DCS Pharmacy, Inc. v Ugenti, Index No. 24516-14, 8/13/15 (Emerson, J.)

Motion to dismiss; Consolidation; Disqualification of counsel; Confidentiality agreement.

By: Jennifer Branca | Editor-in-Chief

In 2015, Defendant, a former employee and one of plaintiff’s shareholders , commenced a special proceeding to dissolve plaintiff. Additionally, Defendant brought a shareholder derivative action on behalf of plaintiff’s company. In 2010, these two matters were joined. Subsequently, defendant and plaintiff entered into a confidentiality agreement in which defendant agreed to protect the confidentiality of information plaintiff produced in the course of the litigation.

The consolidated action was settled in September 2013. The settlement agreement provided that plaintiff would purchase defendant’s stock, payable in three installments. Also, the agreement provided that defendant would return all intellectual property, software, inventions, and client customer lists retained by him to plaintiff. In October 2013, the court issued an order prohibiting defendant from using, divulging, furnishing, or making accessible to any third person or organization any confidential or proprietary information concerning plaintiff or its business for a period of two years.

Plaintiff was a defendant in an action commenced in federal court in Florida by one of its competitors. Plaintiff moved to dismiss the Florida complaint for lack of personal jurisdiction and improper venue. Plaintiff’s attorney supplied competitor’s attorney with invoices showing payments from plaintiff to another company in Florida, which competitor’s attorney used to show that plaintiff did business in Florida.

Plaintiff brought an action against defendant, alleging that the disclosure of the invoices violated defendant’s original employment agreement and the 2010 confidentiality agreement. The court denied defendant’s motion to dismiss. The court held that the aforementioned invoices did not contain confidential information relating to plaintiff. The court could not determine, from the record, whether defendant’s attorney sent documents to the other Florida company’s (the “company”) attorney invoices containing such confidential information. Later, defendant moved to disqualify his counsel on the ground that he was a necessary witness on a significant issue of fact in the action. Because defendant’s attorney personally knew of the issue, the court found that his testimony would be necessary. Therefore, the court granted plaintiff’s motion to disqualify him as counsel for defendant.

DCS Pharmacy, Inc. v Ugenti, Index No. 24516-14, 8/13/15 (Emerson, J.)

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