legally insupportable contentions that it had some sort of
exclusive right to use the word “Atelier”, and/or some sort of right not to have its non-distinct
garments copied.
‘As demonstrated in defendants’ moving papers (and as Your Honor has already
recognized), those claims cannot stand as a matter of law.
4 See Tr.3, line 10.
5 See affidavit of Marcella Law submitted by plaintiff in support of its motion for a
preliminary injunction (the “Law Injunction Affidavit”) and annexed to the Skala Affirmation as
Exhibit 3, par. 7.
6 Trademark infringement, unfair competition, breach of fiduciary duty, tortious
of the
interference with prospective business relations, and constructive trust. A “clean” copy
complaint is annexed as Exhibit 1 to the accompanying affirmation of Bruce Robins.
3
Apparently recognizing the legal deficiencies of these claims, plaintiff suggests ignoring
their legal infirmities or otherwise amending the complaint’, essentially to substitute a new
theory and cause of action, one sounding in theft of corporate opportunity. However, this as yet
unpled theory is similarly invalid as a matter of law since, as set forth more fully below, plaintiff
could have no “tangible expectancy” of selling goods to customers whose business is intensely
sought after, and with whom plaintiff had no purchase orders or agreements, exclusive or
otherwise. This is particularly true because here plaintiff made the calculated business decision
not to enter into an employment agreement with its key employee Arochas which had a specific
duration or contained a restrictive covenant, even though plaintiff admits that, “from its
formation, Arochas has been the JMB principal salesperson, responsible for 99% of sales ...
&
using his network of known buyers ...
Despite its attempt to turn its complaint “on its head”, plaintiff itself recognizes
defendants’ right to compete if they used a different mark or different copied styles. “Per the
legal principals [sic] that are relevant to the right of an employee to leave and [sic] employer and
to compete with an employer, there would be no objection from JMB if Arochas, formed a
company, sold to his existing buyer base, and designed or “knocked off” ... a new garment line,
7 See Plaintiff's Brief, p.29.
® Plaintiff's Brief, p.5. The only “tangible expectancy” that plaintiff could have was
knowing that its critical employee might one day “walk out the door” and go into business for
himself, taking the bulk of the business with him and leaving the plaintiff in exactly the position
in which it finds itself today. That, however, is simply not actionable. This is particularly so in
light of plaintiff's repeated admissions that it has no knowledge or information of any specific
acts by the defendants which are actionable, other than its ill conceived reliance on defendants’
use of the “Atelier Luxe” mark and copying of traditional designs (e.g. “It is not possible to
determine any number of facts pleaded or suggested by the affidavits as to what Arochas did
before and after he left JMB ... .”, Plaintiff's Brief, p.48).
4
labeled ‘Arochas Luxe’ or ‘Excelsior Luxe’ or the like.” Plaintiff's Brief, p.52. Thus, despite its
attempt to create a new theory of the case and a new cause of action, plaintiff's real complaint
against Arochas still reverts to the same two prongs - alleged proprietary rights to its “traditional”
designs and to its weak “Atelier” mark. Each of these prongs, however, which permeate the
complaint, is defective as a matter of law, and thus plaintiff's complaint should be dismissed.
What is really going on here is an attempt by a former employer to use protracted and
expensive litigation, to achieve a restriction on it former employee/competitor’s right to compete
which it never bargained for, and to achieve through harassment what it has been unable to
achieve in the marketplace’. Plaintiff admits that it does not know “if Arochas[‘s] conduct
conformed to the standards set forth in the case law ... .” Plaintiffs Brief, p.4. In other words,
plaintiff readily admits that it does not even know if Arochas has done anything wrong, but that
hasn’t stopped it from serving defendants with 300-plus pages in support of a preliminary
injunction motion that was denied from the bench, serving a 21 page complaint which is
predicated on unsustainable legal theories, and concocting a new (and equally unsustainable)
theory in opposition to this motion. Courts should not be tolerant of former employers who,
although they don’t know if their former employees have done anything wrong, bringin terrorem
lawsuits against them anyway.
° As the Court previously noted, the battle here should be fought in the marketplace, not
the courts: “JMB is going to have to beat Bob [in the marketplace] or they are going to lose and
go out of business. It is toe to toe, go at it.” Tr.17, lines 14-16.
5
POINT ONE
PLAINTIFF HAS NO PROPRIETARY
RIGHT TO USE THE WORD “ATELIER”
TO THE EXCLUSION OF OTHERS
Plaintiff admits that “[W]e are not Gucci or Ralph Lauren'®” and that “the Atelier mark is
not a strong mark''”. As a common descriptive word, used by scores of businesses including
companies in the garment center, plaintiff knows, despite its allegations in the complaint to the
contrary (see complaint, pars. 10 and 39, and also pars. 27, 29, 38, 40, 41, 48-51, 53, 55, 56, 59,
65, 69, 89-91, 94, 115, 123, 126, and 127), that the word “Atelier” has no secondary meaning and
cannot be appropriated by any party to the exclusion of others. It basically conceded this fact by
affirmatively disclaiming, in its application to register the mark “Bask Atelier” with the USPTO,
any right to exclusive use of “Atelier”. See Exhibit 10 to the Skala Affirmation. In addition, the
absence of any advertising, consumer studies, or media coverage, and plaintiff's debilitating
admission that it “is not a strong mark'?” require dismissal of plaintiff's causes of action"® based
on what it had originally alleged was the mark’s secondary meaning. The word “Atelier” is
simply unprotectable as a matter of law, as plaintiff conceded in its “Bask Atelier” application to
the USPTO, it has no proprietary rights in that word, and plaintiff cannot stop anyone else,
including its former employees, from using that word.
Apparently recognizing that it cannot meet the test for showing secondary meaning,
'° Law Injunction Affidavit, par.6
" Tr, 4-5, lines 26-1.
” Tr, 4-5, lines 26-1.
3 See Defendants’ Brief, pp. 9-10
plaintiff advances a number of insupportable and patently absurd arguments for why it should
still be able to exclude defendants from using the word “Atelier”, even though it mounted no
such challenge before the USPTO. First, plaintiff argues that the whole recognized secondary
meaning analysis should be ignored (“the standards for determining ‘secondary meaning’ should
be adjusted ... .”)"', but offers no authority supporting such departure from well-settled law.
Plaintiff further argues that even “[w]ithout a demonstration of secondary meaning'™ it
nevertheless has some sort of right to prevent others, including the defendants, from using the
word “Atelier”. In other words, plaintiff argues that even if it has no protectable rights to the
word “Atelier”, it can still somehow prevent the defendants from using their own registered
trademark (“Atelier Luxe”) which plaintiff never even opposed! Plaintiff's argument is not only
belied by common sense, but, more importantly, by the very cases it cites.
For example, in Allied Maintenance, supra, the plaintiff Allied Maintenance Corp.
(“AMC”) sought to enjoin defendant Allied Mechanical Trades, Inc. (“AMT”), which performed
the same services as AMC, from using the term “Allied” in connection with its business,
claiming that such use infringed its trademark and constituted unfair competition. The Court of
Appeals not only denied the injunction, but dismissed the complaint, holding that “to merit
protection, the plaintiff must possess a strong mark — one which has a distinctive quality or has
acquired a secondary meaning ... .” 42 N.Y.2d at 545, 399 N.Y.S.2d at 632. Here, plaintiff has
admitted that it does not possess a strong mark - it has no distinctive quality and no secondary
meaning!
Plaintiff's Brief, p. 42.
'S Plaintiff's Brief, p.34.
The other cases plaintiff relies on are easily distinguishable. For example, in /TC, Ltd. v.
Punchgini, Inc., 9 N.Y .3d 467, , 479, 850 N.Y.S.2d 366 (2007), a case involving whether New
York law recognizes the “famous foreign marks” doctrine, the cornerstone of the Court of
Appeals’s decision was its holding that there is no protection for a foreign mark (or any mark)
unless that mark possesses “renown in New York” or is associated with its (foreign) owner. In
Fusha Japanese Restaurant v. Fusha, 17 A.D.3d 226, 227, 793 N.Y.S.2d 43, 44 (1* Dept. 2005),
the Court held that the defendants (whose mark, unlike defendants, was not registered) had failed
to show that “the term ‘Fusha’ ... is a readily recognized common business name in the New
York metropolitan area” because “only three other businesses, none restaurants, were registered
2 Citations omitted. Here,
with the Secretary of State under a name that uses the term ‘Fusha’ :
hundreds of businesses in New York, many in the apparel business, are registered with the
Secretary of State under a name that uses the term “Atelier”. See Exhibit 4 to the Skala
Affirmation. In Fifieenth Avenue Food Corp. v. Sibstar Bread, Inc., 16 Misc.3d 1102A, 841
N.Y.S.2d 826, 2007 N.Y. Misc. Lexis 4313, *3 (Sup.Kings 2007), the Court recognized that the
mark in question, unlike the plaintiffs mark here, was a strong mark which had acquired
secondary meaning. Unlike in this case, the defendant had not registered its mark, and the
plaintiff had at no time disclaimed exclusive use of the word it was challenging.
Plaintiff also argues that defendants should be estopped to be able to argue that the
“Atelier” mark is weak because Arochas allegedly influenced plaintiff not to use some other
mark'®, See Plaintiff's Brief, p.38. Even aside from the absurdity of trying to bar defendants
'6 In its estoppel theory, plaintiff essentially tries to “punish” Arochas for influencing it
to use the word “Atelier”, even though it claims that using that word has been beneficial to it.
8
from relying on a fact which plaintiff concedes, the argument has no basis. It was not Arochas
who caused hundreds of other businesses to use the term “Atelier”, or caused the plaintiff not to
advertise “Atelier”, or caused the plaintiff to disclaim any right to the exclusive use of the word
“Atelier”!
Plaintiff points to no case where the courts have afforded protection to an admittedly
weak mark, which is used by scores of businesses, which has not been advertised, or been the
subject of any consumer studies, and where the mark’s owner had expressly disclaimed the right
to its exclusive use. Certainly such a mark cannot be preferred over a registered trademark!
In sum, “Atelier” is not a registered trademark; defendants’ “Atelier Luxe” mark is.
“Atelier” is a descriptive term which is used by hundreds of other businesses in New York, many
in the apparel industry, and is a component of many registered trademarks. Plaintiff concedes
“the Atelier mark is not a strong mark'”’ and, absent secondary meaning, plaintiff cannot prevent
others from using the word, and has no claim based on such use.
Accordingly, the causes of action in plaintiff's complaint predicated on a strong mark and
secondary meaning must be dismissed.
” Tr, 4-5, lines 26-1.
POINT TWO
PLAINTIFF HAS NO PROPRIETARY RIGHTS
IN THE DESIGNS OF THE NON-DISTINCTIVE
GARMENTS IT SELLS, WHETHER IT COPIED
ALL, OR JUST 99% OF THOSE DESIGNS
Almost as pervasive as plaintiff's claims resting on a strong mark and secondary meaning
is the second prong permeating its complaint, plaintiff's claims that its “traditional styles” are
somehow protected. Complaint, pars. 11, 14, 16, 27, 31, 32, 37, 52, 60, 62, 69, 71, 72, 79, 90-
94, 96, 98-100, 111, 113, 115, 123, 126, and 127. As this Court previously recognized (Tr.24,
line 17), the notion that plaintiff's two-legged pants are proprietary fails as a matter of law.
Plaintiff admits that its garments “are ... traditional styles ... they do not stand out' * and
that they were “assembled and designed in part ... by our copying, which is how the industry
works, and what is lawfully done by everyone.””” Nor does plaintiff dispute, or even attempt to
distinguish, the cases cited in Defendants’ Brief for the proposition that there is no prohibition
against copying “traditional” non-distinctive garments”. After all how could it, given its
'8 Ty, p.5, lines 1-2.
'® See Reply Affidavit of Marcella Law submitted by plaintiff in support of its motion for
a preliminary injunction (the “Law Injunction Reply Affidavit”) and annexed to the Skala
Affirmation as Exhibit 3, par. 7.
20 Maharishi Hardy Blechman Ltd. v. Abercrombie & Fitch Co., 292 F Supp.2d 535, 542
(S.D.N.Y. 2003)(granting summary judgment dismissing claims, including, inter alia, trade dress
infringement and unfair competition, based on alleged copying of a line of non-distinctive
garments), quoting Thomas & Betts Corp. v. Ponduit Corp., 65 F.3d 654, 657 (7th Cir. 1995);
Jack Schwartz Shoes, Inc. v. Skechers U.S.A., Inc., 233 F.Supp.2d 512 (S.D.N.Y. 2002)(granting
summary judgment dismissing claim of trade dress infringement based on copying because
plaintiff could not show that its shoe design had acquired secondary meaning)(citation, internal
quotations, omitted); Ergotron, Inc. v. Hergo Ergonomic Support Systems, Inc., 1996 WL
143903 (S.D.N.Y. 1996) (granting summary judgment dismissing trade dress infringement claim
based on copying where plaintiff could not demonstrate that its design had attained secondary
10
acknowledgment that its line is largely a product of copying or “knocking off” the styles of
others? Plaintiff therefore concedes, as it must, that “we make no claim to have the same
proprietary rights as a name designer.” See Affidavit of Marcella Law in opposition to
defendants’ dismissal motion (the “Law Dismissal Affidavit”), par. 34. Yet, in claiming that
defendants committed actionable wrongdoing by “knocking off” its designs, that is exactly the
position that plaintiff espouses, a claim which it itself recognizes is untenable. Plaintiff has no
right to prevent others from “knocking off” its non-distinct and publicly-displayed designs,
whether those designs were 100% “knocked off” from others or even if, as plaintiff maintains, a
few may have had some element of originality. The key remains that these are still admittedly
traditional and non-distinct garments sold in public view which, consistent with the norms of the
industry, are expected to be copied. - just as plaintiff itself copies the styles and designs of others
POINT THREE
PLAINTIFF’S ATTEMPT TO INTRODUCE A NEW
CAUSE OF ACTION FOR THEFT OF CORPORATE
OPPORTUNITY DOES NOT SALVAGE THE LEGAL
INFIRMITIES IN THE EXISTING COMPLAINT
Apparently recognizing the deficiencies in its complaint and that its two critical prongs -
a protectable mark and protectable styles - fail as a matter of law, plaintiff now attempts to shift
away from its complaint and transmogrify its claims into a claim for theft of corporate
opportunity. That claim, however (even if it were to be pled), is equally devoid of legal merit.
Plaintiff recognizes that such a claim requires a “tangible expectancy” which is “more
meaning). See also People v. Rosenthal, 6 Misc.3d 1004(A), 800 N.Y.S.2d 354 (Table), 2003
WL 23962174 at *1 (N.Y.City Crim.Ct. 2003)("[I]t is perfectly legal to sell merchandise that
copies the design and style of a product often referred to as 'knock-offs' ... .")
11
certain than a ‘desire’ or a ‘hope’.” Alexander and Alexander of New York, Inc. v. Fritzen, 147
A.D.2d 241, 247-48, 542 N.Y.S.2d 530, 535 (1% Dept. 1989)(quoted on pp. 16-18 of Plaintiff's
Brief. As a matter of law, plaintiff had no such “tangible expectancy” in being able to continue
to do business with the customers brought to it by Arochas after he left its employ”. Notably,
plaintiff cannot point to a single tangible purchase order cancelled by any customer and
transferred to defendants. Nor does it allege that it was prevented in any way from continuing
to market its garments to the same clientele it had always sold to. While a signed purchase order
“in hand” is a “tangible expectancy”, the mere belief that Arochas’s “long-standing clientele”
would continue to buy from plaintiff, in the same amounts as before Arochas left, is neither
tangible, nor actionable. To the contrary, the only real “expectancy” for plaintiff here is its
knowledge that Arochas’s “network of known buyers” were likely to continue to do business
with him if he left plaintiff's employ.
Plaintiff admits that “from its formation, Arochas has been the JMB principal
salesperson, responsible for 99% of sales ... using his network of known buyers ... 23 Tt is thus
completely disingenuous for plaintiff to assert that it had a “tangible expectancy” in continuing to
21 In Alexander, the Court held that, despite defendants having provided life insurance
policies to customers who had placed property insurance policies with their employer, without
notifying their employer that the opportunity to do so existed, defendants had not usurped a
corporate opportunity because the plaintiff “was aware of the profitable opportunity ... .” 147
A.D.2d at 249, 542 N.Y.S.2d at 535. Here, too, plaintiff was perfectly aware of the profitable
opportunities. The fact that defendants may have competed better to obtain those opportunities
does not give rise to a cause of action.
22 Plaintiff admits that “the JMB clientele ... were also Arochas’ long-standing clientele”
(Affirmation of Joseph H. Adams Opposing Motion to Dismiss the Complaint, par.7), and refers
to them as Arochas’s “network of known buyers” (Plaintiff's Brief, p.5).
3 Plaintiff's Brief, p.5.
12
sell to Arochas’s “network of known buyers” when it took no steps to prevent Arochas from
leaving and competing with it, making the business decision to employ Arochas as an “at will”
employee with no restrictive covenant™. And that is exactly what happened when the same
customers to which Arochas had been selling for decades straightforwardly informed plaintiff
“that they were going to make their purchases from ‘Bob’s company’ and not from JMB.”
Complaint, 45.
It is well-settled law that Arochas had the right to continue to service his long-standing
customers after he left plaintiff's employ:
It is well settled that in the ordinary agreement of employment
there is no implied contract by the employee not to solicit the trade
of customers of his employer after the termination of his
employment. Nor does such solicitation constitute unfair
competition, in the absence of an express agreement to the
contrary. The employee may make use in his new employment of
the knowledge he had acquired in the old. If it involves no breach
of confidence, it is not unlawful, for equity has no power to compel
aman who changes his employers to wipe clean the slate of his
memory.
SW. Scott & Co. v. Scott, 186 A.D. 518, 524, 174. N.Y.S. 583, 586 - 587 (Ist Dept.1919) (some
citations, internal quotations, omitted).
American Federal Group, Ltd. v. Rothenberg, 136 F.3d 897 (2d Cir. 1998), on which
plaintiff relies, is entirely consistent with Scott. The American Court held that “[wJhether [a
tangible expectancy existed] or did not depends upon whether ... the requisite expectancy existed
by virtue of any special relationship that may have developed between [the former employer]
24 The risks of plaintiffs business decision to employ Arochas at will, with no restriction
on his right to compete, are even more apparent when one considers that plaintiff admits that
Arochas complained to it that he had been cheated out of his share of profits. See Law Dismissal
Affidavit, par.57.
13
and [the customer].” 136 F.3d at 911 (emphasis added). The Court further approved the holding
in Scott, supra, that a former employee had breached no duty by soliciting customers of its
former employer because “[i]n Sco/t, no such special relationship was suggested; the only
expectancy was whatever could be inferred from general business practices, and in that highly
competitive business, those did not rise to the level of ‘tangible expectancy’.” /d. Here, too, the
only expectancy plaintiff could have is “whatever could be inferred from general business
practices” while, in contrast it is Arochas who has special and long-term relationships with his
“network of known buyers.”
The Court in Abbott Redmont Thinlite Corp. v. Redmont, 475 F.2d 85 (2d Cir. 1973),
another case on which plaintiff mistakenly relies, also distinguished Scott on the same
(inapplicable to this case) basis. “Scott ... dealt with ... a highly competitive business and one in
which ‘expectancies’ were hardly ‘tangible.’ Here, on the other hand, until [the former
employee] went into business there was no competition and ... it was almost a certainty that [the
former employer] would get the final subcontract ... 475 F.2d at 88 (emphasis added). Like
the plaintiff in Scort, plaintiff here had neither special relationships with customers, nor long
term contracts or purchase orders, nor a monopoly in the apparel industry, and thus no “tangible
expectancy” in being able to sell garments to customers with whom Arochas had dealt for years.
In addition to Scort, this case is closely akin to Uniflex, Inc. v. Endurapack, Inc., 319 B.R.
101 (D.Del.Bankry. 2005), a former employee unfair competition case decided under New York
law which discussed and compared the holdings in Scott and Abbott:
To establish that the Defendants usurped a corporate opportunity,
the Debtor must establish that they took a business opportunity in
which the Debtors had a “tangible expectancy.” See, e.g., Abbott
14
Redmont Thinlite Corp. v. Redmont, 475 F.2d 85, 88 (2d Cir.1973)
To meet that standard the Debtor must show more than that the
Defendants took business that any other competitor might have
taken; it must show that they took business that the Debtor would
almost certainly have gotten if they had not been competing with it.
Compare Redmonit, 475 F.2d at 88-89 (former employer had
almost a certainty to win business taken) with S.W. Scott & Co.,
Inc. v. Scott, 186 A.D. 518, 174.N.Y.S. 583, 589
(N.Y.App.Div.1919) (no business taken which would not likely
have been won by competitors).
In this industry, customers do not have long-term contracts with
suppliers, rather they select winning bids for each project based on
price, delivery time and service. The industry is very competitive
on those terms. The Debtor has only non-exclusive contracts with
its clients and bids on work on a project-by-project basis like
everyone else in the industry. With more than 16,000 competitors
in the distribution business, the Debtor can have no expectancy of
any new business from any specific customer.
319 B.R. at 105 (emphasis added).
Here, too, plaintiff is involved in a highly competitive business and had no purchase
orders or long term contracts that were cancelled. The Court can take judicial notice that in the
there
garment industry there is no “certainty” until a purchase order is in hand (and even then,
may be no certainty). Plaintiff could have no “tangible expectancy” of doing business with those
customers, especially since plaintiff made the business decision to allow its key employee who,
brought
since its formation, had been responsible for 99% of its sales, to customers which he had
to it, to be employed “at will”, with no restriction on his right to terminate his employment or
compete with plaintiff.
Tellingly, as previously discussed, plaintiff recognizes that, but for its meritless
arguments about secondary meaning and proprietary styles, Arochas could go forward in his own
business without restriction. The claim plaintiff now has concocted based on a theory of theft of
1S
corporate opportunity (unrelated to secondary meaning or proprietary styles), where no purchase
order is alleged to have been canceled, is likewise unsustainable as a matter of law”*.
Given that plaintiff's “paper dump” in opposition to this motion really has nothing to do
with the complaint it filed, a strong recognition that it is not salvageable, the complaint should be
dismissed. The hodgepodge of legally defective theories which plaintiff belatedly proffers does
not change this result, because these theories have no applicability to an “at will” employee such
as Arochas who has no restrictive covenant and has a long history of selling to the same
customers while working in the garment industry for well over 20 years before becoming
plaintiff's employee.
That plaintiff has lost business to Arochas was well to be expected, and that loss of
business is simply not actionable. Plaintiff first desperately tried to make it actionable by relying
on two theories (proprietary word and proprietary product line) both of which were easily
25 For much the same reasons, plaintiff's reference to a breach of fiduciary duty claim,
(which it had originally tied to the same two discredited theories - proprietary rights to the word
“Atelier” and proprietary rights in its traditional garments) must also be dismissed. Point Three
of Defendants’ Brief dealt with plaintiff's fifth cause of action, which alleged that Arochas had
breached his fiduciary duty to the plaintiff by using the knowledge he had gained over 30-plus
years in the garment center to sell to customers to which he had been selling for decades.
Plaintiff has not attempted to rebut any of the cases discussed therein (discussing only Scott, and
that only in connection with plaintiff's new “theft of corporate opportunity” claim) because it
cannot. Plaintiff admits that the customers defendants sold to were “Arochas’ long-standing
clientele”, and the information that it alleges constitute “trade secrets” - knowledge of customers
and their prior purchases, knowledge of prices, and of materials - is nothing more than the
product of experience, and is information well-known to Arochas’s “network of known buyers”
as well. Thus, the complaint, stripped of the two proprietary rights claims, does not state a claim
for breach of fiduciary duty. “The plaintiff's theory seems to be that they could get the benefit of
Scott's knowledge and experience acquired in the employ of others, but because out of 20 years
of business life in this one line of business he spent fifteen months in plaintiff's employ, he
cannot devote his skill, knowledge, and acquaintance in a business for himself, because by so
doing the plaintiff suffers some loss of trade. Such is not the law.” Scott, supra, 186 A.D. at
524, 174.N.Y.S. at 586.
16
demolished as a matter of law. So plaintiff next tries to cobble together some other basis on
which to resuscitate its action, coming up with a claim sounding in theft of corporate opportunity
Plaintiff cannot “make a silk purse out of a sow’s ear” however; its theft of corporate opportunity
claim is equally meritless as a matter of law, since the critical element of “tangible expectancy”
simply does not exist for this plaintiff, in this competitive industry, as regards a well-seasoned
employee “at will” who has relationships with a “network of known buyers” that pre-date his
employment with the plaintiff. For these reasons, leave to amend should also be denied.
CONCLUSION
For all the foregoing reasons, as well as those set forth in the Skala Affirmation
and Defendants’ Brief, defendants’ motion to dismiss all causes of action in the Complaint
should be granted in its entirety.
Dated: New York, New York
April 5, 2011
FEDER KASZOVITZ, LLP
Attorneys for the Defendant
By
urray L. Skala, Sq.
ruce Robins, Esq.
845 Third Avenue
New York, New York 10022-6601
(212) 888-8200
\\federserver\wpdoc\BR\Arochas\arojmbdmreplymolv2.wpd
17
Preview
(FILED: NEW YORK COUNTY CLERK 0470572011) INDEX NO. 651885/2010 NYSCEF DOC. NO. 53 RECEIVED NYSCEF 04/05/2011 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JMB APPAREL DESIGNER GROUP, INC., Motion # Plaintiff, Index No. 651885/10 Vv. ROBERT S. AROCHAS, D-NACH, LTD., and FAB MILL, INC., Defendants. DEFENDANTS’ REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF THEIR MOTION TO DISMISS PLAINTIFF’S COMPLAINT FEDER KASZOVITZ, LLP Attorneys for the Defendants 845 Third Avenue New York, NY 10022-6601 (212) 888-8200 TABLE OF CONTENTS Page INTRODUCTION POINT ONE - PLAINTIFF HAS NO PROPRIETARY RIGHT TO USE THE WORD “ATELIER” TO THE EXCLUSION OF OTHERS POINT TWO - PLAINTIFF HAS NO PROPRIETARY RIGHTS IN THE DESIGNS OF THE NON-DISTINCTIVE GARMENTS IT SELLS, WHETHER IT COPIED ALL, OR JUST 99% OF THOSE DESIGNS 10 POINT THREE- PLAINTIFF’S ATTEMPT TO INTRODUCE A NEW CAUSE OF ACTION FOR THEFT OF CORPORATE OPPORTUNITY DOES NOT SALVAGE THE LEGAL INFIRMITIES IN THE EXISTING COMPLAINT : : 11 CONCLUSION 17 TABLE OF AUTHORITIES Page Abbott Redmont Thinlite Corp. v. Redmont 475 F.2d 85 (2d Cir. 1973) 14, 15 Alexander and Alexander of New York, Inc. v. Fritzen 147 A.D.2d 241, 542 N.Y.S.2d 530 (1* Dept. 1989) 12 Allied Maintenance Corp. y. Allied Mechanical Trades, Inc. 42. N.Y.2d 538, 399 N.Y.S.2d 628 (1977) American Federal Group, Ltd. v. Rothenberg 136 F.3d 897 (2d Cir. 1998) 13 Ergotron, Inc. v. Hergo Ergonomic Support Systems, Ind., 1996 WL 143903, *7 (S.D.N.Y. 1996) 10 Ftnt. Fifteenth Avenue Food Corp. v. Sibstar Bread, Inc. 16 Misc.3d 1102A, 841 N.Y.S.2d 826, 2007 N.Y. Misc. Lexis 4313, *3 (Sup.Kings 2007) Fusha Japanese Restaurant v. Fusha 17 A.D.3d 226, 793 N.Y.S.2d 43 (1* Dept. 2005) ITC, Ltd. v. Punchgini, Inc. 9N.Y.3d 467, 850 N.Y.S.2d 366 (2007) Jack Schwartz Shoes, Inc. v. Skechers U.S.A., Inc. 233 F.Supp.2d 512 (S.D.N.Y. 2002) 10 Fint Maharishi Hardy Blechman Ltd. vy. Abercrombie & Fitch Co. 292 F.Supp.2d 535 (S.D.N.Y. 2003) 10 Ftnt People v. Rosenthal 6 Misc.3d 1004(A), 800 N.Y.S.2d 354 (Table), 2003 WL 23962174 at *1 (N.Y.City Crim.Ct. 2003) 11 Ftnt SW. Scott & Co. v. Scott 186 A.D. 518, 174.N.Y.S. 583, (1st Dept.1919) 13, 14, 15, 16 Thomas & Betts Corp. v. Ponduit Corp. 65 F.3d 654 (7th Cir. 1995) 10 Ftnt Uniflex, Inc. vy. Endurapack, Inc. 319 B.R. 101 (D.Del.Bankry. 2005) 14 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JMB APPAREL DESIGNER GROUP, INC., Motion # Plaintiff, Index No. 651885/10 v ROBERT S. AROCHAS, D-NACH, LTD., and FAB MILL, INC., Defendants. DEFENDANTS’ REPLY MEMORANDUM OF LAW IN FURTHER Ss UPPORT OF E SUPPORT THEIR OF TBELR e MQ 1A TO DISMISS MOTION e PLAINTIFF’S COMPLAINT INTRODUCTION It is most telling that plaintiff attempts to oppose defendants’ motion directed to the sufficiency of its 21 page complaint without citing to a single specific allegation and barely making any reference to it at all - as if pretending that its complaint doesn’t exist! Recognizing that Your Honor denied plaintiff's motion for a preliminary injunction from the bench because it so obviously lacked any legal merit, plaintiff obviously now feels the need to “run away” from its complaint, submitting over 100 pages (excluding exhibits), filled with new and contradictory theories and allegations, in opposition to defendants’ dismissal motion. Plaintiff's strategy is obvious - to inundate this Court with material (much of it completely irrelevant to this pleadings motion), hoping that something will “stick”’. Plaintiff's new theories, however, do not cure the ' By submitting multiple voluminous affidavits and affirmations dealing with credibility and other non-pertinent matters, plaintiff clearly seeks to distract the Court from the sole issue relevant to this motion - the legal sufficiency of the complaint which plaintiff has served and filed. Plaintiff's speculative attacks against Arochas have no relevance to these issues, and are clearly meant to divert the Court from the legal deficiencies of its complaint. Defendants will patent legal defects in its complaint. The same legal infirmities which the Court recognized in denying plaintiff's preliminary injunction motion from the bench also compel dismissal of its complaint. For this reason, plaintiff's suggestion that it be granted leave to replead (Plaintiff's Brief, p.29) should be denied. In opposing the within motion to dismiss the complaint, plaintiff has not disputed, nor even addressed, its fundamental fatal defects: © the word “Atelier”, in which plaintiff claims proprietary and exclusive rights (while admitting it is a “weak” mark), is a commonly used descriptive french term meaning “studio”. It is not only used by hundreds of New York businesses, including many in the garment industry, but forms a part of at least 16 marks registered with the USPTO’, 12 of which disclaim the exclusive right to use the word "Atelier" alone, recognizing that “Atelier” itself is merely a descriptive or generic word. Indeed, an affiliate of the plaintiff (not Arochas) unsuccessfully attempted to register “Atelier” as a trademark’, and plaintiff itself later expressly disclaimed any exclusive rights to “Atelier” in its recent application to register a “Bask Atelier” trademark. See 9/28/10 Examiner’s Amendment for “Bask Atelier” mark, annexed as Exhibit 10 to the Skala Affirmation. Moreover, Arochas has lawfully registered the trademark “Atelier Luxe” used by defendants with the USPTO, and plaintiff filed no opposition to defendants’ use of that mark. As endeavor not to “take the bait” by getting bogged down in a mudslinging match. What is at issue here are the allegations contained in plaintiff's complaint, as amplified by its admissions in the preliminary injunction papers and other documentary evidence. 2 Terms used herein shall, except as specifically noted, have the same meaning as defined in defendants memorandum of law in support of their motion to dismiss (“Defendants’ Brief”). 3 See Exhibit 7 to the affirmation of Murray L. Skala in support of defendants’ motion to dismiss (the “Skala Affirmation”). Your Honor stated to plaintiff's counsel during the Argument, “[y]ou know what the elements are for a protectable mark, and J don’t see it in the file at all. I don’t.” See p.24, lines 2-4 of the transcript of the oral argument (“Tr.24, lines 2-4”) of plaintiff's motion for a preliminary injunction, which took place on December 15, 2010, annexed as Exhibit 1 to the Skala Affirmation; and © as a matter of law, there is no prohibition against copying non-distinctive goods such as plaintiff's “traditional style garments™, particularly since plaintiff admits that its garments were “assembled and designed in part ... by our copying, which is how the industry works, and what is lawfully done by everyone.”* Thus, plaintiff's counsel could formulate no answer when Your Honor asked, during the Argument, “[w]hat is unique about a pair of pants with two legs?” Tr., 24, line 17. Plaintiff's complaint alleges five causes of action®, each (as set forth in defendants’ moving papers) predicated on its legally insupportable contentions that it had some sort of exclusive right to use the word “Atelier”, and/or some sort of right not to have its non-distinct garments copied. ‘As demonstrated in defendants’ moving papers (and as Your Honor has already recognized), those claims cannot stand as a matter of law. 4 See Tr.3, line 10. 5 See affidavit of Marcella Law submitted by plaintiff in support of its motion for a preliminary injunction (the “Law Injunction Affidavit”) and annexed to the Skala Affirmation as Exhibit 3, par. 7. 6 Trademark infringement, unfair competition, breach of fiduciary duty, tortious of the interference with prospective business relations, and constructive trust. A “clean” copy complaint is annexed as Exhibit 1 to the accompanying affirmation of Bruce Robins. 3 Apparently recognizing the legal deficiencies of these claims, plaintiff suggests ignoring their legal infirmities or otherwise amending the complaint’, essentially to substitute a new theory and cause of action, one sounding in theft of corporate opportunity. However, this as yet unpled theory is similarly invalid as a matter of law since, as set forth more fully below, plaintiff could have no “tangible expectancy” of selling goods to customers whose business is intensely sought after, and with whom plaintiff had no purchase orders or agreements, exclusive or otherwise. This is particularly true because here plaintiff made the calculated business decision not to enter into an employment agreement with its key employee Arochas which had a specific duration or contained a restrictive covenant, even though plaintiff admits that, “from its formation, Arochas has been the JMB principal salesperson, responsible for 99% of sales ... & using his network of known buyers ... Despite its attempt to turn its complaint “on its head”, plaintiff itself recognizes defendants’ right to compete if they used a different mark or different copied styles. “Per the legal principals [sic] that are relevant to the right of an employee to leave and [sic] employer and to compete with an employer, there would be no objection from JMB if Arochas, formed a company, sold to his existing buyer base, and designed or “knocked off” ... a new garment line, 7 See Plaintiff's Brief, p.29. ® Plaintiff's Brief, p.5. The only “tangible expectancy” that plaintiff could have was knowing that its critical employee might one day “walk out the door” and go into business for himself, taking the bulk of the business with him and leaving the plaintiff in exactly the position in which it finds itself today. That, however, is simply not actionable. This is particularly so in light of plaintiff's repeated admissions that it has no knowledge or information of any specific acts by the defendants which are actionable, other than its ill conceived reliance on defendants’ use of the “Atelier Luxe” mark and copying of traditional designs (e.g. “It is not possible to determine any number of facts pleaded or suggested by the affidavits as to what Arochas did before and after he left JMB ... .”, Plaintiff's Brief, p.48). 4 labeled ‘Arochas Luxe’ or ‘Excelsior Luxe’ or the like.” Plaintiff's Brief, p.52. Thus, despite its attempt to create a new theory of the case and a new cause of action, plaintiff's real complaint against Arochas still reverts to the same two prongs - alleged proprietary rights to its “traditional” designs and to its weak “Atelier” mark. Each of these prongs, however, which permeate the complaint, is defective as a matter of law, and thus plaintiff's complaint should be dismissed. What is really going on here is an attempt by a former employer to use protracted and expensive litigation, to achieve a restriction on it former employee/competitor’s right to compete which it never bargained for, and to achieve through harassment what it has been unable to achieve in the marketplace’. Plaintiff admits that it does not know “if Arochas[‘s] conduct conformed to the standards set forth in the case law ... .” Plaintiffs Brief, p.4. In other words, plaintiff readily admits that it does not even know if Arochas has done anything wrong, but that hasn’t stopped it from serving defendants with 300-plus pages in support of a preliminary injunction motion that was denied from the bench, serving a 21 page complaint which is predicated on unsustainable legal theories, and concocting a new (and equally unsustainable) theory in opposition to this motion. Courts should not be tolerant of former employers who, although they don’t know if their former employees have done anything wrong, bringin terrorem lawsuits against them anyway. ° As the Court previously noted, the battle here should be fought in the marketplace, not the courts: “JMB is going to have to beat Bob [in the marketplace] or they are going to lose and go out of business. It is toe to toe, go at it.” Tr.17, lines 14-16. 5 POINT ONE PLAINTIFF HAS NO PROPRIETARY RIGHT TO USE THE WORD “ATELIER” TO THE EXCLUSION OF OTHERS Plaintiff admits that “[W]e are not Gucci or Ralph Lauren'®” and that “the Atelier mark is not a strong mark''”. As a common descriptive word, used by scores of businesses including companies in the garment center, plaintiff knows, despite its allegations in the complaint to the contrary (see complaint, pars. 10 and 39, and also pars. 27, 29, 38, 40, 41, 48-51, 53, 55, 56, 59, 65, 69, 89-91, 94, 115, 123, 126, and 127), that the word “Atelier” has no secondary meaning and cannot be appropriated by any party to the exclusion of others. It basically conceded this fact by affirmatively disclaiming, in its application to register the mark “Bask Atelier” with the USPTO, any right to exclusive use of “Atelier”. See Exhibit 10 to the Skala Affirmation. In addition, the absence of any advertising, consumer studies, or media coverage, and plaintiff's debilitating admission that it “is not a strong mark'?” require dismissal of plaintiff's causes of action"® based on what it had originally alleged was the mark’s secondary meaning. The word “Atelier” is simply unprotectable as a matter of law, as plaintiff conceded in its “Bask Atelier” application to the USPTO, it has no proprietary rights in that word, and plaintiff cannot stop anyone else, including its former employees, from using that word. Apparently recognizing that it cannot meet the test for showing secondary meaning, '° Law Injunction Affidavit, par.6 " Tr, 4-5, lines 26-1. ” Tr, 4-5, lines 26-1. 3 See Defendants’ Brief, pp. 9-10 plaintiff advances a number of insupportable and patently absurd arguments for why it should still be able to exclude defendants from using the word “Atelier”, even though it mounted no such challenge before the USPTO. First, plaintiff argues that the whole recognized secondary meaning analysis should be ignored (“the standards for determining ‘secondary meaning’ should be adjusted ... .”)"', but offers no authority supporting such departure from well-settled law. Plaintiff further argues that even “[w]ithout a demonstration of secondary meaning'™ it nevertheless has some sort of right to prevent others, including the defendants, from using the word “Atelier”. In other words, plaintiff argues that even if it has no protectable rights to the word “Atelier”, it can still somehow prevent the defendants from using their own registered trademark (“Atelier Luxe”) which plaintiff never even opposed! Plaintiff's argument is not only belied by common sense, but, more importantly, by the very cases it cites. For example, in Allied Maintenance, supra, the plaintiff Allied Maintenance Corp. (“AMC”) sought to enjoin defendant Allied Mechanical Trades, Inc. (“AMT”), which performed the same services as AMC, from using the term “Allied” in connection with its business, claiming that such use infringed its trademark and constituted unfair competition. The Court of Appeals not only denied the injunction, but dismissed the complaint, holding that “to merit protection, the plaintiff must possess a strong mark — one which has a distinctive quality or has acquired a secondary meaning ... .” 42 N.Y.2d at 545, 399 N.Y.S.2d at 632. Here, plaintiff has admitted that it does not possess a strong mark - it has no distinctive quality and no secondary meaning! Plaintiff's Brief, p. 42. 'S Plaintiff's Brief, p.34. The other cases plaintiff relies on are easily distinguishable. For example, in /TC, Ltd. v. Punchgini, Inc., 9 N.Y .3d 467, , 479, 850 N.Y.S.2d 366 (2007), a case involving whether New York law recognizes the “famous foreign marks” doctrine, the cornerstone of the Court of Appeals’s decision was its holding that there is no protection for a foreign mark (or any mark) unless that mark possesses “renown in New York” or is associated with its (foreign) owner. In Fusha Japanese Restaurant v. Fusha, 17 A.D.3d 226, 227, 793 N.Y.S.2d 43, 44 (1* Dept. 2005), the Court held that the defendants (whose mark, unlike defendants, was not registered) had failed to show that “the term ‘Fusha’ ... is a readily recognized common business name in the New York metropolitan area” because “only three other businesses, none restaurants, were registered 2 Citations omitted. Here, with the Secretary of State under a name that uses the term ‘Fusha’ : hundreds of businesses in New York, many in the apparel business, are registered with the Secretary of State under a name that uses the term “Atelier”. See Exhibit 4 to the Skala Affirmation. In Fifieenth Avenue Food Corp. v. Sibstar Bread, Inc., 16 Misc.3d 1102A, 841 N.Y.S.2d 826, 2007 N.Y. Misc. Lexis 4313, *3 (Sup.Kings 2007), the Court recognized that the mark in question, unlike the plaintiffs mark here, was a strong mark which had acquired secondary meaning. Unlike in this case, the defendant had not registered its mark, and the plaintiff had at no time disclaimed exclusive use of the word it was challenging. Plaintiff also argues that defendants should be estopped to be able to argue that the “Atelier” mark is weak because Arochas allegedly influenced plaintiff not to use some other mark'®, See Plaintiff's Brief, p.38. Even aside from the absurdity of trying to bar defendants '6 In its estoppel theory, plaintiff essentially tries to “punish” Arochas for influencing it to use the word “Atelier”, even though it claims that using that word has been beneficial to it. 8 from relying on a fact which plaintiff concedes, the argument has no basis. It was not Arochas who caused hundreds of other businesses to use the term “Atelier”, or caused the plaintiff not to advertise “Atelier”, or caused the plaintiff to disclaim any right to the exclusive use of the word “Atelier”! Plaintiff points to no case where the courts have afforded protection to an admittedly weak mark, which is used by scores of businesses, which has not been advertised, or been the subject of any consumer studies, and where the mark’s owner had expressly disclaimed the right to its exclusive use. Certainly such a mark cannot be preferred over a registered trademark! In sum, “Atelier” is not a registered trademark; defendants’ “Atelier Luxe” mark is. “Atelier” is a descriptive term which is used by hundreds of other businesses in New York, many in the apparel industry, and is a component of many registered trademarks. Plaintiff concedes “the Atelier mark is not a strong mark'”’ and, absent secondary meaning, plaintiff cannot prevent others from using the word, and has no claim based on such use. Accordingly, the causes of action in plaintiff's complaint predicated on a strong mark and secondary meaning must be dismissed. ” Tr, 4-5, lines 26-1. POINT TWO PLAINTIFF HAS NO PROPRIETARY RIGHTS IN THE DESIGNS OF THE NON-DISTINCTIVE GARMENTS IT SELLS, WHETHER IT COPIED ALL, OR JUST 99% OF THOSE DESIGNS Almost as pervasive as plaintiff's claims resting on a strong mark and secondary meaning is the second prong permeating its complaint, plaintiff's claims that its “traditional styles” are somehow protected. Complaint, pars. 11, 14, 16, 27, 31, 32, 37, 52, 60, 62, 69, 71, 72, 79, 90- 94, 96, 98-100, 111, 113, 115, 123, 126, and 127. As this Court previously recognized (Tr.24, line 17), the notion that plaintiff's two-legged pants are proprietary fails as a matter of law. Plaintiff admits that its garments “are ... traditional styles ... they do not stand out' * and that they were “assembled and designed in part ... by our copying, which is how the industry works, and what is lawfully done by everyone.””” Nor does plaintiff dispute, or even attempt to distinguish, the cases cited in Defendants’ Brief for the proposition that there is no prohibition against copying “traditional” non-distinctive garments”. After all how could it, given its '8 Ty, p.5, lines 1-2. '® See Reply Affidavit of Marcella Law submitted by plaintiff in support of its motion for a preliminary injunction (the “Law Injunction Reply Affidavit”) and annexed to the Skala Affirmation as Exhibit 3, par. 7. 20 Maharishi Hardy Blechman Ltd. v. Abercrombie & Fitch Co., 292 F Supp.2d 535, 542 (S.D.N.Y. 2003)(granting summary judgment dismissing claims, including, inter alia, trade dress infringement and unfair competition, based on alleged copying of a line of non-distinctive garments), quoting Thomas & Betts Corp. v. Ponduit Corp., 65 F.3d 654, 657 (7th Cir. 1995); Jack Schwartz Shoes, Inc. v. Skechers U.S.A., Inc., 233 F.Supp.2d 512 (S.D.N.Y. 2002)(granting summary judgment dismissing claim of trade dress infringement based on copying because plaintiff could not show that its shoe design had acquired secondary meaning)(citation, internal quotations, omitted); Ergotron, Inc. v. Hergo Ergonomic Support Systems, Inc., 1996 WL 143903 (S.D.N.Y. 1996) (granting summary judgment dismissing trade dress infringement claim based on copying where plaintiff could not demonstrate that its design had attained secondary 10 acknowledgment that its line is largely a product of copying or “knocking off” the styles of others? Plaintiff therefore concedes, as it must, that “we make no claim to have the same proprietary rights as a name designer.” See Affidavit of Marcella Law in opposition to defendants’ dismissal motion (the “Law Dismissal Affidavit”), par. 34. Yet, in claiming that defendants committed actionable wrongdoing by “knocking off” its designs, that is exactly the position that plaintiff espouses, a claim which it itself recognizes is untenable. Plaintiff has no right to prevent others from “knocking off” its non-distinct and publicly-displayed designs, whether those designs were 100% “knocked off” from others or even if, as plaintiff maintains, a few may have had some element of originality. The key remains that these are still admittedly traditional and non-distinct garments sold in public view which, consistent with the norms of the industry, are expected to be copied. - just as plaintiff itself copies the styles and designs of others POINT THREE PLAINTIFF’S ATTEMPT TO INTRODUCE A NEW CAUSE OF ACTION FOR THEFT OF CORPORATE OPPORTUNITY DOES NOT SALVAGE THE LEGAL INFIRMITIES IN THE EXISTING COMPLAINT Apparently recognizing the deficiencies in its complaint and that its two critical prongs - a protectable mark and protectable styles - fail as a matter of law, plaintiff now attempts to shift away from its complaint and transmogrify its claims into a claim for theft of corporate opportunity. That claim, however (even if it were to be pled), is equally devoid of legal merit. Plaintiff recognizes that such a claim requires a “tangible expectancy” which is “more meaning). See also People v. Rosenthal, 6 Misc.3d 1004(A), 800 N.Y.S.2d 354 (Table), 2003 WL 23962174 at *1 (N.Y.City Crim.Ct. 2003)("[I]t is perfectly legal to sell merchandise that copies the design and style of a product often referred to as 'knock-offs' ... .") 11 certain than a ‘desire’ or a ‘hope’.” Alexander and Alexander of New York, Inc. v. Fritzen, 147 A.D.2d 241, 247-48, 542 N.Y.S.2d 530, 535 (1% Dept. 1989)(quoted on pp. 16-18 of Plaintiff's Brief. As a matter of law, plaintiff had no such “tangible expectancy” in being able to continue to do business with the customers brought to it by Arochas after he left its employ”. Notably, plaintiff cannot point to a single tangible purchase order cancelled by any customer and transferred to defendants. Nor does it allege that it was prevented in any way from continuing to market its garments to the same clientele it had always sold to. While a signed purchase order “in hand” is a “tangible expectancy”, the mere belief that Arochas’s “long-standing clientele” would continue to buy from plaintiff, in the same amounts as before Arochas left, is neither tangible, nor actionable. To the contrary, the only real “expectancy” for plaintiff here is its knowledge that Arochas’s “network of known buyers” were likely to continue to do business with him if he left plaintiff's employ. Plaintiff admits that “from its formation, Arochas has been the JMB principal salesperson, responsible for 99% of sales ... using his network of known buyers ... 23 Tt is thus completely disingenuous for plaintiff to assert that it had a “tangible expectancy” in continuing to 21 In Alexander, the Court held that, despite defendants having provided life insurance policies to customers who had placed property insurance policies with their employer, without notifying their employer that the opportunity to do so existed, defendants had not usurped a corporate opportunity because the plaintiff “was aware of the profitable opportunity ... .” 147 A.D.2d at 249, 542 N.Y.S.2d at 535. Here, too, plaintiff was perfectly aware of the profitable opportunities. The fact that defendants may have competed better to obtain those opportunities does not give rise to a cause of action. 22 Plaintiff admits that “the JMB clientele ... were also Arochas’ long-standing clientele” (Affirmation of Joseph H. Adams Opposing Motion to Dismiss the Complaint, par.7), and refers to them as Arochas’s “network of known buyers” (Plaintiff's Brief, p.5). 3 Plaintiff's Brief, p.5. 12 sell to Arochas’s “network of known buyers” when it took no steps to prevent Arochas from leaving and competing with it, making the business decision to employ Arochas as an “at will” employee with no restrictive covenant™. And that is exactly what happened when the same customers to which Arochas had been selling for decades straightforwardly informed plaintiff “that they were going to make their purchases from ‘Bob’s company’ and not from JMB.” Complaint, 45. It is well-settled law that Arochas had the right to continue to service his long-standing customers after he left plaintiff's employ: It is well settled that in the ordinary agreement of employment there is no implied contract by the employee not to solicit the trade of customers of his employer after the termination of his employment. Nor does such solicitation constitute unfair competition, in the absence of an express agreement to the contrary. The employee may make use in his new employment of the knowledge he had acquired in the old. If it involves no breach of confidence, it is not unlawful, for equity has no power to compel aman who changes his employers to wipe clean the slate of his memory. SW. Scott & Co. v. Scott, 186 A.D. 518, 524, 174. N.Y.S. 583, 586 - 587 (Ist Dept.1919) (some citations, internal quotations, omitted). American Federal Group, Ltd. v. Rothenberg, 136 F.3d 897 (2d Cir. 1998), on which plaintiff relies, is entirely consistent with Scott. The American Court held that “[wJhether [a tangible expectancy existed] or did not depends upon whether ... the requisite expectancy existed by virtue of any special relationship that may have developed between [the former employer] 24 The risks of plaintiffs business decision to employ Arochas at will, with no restriction on his right to compete, are even more apparent when one considers that plaintiff admits that Arochas complained to it that he had been cheated out of his share of profits. See Law Dismissal Affidavit, par.57. 13 and [the customer].” 136 F.3d at 911 (emphasis added). The Court further approved the holding in Scott, supra, that a former employee had breached no duty by soliciting customers of its former employer because “[i]n Sco/t, no such special relationship was suggested; the only expectancy was whatever could be inferred from general business practices, and in that highly competitive business, those did not rise to the level of ‘tangible expectancy’.” /d. Here, too, the only expectancy plaintiff could have is “whatever could be inferred from general business practices” while, in contrast it is Arochas who has special and long-term relationships with his “network of known buyers.” The Court in Abbott Redmont Thinlite Corp. v. Redmont, 475 F.2d 85 (2d Cir. 1973), another case on which plaintiff mistakenly relies, also distinguished Scott on the same (inapplicable to this case) basis. “Scott ... dealt with ... a highly competitive business and one in which ‘expectancies’ were hardly ‘tangible.’ Here, on the other hand, until [the former employee] went into business there was no competition and ... it was almost a certainty that [the former employer] would get the final subcontract ... 475 F.2d at 88 (emphasis added). Like the plaintiff in Scort, plaintiff here had neither special relationships with customers, nor long term contracts or purchase orders, nor a monopoly in the apparel industry, and thus no “tangible expectancy” in being able to sell garments to customers with whom Arochas had dealt for years. In addition to Scort, this case is closely akin to Uniflex, Inc. v. Endurapack, Inc., 319 B.R. 101 (D.Del.Bankry. 2005), a former employee unfair competition case decided under New York law which discussed and compared the holdings in Scott and Abbott: To establish that the Defendants usurped a corporate opportunity, the Debtor must establish that they took a business opportunity in which the Debtors had a “tangible expectancy.” See, e.g., Abbott 14 Redmont Thinlite Corp. v. Redmont, 475 F.2d 85, 88 (2d Cir.1973) To meet that standard the Debtor must show more than that the Defendants took business that any other competitor might have taken; it must show that they took business that the Debtor would almost certainly have gotten if they had not been competing with it. Compare Redmonit, 475 F.2d at 88-89 (former employer had almost a certainty to win business taken) with S.W. Scott & Co., Inc. v. Scott, 186 A.D. 518, 174.N.Y.S. 583, 589 (N.Y.App.Div.1919) (no business taken which would not likely have been won by competitors). In this industry, customers do not have long-term contracts with suppliers, rather they select winning bids for each project based on price, delivery time and service. The industry is very competitive on those terms. The Debtor has only non-exclusive contracts with its clients and bids on work on a project-by-project basis like everyone else in the industry. With more than 16,000 competitors in the distribution business, the Debtor can have no expectancy of any new business from any specific customer. 319 B.R. at 105 (emphasis added). Here, too, plaintiff is involved in a highly competitive business and had no purchase orders or long term contracts that were cancelled. The Court can take judicial notice that in the there garment industry there is no “certainty” until a purchase order is in hand (and even then, may be no certainty). Plaintiff could have no “tangible expectancy” of doing business with those customers, especially since plaintiff made the business decision to allow its key employee who, brought since its formation, had been responsible for 99% of its sales, to customers which he had to it, to be employed “at will”, with no restriction on his right to terminate his employment or compete with plaintiff. Tellingly, as previously discussed, plaintiff recognizes that, but for its meritless arguments about secondary meaning and proprietary styles, Arochas could go forward in his own business without restriction. The claim plaintiff now has concocted based on a theory of theft of 1S corporate opportunity (unrelated to secondary meaning or proprietary styles), where no purchase order is alleged to have been canceled, is likewise unsustainable as a matter of law”*. Given that plaintiff's “paper dump” in opposition to this motion really has nothing to do with the complaint it filed, a strong recognition that it is not salvageable, the complaint should be dismissed. The hodgepodge of legally defective theories which plaintiff belatedly proffers does not change this result, because these theories have no applicability to an “at will” employee such as Arochas who has no restrictive covenant and has a long history of selling to the same customers while working in the garment industry for well over 20 years before becoming plaintiff's employee. That plaintiff has lost business to Arochas was well to be expected, and that loss of business is simply not actionable. Plaintiff first desperately tried to make it actionable by relying on two theories (proprietary word and proprietary product line) both of which were easily 25 For much the same reasons, plaintiff's reference to a breach of fiduciary duty claim, (which it had originally tied to the same two discredited theories - proprietary rights to the word “Atelier” and proprietary rights in its traditional garments) must also be dismissed. Point Three of Defendants’ Brief dealt with plaintiff's fifth cause of action, which alleged that Arochas had breached his fiduciary duty to the plaintiff by using the knowledge he had gained over 30-plus years in the garment center to sell to customers to which he had been selling for decades. Plaintiff has not attempted to rebut any of the cases discussed therein (discussing only Scott, and that only in connection with plaintiff's new “theft of corporate opportunity” claim) because it cannot. Plaintiff admits that the customers defendants sold to were “Arochas’ long-standing clientele”, and the information that it alleges constitute “trade secrets” - knowledge of customers and their prior purchases, knowledge of prices, and of materials - is nothing more than the product of experience, and is information well-known to Arochas’s “network of known buyers” as well. Thus, the complaint, stripped of the two proprietary rights claims, does not state a claim for breach of fiduciary duty. “The plaintiff's theory seems to be that they could get the benefit of Scott's knowledge and experience acquired in the employ of others, but because out of 20 years of business life in this one line of business he spent fifteen months in plaintiff's employ, he cannot devote his skill, knowledge, and acquaintance in a business for himself, because by so doing the plaintiff suffers some loss of trade. Such is not the law.” Scott, supra, 186 A.D. at 524, 174.N.Y.S. at 586. 16 demolished as a matter of law. So plaintiff next tries to cobble together some other basis on which to resuscitate its action, coming up with a claim sounding in theft of corporate opportunity Plaintiff cannot “make a silk purse out of a sow’s ear” however; its theft of corporate opportunity claim is equally meritless as a matter of law, since the critical element of “tangible expectancy” simply does not exist for this plaintiff, in this competitive industry, as regards a well-seasoned employee “at will” who has relationships with a “network of known buyers” that pre-date his employment with the plaintiff. For these reasons, leave to amend should also be denied. CONCLUSION For all the foregoing reasons, as well as those set forth in the Skala Affirmation and Defendants’ Brief, defendants’ motion to dismiss all causes of action in the Complaint should be granted in its entirety. Dated: New York, New York April 5, 2011 FEDER KASZOVITZ, LLP Attorneys for the Defendant By urray L. Skala, Sq. ruce Robins, Esq. 845 Third Avenue New York, New York 10022-6601 (212) 888-8200 \\federserver\wpdoc\BR\Arochas\arojmbdmreplymolv2.wpd 17