Imaginative Research Assoc.s Inc. v. Ramirez

718 F.Supp.2d 236

IMAGINATIVE RESEARCH ASSOCIATES, INC., Plaintiff,

v.Jose E. RAMIREZ and Jose Ramirez, Ph.D., LLC, Defendants.

Civil No. 3:07cv861 (JBA).

United States District Court,D. Connecticut.

June 8, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Brian E. Moran, Robinson & Cole, Stamford, CT, for Plaintiff.

James Newhall Tallberg, Karsten, Dorman & Tallberg LLC, Kerry L. Keeney-Curtin, Karsten, Dorman & Tallberg LLC, West Hartford, CT, for Defendants.

RULING ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

JANET BOND ARTERTON, District Judge.

Plaintiff Imaginative Research Associates, Inc. (“IRA”) brings this suit against Jose E. Ramirez (“Ramirez”), its former founder and partner, and Jose Ramirez, Ph.D., LLC (the “PhD LLC”) (collectively, “Defendants”), a company Ramirez founded after leaving IRA. IRA claims that after Ramirez left IRA, the Defendants disclosed and used IRA's confidential information in violation of certain contractual, common-law, and statutory duties. Defendants assert counterclaims based on the same and other contracts as well as common-law principles and the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen.Stat. § 42-110a et seq. Following discovery, Defendants moved for summary judgment on Plaintiff's claims and their counterclaims, which Plaintiff opposes. For the reasons that follow, Defendants' motion for summary judgment will be granted in part and denied in part.

I. Facts

Taken in the light most favorable to the non-moving Plaintiff, the record reveals that the parties' dispute arises out of the following factual scenario. ¹

1.

After earning his Ph.D. in physical chemistry in 1970, Ramirez began working in the cosmetics and pharmaceuticals industry. Between 1970 and 1987 Ramirez worked at various companies at which he was responsible for developing and introducing new products, including creams, lotions, antibiotics, vitamins, aerosol sprays, wipes, sticks, cleansers, emulsions, and solutions. In 1987 he and Mohan Vishnupad (“MV”) formed IRA, and between 1987 and 2000 they worked together and invented products and obtained a number of patents “having substantial financial value.” (2d Ramirez Aff. at ¶ 13. ² ) According to MV's daughter Naomi Vishnupad (“NV”), who joined IRA in October 2001 and is now its president, “IRA is a chemical research and development company focused on skin care products, cosmetics and prescription dermatology products,” and works primarily to develop products based on benzoyl peroxide (“BPO”) “to treat acne.” (NV Dep. at 26; NV Aff. at ¶¶ 2, 3.) IRA is “well known within industry circles as a highly innovative formulator of BPO compositions.” ( Id. at ¶ 4.) BPO is a well-known acne-fighting compound. (MV Dep. at 136 (“[A]ny professional who is in this business knows that [BPO] is the most effective treatment for acne.”).)

Although “[t]he overwhelming majority of IRA's research and development work and know how is not patented” and is instead “treated as confidential by IRA and its licensees” (NV Aff. at ¶ 6), IRA has applied for and obtained a number of patents. One of these patents is U.S. Patent No. 5,632,996 (the “'996 Patent”), which issued on May 27, 1997, which Ramirez and MV assigned to IRA, and whose abstract claims: “[n]on-irritating compositions containing benzoyl peroxide and a non-irritating benzoic acid ester are useful in preparing products suitable for use in contact with the skin.” (NV Ex. F & Defs.' Ex. 17-2. ³ ) IRA licensed its patent to two companies that make competing acne-treatment products: Medicis, which manufactures “TRIAZ,” and Johnson & Johnson, which manufactures “Clean & Clear.” In 2000, IRA contracted with one of its existing customers to develop new products based on existing and new BPO compounds. According to MV and NV, Ramirez was heavily involved in the development of these products until his departure in August. ( See NV Dep. at 69-72; MV Dep. at 169-72.) ⁴

2.

For reasons that do not appear in the record, MV and Ramirez decided to go their separate ways, and “[i]n August 2000 [they] entered into several agreements for the purpose of dividing [their] interest in IRA and winding up [their] business relationship.” (2d Ramirez Aff. at ¶ 15.) Ramirez then formed the PhD LLC. The documents they signed that month form the basis of this case.

First, on August 18, 2000, Ramirez and MV reached an agreement on a “Proposal” initially made by Ramirez to MV, which agreement formed the basis of the contracts they executed on August 23, 2000. The Proposal lists eight “Purpose [s]” and 17 “Steps” to accomplish them. The Proposal's purposes included:

a. Terminate 50/50 ownership

b. Orderly termination of employee as of 12/31/00

c. Orderly transfer of pension funds ...

h. To close on 8/23/00.

(Fax & Proposal, Defs.' Ex. 4, at 2.) The Proposal's steps included:

1. JR sells 1% of company to MV on 8/23/00 for $5,000.

2. JR agrees to sell 49% of company stock on 8/23/00, effective date 12/31/03 for a price of $245,000[.]

3. Stock price of $245,000 to be paid as mutually agreed (either installments [of “$2150 mo. starting 1/ 1/04”] or other appropriate method.

4. JR will remain a stock holder of company until 12/31/03.

5. Company will sign an irrevocable consulting agreement effective 1/1/01 with [the PhD LLC] for 12.5 years at a rate of [$]220,000 for 12.5 yrs-[$] 18333/mo.

( Id. at 2-3.) The Proposal concluded with Ramirez's observation that

It is my understanding that the steps and procedures outlined above will help us agree on the terms for a successful closing. If there are serious disagreements or concrete financial (e.g. pension data) information is missing, I suggest we delay next week's closing date.

( Id. at 3.) The Proposal bears the signatures of both Ramirez and MV. ( Id.) Five days later, on August 23, 2000, Ramirez and NV signed a number of contracts (collectively, the “August 2000 Arrangement”), which included six separate contracts: an “Agreement” (the “First Agreement” (Defs.' Ex. 5)); a Confidential Disclosure Agreement (Defs.' Ex. 7 & NV Ex. C); a Consulting Agreement (Defs.' Ex. 8 & NV Ex. D); a Stock Redemption Agreement (Defs.' Ex. 9 & NV Ex. A); an Addendum Agreement (Defs.' Ex. 11 & NV Ex. E); and a Second Addendum Agreement (Defs.' Ex. 13). ⁵ Additionally, on January 1, 2001, IRA and Ramirez executed an Employment Agreement (Defs.' Ex. 6 & NV Ex. B), and on December 31, 2003 MV executed a Promissory Note (Defs.' Ex. 10).

The First Agreement. The First Agreement, which states that it is “by and among” Ramirez, NV, IRA, and an IRA subsidiary called RAVI, provided that

WHEREAS, IRA has a total of 5000 shares of common stock authorized, all of which is issued fully paid, non-assessable and outstanding (the “Stock”); and,

WHEREAS, Ramirez owns 2,500 shares of the Stock and desires to have his stock interest in IRA redeemed by IRA; and,

WHEREAS, IRA desires to redeem the shares of Stock owned by Ramirez, which will result in MV then owning one hundred percent (100%) of the Stock of IRA and,

WHEREAS, Ramirez and IRA desire that said redemption shall occur in two transactions, the first occurring on the date hereof, whereupon IRA shall redeem 50 shares of the Stock from Ramirez and the second occurring on December 31, 2003, whereupon the remaining 2,450 shares of Stock shall be redeemed from Ramirez by IRA; and,

WHEREAS, Ramirez desires to transfer his entire interest in RAVI to MV, which will result in MV then owning the entire Membership Interest in RAVI, subject to the terms and conditions set forth herein

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, Ramirez, [IRA], RAVI and MV hereby agree as follows:

(First Agreement at 1.) The First Agreement provided that Ramirez would transfer his IRA stock to an escrow agent, Lawrence P. Lemieux, CPA, at a particular redemption price to be paid by IRA:

The redemption price for the stock to be redeemed hereunder (the “Redemption Price”) is:

for the FIFTY (50) shares of stock to be redeemed on the Closing Date-FIVE THOUSAND ($5,000.00) dollars;

for the TWO THOUSAND FOUR HUNDRED FIFTY (2,450) shares of stock to be redeemed on December 31, 2003-ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED SEVENTY NINE & 30/100 ($175,979.30) DOLLARS.

( Id. at 2 (§ 1.1.2).) IRA was to pay the $5,000 in cash, and to pay the $175,979.30 at “SEVEN & 1/2 (7.5%) percent per annum, payable in ONE HUNDRED FOURTEEN (114) successive equal monthly installments of TWO THOUSAND ONE HUNDRED FIFTY ($2,150.00) dollars each” beginning on January 1, 2004 under a schedule attached to the First Agreement as a Promissory Note ( id. (§ 1.1.3)) that set forth that IRA's 114 monthly payments were due on the first day of each month; the last payment is due “June 1, 2013, at which time the entire principal and accrued but unpaid interest thereon shall be due and payable”; that a late charge of five percent will be charged on each payment not paid within 10 days of its due date; and that upon default Ramirez had the option to call “immediately ... due and payable” “the entire principal balance.” (First Agreement at 50-51 (Ex. B (Promissory Note) (not executed)); executed version at Defs.' Ex. 10 (with spreadsheet of schedule noting payment of interest and principal over 114 payments totaling $245,100.00).)

The parties to the First Agreement further agreed that “MV [would] purchase all of the Membership Interest owned by Ramirez in RAVI” for $1,000, payable in cash on August 23, 2000. ( Id. at 3 (§ 1.2).) The First Agreement also stated that neither IRA nor RAVI had any “obligation, contingent or otherwise, under any employment agreement” or any “deferred compensation agreement, retainer or consulting arrangements, bonus or profit-sharing plan, stock option or purchase plan or other employee contract ... or other employee or fringe benefit plan, including vacation, sick leave or disability plans or programs.” ( Id. at 6 (§ 3.10...