Opinion ID: 815989
Heading Depth: 4
Heading Rank: 2

Heading: New York Common Law

Text: The foundation of New York common law of unfair competition is “the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another.” Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511, 516 (2012) (quoting Miller v. Schloss, 218 N.Y. 400, 407 (1916)). An unfair competition claim under New York common law “must be grounded in either deception or appropriation of the exclusive property of the plaintiff.” H.L. Hayden Co. v. Siemens Med. Sys., Inc., 879 F.2d 1005, 1025 (2d Cir. 1989). New York precedent establishes that unjust enrichment includes “that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered.” Georgia Malone, 19 N.Y.3d at 516. HALL v. BED BATH 19 This count of the complaint arises from the actions of the defendants in accepting Hall’s sample towel, ostensibly for consideration of a commercial relationship, and acting in bad faith by having Hall’s towels copied for commercial benefit. The common law count of unfair competition requires some element of bad faith. See Eagles Comtronics, Inc. v. Pico Prods., Inc., 682 N.Y.S.2d 505, 506 (App. Div. 1998) (the gravamen of a claim of unfair competition is bad faith misappropriation). Hall’s Complaint sets forth acts of bad faith: ¶72. Upon information and belief, Defend- ants have misappropriated Hall’s labors, skills, efforts, invention, and good will in connection with the Tote Towel by stealing his patented design features and creating knock-off replicas of the Tote Towel. ¶73. Upon information and belief, by un- lawfully copying Hall’s designs, mass-producing the Counterfeit Towels, and selling them to con- sumers, Defendants have in bad faith exploited a commercial advantage which belongs exclusively to Plaintiff. The district court observed that an action for misappropriation of an idea “requires showing ‘(1) a legal relationship between the parties in the form of a fiduciary relationship, an express or implied-in-fact contract, or quasi-contract, and (2) a novel and concrete idea.’” Order at 14 (quoting LinkCo, Inc. v. Fujitsu Ltd., 230 F. Supp. 2d. 492, 501 (S.D.N.Y. 2002)). The district court found that Hall’s complaint “makes clear that these parties never had any kind of contractual or quasi-contractual relationship.” The court also stated that “[t]he central principle underlying a claim for unfair competition under New York law is that one may not misappropriate the 20 HALL v. BED BATH results of the labor, skill, and expenditures of another.” Order at 13 (quoting LinkCo, 230 F. Supp. 2d at 500). The court held that this principle was not met. Thus the court dismissed the New York misappropriation counts on the pleadings. Hall argues that the district court confused two lines of New York precedent, one concerned with the misappropriation of ideas and the other with the misappropriation of labor. Hall asserts that the counts of his complaint are directed not to misappropriation of his idea, but of his labor. Hall states that he spent time and money designing the towel, surveying and buying materials, assessing consumer interest, manufacturing the Tote Towel, and further efforts, including applying for the ’439 Patent. The complaint alleges that those skills, investments, and efforts were misappropriated by the defendants – a misappropriation of labor, not of an idea. BB&B states that Hall voluntarily gave BB&B a sample of his towel. BB&B does not deny that it copied Hall’s towel, and states that the absence of a contractual relationship is fatal to Hall’s claim under New York common law. However, New York law does not condone inappropriate actions, and provides that equitable doctrines may support a misappropriation claim. Such a claim “contemplates an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties.” Georgia Malone, 19 N.Y.3d at 516 (internal citations omitted). New York unfair competition law is “adaptable and capacious” in its reach into the morality of commerce: New York courts have noted the incalculable vari- ety of illegal practices falling within the unfair competition rubric, calling it a broad and flexible doctrine that depends more upon the facts set HALL v. BED BATH 21 forth than in most causes of action. It has been broadly described as encompassing any form of commercial immorality, or simply as endeavoring to reap where one has not sown; it is taking the skill, expenditures and labors of a competitor, and misappropriating for the commercial advantage of one person a benefit or property right belonging to another. The tort is adaptable and capacious. Roy Export Co. Establishment v. Columbia Broad. Sys., Inc., 672 F.2d 1095, 1105 (2d Cir. 1982) (internal citations, quotation marks, and alterations omitted). The LinkCo court stated that “New York courts have found that persons have a protectable property interest in their ‘labor, skill, expenditure, name and reputation.’” 230 F. Supp. 2d at 502 (citing Metropolitan Opera Ass’n v. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483, 492 (Sup. Ct. 1950)). The district court erred in holding that a contractual relationship is required to support a misappropriation claim, whether the misappropriation is of a bare idea, or of labor and skill. New York precedent recognizes that quantum me- ruit and unjust enrichment claims may together form a “single quasi contract claim.” Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005). It was generally undisputed that Hall provided his sample towel in good faith, and that BB&B acted to Hall’s detriment. Applying the standards of equity and good conscience embodied in New York law, the count of misappropriation was not subject to dismissal on the pleadings. Dismissal of the New York law counts is reversed. 22 HALL v. BED BATH