DECISION AND ORDER and ORDER OF REFERENCE The following papers were filed on the New York State Electronic Filing System (“NYSCEF”) as NYSCEF Doc. No. 93-135 and considered on (i) Motion Seq. No. 2 filed by defendants to dismiss plaintiffs’ Amended Complaint pursuant to CPLR 3211 (a)(l) and (7) and other related relief; and (ii) Motion Seq. No. 3 filed by plaintiffs in opposition to defendants’ Motion to Dismiss and on Cross-Motion for an order of contempt, to compel compliance with an order of the court and issue sanctions against defendants pursuant to Judiciary Law 753. Nature of Action and Motions Before the Court Plaintiffs filed this legal action alleging ongoing and deliberate misappropriation of trade secrets by defendant John Wood (“Wood”) and Evolve Resource Management, LLC (“Evolve”), pertaining to proprietary information owned by plaintiff Colin Felton (“Felton”) and Felton’s company, Compositech, LLC (“Compositech”). Plaintiffs seek injunctive relief and monetary damages, making the following factual allegations against defendants: (a) breach of confidentiality agreements; (b) misappropriation of the plaintiffs’ trade secrets and confidential information to enrich themselves unjustly; (c) disclosure of the plaintiffs’ trade secrets, confidential information, and patents to third parties; (d) unlawful retention of plaintiffs’ physical and intellectual property; and, (e) use of plaintiffs’ trade secrets, confidential information and/or patent to unfairly compete with plaintiffs. (NYSCEF Doc. No. 42). To this end, the Amended Complaint pleads seven claims arising from these allegations: (1) breach of contract; (2) misappropriation of trade secrets; (3) conversion; (4) negligence; (5) unfair competition; (6) unjust enrichment; and (7) permanent injunction. (NYSCEF Doc. No. 71). On November 30, 2023, the parties entered into a Stipulation, So-Ordered by this Court, which acts as the equivalent of a preliminary injunction for the duration of this action. (NYSCEF Doc. No. 39). Pertinent to the motions currently before this Court, the So-Ordered stipulation contains the following relevant provisions: (4) On the date of the signing of the Mutual Agreement of Confidentiality dated March 23, 2020 (NSYCEF Doc. No. 6), [d]efendants were involved in the plastics recycling industry including collection, grinding, separating, sorting and selling recycling plastics and the Plaintiffs were involved in the plastics recycling industry including the repurposing and molding of recycled plastics. Plaintiffs have developed certain processes related to the compression molding and mixing of recycled plastics involving equipment, methods, designs and formulations, and hold or are in the process of obtaining patents related to products made using these processes. The Parties agree that Plaintiffs’ processes consist of confidential information and trade secrets. (5) Defendant John Wood and Evolve Resource Management, LLC agree to refrain from, directly or indirectly: a. Breaching the Mutual Agreement of Confidentiality dated March 23, 2020 (NYSCEF Doc. No. 6) and/or the Mutual Agreement of Confidentiality dated December 5. 2022 (NYSCEF Doc. No. 9) (in cumulative “Confidential Agreements”); b. breaching the Mutual Agreement of Confidentiality dated March 23, 2020 (NYSCEF Doc. No. 6) and/or the Mutual Agreement of Confidentiality dated December 15, 2022 (NYSCEF Doc. No. 9) (in cumulative “Confidential Agreements”); c. utilizing, disclosing, disseminating, de-formulating, analyzing, depicting, describing, advertising, promoting, profiting from, taking, converting, and/or misappropriating [p]laintiffs’ trade secrets, confidential and/or proprietary information as defined within the Confidential Agreements (“Confidential Information”), and/or [p]laintiffs’ patents with the following serial/registration numbers: (1) Application 17/430245 (Published 08/11/2021), (2) Application 17/853903 (Published 10/28/2022), (3) US Patent # 11408182 (Published 08.09.2022), (4) US Application # 16/832722 (Published 03-27-2020), (5) US Application # 18/319443 (“Patents”); d. allowing or permitting third parties who are under [d]efendants’ employment or control or to whom the [dlefendants may have disclosed [p]laintiffs Confidential Information, Patents, and/or trade secrets, to utilize, disclose, de-formulate, analyze and/or take [p]laintiffs’ Confidential Information, Patents, and/or trade secrets or to continue doing the same; e. disclosing and/or allowing others who are under [d]efendants’ employment or control or to whom the [d]efendants may have disclosed [p]laintiff’s Confidential Information, Patents, and/or trade secrets to disclose to any third-party [p]laintiffs’ Confidential Information, Patents, and trade secrets; f. continuing to hold and/or withhold from the [p]laintiffs the [p]laintiffs’ physical and intellectual property, trade secrets, Confidential Information and/or Patents located at any facility and/or on any electronic device owned and/or operated by the [d]efendants; g. withholding, using, disseminating and/or profiting from [p]laintiffs’ physical and intellectual property, trade secrets, Confidential Information, and Patents; h. utilizing, depicting and/or describing [p]laintiffs’ physical and intellectual property, trade secrets, Confidential Information, and/or Patents for any purpose; i. utilizing, depicting and/or describing [p]laintiffs’ physical and intellectual property, trade secrets, Confidential Information, and/or Patents to promote, advertise and/or represent [d]efendants’ products, potential products, business, and/or potential business opportunities; j. converting [p]laintiffs’ physical and/or intellectual property, including but not limited to holding [p]laintiffs’ trade secrets, Confidential Information, and/or Patents by any electronic means owned, operated, and/or controlled by [d]efendants. On May 16, 2024, defendants filed a motion to dismiss plaintiffs’ Amended Complaint (“Motion to Dismiss”), arguing that plaintiffs failed to adequately plead causes of action for breach of contract, misappropriation of trade, negligence, unfair competition, unjust enrichment, and injunction. Defendants further argued that, based on documentary evidence, plaintiffs’ claims for conversion should be dismissed as it does not state a cause of action. In support of their motion, the defendants submitted the affirmation of defendant Wood, defendants’ attorney Michael Crowe and six documents as exhibits. (See NYSCEF Doc. Nos. 93-100, 125-128). Plaintiffs filed opposition to defendants’ Motion to Dismiss, arguing that plaintiffs’ causes of action were adequately pled. Additionally, plaintiffs submitted a cross-motion requesting an order pursuant to Judiciary Law 753(A) for Wood to appear at a hearing, asserting that there was good cause indicating he was in violation of the So-Ordered Stipulation (the “Cross-Motion”). Plaintiffs seek a hearing and discovery, including the right for both Plaintiffs and an expert to evaluate all of the processes employed by defendants at all of their facilities. (NYSCEF Doc. No. 132, Supplemental Felton Affidavit at
15, 17). Plaintiffs assert that the defendants are presently using plaintiffs’ property and trade secrets to manufacture similar products to those derived from the plaintiffs’ innovations and processes. (NYSCEF Doc. No. 1 19, Affidavit of Joseph DiPisa at In support of their opposition and Cross-Motion, the plaintiffs submitted the Amended Complaint (NYSCEF Doc. No. 71) affidavit of plaintiff Felton, and plaintiffs’ attorney Joseph A. DiPisa along with nineteen (19) documents as exhibits. (See NYSCEF Doc. Nos. 102-118, 120123, 132). Factual Background Pointedly, there has been no discovery in this action and the facts recounted here are based upon the limited record as established by pre-discovery submissions. The facts are summarized herein as stated by the parties based upon the record submitted for the purpose of addressing whether plaintiffs have sufficiently pled a cause of action and whether a hearing concerning an alleged civil contempt against defendants is warranted. I. Facts Presented on Stipulation The parties have stipulated that plaintiffs have been involved in the production of recycled plastic and constructed a mold tailored for the production of construction blocks (the “IP Blocks”) (see So-Ordered Stipulation, NYSCEF Doc. No. 39). Defendants were involved in the plastics recycling industry including collection, grinding, separating, sorting and selling recycling plastics. Plaintiffs have developed certain processes related to the compression molding and mixing of recycled plastics involving equipment, methods, designs and formulations, and hold or are in the process of obtaining patents related to products made using these processes. (id.) Pursuant to the So-Ordered Stipulation, the parties have agreed that plaintiffs’ processes consist of confidential information and trade secrets. (id. at 14). II. Facts Presented on Plaintiffs’ Record On March 1 7, 2020, plaintiffs had a meeting with Wood, the new owner of Evolve, to discuss technologies for building products from recycled plastics and natural fibers. (NYSCEF Doc. No. 102, Affidavit of Colin Felton “Felton Aff.” at ’1 22). During this meeting, Felton presented samples of composite roofing, decking, sheets, structural lumber, and IP Blocks that he had developed and was in the process of patenting. (id. at 23). From the outset of the meeting, Wood displayed an interest in the roofing panels and more of an interest in the IP Blocks that Felton was developing. (id. at 24). The parties recognized the possible groundbreaking nature of the IP Blocks, and Felton understood that any party with access to the IP Blocks themselves and the construction formula needed to be bound by non-disclosure agreements. (id. at 30). On March 23, 2020, plaintiffs entered into the first of two Non-Disclosure Agreements with defendant Evolve (the “2020 NDA”). (Amended Complaint, NYSCEF Doc. No. 71 at 25). The purpose of the 2020 NDA was for Evolve to assist Felton with setting up a building block operation. (id. at 1[26). When Felton initiated the relationship, neither Evolve nor Wood personally, had a research and development department, research relationships, or any history of filing patents. (id. at 29). The goal was to create a formal business relationship, such as a licensing agreement or a partnership in a manufacturing operation, within eighteen months of signing the 2020 NDA. (id. at Il 34). If the vision did not come to fruition, it was agreed that Felton would take back his equipment and the parties would move on and Wood was never to have any claims over Felton's equipment, patents, pending patents, trade secrets, or confidential information. (id. at 34). Over time, another NDA was implemented. Similar to the 2020 NDA the 2022 NDA was designed to protect plaintiffs' confidential information and trade secrets. Like its predecessor, the 2022 NDA shielded plaintiffs from the disclosure, improper use, and potential misappropriation of confidential information and trade secrets. (NYSCEF Doc. No. 102, Felton Aff. at Il 34). Throughout the course of the collaboration, plaintiffs shared intricate details regarding the processes and formulations involved in the production of blocks, roofing panels, and other potential products with Wood and Evolve. (id. at '141). Between 2020 and 2023, Felton had numerous email communications with Wood regarding the block and roofing products, and Felton provided multiple revisions of commercial manufacturing cost analysis during this period. (id. 42). In addition, plaintiffs' machinery was shipped from Texas to Evolve's facility in Argyle, New York, known as Adirondack Plastics (the facility is hereinafter referred to as the "Argyle Facility") where Felton would make sample IP Blocks using plaintiffs' own equipment. (id. at 44). Over the period spanning from March 21, 2020, to September 2022, at the request of Wood, Felton crafted and disseminated eight revisions of commercial block manufacturing analyses for manufacturing the IP Blocks ("Sample IP Blocks"). (id. at '1 44). Following the successful production of Sample IP Blocks, defendants and plaintiffs agreed to a 4 percent licensing agreement, in furtherance of which plaintiffs sent defendants draft terms on June 20, 2022, and July 25, 2022, without receiving a response from Wood. (id. at 52). Wood later acknowledged that he did not sign the agreements with the plaintiffs that memorialized the terms, despite having received the written agreements sent by Felton (id. at 83). The relationship between plaintiffs and defendants then "soured" toward the end of 2022 due to defendants delays in establishing a full-scale production facility and discoveries made by plaintiffs that defendants were seeking to exploit the trade secrets for their own benefits. (id. at 57). On or around July 1 5, 2022, John Aspland, an employee of Evolve, admitted to providing blocks and a process diagram to a company named PureCycle in Orlando, Florida, without plaintiffs' knowledge or consent. (id. at 58). The plaintiffs subsequently found a Facebook post from the defendants dated August 5, 2022, which stated: "Did you know the construction grade building block pictures above was made from over 50 percent trash collected and recycled from Pirates Cove Beach in Rye, NH?" and "Stay tuned for some BIG announcements in the near future…" (id. at 60; NYSCEF Doc. No. 108 --- Exhibit F). Plaintiffs never authorized use of the IP Blocks in the Facebook post and claim of ownership by Evolve, nor did plaintiffs have any knowledge of the "BIG announcements" to which the defendants referred. (NYSCEF Doc. No. 102 at 61). Since plaintiffs' trade-secret compounding and molding technologies were personally demonstrated to Wood and John Aspland multiple times in 2020, 2021, and 2022, the technology mentioned on Facebook may have likely derived from plaintiffs. (See NYSCEF Doc. No. 132, Supplemental Felton Affidavit at 11). On September 26, 2022, during a conference call, Felton was made aware that Wood had disclosed a confidential process diagram with a company called Erema, N.A., without plaintiffs' knowledge or consent. (NYSCEF Doc. No. 102, Felton Aff. at 59.) Felton also discovered that Wood had obtained a hydraulic press, similar to a smaller model that he had purchased and previously disclosed to him. (id. at 65). Wood's claim that he never bought any equipment for compression molding directly contradicts a conversation that Felton had with him on January 18, 2023, during which he verified purchasing a press for $4,200.00 at the same Ohio auction where Felton acquired his compression molding press. (NYSCEF Doc. No. 132, Supplemental Felton Affidavit at 14). After discovering that Evolve had disclosed blocks and process diagrams without plaintiffs' consent, Felton sent an email to Wood asking for the return of plaintiffs' Sample IP Blocks. (NYSCEF Doc. No. 102, Felton Aff. at 63, Exhibit G) Plaintiffs made this request because plaintiffs felt it was important to prevent third parties from attempting to copy the IP Blocks. (id. at 64). Then, in January of 2023, Evolve posted a photograph of plaintiffs' IP Blocks on Linkedln. The January 2023 Linkedln post states that Evolve is launching exciting projects in 2023 and announces: "Our Compression Molded Blocks made out of recycled material are coming." Cid. at 71-72; NYSCEF Doc. No. 1 11-Exhibit 1). During a January 6, 2023 telephone call, Wood disclosed his own plans to produce blocks and claimed that he had invested $1 ()0,()00.00 in the plaintiffs' project. (NYSCEF Doc. No. 102 at '174). On January 10, 2023, in another phone conversation, Wood mentioned "having a block business." (id. at '1 75). On January 22, 2023, a fire occurred at the Adirondack Plastics Facility where plaintiffs' property was located, creating corrosive smoke that damaged plaintiffs' machines. (id. at 76). On January 23, 2023, Wood notified Felton that the fire had occurred and in the same conversation mentioned collaborating with six-scientists in Denmark to develop block making techniques. (id. at 77). On February 23, 2023, Felton e-mailed Wood asking for a written release of plaintiffs' equipment. (id. at 75, Exhibit J). On March 9, 2023, during an in-person encounter when Felton was relocating equipment, Wood mentioned plans to use the Argyle Facility for block production and discussed achieving 160,000 pounds compression strength with the blocks, which plaintiffs claim was a trade secret that Felton previously discussed with Wood. (id. at '1 82). On May 4, 2023, Felton sent a follow-up e-mail to Wood and others demanding the return of thirteen (13) composite block samples, two (2) full-scale model blocks crafted from plywood, and a roofing assembly composed of composite roofing shakes that was situated at the Adirondack Plastics Facility. (id. at 84; Exhibit K) Plaintiffs have not yet received the return of these items. (id. at '1 85). In fact, defendants acknowledge they continue to hold property (and refuse to pay to facilitate the return. (see NYSCEF Doc. No. 125, Supplemental Wood Affidavit at 4). The plaintiffs assert that, since the defendants initially retained the IP blocks, it is now the defendants' responsibility to facilitate their return. This includes ensuring that they maintain commercially reasonable insurance to protect against any potential loss or damage, such as the fire that previously occurred at the defendants' facility, which affected the plaintiffs' property (see NYSCEF Doc. No. 132, Supplemental Felton Affidavit at '1 5). Despite the plaintiffs demanding defendants return of the property, the defendants have not arranged for its return or covered the shipping costs. (id. at 6; NYSCEF Doc. No. 120, May 15, 2024 Letter). Despite Wood's claim that "there is not a single piece of compression molding equipment In the Argyle Facility" it remains possible that Evolve has other facilities apart from the Argyle Facility where the compression molding equipment might presently be located. The key point of this inquiry is whether Evolve or its affiliates are utilizing other facilities for compression molding. The defendants' submissions have not addressed whether Wood may have established another entity to use the IP Blocks or entered into a licensing agreement with another company to exploit the plaintiffs' trade secrets. Such actions would violate the NDAs and the So-Ordered Stipulation. (Il 21). Ill. Facts Presented on Defendants' Record Wood indicates that he had no "specific" interest in the construction blocks or the roofing tiles, he was interested in being able to demonstrate the potential of the raw materials. (NYSCEF Doc. No. 95, Wood Affidavit at 12). Wood "really did not care" what Felton was making, as long as Felton was able to produce something from the raw materials that Evolve could showcase. (id. at 13). Wood had Felton's material transported and set-up at the Argyle Facility. (id. at 14). Aside from providing the space, utilities, and materials, neither Wood nor anyone else affiliated with the Argyle Facility or Evolve had anything to do with Felton's production process. (id. at 16). Felton never shared nor was he asked to share any details regarding his compression molding process. (id. at 19). By spring of 2022, Felton had produced approximately 30 Blocks utilizing Evolve's raw materials and his compression molding process. (id. at '1 24). The fact that Felton had turned waste product into raw materials and then turned the raw materials into a finished product was exactly the type of development that Wood was looking for. (id. at 25). As such, Wood was motivated to showcase the IP Blocks to increase awareness in the development of the raw materials. (id. at 26). Wood was actively showcasing the IP Blocks to every potential stakeholder who could possibly contribute to the process either through developing equipment, supplying materials, or increasing demand for the finished product. (id. at 30). Wood discovered that Felton was trying to start a new operation with different partners and he could no longer trust Felton to be involved. (id. at 37-38). Wood never prevented Felton from removing any of his equipment from the Argyle Facility. (id. at 42). Wood is aware that there are a few of plaintiffs' IP Blocks and roofing tiles remaining at the Argyle Facility. (NYSCEF Doc. No. 125, Supplemental Wood Affidavit at '14). Wood states that defendants are not using any of plaintiffs' machines, processes, techniques, patents or trade secrets to make compression molded construction blocks from recycled plastics. (id. at 7). Currently operating in the Argyle Facility is a Gluco injection molder which takes pelletized plastic, heats it, and injects it into mold to produce a finished product. (id. at
