OPINION
Plaintiffs Faiveley Transport USA, Inc., Faiveley Transport Nordic AB, Faiveley Transport Amiens S.A.S., and Ellcon National, Inc. (collectively the “Faiveley plaintiffs”) bring this action against defendant Wabtec Corporation (“Wabtec”) asserting various claims based on Wabtec’s alleged misappropriation of certain trade secrets from an entity affiliated with plaintiffs, Faiveley Transport Malmó AB (“Malino”). On June 25, 2010, Wabtec moved to dismiss the plaintiffs’ amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 19. The Court received full briefing on these motions, and following oral argument on August 18, 2010, granted Wabtec’s application to submit a short letter setting forth additional authority in support of their motions and permitted plaintiffs to submit a short letter in response thereto. After careful consideration of the parties’ submissions, the Court, by Order dated August 30, 2010, denied Wabtec’s motions in their entirety. This Opinion provides the reasons for that ruling.
The instant action traces back to earlier litigation between Malmö and Wabtec. As part of that litigation, this Court denied Malmd’s petition for a preliminary injunction prohibiting Wabtec from undertaking
During the arbitration between Malmö and Wabtec, the parties disputed whether Malmö should be able to assert claims and recover damages on behalf of the Faiveley plaintiffs. See Award ¶ 552. The Tribunal concluded that, as the sole claimant in the arbitration, Malmö could not collect damages based on injuries suffered by other Faiveley affiliates. Id. ¶¶ 881-82. Though the Tribunal awarded damages to Malmö of approximately $3.9 million, it noted that the entities most harmed by Wabtec’s misappropriation of Malmö’s trade secrets were the Faiveley plaintiffs, specifically Faiveley USA. See id. ¶ 883.
Pursuant to the Tribunal’s deliberations as to whether it could properly award damages to Malmó based on injuries suffered by other Faiveley entities, both the Faiveley plaintiffs and Wabtec made representations to the Tribunal that are in considerable tension with their statements to the Court in the instant action. In the course of (unsuccessfully) trying to persuade the Tribunal to award damages to Faiveley plaintiffs, Xavier de Lavallade, the general counsel of Faiveley Transport S.A. (“Faiveley Transport”) — parent company of both the Faiveley plaintiffs and Malmó — submitted a sworn letter purporting to “confirm” that an award entered against Malmó would have res judicata effect as against the Faiveley plaintiffs. See Winters Decl., 6/25/2010, Ex. 3 (“de Lavallade letter”). By contrast, Wabtec specifically represented to the Tribunal that the Faiveley plaintiffs would not be barred by res judicata from pursuing their damages claims in a separate proceeding. Mancini Decl., 7/26/10, Ex. 2, ¶ 5.11.8.20. The Tribunal agreed with Wabtec on this point, indicating that, notwithstanding the Tribunal’s decision, the Faiveley plaintiffs would still be entitled to seek damages from Wabtec in another action. Award ¶¶ 547, 882. This is that action.
In their complaint, the Faiveley plaintiffs allege the following. The plaintiffs are, respectively, New York, Swedish, French, and New York corporations that produce, sell, and service products for freight and passenger railway systems. Compl. ¶¶ 2-5. Wabtec is a Delaware corporation that manufactures products for locomotives, freight cars, and passenger cars.
Id.
¶ 6. In November 2004, Faiveley Transport acquired a company known as SAB Wabco Group AB (“SAB”), which designed and manufactured brake equipment and other components of railway ears.
Id.
¶¶ 9, 12. In a license agreement executed on December 31, 1993 (“license agreement”), SAB licensed the intellectual property rights to the products that are the subject of this litigation — the Brake Friction Cylinder, the PB actuator, and the PBA actuator (collectively, the “Products”) — to a corporation known as Wabco (the predecessor to Wabtec).
Id.
¶¶ 86-87. This license agreement provided Wabco with the rights to manufacture, sell, and
Malmo is the successor-in-interest to SAB’s intellectual property rights in the Products. Id. ¶¶ 14, 88. Malmo conveyed these rights to various Faiveley affiliates, including the Faiveley plaintiffs. Id. ¶¶ 5, 14-18. Accordingly, from December 2004, Faiveley plaintiffs have enjoyed the exclusive rights to manufacture, use, sell, assemble, and market the Products in North America. Id. ¶ 100.
The amended complaint alleges that Wabtec, despite its awareness of the Faiveley plaintiffs’ rights with respect to the Products, continued to represent to Faiveley plaintiffs’ customers that the Products belonged to Wabtec. Id. at ¶¶ 101-103. Moreover, according to the complaint, Wabtec’s representations caused considerable injury to Faiveley plaintiffs, including the loss of several lucrative contracts with various municipal transit authorities. Id. at ¶¶ 117-129.
Based on these allegations, the Faiveley plaintiffs’ amended complaint asserts five causes of action against Wabtec for: misappropriation of trade secrets; 1 unfair competition; tortious interference with business relations; tortious interference with plaintiffs’ prospective economic advantage; and unjust enrichment. Wabtec moved to dismiss the complaint in its entirety under Rule 12(b)(6), alleging that: plaintiffs had waived their right to bring this action; the action was barred by res judicata; the relief sought in this action would constitute an impermissible collateral attack on the Tribunal’s award; and that each of plaintiffs individual causes of action failed to state a claim. Wabtec also moved to dismiss the complaint under Rule 19 for failure to join Malmö, an allegedly indispensible party. For the following reasons, the Court found all of Wabtec’s claims to lack merit, and accordingly, by Order dated August 30, 2010, dismissed the motion in its entirety.
The Court first turns to Wabtec’s threshold assertion that Faiveley plaintiffs have waived their right to assert any claims against Wabtec. Wabtec bases this argument on the statement submitted by Xavier de Lavallade, Faiveley Transport’s general counsel, to the Tribunal, which stated that:
If and to the extent that an award in the above mentioned Arbitration has res judicata effect on [Malmö], I also confirm that the same res judicata effect shall apply also to each of the [Faiveley plaintiffs]. de Lavallade letter at 2.
Wabtec alleges that this statement constitutes a knowing and intentional waiver of plaintiffs’ right to bring this action.
The Court concludes that de Laval-lade’s witness statement, regardless of its substantive import, is not properly considered by the Court on a motion to dismiss. Subject to certain exceptions, none of which are applicable to this case, the Court “is normally required to look only to the allegations on the face of the complaint” when adjudicating a motion to dismiss.
Roth v. Jennings,
Further, the Court concludes that, even if the Court were to consider the witness statement, Wabtec’s waiver argument would still fail. Under applicable New York law, one’s intent to relinquish one’s legal rights must be “clear, unmistakable, and without ambiguity” in order to constitute a waiver of those rights.
RST (2005) Inc. v. Research in Motion Ltd.,
Next, Wabtec argues that plaintiffs’ claims are barred by
res judicata.
To establish that a claim is precluded under the doctrine of
res judicata,
Wabtec must show, inter alia, that “the previous action involved the [parties] or those in privity with them.”
2
Monahan v. New York City Dep’t of Corr.,
Further, Wabtec has proffered no support for its contention that Faiveley plaintiffs were obligated to either assign their claims to Malmö pursuant to the arbitration or lose their right to recover on those claims in another action.
See
Def. Letter Br. 8/23/2010. The only case Wabtec cites for this proposition is readily distinguishable from the instant action.
See Fried v. Brevel Motors, Inc.,
Alternatively, the Court concludes that Wabtec is judicially estopped from arguing that
res judicata
bars plaintiffs’ claims in this action, as that argument is directly contrary to arguments Wabtec made and prevailed on during the arbitration. Judicial estoppel serves to “prevent[ ] a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.”
Pegram v. Herdrich,
Wabtec’s actions clearly satisfy all three factors identified by the Supreme Court in New Hampshire. First, its current argument that plaintiffs are bound by res judicata is utterly inconsistent with its position before the arbitrator. See Mancini Decl., 7/26/10, Ex. 2, ¶ 5.11.6.1 (stating that “[a]ny right to damages for [Faiveley plaintiffs’ losses] must be determined according to the jurisdiction where each specific legal entity operates”). Second, the Tribunal agreed with Wabtec’s assertions regarding the preclusive effect of its proceedings, and indicated that Faiveley plaintiffs would be entitled to claim damages against Wabtec in another forum. See Award ¶ 882 (Faiveley plaintiffs “would not be bound by the res judicata effect of the award and would still be entitled to claim damages against [Wabtec] before another jurisdiction.”) Finally, the Court concludes that Wabtec would obtain an unfair advantage if it prevailed and the Faiveley plaintiffs were barred from receiving damages due to res judicata. Wabtec succeeded in shielding itself from plaintiffs’ claims for damages in the arbitration by persuading the Tribunal that an alternate forum would be available to plaintiffs to assert these claims. Judicial estoppel precludes Wabtec from arguing otherwise here. 3
The Court concludes that this issue is unripe for its consideration, as there is no indication at present that the Court could not award relief in this action that is fully consistent with the Tribunal’s award. In its prayer for relief, the amended complaint seeks, inter alia, compensatory and punitive damages. Compl. at ¶38. The Court sees no necessary contradiction between awarding such relief and the Tribunal’s decision not to enjoin Wabtec’s continued use of the allegedly misappropriated trade secrets. The Court reserves judgment on whether and to what extent other forms of relief may constitute an improper collateral attack on the Tribunal’s reward until such time as those issues are ripe for its consideration. In so doing, however, the Court will strongly weigh the fact that the Tribunal’s award recognized that most of the damages caused by Wabtec’s misappropriation were suffered by Faiveley plaintiffs, and moreover, expressly contemplated that Faiveley plaintiffs could bring suit to recover those damages in a later action. Id. ¶¶ 881-83, 887.
The Court now moves to consider Wabtec’s argument that Faiveley plaintiffs’ claims should be dismissed for failure to join Malmö, which it contends is a necessary party to this action. See Fed.R.Civ.P. 19. Under Rule 19(a)(1), a party is “necessary” if:
(A) in that person’s absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may;
(i) as a practical matter impair or impede the person’s ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
Applying Rule 19, the Court concludes that Malmo is not a necessary party to this action. First, with regard to sub-section (A) of Rule 19(a)(1), the Court can clearly accord the Faiveley plaintiffs complete relief without the joinder of Malmo. Each Faiveley plaintiff has an individualized basis for its claims against Wabtec, and Wabtec’s ability to assert defenses to those claims is in no way affected by Malmo’s absence. Further, with respect to subsection (B)(i), this action will in no way impede Malmo’s interest in its trade secrets, as — contrary to Wabtec’s assertions — the Faiveley plaintiffs’ claims raise no issue regarding Malmö’s underlying ownership of those trade secrets.
See
Compl. at ¶¶ 74-79. Moreover, Malmö has already fully (and successfully) adjudicated its related claims against Wabtec, so there is no risk that this action will prejudice Malmö’s legal rights with regard to those claims. Finally, with respect to sub-section (B)(ii), any relief that the Court might fashion in this action could easily be tailored so as to ensure consistency with the
Additionally, even if the Court were to rule that Malmo is a necessary party under Rule 19(a), dismissal of this action is not proper because the Court concludes that “in equity and good conscience” it should not dismiss the ease. See Fed.R.Civ.P. 19(b). Rule 19(b) identifies four factors to guide the Court in exercising its discretion to allow an action to continue even absent a necessary party, all of which militate towards not dismissing the case. First, as explained above, Malmo’s absence in this action presents no risk that either it or Wabtec will be prejudiced. Id. at 19(b)(1). Second, any theoretical risk that Wabtec might be subject to inconsistent obligations can be wholly foreclosed by the Court’s properly shaping any relief to avoid inconsistency with the Tribunal’s award. Id. at 19(b)(2). Third, Malmo’s presence is entirely unnecessary to ensure an adequate judgment. Id. at 19(b)(3). Finally, and most significantly, if the Court were to dismiss this action for nonjoinder, plaintiffs would be deprived of a forum in which to bring its claims against Wabtec. Id. at 19(b)(4). Given the Tribunal’s ruling that it could not adjudicate Faiveley plaintiffs’ claims — a ruling that Wabtec vigorously urged the Tribunal to adopt, see Award ¶¶ 559, 882 — the Court in its equity concludes that it should not dismiss this action based on Malmo’s nonjoinder.
The Court now moves to Wabtec’s assertion that each of plaintiffs’ four individual claims must be dismissed under Rule 12(b)(6) for failure to state a claim upon which relief may be granted. First, as to the claim for misappropriation of trade secrets, Wabtec contends that plaintiffs lack standing because they are not the owners of the trade secrets at issue in this case. The Second Circuit has consistently held, however, that possession of a trade secret is sufficient to confer standing on a party for a claim of trade secret misappropriation.
See, e.g., N. Atl. Instruments, Inc. v. Haber,
Wabtec also claims that the Faiveley plaintiffs lack standing to bring the misappropriation claim because they do not allege a breach of confidence or duty between themselves and Wabtec, but rather rely on a duty owed by Wabtec to plaintiffs’ affiliate, Malmö. Wabtec’s sole basis for this contention, however, is a comment to the Uniform Trade Secrets Act, which New York has not adopted. Def. Mem. at 13. By contrast, courts applying New York law have consistently rejected the notion that only the entity from which a trade secret was misappropriated has standing to bring suit for that misappropriation.
See, e.g., Bus. Trends Analysts v. Freedonia Group, Inc.,
While the instant action concededly deals with the difficult issue of determining which entities have standing to sue for misappropriation when there are
multiple
licensees of trade secrets — a question on which there appears to be no controlling authority — the Court concludes that the Faiveley plaintiffs have alleged a sufficiently concrete and particularized interest so as to establish standing.
See Lujan v. Defenders of Wildlife,
Next, the Court turns to Wabtec’s argument that Faiveley plaintiffs have failed to state a claim for unfair competition. Under New York law, where an unfair competition claim and a misappropriation claim arise from the same factual predicate, as in this action, “the two claims generally rise or fall together.”
Scientific Components v. Sirenza Microdevices, Inc.,
Under New York law, however, a party asserting an unfair competition claim need only have “a colorable property or pecuniary interest” in the intellectual property at issue to state a claim.
Berni v. Int’l Gourmet Restaurants of Am., Inc.,
Wabtec next moves to dismiss the two tortious interference counts on the basis that plaintiffs have failed to plead their necessary elements. To establish a claim for tortious interference with prospective economic advantage or prospective business relations, plaintiffs must show that: (1) they “had a [particular and
The Court concludes that plaintiffs have alleged each of these elements with sufficient particularity to state claims for tortious interference. First, the complaint alleges with particularity no less than ten business relationships with which Wabtec interfered, and includes in-depth discussion of one business relationship in particular, with New York City Transit (NYCT), Compl. ¶¶ 129, 151, 156, 166, 171. Second, the complaint makes non-conclusory allegations regarding Wabtec’s awareness of plaintiffs’ pre-existing relationships with these third parties, Wabtec’s interference with those relationships, and the intentionality of that interference.
Id.
at ¶¶ 98-129. Third, under New York law, the complaint’s assertion that the alleged interference occurred by means of separate torts, here trade secret misappropriation and unfair competition, is sufficient to satisfy the “improper means” element of a tortious interference claim.
See All R’s Consulting, Inc. v. Pilgrims Pride Corp.,
For the foregoing reasons, the Court, by Order dated August 30, 2010, denied Wabtec’s motion to dismiss in its entirety.
Notes
. The misappropriation claim is brought by plaintiffs Nordic, Amiens, and Ellcon.
.
Res judicata
is a legal matter subject to the Court's determination.
See, e.g., In re Marsh & McLennan Cos., Inc. Sec. Litig.,
. Wabtec seeks to evade the application of judicial estoppel by arguing that the doctrine applies to inconsistent factual positions but not to inconsistent legal positions. While some courts in this district have so held,
see U.S. Fidelity & Guar. Co. v. Treadwell Corp.,