SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

397 

CA 13-01248 

PRESENT: SCUDDER, P.J., CARNI, LINDLEY, AND WHALEN, JJ. 

 

RICHARD W. MAHUSON AND WALTER ROBERT BECKLUND, 

PLAINTIFFS-RESPONDENTS, 

 

V MEMORANDUM AND ORDER

VENTRAQ, INC. AND ARISTON GLOBAL HOLDING, LLC, 

DEFENDANTS-APPELLANTS.

 

NIXON PEABODY LLP, ROCHESTER (CHRISTOPHER D. THOMAS OF COUNSEL), AND

DENTONS US LLP, NEW YORK CITY, FOR DEFENDANTS-APPELLANTS. 

HARTER SECREST & EMERY LLP, ROCHESTER (JEFFREY J. CALABRESE OF

COUNSEL), FOR PLAINTIFFS-RESPONDENTS. 

 

Appeal from an order and judgment (one paper) of the Supreme

Court, Monroe County (Matthew A. Rosenbaum, J.), entered May 2, 2013. 

The order and judgment, among other things, granted the motion of

plaintiffs for summary judgment, dismissed defendants’ counterclaims

and awarded plaintiffs money damages. 

It is hereby ORDERED that the order and judgment so appealed from

is unanimously modified on the law by denying those parts of the

motion seeking summary judgment on the complaint and dismissing the

first and third counterclaims, and by reinstating the first and third

counterclaims, and as modified the order and judgment is affirmed

without costs. 

Memorandum: Plaintiffs were the majority shareholders in 10e

Solutions LLC (10e), a software company sold to the predecessor of

defendant Ventraq, Inc. (Ventraq) pursuant to a Securities Purchase

Agreement (Agreement). The Agreement contemplated that Ventraq would

employ plaintiffs, and plaintiffs entered into employment agreements

with Ventraq. Under the non-competition and non-solicitation

covenants in the Agreement and employment agreements, plaintiffs

agreed not to compete with Ventraq or solicit its customers or

employees for a specified period of time. The Agreement further

provided that plaintiffs and other former members of 10e were eligible

to receive payment of “Earn-Out Amounts” that were calculated in

accordance with the post-closing performance of 10e.

Based upon the post-closing performance of 10e, the members of

10e were entitled to such earn-out amounts. Ventraq agreed to pay

plaintiffs their respective shares of those amounts in monthly

installments, as evidenced by a Subordinated Note (Note). Ventraq,
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CA 13-01248 

however, was unable to make the scheduled payments, and the parties

renegotiated the payment terms set forth in the Note.

After Ventraq defaulted in making payment under the renegotiated

terms of the Note, plaintiffs commenced the instant action alleging,

inter alia, breach of contract and seeking the balance of the earn-out

amounts remaining due to them. Ventraq and defendant Ariston Global

Holding, LLC, its parent company, asserted counterclaims for breach of

contract, breach of fiduciary duty and misappropriation of trade

secrets based upon plaintiffs’ alleged violation of the noncompetition and non-solicitation covenants in the Agreement and

employment agreements, and their alleged misappropriation of trade

secrets acquired by Ventraq through its purchase of 10e. Defendants

allege, inter alia, that during their employment with Ventraq

plaintiffs formed Preclarity Capital LLC (Preclarity), which competes

directly with Ventraq, and that plaintiffs solicited three employees

who thereafter left their employment with Ventraq for employment with

Preclarity.

Supreme Court properly granted that part of plaintiffs’ motion

seeking summary judgment dismissing the second counterclaim, alleging

misappropriation of trade secrets. Plaintiffs established their

entitlement to judgment by submitting evidence that they did not take

and Preclarity had not used any of the trade secrets identified by

defendants, and defendants’ submission in opposition to that evidence,

“consist[ing] of nonspecific conclusory statements” that plaintiffs

must have misappropriated trade secrets, did not raise a triable issue

of fact (Moser v Devine Real Estate, Inc. [Florida], 42 AD3d 731,

736). 

The court erred, however, in granting that part of plaintiffs’

motion seeking summary judgment dismissing the first counterclaim,

alleging breach of contract, and we therefore modify the order and

judgment accordingly. Plaintiffs’ own submissions raise triable

issues of fact whether they violated the non-competition and nonsolicitation covenants at issue (see generally Micro-Link, LLC v Town

of Amherst, 109 AD3d 1130, 1131). Contrary to the court’s conclusion,

moreover, we conclude that plaintiffs did not establish their

entitlement to judgment as a matter of law on their affirmative

defenses of waiver and estoppel. “ ‘[T]he doctrine of equitable

estoppel is to be invoked sparingly and only under exceptional

circumstances’ ” (Townley v Emerson Elec. Co., 269 AD2d 753, 753-754),

and “waiver ‘should not be lightly presumed’ and must be based upon ‘a

clear manifestation of intent’ to relinquish a contractual protection”

(Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P.,

7 NY3d 96, 104). Plaintiffs’ submissions do not eliminate issues of

fact with respect to either estoppel (see Reeve v General Acc. Ins.

Co. of N.Y., 239 AD2d 759, 761) or waiver (see Fundamental Portfolio

Advisors, Inc., 7 NY3d at 104). Plaintiffs, moreover, cannot

establish their entitlement to judgment dismissing the first

counterclaim by pointing to alleged gaps in defendants’ proof (see

Burke, Albright, Harter & Rzepka, LLP v Sills, 83 AD3d 1413, 1413). 

The court also erred in granting that part of plaintiffs’ motion
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CA 13-01248 

seeking summary judgment dismissing the third counterclaim, alleging

breach of fiduciary duty, and we therefore further modify the order

and judgment accordingly. “It is well settled that an employee owes a

duty of good faith and loyalty to an employer in the performance of

the employee’s duties” (Wallack Frgt. Lines v New Day Express, 273

AD2d 462, 463), and triable issues of fact remain whether plaintiffs

made improper use of Ventraq’s time, facilities or proprietary secrets

while they were in Ventraq’s employ (see Don Buchwald & Assoc., Inc. v

Marber-Rich, 11 AD3d 277, 278-279). 

We further conclude that the court erred in granting that part of

plaintiffs’ motion seeking summary judgment on the causes of action

alleged in the complaint, and granting all of the relief sought

therein. We thus further modify the order and judgment accordingly. 

The Agreement provides that, in the event of a breach of the noncompetition or non-solicitation covenants by plaintiffs, defendants

may assert any rights or remedies available to them “at law or in

equity.” Thus, although plaintiffs established that they are entitled

to certain earn-out amounts pursuant to the Agreement and the Note,

the Agreement also provides for offsets in the event of plaintiffs’

violation of the non-competition and non-solicitation covenants (see

Fiore v Oakwood Plaza Shopping Ctr., 164 AD2d 737, 739, affd 78 NY2d

572, rearg denied 79 NY2d 916, cert denied 506 US 823; Vecchio v

Colangelo, 274 AD2d 469, 471). Triable issues of fact remain with

respect to defendants’ right to an offset (see Vecchio, 274 AD2d at

471).

Finally, we note that defendants’ request for leave to amend the

answer to assert a counterclaim alleging tortious interference with

contractual relations is improperly made for the first time on appeal

(see Flax v Lincoln Natl. Life Ins. Co., 54 AD3d 992, 995). 

Entered: June 13, 2014 Frances E. Cafarell

Clerk of the Court