United States District Court, D. New Jersey
Kerri E. Chewning, Esq., ARCHER & GREINER, PC, Haddonfield, NJ, Attorney for Plaintiff Diversified Industries, Inc.
Gregg S. Kahn, Esq., WILSON ELSER, Newark, NJ, Attorney for Defendants Vinyl Trends, Inc. and William Vance Hardin.
JEROME B. SIMANDLE, Chief District Judge.
This matter comes before the Court on Plaintiff Diversified Industries, Inc.'s motion to dismiss Defendant Vinyl Trends, Inc.'s counter-claims for tortious interference with a prospective or existing economic relationship, unfair competition, and misappropriation of trade secrets [Docket Item 12] and Defendant's cross-motion for leave to file an amended counter-claim [Docket Item 17.]
Because Plaintiff has had an opportunity to address Defendant's cross-motion to amend in its reply brief and at oral argument, and in the interest of efficiency, the Court will consider the merits of both motions. For the reasons discussed below, the Court will grant Defendant's cross-motion to amend and grant in part and deny in part Plaintiff's motion to dismiss.
A. Factual Background
The facts set forth below are those alleged in Defendant's "First Amended Answer to Complaint and Counterclaim" which the Court accepts as true for purposes of the instant motions. Defendant Vinyl Trends, Inc. is in the business of manufacturing and selling flooring products, including foam products for use as underlayment for flooring. (Amended Answer and Counterclaim ("Am. Ans.") [Docket Item 17-1] ¶ 9.) The products manufactured and sold by Defendant include the Eternity and Eternity SG products. (Id. ¶ 10.) Defendant and Plaintiff, Diversified Industries, Inc., are competitors in the flooring underlayment market, and Plaintiff sells the FloorMuffler product which competes with Defendant's Eternity and Eternity SG products. (Id. ¶¶ 13, 15.)
Defendant's counter-claim alleges that Defendant and Plaintiff use the same foam supplier, Toray Plastics ("Toray"), which has allowed Plaintiff to obtain information about Defendant's Eternity and Eternity SG products. (Id. ¶ 17.) Plaintiff has obtained information from Toray concerning the sound rating and volatile organic compound ("VOC") content of Defendant's Eternity and Eternity SG products, as well as information concerning other product specifications, development, marketing, and sale of Defendant's Eternity and Eternity SG products. (Id. ¶ 18.) The information Plaintiff has obtained from Toray is confidential, non-public, and provided to Toray in furtherance of Defendant's relationship with Toray. (Id. ¶ 19.) Plaintiff has used and continues to use this information to gain an unfair competitive advantage over Defendant in the marketplace. (Id. ¶ 20.)
Defendant alleges it has suffered actual losses in the form of lower sales of its Eternity and Eternity SG products as a direct consequence of Plaintiff's conduct, and Plaintiff has been unjustly enriched. (Id. ¶ 21.) Plaintiff has used and will continue to use wrongfully obtained information to gain an unfair competitive advantage of Defendant through its marketing materials and in its communications with actual and prospective customers. (Id.)
Plaintiff has also allegedly interfered with Defendant's business relationships with its manufacturers, Toray and Sekisui Voltek ("Voltek"). (Id. ¶ 22.) Plaintiff first interfered with Defendant's relationship with Toray in or around 2007 when Plaintiff made false statements about Defendant's products and product specifications/characteristics in an effort to wrongfully induce Toray to stop doing business with Defendant. (Id.) As a result, Defendant's development and sale of its products were significantly delayed, causing Defendant to suffer lost sales and revenue. (Id.) Defendant did not resume doing business with Toray until 2012. (Id.)
Because Toray supplied Plaintiff with a similar product, Defendant engaged Voltek to design a separate luxury vinyl tile ("LVT") underlayment product which Defendant marketed and sold under its Easy Step and Eternity brands. (Id. ¶ 23.) After expending considerable effort and money developing and marketing the products supplied by Voltek, one or more of Plaintiff's employees or agents around April or May 2013 allegedly made false statements about Defendant's products to Voltek including statements concerning the sound rating, VOC content, and other product specifications of Defendant's products, in order to induce Voltek to stop doing business with Defendant. (Id. ¶ 24.) Plaintiff's actions caused Voltek to stop supplying additional LVT underlayment product after an initial amount, which was insufficient to satisfy orders Defendant was already obligated to provide to customers. (Id. ¶ 25.) Defendant allegedly suffered monetary damages because Defendant was forced to spend significant time and resources communicating with Voltek and alternate suppliers to ensure existing orders were timely completed. (Id.)
Additionally, the counter-claim alleges one or more of Plaintiff's employees, agents, or representatives, have made false or misleading statements on its website or in its marketing materials regarding the flooring underlayment products offered by Plaintiff and Defendant in an effort to gain an unfair competitive advantage over Defendant, including statements concerning Plaintiff's products' sound rating and/or acoustic barrier, statements concerning Defendant's products' purple and/or red color, statements concerning Defendant's tapper displays, and statements concerning Plaintiff's patent on cross link polypropylene foam product. (Id. ¶ 26.) Specifically, Plaintiff falsely states in its marketing materials that its FloorMuffler product has "[t]he highest rated and most effective acoustic barrier on the market." (Id. ¶ 27.) Plaintiff in its marketing materials warns against being "fooled by the color. Be sure to look for ...