KIND OPERATIONS INC v. AUA PRIVATE EQUITY PARTNERS LLC (2021)

Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered October 16, 2020, which, to the extent appealed from as limited by the briefs, granted defendants AUA Private Equity Partners, LLC and AOG, LLC's motion to dismiss the tortious interference with contract claim as against them, the breach of the implied covenant of good faith and fair dealing and breach of contract claims as against AOG, and the misappropriation of trade secrets claim, and granted defendants Andy Unane, David Benyaminy, Kyce Chihi, and Jack Lin's motion to dismiss the tortious interference claim as against them, unanimously affirmed, without costs.

The allegations of the complaint do not establish a continuity of ownership following AOG's purchase of defendant Pa Co–Man, Inc.'s assets from third-party secured creditors, and therefore fail to establish that the asset purchase transaction was a de facto merger (see Matter of TBA Global, LLC v. Fidus Partners, LLC, 132 A.D.3d 195, 209–210, 15 N.Y.S.3d 769 [1st Dept. 2015]).  We note that the other indicia of de facto merger, such as assumption of the predecessor's debts, are not alleged.  Accordingly, AOG was not bound by plaintiff's contract with Pa Co–Man, and the complaint fails to state causes of action for breach of the implied covenant of good faith and fair dealing and breach of contract.

The complaint also fails to state a cause of action for tortious interference with contract as against AUA and AOG because the allegations do not establish the element of absence of justification (see Oddo Asset Mgt. v. Barclays Bank PLC, 19 N.Y.3d 584, 594, 950 N.Y.S.2d 325, 973 N.E.2d 735 [2012]).  Nor is the allegation that PA Co–Man's CEO was “directed” by AUA to conceal the asset purchase from plaintiff sufficient to establish procurement since the CEO was free to reject that “direction.”  The complaint fails to allege any conduct on the part of the individual defendants that would establish their intentional and improper procurement of a breach of the contract without justification.

The complaint fails to state a cause of action for misappropriation of trade secrets because it does not allege that AOG made use of the confidential information (see Meer Enters. LLC v. Kocak, 173 A.D.3d 629, 105 N.Y.S.3d 415 [1st Dept. 2019]).  Moreover, on this cause of action plaintiff seeks only injunctive relief, which became moot when plaintiff entered into a manufacturing contract with AOG.

We have considered plaintiff's remaining arguments and find them unavailing.