        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 non-
competition 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 non-
solicitation 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 non-
competition 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
