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Youtie v. Macy's Retail Holdings

August 31, 2009

PHILIP YOUTIE
v.
MACY'S RETAIL HOLDING, INC., AND MACY'S, INC.



The opinion of the court was delivered by: O'neill, J.

MEMORANDUM

On July 17, 2009, David's Bridal, Inc. filed a motion to intervene as a party to defendants Macy's Inc. (Macy's)*fn1 and Macy's Retail Holdings, Inc.'s (Macy's Retail)*fn2 counterclaims against plaintiff Philip Youtie pursuant to Federal Rule of Civil Procedure 24(a) and 24(b) because it is the current owner of the trade secret/confidential information at issue in the counterclaims. Presently before me are the motion to intervene (D. No. 81), plaintiff's response and David's Bridal's reply thereto.

BACKGROUND

I. Procedural History

On August 3, 2007, plaintiff Philip Youtie filed a complaint against defendant Macy's alleging a breach of plaintiff's employment agreement and violations of the Pennsylvania Wage Payment and Collection Law (WPCL), 43 P.S. § 260.1, et seq. Jurisdiction is based on diversity of citizenship. 28 U.S.C. § 1332.*fn3 On December 17, 2007, Macy's filed an answer, affirmative defenses and counterclaims alleging that plaintiff breached his employment agreement, misappropriated trade secrets and/or confidential and proprietary information, breached his fiduciary duty and duty of loyalty, engaged in tortious interference with business and employment relations, was unjustly enriched and engaged in unfair competition. On August 19, 2008, plaintiff filed an answer to Macy's counterclaims. On March 26, 2009, plaintiff filed an amended complaint against defendants alleging the same claims and adding Macy's Retail as an additional defendant. Defendants filed their answer to the amended complaint, affirmative defenses and identical counterclaims against plaintiff on April 15, 2009. On May 5, 2009, plaintiff filed his answer to defendants' counterclaims.

The parties filed their first cross-motions for summary judgment in Fall 2008. On June 5, 2009, I ruled on the motions as follows: (1) I granted defendants' and denied plaintiff's motion for summary judgment on plaintiff's breach of contract and WPCL claims and entered judgment for defendants and against plaintiff on that claim; (2) I granted plaintiff's and denied defendants' motion for summary judgment on defendants' counterclaims of breach of contract, breach of fiduciary duty and duty of loyalty and tortious interference with business and employment relations with respect to plaintiff's introduction of David's Bridal employee Linda Shaps-Shanin to Steven Erlbaum; (3) I granted defendants' and denied plaintiff's motion for summary judgment on defendants' counterclaim of breach of contract for plaintiff's request for and disclosure of "first cost" data; (4) I denied without prejudice plaintiff's and defendants' motion for summary judgment on defendants' counterclaims of misappropriation of trade secrets and/or confidential and proprietary information, breach of fiduciary duty and duty of loyalty, unjust enrichment and unfair competition with regard to plaintiff's request for and disclosure of "first cost" data and allowed defendants to file an amended counterclaim complaint adding a claim under the Pennsylvania Uniform Trade Secrets Act (PUTSA), 12 Pa. Cons. Stat. Ann. § 5301, et seq. (2004); (5) I allowed the parties to file motions for summary judgment thereafter; and (6) I denied without prejudice plaintiff's motion for summary judgment on defendants' request for injunctive relief.

On June 20, 2009, defendants filed an amended counterclaim to include a claim under the PUTSA. The parties filed their second cross-motions for summary judgment on defendants' remaining counterclaims which are currently pending before me. On July 14, 2009, plaintiff filed his answer to defendants' amended counterclaim.

II. Factual History

In the counterclaims in which David's Bridal, a Florida corporation, has moved to intervene, defendants argue that the conduct of plaintiff during his employment with them gave rise to their causes of action against him.

On August 1, 2000, Macy's acquired all of the publicly-held shares of David's Bridal. David's Bridal is a corporation and a clothier specializing in bridal gowns and other formal wear and accessories. Plaintiff had purchased David's Bridal in 1972, expanded the operations, partnered with Steven Erlbaum beginning in 1989 or 1990 and with Erlbaum made a public offering of David's Bridal's stock in 1999. After Macy's acquired David's Bridal, plaintiff entered into a contract of employment with a division of Macy's, Macy's Retail. In accordance with the terms of the agreement, plaintiff served as the Executive Vice-President, Product Development and Sourcing of the David's Bridal division of Macy's Retail. On November 17, 2006, an affiliate of Leonard Green & Partners signed an agreement with Macy's to acquire David's Bridal. The sale and transfer of stock of David's Bridal to the Leonard Green affiliate was consummated on January 31, 2007. As part of the transaction, Macy's subsidiary Macy's Retail assigned its employment agreement with plaintiff to David's Bridal. This assignment provided the basis for plaintiff's breach of contract and WPCL claims on which I entered judgment in favor of defendants in my June 5, 2009 Order.

David's Bridal terminated plaintiff's employment "for cause" as Executive Vice President on February 27, 2007 based upon his allegedly competitive and disloyal conduct that is the basis of defendants' counterclaims.

Plaintiff admits that he obtained first cost data on the dresses in David's Bridal's Spring 2007 catalogue from Lydia Chow, an employee of Fillberg LTD, David's Bridal's Hong Kong marketing representation, during a business trip to Hong Kong in January 2007 with David's Bridal employees. Plaintiff does not dispute that the first cost data at issue is the cost the manufacturer charged David's Bridal to manufacture the designs David's Bridal provided the manufacturer for its Spring 2007 catalogue. Additionally, plaintiff admitted in his affidavit that he "asked for the cost data because [] Erlbaum . . . was interested in what David's Bridal paid various manufacturers for the dresses they manufactured." Plaintiff further admits that he gave a copy of the cost sheet to Erlbaum.*fn4 However, whether plaintiff provided the first cost data to Erlbaum while still employed by Macy's Retail, after his agreement was assigned to David's Bridal or after he was terminated by David's Bridal is uncertain. Defendants claim that plaintiff provided conflicting testimony regarding the timing of the disclosure. He stated: (1) in his June 2008 deposition testimony that he did not know when he disclosed the first cost data to Erlbaum; (2) in his December 29, 2008 response to defendants' partial motion for summary judgment that, although he did not recall exactly when he provided the first cost data to Erlbaum, he recalls that he disclosed it after he recovered from his January 2007 surgical procedure which would have been some time in February 2007 when he was employed by David's Bridal; and (3) in his July 14, 2009 answer to defendants' counterclaims that he did not disclose the information "until after his employment with David's Bridal was terminated on February 27, 2007."

Section 6(a) of the Employment Agreement prohibited plaintiff "at any time, directly or indirectly, [from] us[ing] or disclos[ing] any of May's [aka Macy's Retails'] Confidential Information except as authorized and within the scope of [his] employment with May [aka Macy's Retail.]" Section 6(d) defines "confidential information" and the agreement also ...


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