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Proxysoft Worldwide, Inc. v. Flosscare Worldwide, Inc.

United States District Court, D. Connecticut

August 22, 2018

PROXYSOFT WORLDWIDE, INC., Plaintiff,
v.
FLOSSCARE WORLDWIDE, INC., ISLAND BROOK LLC, VKRAM CONSTRUCTION, INC., CHAMKAUR SINGH and HARJIT SINGH, Defendants.

          MEMORANDUM OF DECISION ON SUMMARY JUDGMENT

          WARREN W. EGINTON SENIOR UNITED STATES DISTRICT JUDGE.

         In this action, plaintiff ProxySoft Worldwide, Inc. has alleged that defendants Flosscare Worldwide, Inc., Island Brook LLC, Vikram Construction, Inc., Chamkaur Singh, Vikram Singh and Harjit Singh are liable for violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Lanham Act, the Connecticut Unfair Trade Secrets Act (“CUTSA”), and the Connecticut Unfair Trade Practices Act (“CUTPA”). In Count One, plaintiff alleges that defendants have violated RICO by conspiring to sell stolen or bootleg specialty dental floss to plaintiff's customers, and to employ stolen trade secrets; in Count Two, plaintiff, seeking injunctive relief, alleges that defendants Flosscare and Island Brook have violated the Lanham Act by selling Flosscare products in interstate commerce, which products represent defendants' copying of plaintiff's trade dress; in Count Three, plaintiff alleges that defendants Chamkaur and Harjit Singh committed civil larceny by stealing finished goods, raw materials, proprietary machinery designs and specifications, manufacturing information, files, confidential customer lists, packaging, and other trade secrets; in Count Four, plaintiff alleges that defendants have violated CUTSA by stealing ProxySoft's trade secrets; in Count Five, plaintiff alleges that defendants have violated CUTPA; and in Count Six, plaintiff alleges that defendants have violated New York state unfair competition law.

         Defendants have filed a motion for summary judgment on plaintiff's complaint. For the following reasons, the motion for summary judgment will be granted.

         A. BACKGROUND

         The parties have submitted statements of undisputed facts, with support exhibits. These materials reflect the following factual background.

         Plaintiff is a manufacturer of specialty dental floss products that can be manufactured by a single machine. Brett Thornton is plaintiff's president and chief executive. Plaintiff alleges that the machinery used by ProxySoft are closely guarded secrets. Plaintiff asserts that prior technology was covered by now-expired patents obtained by his deceased father, Thomas Thornton, who established his dental floss manufacturing business with Thornton International, Inc., and Home Dental Care, Inc.

         Defendant Chamkaur Singh was an employee of Thornton International from 1999 through 2015. Thereafter, he worked for ProxySoft unitl his termination. He asserts that, during his two decades of work manufacturing dental floss products, he became familiar with the customer names and contact information of his employer; that he gained expertise in the construction and operation of machines used to produce the dental floss products; and that he had not been requested to execute a confidentiality agreement. Brett Thornton asserts that Chamkaur Singh was terminated after he was found to have stolen from plaintiff.

         Plaintiff alleges that that defendants Chamkaur Singh, Harjit Singh, and Vikram Singh conspired to steal plaintiff's proprietary machinery designs, manufacturing techniques and confidential information to produce dental floss products at defendant Island Brook's factory, which products were later sold to plaintiff's customers by Flosscare Worldwide at a commercial space owned by Vikram Construction. Plaintiff also alleges that defendants Chamkaur and Harjit Singh conspired to steal finished and unfinished dental floss products, raw materials and chemicals from ProxySoft.

         In August 2017, plaintiff commenced the instant action by filing a complaint and an ex-parte application for a temporary restraining order based on defendants' asserted misappropriation of trade secrets. The Court granted the motion on August 1, 2017, but modified the order after oral argument on August 30, 2017, to allow defendants to engage in commercial and other business activities provided that defendants did not disseminate plaintiff's alleged trade secrets to a wider audience.

         Prior State Court Litigation: Russo Action

         In May 2015, Home Dental Care, Thornton International, and Robert Russo, the executor of the Estate of Thomas Thornton, brought an action (the “Russo Action”) in Connecticut Superior Court against Brett Thornton, ProxySoft Worldwide, and ProxySoft Direct, Inc., alleging that Thornton had stolen property from Thornton International; that he had violated CUTPA; and that he had diverted corporate opportunities to his ProxySoft entities away from Thornton International. The complaint in the Russo Action alleged that Brett Thornton had stolen dental floss machines, a coating machine, customer ledgers, delivery records, customer lists, trade secrets, raw materials, finished inventory, and design and operation of machinery.

         On April 12, 2016, Judge Heller issued a bench ruling on a motion for temporary injunction, finding that the preponderance of the evidence showed that Brett Thornton, while President of Thornton International, had diverted payments that should have gone to Thornton International to Thornton Oral Care, a company he had formed; and that he had directed Thornton International customers to send their payments to ProxySoft. Judge Heller noted Brett Thornton had formed ProxySoft to compete with Thornton International, had paid himself extra salary from Thornton International funds, and had taken inventory, raw materials, books and records from Thornton International. Judge Heller observed that Brett Thornton was “essentially gutting” Thornton International so that it could not compete with ProxySoft. In an affidavit opposing the motion for an injunction in the Russo Action, Brett Thornton stated that there was “nothing confidential about the customer list” of Thornton International and Home Dental Care.

         On October 31, a jury, after considering the evidence, awarded damages on the claims of breach of fiduciary duty, statutory theft and interference with contracts and business expectancies against Brett Thornton. In accordance with its answers to interrogatories, the jury found that Brett Thornton had intentionally and without authorization taken property that belonged to Thornton International, Inc. and Home Dental Care.

         B. ...


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