## Facts

- Dreyfus Corporation (Dreyfus) handled marketing for the Dreyfus Fund, a major mutual fund.
- Harvey Epstein, Dreyfus’s president, was friends with Herbert Abelow, who headed Educational Sales Programs, Inc. (Educational), a sales-training business.
- Abelow approached Epstein with an idea for a Dreyfus-related sales-training program.
- Epstein allegedly promised orally that everything discussed would be kept confidential and would not be used by Dreyfus unless the parties reached a deal.
- Educational’s idea was a sales-training program delivered on cassette tapes directly to mutual-fund salesmen, rather than distributed through their brokerage firms.
- While cassette tapes had been used for education and training before, Educational alleged that marketing the training directly to salesmen (bypassing brokers) was new.
- The parties discussed having Educational run the program for Dreyfus for several months but did not reach an agreement.
- Several months after talks ended, Dreyfus began a similar cassette-tape training program without Educational.
- Educational sued Dreyfus asserting, among other claims, breach of confidence and unjust enrichment based on misuse of Educational’s idea.

## Issues

1. Whether Educational’s allegations that it submitted a “novel, unique, and original” idea to Dreyfus were sufficient at the pleading stage to support causes of action based on misuse of an idea.
2. Whether the alleged oral confidentiality promise and the alleged subsequent use of the idea were enough to plead breach of confidence and unjust enrichment so as to defeat a motion to dismiss.

## Decision

- The court denied Dreyfus’s motion to dismiss.
- The court held that, accepting the complaint’s allegations as true and drawing favorable inferences for the plaintiff, Educational stated claims for breach of confidence and unjust enrichment based on misappropriation of a protectable idea.
- The court treated the idea’s novelty and originality as questions that could not be resolved against Educational on the pleadings.

## Legal Principles

- In New York, liability for use of a submitted idea may rest on breach of confidence and/or unjust enrichment when an idea is disclosed under a confidential relationship (or a promise of confidentiality) and then used without compensation.
- A threshold requirement for such idea-submission claims is that the idea be “novel, unique, and original” (at least in the relevant sense alleged), rather than a matter of general knowledge or common usage.
- An express oral promise that discussions will be confidential and that the idea will not be used absent a deal can support pleading a confidential relationship.
- On a motion to dismiss, the court accepts well-pleaded factual allegations as true and generally will not decide disputed fact questions—such as whether an idea is truly novel—unless the lack of novelty is clear from the face of the complaint.

## Conclusion

Because Educational alleged that it disclosed a new cassette-tape, direct-to-salesman training program to Dreyfus under an oral promise of confidentiality, and that Dreyfus later implemented a similar program after negotiations failed, the court ruled that the complaint sufficiently stated claims for breach of confidence and unjust enrichment and allowed the action to proceed.


Educational Sales Programs, Inc. v. Dreyfus Corp., 65 Misc. 2d 412, 317 N.Y.S.2d 840 (1970)