## Facts

- Pure Power Boot Camp operated a military-themed fitness business and prepared to franchise.
- Pure Power required instructors, including Ruben Dario Belliard and Alexander Kenneth Fell, to sign employment agreements containing confidentiality obligations.
- While still employed, Belliard and Fell planned a competing business with Jennifer J. Lee and formed Warrior Fitness Boot Camp.
- Belliard took Pure Power’s business plan, start-up manual, and operations manual, shared them with Fell and Lee, and used them to create Warrior Fitness business documents.
- Belliard also downloaded Pure Power’s customer list; defendants later solicited Pure Power clients after leaving and opened Warrior Fitness.
- Separately, individuals associated with Pure Power accessed Fell’s personal web-based email accounts using discovered login credentials on a Pure Power computer, printed emails, and provided them to Pure Power’s owner; some emails were later precluded from use, and Stored Communications Act (SCA) liability was litigated in related rulings.

## Issues

1. Whether departing employees breached New York’s duty of loyalty by preparing to compete while still employed and by taking internal manuals and customer information.
2. Whether defendants breached contractual confidentiality obligations by copying and using internal documents and customer lists to start a competitor.
3. What remedies were available for disloyal competition and confidentiality breaches, including whether lost profits or disgorgement of the competitor’s profits was recoverable and how such awards should be limited.

## Decision

- After a bench trial, the court found Belliard and Fell breached their duty of loyalty by engaging in disloyal competition while employed, including misappropriating internal documents and customer information for a competing venture.
- The court found defendants breached enforceable confidentiality provisions by copying and using Pure Power’s internal manuals and related business materials.
- The court rejected expansive damages theories and limited monetary relief to amounts sufficiently connected to the proven wrongdoing.
- The court allowed disgorgement as an equitable remedy for breach of loyalty but limited it to the period and benefits attributable to disloyal conduct, not the entirety of the competitor’s profits.
- The court treated plaintiffs’ improper email access as relevant to evidentiary and equitable considerations but did not treat it as a complete bar to adjudicating and awarding relief on the business-misconduct claims based on admissible proof.

## Legal Principles

- Under New York law, employees may make some plans to compete after departure, but they may not, while still employed, misappropriate confidential documents, copy customer lists, or solicit clients in a way that harms the employer.
- Confidentiality agreements are enforceable, and copying and using internal business plans, operations materials, and compiled customer information to build a competing business can constitute breach.
- Broad business “concepts” and common industry themes may be difficult to protect as proprietary, but specific internal manuals and compiled client information may qualify as protectable confidential information when treated as such and wrongfully taken.
- Disgorgement for breach of the duty of loyalty is equitable and must be tied to the period of disloyalty and to gains reasonably attributable to the misconduct; courts may refuse to award all profits of a competing enterprise.
- Lost-profit recovery may be limited where proof of causation is weak or calculations are speculative, particularly in developing markets and where contractual terms do not clearly support the claimed measure of damages.

## Conclusion

The court held that former instructors who used their employer’s internal manuals and customer information to build a competing gym while still employed breached both the duty of loyalty and contractual confidentiality obligations, but it constrained monetary relief by requiring a tight connection between the wrongdoing and any disgorgement or profit-based recovery.


Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d 489 (S.D.N.Y. 2011)