Swimwear Solution, Inc. v. Orlando Bathing Suit, LLC
309 F. Supp. 3d 1022
D. Kan.2018Background
- Swimwear Solution (Swimwear), a long‑established Kansas boutique, entered negotiations with national chain Everything But Water (EBW) regarding a possible acquisition and executed a Mutual Nondisclosure Agreement (MNDA) in 2012 (renewed 2015).
- The MNDA broadly defined and limited use of "Confidential Information," required return of documents on request, contained a New York choice‑of‑law clause for the contract, and an express waiver/merger provision addressing trade‑secret remedies.
- Swimwear alleges EBW induced disclosures of its vendor, market, employee, and financial information under false pretenses, then opened a competing store nearby and solicited Swimwear employees in violation of restrictive covenants.
- Swimwear asserted multiple claims: breach of contract, tortious interference (employees and business), breach of fiduciary duty, misappropriation of trade secrets (Kansas and New York), fraud, unjust enrichment, conversion, and declaratory relief.
- EBW counterclaimed for breach of the MNDA, alleging Swimwear failed to return EBW confidential information upon written request and that some materials were lost or disposed of.
- The court applied New York law to contract claims (per MNDA) and Kansas law to tort claims (lex loci delicti), and resolved motions to dismiss, a motion to dismiss the counterclaim, and a Rule 12(e) motion for a more definite statement on fraud.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of fiduciary duty (Count V) — whether MNDA supports independent fiduciary duty | MNDA plus special confidence produced additional fiduciary duties (safeguard, non‑usurpation) | Duties are contractually defined by MNDA; no special dominating relationship pleaded | Dismissed with prejudice — no plausible facts of dominance/position to create fiduciary duty independent of contract |
| Conversion (Count X) — whether retention/use of confidential info is independent tort | EBW assumed ownership of Swimwear’s confidential info, supporting conversion | MNDA governs retention/use; conversion duplicates contract remedy | Dismissed with prejudice — conversion not independent of MNDA |
| Trade‑secret misappropriation (Counts VI & VII) — whether claim survives MNDA waiver | Trade‑secret protections should apply despite MNDA waiver | MNDA contains explicit waiver/merger of trade‑secret remedies; parties knowingly renewed it | Dismissed with prejudice — waiver enforceable under New York law governing contract claims |
| Unjust enrichment (Count IX) — available when contract exists/expired | Unjust enrichment available for post‑MNDA enrichment and where contract remedies insufficient | A valid written contract addressing the subject precludes quasi‑contract recovery; restitution for breach remains available | Dismissed, but with leave to amend to plead unjust enrichment only if MNDA invalid; otherwise rely on breach‑of‑contract/restitution remedies |
| Tortious interference with employee contracts (Count III) — required pleading of an actual breach | EBW’s solicitation was ongoing interference justifying claim | Kansas requires pleading actual breach or procurement of breach; mere solicitation without breach is insufficient | Dismissed with prejudice — Complaint fails to allege any employee actually breached their contract |
| EBW counterclaim for breach of MNDA — whether damages or equitable relief adequately pleaded | N/A (defendant seeks return, nominative damages, specific performance) | Swimwear: counterclaim fails for lack of pleaded damages | DENIED — amended counterclaim pleads nominal damages and seeks specific performance; nominal damages suffice under New York law |
| Fraud/misrepresentation (Count VIII) — sufficiency under Rule 9(b) | Alleged repeated false intent to purchase induced disclosures; proposed amended complaint supplies dates and speakers | EBW: original pleading vague; requested specificity as to who, when, where, and each statement | Rule 12(e) granted — Swimwear must replead to specify place/form of each statement and particularize any additional statements relied upon; proposed amendments largely fix timing and speakers but lack place/form details |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim, not mere labels or conclusions)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (two‑step plausibility analysis for Rule 12(b)(6) motions)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal court in diversity applies forum state choice‑of‑law rules)
- Ely‑Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399 (1993) (nominal damages are always available in New York breach‑of‑contract actions)
- Burcham v. Unison Bancorp, Inc., 276 Kan. 393 (2003) (tort claims parallel to contract permitted only when tort is independent of contract)