Nutmeg Gaming & Bingo Prods. v. Abbott Prods.

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NUTMEG GAMING AND BINGO PRODUCTS, LLC, Plaintiff, v. ABBOTT PRODUCTS INC. et al., Defendants.

No. 3:22-cv-716 (JAM)

United States District Court, D. Connecticut

January 9, 2023

ORDER RE MOTIONS TO DISMISS AND MOTION FOR PRELIMINARY INJUNCTION

Jeffrey Alker Meyer United States District Judge.

This federal diversity case is about a dispute over the sale of a bingo game business. The plaintiff bought the business from one of the defendants but then their relationship went south. The plaintiff alleges breach of contract among many other claims against various defendants.

Two of the defendants have moved to dismiss for lack of personal jurisdiction. The plaintiff moves for a preliminary injunction. For the reasons set forth in this ruling, I will grant the two defendants' motions to dismiss and deny the plaintiff's motion for a preliminary injunction.

Background

Plaintiff Nutmeg Gaming and Bingo Products, LLC (“Nutmeg”) has filed this lawsuit against numerous defendants: Abbott Products, Inc. (“Abbott”); John Lenzi, president of Abbott Products; Lisa Lenzi, wife of John Lenzi; Diamond Distributors, Inc. (“Diamond Distributors”); and Steven Stanford (“Stanford”) d/b/a/ New England Bingo Supply.^[1] Nutmeg is a limited liability company based in Connecticut and principally managed by Eric Leshine.^[2] According to the amended complaint, Nutmeg and Abbott entered into an asset purchase and sales agreement in May 2020.^[3] Abbott sells bingo supplies and equipment, and under the terms of the agreement Nutmeg agreed to purchase substantially all of Abbott's business assets.^[4]These assets include:

• Equipment, machinery, bingo paper and bingo products sealed tickets, general supplies, gaming products, inventory and trucks and motor vehicles.^[5] A bill of sale executed on December 20, 2021 specifies that these assets are to include a 10-foot wooden conference table, a 6-drawer 3-piece wooden desk, and 14 file cabinets of various sizes.^[6]

• Customer contact records and files, including documents, tapes, software programs, and other information documenting the name, address, contact information and purchasing and account history of existing, previous, and prospective customers of Abbott Products.^[7]

• Open or pending purchase orders identified in the bill of sale, as well as all contracts, indentures, licenses, agreements, commitments, bids, quotes, proposals, purchase orders, and sale orders.^[8] The bill of sale states that this information is to include a copy of Quickbooks-an accounting software-with 3 years of customer history.^[9]

• All rights, title, and interest in and to all contracts and/or purchase orders with vendors, and/or subcontracts, that will provide product to satisfy open purchase orders.^[10]

• All rights to websites and social media accounts used by Abbott Products, including the website “abbottbingoproducts.com.”^[11]

The complaint further alleges that in December 2021 Nutmeg entered into a non-compete and confidentiality agreement with the Lenzis.^[12] The agreement prohibits the Lenzis from unauthorized disclosure or misuse of “Confidential Information,” which the agreement defines as Nutmeg's “trade secrets and proprietary information, financial results and information, processes and techniques, methods of doing business and information concerning customers and/or prospects of the Company, [and] identifying information regarding customers and/or prospects of the Company.”^[13] It also prohibits them from soliciting, encouraging, or inducing any customer and/or prospects to do business with a competitor of Nutmeg or to refrain from doing business with Nutmeg; interfering with the business relationship between Nutmeg and any customer; and divulging the names of Nutmeg's accounts to any person.^[14]

The sale closed in December 2021, and the relationship between the parties soon soured. After the sale closed, Abbott and John Lenzi notified Diamond Distributors and Stanford that Abbott had sold its business to Nutmeg, including its rights and interests in the contractual agreements and relationships between Abbott and its customers and vendors.^[15] Abbott and John Lenzi allegedly encouraged Diamond and Stanford to tell customers and vendors of Nutmeg to terminate their relationships with Nutmeg and to place future orders with Nutmeg's competitors.^[16]

On March 8, 2022, John Lenzi told Nutmeg that he would prevent Nutmeg from accessing inventory stored at a Massachusetts business premise and prohibit Nutmeg from using that premise to do business.^[17] On March 27, 2022, Nutmeg went to the Massachusetts business premise to remove certain business assets identified in the sales agreement-namely bingo flash boards, bingo consoles, a wooden desk, a wooden conference table, and file cabinets.^[18] But upon arriving at the premise, Nutmeg discovered that John Lenzi had already removed those assets.^[19] On or around March 11, 2022, Abbott and John Lenzi allegedly instructed the host of the Abbott Products website and other social media and internet accounts to shut down those accounts, without transferring any of the account information to Nutmeg as required by the sales agreement.^[20] At some point after close of purchase, Abbott and John Lenzi also posted a message on the Abbott Products website notifying customers that the Abbott Products business had been sold and directing customers to contact Diamond Distributors to fulfill future orders.^[21]Nutmeg has attached to its complaint a screenshot of this auto-reply message, which reads: “If you are in need of Bingo Supplies or Products please call Diamond Distributors at 1-800-8603887. This business as [sic] been sold and this Email Account is no longer monitored.”^[22]

On April 12, 2022, Nutmeg emailed Diamond and Stanford a letter advising them that Nutmeg was aware that Abbott and John Lenzi had disclosed confidential Nutmeg customer information to Diamond and Stanford in violation of the confidentiality agreement, and had also directed Diamond and Stanford to contact Nutmeg customers to solicit orders.^[23] The letter directed each party to “provide [Nutmeg] with the names of any such business customers or accounts” who have contacted the defendants or were referred to them directly or indirectly by John Lenzi or any other former employees of Abbott Products.^[24]

Finally, Abbott has refused to provide Nutmeg with “Quickbooks” financial software containing three years of customer history, inhibiting Nutmeg's ability to carry on with the business operations purchased from Abbott.^[25] John Lenzi has also retained pieces of U.S. mail, including customer check payments belonging to Nutmeg, which he has refused to turn over to Nutmeg.^[26]

Abbott and the Lenzis largely dispute these allegations of the amended complaint.^[27] It is not necessary at this time, however, for me to detail their counter-version of the events.

The amended complaint alleges several counts. Count One alleges a claim for injunctive relief. Counts Two and Three allege claims for breach of the sales agreement and confidentiality agreement against Abbott and the Lenzis. Count Four alleges fraud against Abbott and John Lenzi. Count Five alleges conversion against Abbott and the Lenzis. Counts Six and Seven allege tortious interference with contract and business expectancies against Stanford and Diamond Distributors. Counts Eight and Nine allege claims for violation of the Connecticut Uniform Trade Secrets Act and the Connecticut Unfair Trade Practices Act against Abbott and the Lenzis.

Stanford and Diamond Distributors have moved to dismiss. Nutmeg has moved for a preliminary injunction. Following a hearing at which I heard from all parties, this ruling follows.^[28]

Discussion

I will first address the jurisdictional motions to dismiss filed by Stanford and Diamond Distributors. Then I will turn to Nutmeg's motion for a preliminary injunction.

Stanford motion to dismiss

Stanford has moved to dismiss in part for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2).^[29] A court may lack personal jurisdiction over an out-of-state defendant if the defendant is not subject under state law to the “long-arm” jurisdiction of the courts of that State, or if exercise of jurisdiction over the defendant would not comport with constitutional principles of fairness and due process. See generally U.S. Bank Nat'l Ass'n v. Bank of Am. N.A., 916 F.3d 143, 149 (2d Cir. 2019); Reich v. Lopez, 858 F.3d 55, 63 (2d Cir. 2017); Waldman v. Palestine Liberation Org., 835 F.3d 317, 327 (2d Cir. 2016).^[30]

When a defendant moves to dismiss for lack of personal jurisdiction the plaintiff bears the burden of making a prima facie showing that jurisdiction exists, including averments of facts that-if credited-would suffice to establish jurisdiction over the defendant. See Charles Schwab Corp. v. Bank of Am. Corp., 883 F.3d 68, 81 (2d Cir. 2018); SPV Osus Ltd. v. UBS AG, 882 F.3d 333, 342 (2d Cir. 2018). While a court must assume the truth of the plaintiff's factual allegations, “[v]ague and conclusory allegations in a pleading are insufficient to establish personal jurisdiction.” Simonson v. Olejniczak, 2022 WL 6509428, at *2 (D. Conn. 2022).

Stanford is a citizen and resident of Massachusetts, and he does business there under the name New England Bingo Supply.^[31] Nutmeg contends that the Court may exercise personal jurisdiction over Stanford “based upon the alleged tortious actions occurring in Massachusetts which resulted in injuries to the Plaintiff in Connecticut.”^[32]

Under Connecticut's long-arm statute, “a court may exercise personal jurisdiction over any non-resident individual . . . who in person or through an agent commits a tortious act outside the state causing injury to a...