19‐2057‐cv
Inspired Capital LLC v. Condé Nast
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED
BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 12th day of February, two thousand twenty.
PRESENT: DENNIS JACOBS,
GUIDO CALABRESI,
DENNY CHIN,
Circuit Judges.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
INSPIRED CAPITAL, LLC, and ERICA GARY,
derivatively on behalf of Inspired Food Solutions,
LLC,
Plaintiffs‐Appellants,
‐v‐ 19‐2057‐cv
CONDÉ NAST, an unincorporated division of
Advance Magazine Publishers, Inc., and
FREMANTLEMEDIA NORTH AMERICA, INC., a
foreign corporation,
Defendants-Appellees.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
FOR PLAINTIFFS‐APPELLANTS: Jermaine A. Lee, Hernandez Lee Martinez,
LLC, Miami Shores, Florida; Scott Zarin, Zarin
& Associates, P.C., New York, New York.
FOR DEFENDANTS‐APPELLEES: Cynthia E. Neidl, Greenberg Traurig, LLP,
Albany, New York, for Condé Nast.
Sean Riley, Glaser Weil Fink Howard Avchen
& Shapiro LLP, Los Angeles, California; Judith
A. Lockhart, Carter Ledyard & Milburn LLP,
New York, New York, for FremantleMedia
North America, Inc.
Appeal from the United States District Court for the Southern District of
New York (Keenan, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgments of the district court are AFFIRMED.
Plaintiffs‐appellants Inspired Capital, LLC and Erica Gary (ʺplaintiffsʺ)
appeal from the November 26, 2018 judgment of the district court granting the motion
of defendants‐appellees Condé Nast and FremantleMedia North America, Inc.
(ʺdefendantsʺ) to dismiss the complaint for failure to state a claim pursuant to Federal
Rule of Civil Procedure 12(b)(6) and the June 5, 2019 judgment denying plaintiffsʹ
motion for leave to amend. We assume the partiesʹ familiarity with the underlying
facts, the procedural history of the case, and the issues on appeal.
The following facts are drawn from the complaint and presumed true for
purposes of this appeal. Plaintiffs are minority shareholders of a Florida corporation,
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Inspired Food Solutions, LLC (ʺIFSʺ). IFS was created by Chef Calvin Harris, who was
its majority shareholder and Chief Executive Officer.
In 2013, defendants entered into a licensing agreement with IFS pursuant
to which defendants granted IFS a license to use defendantsʹ intellectual property to
develop and market health food products. In 2014, however, when IFS could no longer
pay its debts, Harris left IFS and, with a new investor, created a new entity, Benevida
Foods, LLC (ʺBenevidaʺ). When IFS failed to make a required payment, defendants
terminated their license agreement with IFS and entered into a new license agreement
with Benevida.
Plaintiffs sued Harris, Benevida, and their investor in Florida and
eventually amended their complaint in Florida to add claims against defendants. The
Florida court dismissed the claims against defendants based on a New York forum
selection clause. Plaintiffs then brought this action below asserting claims against
defendants for: (1) breach of contract; (2) aiding and abetting breach of fiduciary duty;
(3) fraudulent concealment/omission; (4) aiding and abetting fraud; (5) conspiracy to
commit fraud; and (5) misappropriation of trade secrets.
On May 23, 2018, defendants moved to dismiss the complaint. In an
Opinion and Order issued November 26, 2018, the district court granted the motion,
holding that the complaint failed to allege plausible claims for breach of contract,
fraudulent concealment, aiding and abetting fraud, conspiracy to commit fraud, and
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misappropriation, and that the aiding and abetting breach of fiduciary duty claim was
time‐barred. Plaintiffs moved for leave to amend the complaint and submitted a
proposed amended complaint (the ʺPACʺ), which they alleged cured any identified
deficiencies. In an Opinion and Order issued May 21, 2019, the district court denied
plaintiffsʹ motion to amend on the grounds that amendment would be futile.
This appeal followed. The sole issues on this appeal are whether the
district court erred in dismissing plaintiffsʹ claims for (1) aiding and abetting breach of
fiduciary duty, (2) misappropriation of trade secrets, (3) and aiding and abetting and
conspiracy to commit fraud.1
DISCUSSION
I. Standard of Review
We review de novo both the granting of a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6) and the denial of a motion for leave to amend the
complaint premised on futility. See Edwards v. Sequoia Fund, Inc., 938 F.3d 8, 12 (2d Cir.
2019); Yamashita v. Scholastic Inc., 936 F.3d 98, 107‐08 (2d Cir. 2019) (per curiam). In
evaluating whether a complaint states a claim, ʺwe accept as true all factual allegations
1
Although plaintiffs appeal the district courtʹs dismissal of their ʺfraud claims,ʺ they dispute only
the district courtʹs holding that the fraud claims were not pled with particularity. Plaintiffsʹ fraudulent
concealment claim, however, was dismissed for a failure to plead a benefit obtained by defendants, a
required element of a cause of action. See Inspired Capital, LLC v. Condé Nast, No. 18 CIV. 0712 (JFK), 2018
WL 6173712, at *5 (S.D.N.Y. Nov. 26, 2018). Plaintiffs do not address this claim in their brief. To the
extent plaintiffsʹ appeal also challenges dismissal of their fraudulent concealment claim, we affirm for the
reasons set forth by the district court. See id.
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and draw from them all reasonable inferences; but we are not required to credit
conclusory allegations or legal conclusions couched as factual . . . allegations.ʺ Nielsen v.
Rabin, 746 F.3d 58, 62 (2d Cir. 2014) (internal quotation marks omitted). ʺ[T]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.ʺ Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
II. Aiding and Abetting Breach of Fiduciary Duty
Although the district court dismissed plaintiffsʹ aiding and abetting
breach of fiduciary claim as time‐barred, we affirm on the alternative ground that the
complaint and PAC failed to allege a plausible claim.2 To state an aiding and abetting
breach of fiduciary claim under New York law, a plaintiff must allege (1) a ʺbreach by a
fiduciary of obligations to anotherʺ of which the defendant ʺhad actual knowledge;ʺ (2)
ʺthat the defendant knowingly induced or participated in the breachʺ; and (3) ʺthat [the]
plaintiff suffered damage as a result of the breach.ʺ See In re Sharp Intʹl Corp., 403 F.3d
43, 49‐50 (2d Cir. 2005).3
The PAC alleged that Harris violated his fiduciary duty to IFS when he
transferred his recipes and food products to Benevida and reinitiated a business
relationship with defendants through the new corporate entity. Even assuming Harris
breached a fiduciary duty he owed to plaintiffs ‐‐ which we do not decide here ‐‐
2 ʺWe may affirm on any ground that finds support in the record.ʺ Dettelis v. Sharbaugh, 919 F.3d
161, 163 (2d Cir. 2019) (per curiam).
3 The parties agree that New York law applies to the claims at issue in this appeal.
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plaintiffsʹ claim fails because the facts alleged do not give rise to an inference that
defendants knew or should have known of this breach. The complaint and PAC alleged
that defendants dealt exclusively with Harris and that Harris executed all contracts with
them on behalf of IFS. Plaintiffs have not identified any plausible reason why
defendants would have had reason to know the specifics of Harrisʹs arrangement with
IFS regarding his recipes and products, or that Harris was not authorized to continue
doing business with them through Benevida after IFSʹs dissolution.4
Amendment would also have been futile. Plaintiffsʹ added allegation that
defendants received and reviewed IFSʹs internal Limited Liability Company Agreement
‐‐ presumably for defendantsʹ own liability purposes ‐‐ before granting a license to IFS
in 2013, does not give rise to the inference that defendants knew Harris was breaching
his duties under that agreement a year later. See Lerner v. Fleet Bank, N.A., 459 F.3d 273,
294 (2d Cir. 2006) (holding that an aiding and abetting claim under New York law
requires ʺan allegation that such defendant had actual knowledge of the breach of
dutyʺ).
4 Plaintiffsʹ allegations that defendants ʺknew that IFS developed and owned the food recipes and
food productsʺ and ʺknew that Harris developed and owed and was breaching his fiduciary duties,ʺ
Appʹx at 231‐32, are conclusory and cannot save their aiding and abetting breach of a fiduciary duty
claim. See Webb v. Goord, 340 F.3d 105, 111 (2d Cir. 2003) (affirming the dismissal of a claim where
ʺplaintiffs ha[d] not alleged, except in the most conclusory fashion . . . any . . . meeting of the minds
occurred among any or all of the defendants.ʺ).
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III. Misappropriation of Trade Secrets
ʺA plaintiff claiming misappropriation of a trade secret must prove: (1) it
possessed a trade secret, and (2) defendant is using that trade secret in breach of an
agreement, confidence, or duty, or as a result of discovery by improper means.ʺ
Integrated Cash Mgmt. Servs., Inc. v. Dig. Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990)
(internal quotation marks omitted). The district court dismissed plaintiffsʹ
misappropriation of trade secrets claim for a failure to allege the existence of a trade
secret and denied leave to amend on the grounds that the claim was time‐barred.
We need not decide either issue reached by the district court. Even
assuming the claim was timely and a trade secret sufficiently alleged, dismissal was
warranted because the complaint did not allege a single instance of defendants ‐‐ as
opposed to Harris ‐‐ ʺusingʺ IFSʹs intellectual property. Id. Defendants granted IFS, and
subsequently Benevida, the right to use defendantsʹ intellectual property in connection
with the sale of Harrisʹs food products, not the inverse. To the extent that defendants
continued to authorize use of their own intellectual property in connection with the
marketing and sale of the health food products with Benevida after terminating their
license agreement with IFS, such conduct would not constitute misappropriation of
IFSʹs trade secrets. And even if, as plaintiffs allege, defendants provided ʺsupportʺ to
Benevida in marketing its healthy food line, Appʹx at 236, that is not misappropriation.
Accordingly, dismissal of plaintiffsʹ misappropriation of trade secrets claim is affirmed.
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IV. Fraud Claims
The district court also did not err in dismissing plaintiffsʹ aiding and
abetting fraud and conspiracy fraud claims because neither the complaint nor the
proposed amendments in the PAC satisfied the heightened pleadings standard for
fraud claims under Federal Rule of Civil Procedure 9(b). Plaintiffs first argued a
fraudulent omission ‐‐ that Harris ʺconceal[ed] that he had formed Benevida with an
objective directly antagonistic to IFS.ʺ Dist. Ct. Dkt. No. 31 at 19. In the PAC, plaintiffs
altered their theory of fraud to a misstatement, alleging that in March 2013 and
ʺperiodically thereafter,ʺ Harris told IFS that its investment would be used ʺstrictly for
the benefit of IFS.ʺ Appʹx at 219. This statement was misleading, according to plaintiffs,
because it ʺfail[ed] to disclose that [Harrisʹs] efforts would be, and were instead aimed
at securing for himself a relationship with [defendants] contrary to the terms ofʺ their
operating contract with IFS. Appʹx at 219.
We have repeatedly explained that Rule 9(b)ʹs heightened pleading
requirement ʺserves to provide a defendant with fair notice of a plaintiffʹs claim,
safeguard his reputation from improvident charges of wrongdoing, and protect him
against strike suits.ʺ ATSI Commcʹns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir.
2007). Allegations of fraud under Rule 9(b), therefore, must be pled with particularity
and ʺspecify the time, place, speaker, and content of the alleged misrepresentations.ʺ
Caputo v. Pfizer, Inc., 267 F.3d 181, 191 (2d Cir. 2001). Plaintiffsʹ allegation that Harris
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made an alleged misstatement, at an unidentified location, on an unidentified date in
March 2013 and ʺperiodically thereafter,ʺ Appʹx at 219, clearly does not satisfy this
standard.
Because the PAC failed to allege fraud, it could not state a claim for either
aiding and abetting fraud or fraud conspiracy, as both causes of action require an
underlying fraud to be alleged. See Lerner, 459 F.3d at 292 (ʺTo establish liability for
aiding and abetting fraud, the plaintiffs must show . . . the existence of a fraudʺ (internal
quotation marks omitted)); Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 26 n.4 (2d
Cir. 1990) (noting that stating a civil fraud conspiracy claim requires pleading
ʺunderlying acts of fraudʺ with particularity). Accordingly, the district courtʹs dismissal
of plaintiffsʹ fraud claims and subsequent denial of leave to amend is affirmed.
* * *
We have considered plaintiffsʹ remaining arguments and conclude they
are without merit. For the foregoing reasons, we AFFIRM the judgment of the district
court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk
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