“Extra Element” Victory on State Law Claims for White House/Black Market and Chico’s - FREE DOWNLOAD: Opinion - White House/Black Market, et al. v. Cache INC., et al.

“Extra Element” Victory on State Law Claims for White House/Black Market and Chico’s - FREE DOWNLOAD: Opinion - White House/Black Market, et al. v. Cache INC., et al.

On July 27th, Judge Paul G. Gardephe of the Southern District of New York granted White House/Black Market, Inc.'s motion to remand its suit against Cache, Inc., Rabia Farhang and Christine Broad [also referred to as Christine Board] to the New York Supreme Court.  Plaintiffs brought claims for breach of contract, tortious interference with contractual relations, misappropriation of trade secrets, breach of fiduciary duty and civil conspiracy.  Cache argued that Plaintiffs' claim for misappropriation of trade secrets was preempted by the Copyright Act, thereby making the federal district court the exclusive proper forum for the case.[i]  Judge Gardephe noted, however, that this argument was incomplete.  To satisfy the second requirement for federal jurisdiction-the general scope requirement laid out in Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004)-the " state law claim must involve acts of reproduction, adaptation, performance, distribution or display . . . ." and must not include "any extra elements that make it qualitatively different from a copyright infringement claim."  Plaintiffs argued, and the Court agreed, that their claim for misappropriation of trade secrets was not preempted by the Copyright Act because the misappropriation claim required proof of an "extra element[] that make[s] it qualitatively different from a copyright infringement claim."  Thus, the state claim was not preempted by federal copyright law, and jurisdiction in the state court was proper.

Earlier this summer, Plaintiffs White House/Black Market, Inc. and Chico's FAS, Inc. filed suit against Defendants Cache Inc., and others, asserting claims arising from Defendants' alleged misappropriation of trade secrets and confidential information relating to White House/Black Market's retail business selling women's apparel and accessories.  Plaintiffs allege that defendants Farhang and Broad are former employees of White House/Black Market (WHBM), and as employees of WHBM, "both Farhang and Broad executed non-disclosure agreements and signed acknowledgements that they would abide by Chico's Code of Ethics and Chico's HQ Associate Handbook."   WHBM and Chico's claim that Farhang and Broad were "intimately involved in the conceptualization and development of WHBM's 2010 Spring, Summer and Fall season lines."  WHBM and Chico's further aver that Cache's poor performance in producing women's apparel spurred the company to hire Broad and Farhang.  According to the complaint, Broad allegedly printed confidential documents days before her departure from WHBM, including "documents disclosing the Company's marketing plans, sales strategy, shipping and release dates for its clothing lines, suppliers, sales forecasts, costs and profit margins, operational calendars, and information about trends used in formulating upcoming clothing lines."

Plaintiffs further allege that, after Farhang and Broad began working at Cache, that company released a Spring 2010 line that included garments that were "identical or virtually identical to products designed by WHBM while Farhang and Broad were employed by WHBM."  These garments, the Plaintiffs aver, utilized color schemes and prints similar or identical to those planned for WHBM's lines.  WHBM and Chico's are seeking an injunction preventing Cache from "designing, manufacturing, marketing and selling garments in Cache's Spring, Summer and Fall 2010 lines, or any seasonal line released thereafter, derived from Plaintiffs' confidential, proprietary or trade secret information and ordering a recall of any garments produced using this information."

WHMB and Chico's decision to sue Cache employees for misappropriation of trade secrets represents a departure from the frequent route of trying to hold entire companies liable for trademark infringement.  There are circumstances, particularly in cases involving former employees, in which litigating state law claims in state court is an attractive alternative to litigating the usual panoply of federal IP claims in District Court, and this decision reinforces the availability of that option to aggrieved rightsholders.



[i] "District courts have exclusive jurisdiction over any civil action arising under any Act of Congress relating to copyrights."  Panizza v. Mattel, Inc., No. 02 Civ. 7722 (GBD), 2003 U.S. Dist. LEXIS 17228 *2; 68 U.S.P.Q.2D (BNA) 1469 (S.D.N.Y. Sept. 30, 2003) (citing 28 U.S.C. §1338(a); 17 U.S.C. § 301(a)).

Please click on the link at the top of the post to view or download the entire opinion from White HouseBlack Market, et al. v. Cache INC., et al., 110cv05266 (SDNY)

Attachment: White HouseBlack Market, et al. v. Cache INC., et al., 110cv05266 (SDNY).pdf