Deman Data Systems, LLC et al v. Schessel et al
Filing
560
ORDER granting in part and denying in part 441 Plaintiffs' Motion for Partial Summary Judgment; granting in part and denying in part 486 Schessel's Motion for summary judgment; granting in part and denying in part 487 Primrose's Motion for summary judgment. Signed by Judge Susan C Bucklew on 12/1/2014. (JD)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
DEMAN DATA SYSTEMS,
LLC, ET AL.,
Plaintiffs,
v.
Case No. 8:12-cv-2580-T-24 EAJ
MARC S. SCHESSEL, ET AL.,
Defendants.
____________________________
MARC S. SCHESSEL, ET AL.,
Counter-Plaintiffs,
v.
DEMAN DATA SYSTEMS,
LLC, ET AL.,
Counter-Defendants.
________________________________/
ORDER
This cause comes before the Court on three motions: (1) Defendant Schessel’s Motion for
Summary Judgment (Doc. No. 486), which Plaintiffs oppose (Doc. No. 473); (2) Defendant
Primrose Solutions’ Motion for Summary Judgment (Doc. No. 487), which Plaintiffs oppose;
and (3) Plaintiffs’ Motion for Partial Summary Judgment (Doc. No. 441), which Defendants
oppose (Doc. No. 472). As explained below, these motions are granted in part and denied in
part.
I. Standard of Review
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The Court must draw all inferences from the evidence in the light most favorable to the
non-movant and resolve all reasonable doubts in that party's favor. See Porter v. Ray, 461 F.3d
1315, 1320 (11th Cir. 2006)(citation omitted). The moving party bears the initial burden of
showing the Court, by reference to materials on file, that there are no genuine issues of material
fact that should be decided at trial. See id. (citation omitted). When a moving party has
discharged its burden, the non-moving party must then go beyond the pleadings, and by its own
affidavits, or by depositions, answers to interrogatories, and admissions on file, designate
specific facts showing there is a genuine issue for trial. See id. (citation omitted).
II. Background
The facts in this case are largely in dispute. However, the following background
provides a framework for the few legal issues that can be decided, or at least narrowed, at this
stage.
Schessel’s Prior Employment
Defendant Marc Schessel was employed by Continuum prior to his relationship with
Plaintiffs. Schessel’s employment at Continuum ended in 2000, and later in the summer of 2003,
a felony charge was brought against Schessel relating to conduct that occurred while he was
employed at Continuum. (Doc. No. S-511, depo. p. 332-33). There is no clear evidence before
the Court that Continuum was aware of Schessel’s felonious conduct prior to his termination
from Continuum and/or that such conduct was the reason for his termination from Continuum.
Instead, the person that Schessel reported to at Continuum has stated that Schessel was not fired
by Continuum and that Schessel was not terminated from Continuum due to any involvement in
fraudulent activities. (Doc. No. 444-20; Doc. No. 444-1, ¶ 25).
2
In 2002, Schessel created a company called Innovative Supply Strategies, Inc. (“ISS”).
Schessel’s plan for ISS was to create a database that would help hospitals analyze their
purchasing costs and utilization of products that they purchased. To do this, ISS hired a
company called V-GPO to write a software program to Schessel’s specifications for the creation
of the database. The V-GPO programmer that wrote the code for ISS was Todd Bennett.
According to Todd Bennett, 99% of the mapping and data normalization functionality of the
software program that he wrote for Schessel and ISS now exists in the CAdRe software at issue
in this case. (Doc. No. 445-14, ¶ 3).
The Creation of DDS
Todd Bennett was employed by Plaintiff Florida Software Systems, Inc. (“FSS”), which
is owned by Norman Dobiesz, who was also the controlling owner of V-GPO.1 Schessel and
Dobiesz met, and they ended up creating Plaintiff Deman Data Systems, LLC (“DDS”) in
January of 2003. Dobiesz became the Chairman and CEO of DDS, while Schessel was the
president of DDS.
Prior to the formation of DDS, Dobiesz asked Schessel about the termination of his
employment with Continuum. (Doc. No. 444-14, depo. p. 95). Schessel told Dobiesz that he left
on his own accord in order to go on to bigger and better things. (Doc. No. 444-14, depo. p. 95).
During this discussion, Schessel did not indicate that he was involved in any fraudulent activities
while employed by Continuum. (Doc. No. 444-14, depo. p. 98).
The business of DDS consisted of licensing proprietary software (called CAdRe) to
hospitals; this software helped hospitals analyze their purchasing costs and utilization of
1
FSS has since changed its name to Healthcare IQ, LLC. (Doc. No. 472-11, depo. p. 19).
However, the Court will refer to this entity as FSS throughout this Order.
3
products that they purchased. DDS licensed the software from FSS; FSS created the software.
(Doc. No. S-511, Ex. 7B; S-504, depo. p. 226-27). The software, however, was owned by
another entity, Plaintiff Florida Software Systems Corporation (“FSS-Corp.”). (Doc. No. S-504,
depo. p. 227; Doc. No. S-507, depo. p. 192). Thus, FSS-Corp. owns the software that FSS
develops, and FSS-Corp. licensed the software to FSS.2 (Doc. No. S-507, depo. p. 192, 197;
Doc. No. 468-13). FSS, in turn, sub-licensed the software to DDS, and DDS licensed the
software to hospitals. (Doc. No. S-507, depo. p. 197).
The 2003 Operating Agreement
According to an Operating Agreement dated January 2, 2003 (Doc. No. 419-3), there
were three equal members of DDS: FSS, Schessel, and IHC Investments, Ltd. (“IHC”).3 Dobiesz
was the president of both FSS and IHC at the time that the Operating Agreement was executed.
According to the Operating Agreement, the managing member of DDS was FSS.
Paragraph 4.5 of the Operating Agreement provides the standards for FSS’s management
of DDS. Specifically, paragraph 4.5 provides the following:
The Manager [FSS] shall perform . . . its duties in good faith, in a
manner . . . it reasonably believes to be in the best interest of [DDS]
and with such care as an ordinary prudent person in a similar position
would use under similar circumstances. . . . The Manager shall not be
liable to . . . any Member for any loss or damage sustained by . . . any
Member, unless the loss or damage shall have been the result of the
gross negligence or willful misconduct of such Manager.
(Doc. No. 419-3, p. 4).
2
As previously stated, Dobiesz is the sole owner of FSS. (Doc. No. S-507, depo. p. 192).
However, the ownership of FSS-Corp. is not completely clear. Dobiesz testified that either he is
the owner of FSS-Corp. or FSS is the owner of FSS-Corp. (Doc. No. S-507, depo. p. 24-25,
192).
3
Dobiesz owned 100% of FSS and 50% of IHC. (Doc. No. S-504, depo. p. 75).
4
The Operating Agreement also specifies the capital contributions required of each
member. For Schessel, the Operating Agreement specifies that his capital contribution would
consist of “[p]ayment, performance, and delivery of the consideration described in the
Subscription Agreement with [DDS] dated January __, 2003.” (Doc. No. 419-3, p. 14).
The Subscription Agreement
The 2003 Subscription Agreement (Doc. No. 419-2) provides the following conditions on
Schessel’s purchase of 1/3 of the membership units in DDS:
The consideration which must be fully and finally paid, performed
and delivered by [Schessel] in order to receive the [DDS
Membership] Units (prior to which the Units shall be deemed not
issued) shall be the following:
1.
Receipt by [FSS] of all Fees and reimbursements of costs
under the License Agreement with [DDS].
2.
Payment of approximately $85,000 of [FSS’s] start up
expenses (to be paid from distributions to [Schessel]).
3.
Assignment to [DDS] of all contracts and contract
opportunities related to the business of [DDS] by [Schessel]
and his affiliates (including, specifically but not exclusively
Innovative Supply Strategies, Inc.).
4.
Operations of [DDS] for two years within the Budgets
attached as Exhibit B to this Agreement.
(Doc. No. 419-2, p. 3). These conditions are not well explained within the Subscription
Agreement.
There is no further explanation regarding the first condition’s requirement regarding
payment to FSS of “Fees and reimbursements of costs under the License Agreement with
[DDS].” There is no indication regarding who is to pay such fees and reimbursements to FSS,
nor is there any indication regarding the amount of such fees and reimbursements within the
Subscription Agreement. Furthermore, Schessel contends that this condition was satisfied,
because DDS had paid all of the FSS license fees and costs as of January 6, 2003. (Doc. No.
5
472-4, ¶ 16).
With regard to the third condition, the Subscription Agreement contains a provision that
purports to assign certain rights and opportunities of Schessel and ISS to DDS. Specifically, the
Subscription Agreement provides that there is an “Exhibit A” attached to the Subscription
Agreement that lists all of the “contracts, customers and contract/customer opportunities”
relating to the healthcare/supply chain material management business of DDS, which are
“unconditionally and fully assigned” to DDS by Schessel and ISS. (Doc. No. 419-2, p. 2).
However, Exhibit A to the Subscription Agreement is titled “Budgets of the Company.”
Additionally, there is an Exhibit B to the Subscription Agreement, which is titled “Contracts,
Customers and Contract/Customer Opportunities,” but that exhibit is blank beyond its title.
With regard to the fourth condition—that DDS is operated for two years within the
budgets attached as Exhibit B—there are no budgets attached at Exhibit B. There is an Exhibit
A attached to the Subscription Agreement, which is titled “Budgets of the Company,” but that
exhibit simply states that the budgets are attached as Schedule A-1, but no schedule or budget is
attached. Schessel has stated that no budgets were attached to the Subscription Agreement.
(Doc. No. 472-4, ¶ 15).
The 2003 Employment Agreement
Schessel became the president of DDS and executed a two-year Employment Agreement,
dated January 6, 2003. (Doc. No. 419-1). Paragraph 9.1 of the Employment agreement, which is
at issue in this case, provides the following:
[Schessel] agrees that any Inventions (as hereinafter defined) that he,
alone or with others, may conceive, develop, make or perfect, in
whole or in part, during the term of this Agreement and for a period
of one (1) year after any termination of his employment, which ever
shall occur last, which relate to the existing scope of [DDS’s]
6
business, or that he, alone or with others, may conceive, develop,
draw, design, draft, make or perfect, in whole or in part, in the
performance of the duties of his employment by [DDS], . . . shall be
and hereby is assigned exclusively to [DDS] . . . and shall become the
sole property of [DDS] or its nominee. For purposes hereof, the term
"Inventions" shall mean . . . ideas, concepts, systems, designs,
product toolings, architectures, product composition and formula,
programming sequences and codes, works, trade secrets, know-how,
[and] intellectual property . . . .
(Doc. No. 419-1, p. 4).
The Restrictive Covenants Agreement
In connection with his employment with DDS, Schessel also executed a NonCompetition, Non-Solicitation, and Non-Disclosure Agreement (“Restrictive Covenants
Agreement” or “RCA”) with DDS, dated January 6, 2003. (Doc. No. 419-4). Two provisions of
the Restrictive Covenants Agreement are implicated in this case. First, the RCA provides that
Schessel “will not, directly or indirectly disclose to anyone, or use or otherwise exploit for
[Schessel’s] own benefit or for the benefit of anyone other than [DDS], any confidential
information .” (Doc. No. 419-4, p. 2).
Second, the RCA provides that “during the Restricted Period and for a period of two (2)
years thereafter, [Schessel] will not directly or indirectly . . . entice or induce or in any manner
influence, or attempt to entice, induce or in any manner influence, any person who is or shall be
in the employ or service of [DDS] to leave such employ or service for the purpose of engaging in
a business which may be in competition with the Business of [DDS].” (Doc. No. 419-4, p. 2-3).
The RCA defines the “Restricted Period” as the “period commencing on [January 6, 2003] and
ending on the date which is thirty-six (36) months following the date [Schessel] ceases to be
employed by [DDS] for any reason.” (Doc. No. 419-4, p. 1). The RCA defines the “Business”
of DDS as “the marketing, sale and support of certain proprietary software for supply chain
7
management and optimization in the medical and hospital industry.” (Doc. No. 419-4, p. 1).
The 2003 Software License Agreement Between FSS and DDS
FSS licensed the CAdRe software to DDS, which DDS licensed to its hospital customers.
Pursuant to the 2003 License Agreement between DDS and FSS, DDS was required to pay a
license fee to FSS that consisted of three components (Doc. No. S-511, Ex. 7B): The first
component was a monthly license fee4 that ranged from $150,000 to $250,000 per month (and
contained a 20% increase when the license agreement automatically renewed). The second
component was payment to FSS of 1/3 of the net proceeds generated by DDS (after payment of
the license fee5 and payment of DDS’s expenses). The third component was payment of FSS’s
out-of-pocket expenses, which according to Exhibit B to the License Agreement appear to be
described as “[a]ll expenses incurred in the daily operations of carrying out [FSS’s] obligations
relating to the License Agreement.” (Doc. No. S-511, Ex. 7B).
During the eleven year period of 2003 through 2013, DDS was required to pay FSS over
$100 million in license fees. (Doc. No. 468-2). At the time of his deposition in October of 2013,
Dobiesz stated that he believed that DDS owed FSS approximately $20 million in unpaid license
fees.
Schessel’s Prior Felonious Conduct
In the summer of 2003, a felony charge was brought against Schessel relating to conduct
4
Like most of the legal documents being sued upon in this case, the License Agreement is
poorly drafted. The “License Fee” is defined as having three components, one of which is called
the “License Fee.” (Doc. No. S-511, Ex. 7B, p. 10).
5
It is not clear which “License Fee” this component is referring to—the License Fee that
has three components or the License Fee described as the first component.
8
that occurred while he was employed at Continuum. (Doc. No. S-511, depo. p. 332-33).
Specifically, while he was employed at Continuum, Schessel engaged in a fraudulent scheme for
which he received $545,000, and he did not pay taxes on such income. (Doc. No. S-511, depo.
p. 306). As a result of his failure to pay taxes on the $545,000, the State of New York charged
Schessel with felony tax evasion for the 1999 tax year. (Doc. No. S-511, Ex. 79, 81).
Part of the fraudulent scheme included Schessel diverting a $100,000 rebate that should
have been paid to Continuum and causing it to be paid to another company. (Doc. No. S-511,
Ex. 86, 87; Doc. No. S-511, depo. p. 328). Schessel was not charged for his part in the
fraudulent scheme; he was only charged with tax evasion.
On August 6, 2003, Schessel pled guilty to the tax evasion charge. (Doc. No. S-511, Ex.
82). As part of his guilty plea, Schessel agreed to pay $100,000 in restitution to Continuum for
the diversion of the $100,000 rebate. (Doc. No. S-511, Ex. 86, 87; Doc. No. S-511, depo. p.
328).
Schessel contends that prior to pleading guilty, he told Dobiesz about the situation and
the felony charge against him. (Doc. No. S-511, depo. p. 328-29). Specifically, Schessel states
that he met Dobiesz at a Boy Scout retreat that Dobiesz was attending with his son, and Schessel
explained the entire situation to Dobiesz. (Doc. No. S-511, p. 329-46). According to Schessel,
Dobiesz responded that they would take care of the situation; that Schessel should plead guilty
and they would send $100,000 to Continuum. (Doc. No. S-511, depo. p. 329). Dobiesz disputes
that Schessel ever told him the true details about the fraudulent scheme and tax evasion charge,
and instead, Schessel simply told Dobiesz that he had an IRS tax debt. (Doc. No. 468, ¶ 21).
The parties do not dispute that Dobiesz agreed to help Schessel pay the $100,000 he
owed. On May 18, 2004, Dobiesz transferred $100,000 from DDS’s bank account to Schessel’s
9
bank account so that Schessel could make the restitution payment. (Doc. No. S-511, p. 332, Ex.
66). However, according to Dobiesz, he believed that this money was being used to pay an IRS
tax debt. (Doc. No. 468, ¶ 21). According to Dobiesz, at the time of their discussion regarding
the guilty plea and restitution payment, Dobiesz specifically asked Schessel if there was anything
about his past that would reflect adversely on DDS, to which Schessel replied that there was not
anything. (Doc. No. 468, ¶ 21). According to Dobiesz, Schessel never told him the true details
about the fraudulent scheme and tax evasion charge. (Doc. No. 468, ¶ 21, ¶ 23, 25).
Schessel’s Employment with FSS
On September 1, 2007, FSS made Schessel its president. (Doc. No. S-507, depo. p. 201,
212-13, 216-17, 270-75). Dobiesz has stated that FSS employees and DDS employees act in
concert and are not treated separately. (Doc. No. S-506, depo. p.11; Doc. No. S-507, depo. p.
216-17, 274). Dobiesz considered Schessel to be in charge of both DDS and FSS. (Doc. No. S507, depo. p. 271-72).
DDS’s Financial Transactions
DDS licensed the CAdRe software to hospitals, and Schessel was under the belief that
DDS was very profitable. However, Schessel contends that Dobiesz prevented him from
reviewing relevant DDS financial information. Furthermore, Schessel’s capital account at the
end of 2012 had a book value of negative $1.8 million. (Doc. No. 472-5, p. 10). A review of
Dobiesz’s deposition testimony in this case reveals certain financial transactions worth
mentioning.
First, Dobiesz treats FSS and DDS like a single company, wherein DDS funds all of the
expenses of FSS. (Doc. No. S-506, depo. p. 236, 251-52, 294; Doc. No. S-507, depo. p. 128).
As previously stated, Dobiesz has stated that FSS employees and DDS employees act in concert
10
and are not treated separately. (Doc. No. S-506, depo. p.11; Doc. No. S-507, depo. p. 216-17,
274). FSS’s only “customer” is DDS. (Doc. No. S-506, depo. p. 12).
Dobiesz’s family members were hired and paid salaries by FSS, which were reimbursed
by DDS. Dobiesz’s wife, Maureen Donovan, is the executive vice president of administration
and customer service at FSS, and Dobiesz contends that she provides services to both FSS and
DDS. (Doc. No. S-506, depo. p. 11). Her salary is $90,000. (Doc. No. S-506, depo. p. 18).
Schessel contends that Donovan lacked the experience for the position, and instead, the value of
her services was $15,000, as she merely provided clerical assistance. (Doc. No. 472-4, ¶ 18).
Furthermore, Schessel contends that Donovan did not provide any services nor did she come into
the offices of DDS or FSS prior to late 2009, yet she received a salary at all times since the
formation of DDS in 2003. (Doc. No. 472-4, ¶ 18).
Dobiesz’s son, Aaron Dobiesz, is the director of sales for FSS, and he does software
demonstrations for DDS’s potential customers. (Doc. No. S-506, depo. p. 24). His salary is
$75,000. (Doc. No. S-507, depo. p. 184). Schessel contends that Aaron lacked the experience
for the position, and instead, the value of Aaron’s services was $15,000, as he merely provided
clerical assistance. (Doc. No. 472-4, ¶ 17). Dobiesz’s daughter, Tracey Carter, is FSS’s
controller and accountant. (Doc. No. S-506, depo. p. 221).
Dobiesz also owns a company called International Limo, Inc., which is a corporation that
owns transportation assets. (Doc. No. S-507, depo. p. 54). One of International Limo’s assets is
an aircraft lease. (Doc. No. S-507, depo. p. 55-56). Dobiesz states that DDS and FSS each pay
$50,000 per month to International Limo for use of the aircraft. (Doc. No. S-507, depo. p. 80,
122-23, 135-36). However, the actual lease payments for the aircraft range between $20,000 to
$30,000 per month, even though DDS and FSS pay a total of $100,000 per month in order to,
11
according to Dobiesz, cover the expenses of the aircraft (such as gas, renting the hangar, landing
fees, and insurance). (Doc. No. S-507, depo. p. 143-44).
International Limo also owns cars which were paid for by FSS and/or DDS. (Doc. No. S507, depo. p. 54-61). Dobiesz states that the cars are used by FSS and/or DDS, but the cars are
titled to International Limo in order to get better car insurance rates. (Doc. No. S-507, depo. p.
61).
Finally, while DDS’s financial statements and general ledgers are not before the Court,
Dobiesz was questioned about them during his depositions. Dobiesz acknowledged that DDS
paid him an amount equal to his income tax payments, and he acknowledged two such payments
in the amounts of $243,969 and $700,000 (Doc. No. S-507, depo. p. 102-03, 110-11). By
December 31, 2011, Dobiesz’s draws from DDS exceeded $1 million (Doc. No. S-507, depo. p.
133-34, 138-39, 148). At one point, Dobiesz was receiving a $50,000 per month salary from
FSS, while Schessel was only receiving a $12,500 per month salary from DDS. (Doc. No. S507, depo. p. 281-84). Finally, according to Arie Schinnar, Defendants’ expert who reviewed
DDS’s general ledger, Dobiesz’s draws from DDS were fifteen times the amount of Schessel’s
draws, and Dobiesz’s wages and advances were three times the amount of Schessel’s wages and
advances. (Doc. No. 472-10, ¶ 14).
The 2009 and 2010 Promissory Notes Executed by Schessel
From April 2009 through February of 2010, Schessel executed ten promissory notes in
favor of DDS in exchange for a total of $165,000. (Doc. No. 419-5). The promissory notes
provide that DDS had the right to convert any or all amounts advanced under the promissory
notes into employment compensation that DDS owed Schessel. (Doc. No. 419-5).
Schessel contends that he does not owe anything to DDS under these promissory notes.
12
(Doc. No. 472-4, ¶ 9). Instead, he contends that, prior to signing the notes, Dobiesz told him that
the notes were advances for Schessel’s salary and that DDS would not be demanding payment as
long as Schessel was employed by DDS for the month following the advance. (Doc. No. 472-4,
¶ 9). DDS is both suing Schessel for repayment of the promissory notes and has issued Schessel
a 1099 tax form for the amount due under the notes (as if the amounts provided under the notes
were compensation). (Doc. No. 9, ¶ 9).
The 2011 Purported Amendment to the 2003 Operating Agreement
By 2011, the business relationship between Schessel and Dobiesz began to deteriorate.
As a result, FSS purported to amend the 2003 Operating Agreement via a document titled
“Amendment to Operating Agreement” dated August 30, 2011 (“2011 Amendment”). (Doc. No.
89-2).
However, pursuant to paragraph 11.2 of the 2003 Operating Agreement, an amendment
to the Operating Agreement was required to be in writing and executed by the holders of a
majority of the outstanding membership interests in DDS. (Doc. No. 419-3, p. 11). FSS
executed the 2011 Amendment to the Operating Agreement as the manager of DDS and as the
holder of a majority of the membership interests in DDS.6 However, it appears that FSS was not,
in fact, a holder of a majority of the membership interests in DDS on August 30, 2011.7
Dobiesz stated in his deposition that in 2006, FSS bought all of IHC’s membership
6
Dobiesz signed the 2011 Amendment as Chairman of DDS and as the Chairman of FSS;
he did not expressly sign the 2011 Amendment on behalf of IHC. (Doc. No. 89-2).
7
In their response to Schessel’s motion for summary judgment, Plaintiffs appear to
concede that FSS could not amend the Operating Agreement simply based on its status as the
manager, as Plaintiffs state that “FSS did not amend the Operating Agreement as the manager.”
(Doc. No. 473, p. 22).
13
interest in DDS and became the holder of a majority of DDS’s membership interests. (Doc. No.
S-504, depo. p. 74-75). However, DDS’s Schedule K-1 tax form for the 2012 tax year shows
that IHC’s ownership in DDS increased from 33.333% to 50% in 2012. (Doc. No. 477-3; Doc.
No. 477, ¶ 22). Furthermore, Dobiesz states in his declaration filed with the Court that both FSS
and IHC are members of DDS. (Doc. No. 468, ¶ 37). Finally, in their response brief to
Schessel’s motion for summary judgment, Plaintiffs appear to acknowledge that FSS did not
hold a majority of the membership interest and concede that FSS and IHC each held 33%. (Doc.
No. 473, p.24-25).
The purported 2011 Amendment added a paragraph 9.5 to the Operating Agreement,
which provided for expelling a member of DDS. Specifically, this paragraph has two provisions:
(a)
A Member may be expelled from Membership in [DDS],
without cause, and required to surrender to [DDS] his or her
Membership Interest upon the vote or written consent of
Members who hold at least a majority of the Membership
Interests. In exchange for the expelled Members’ [sic]
Membership Interest, [DDS] shall pay the expelled Member
an amount equal to his or her pro rata share of the Book
Value of [DDS], determined by [DDS] as of the last day of
the quarter immediately preceding the date of expulsion
(“Book Value”).
(b)
A Member may be expelled from Membership in [DDS],
“with cause” (as hereinafter defined), and required to
surrender to [DDS] his or her Membership Interest upon the
vote or written consent of Members who hold at least a
majority of the Membership Interests. In exchange for the
expelled Members’ [sic] Membership Interest, [DDS] shall
pay the expelled Member an amount equal to fifty percent
(50%) of the Book Value determined by [DDS] as of the last
day of the quarter immediately preceding the date of
expulsion. “With cause” under this Section 9.5 shall mean
facts which permit a conclusion by [DDS] that the Member
has . . . failed or refused to carry out the directions of the
Manager or the Chairman of [DDS]. . . .
14
(Doc. No. 89-2).
Dobiesz contends that after FSS executed the 2011 Amendment, he showed the document
to Schessel and Schessel verbally agreed to it. (Doc. No. S-504, depo. p. 80-83). Schessel
denies that he was shown the document or that he ever agreed to it. (Doc. No. 444-1, ¶ 28).
Schessel’s Computer Access and the Termination of Schessel’s Employment with DDS
By May of 2012, the business relationship between Schessel and Dobiesz had completely
soured. Dobiesz caused FSS to stop paying Schessel for his travel expenses, and Schessel
stopped traveling to DDS’s Florida office. (Doc. No. S-511, depo. p. 29-30, 348-49).
While Schessel was traveling on DDS business on May 7, 2012, he remotely accessed his
DDS files from his hotel room by connecting to FSS’s and DDS’s server and started to download
the files before he went to bed. (Doc. No. 444-1, ¶ 11; Doc. No. 444-8). Uploading and
downloading DDS files via remote access was part of Schessel’s normal practices, as he was the
president, co-founder, and co-owner of DDS. (Doc. No. 441-1, ¶ 10). However, because
Schessel had downloaded 67 files, on the morning of May 8, 2012 the IT department of DDS
became suspicious, reported the situation to Dobiesz, and Dobiesz instructed the IT department
that Schessel’s remote connection be terminated while the situation was investigated. (Doc. No.
444-2; Doc. No. 444-1, ¶ 12-13; Doc. No. 469, ¶ 6). Plaintiffs contend that as of May 8, 2012,
FSS revoked Schessel’s ability to use his credentials to access CAdRe. (Doc. No. 469, ¶ 10).
On May 9, 2012, Schessel was doing work for one of DDS’s customers and needed to
remotely access DDS’s computers. (Doc. No. 444-1, ¶ 14). Schessel was still unable to access
DDS’s computers, and he contends that he informed Dobiesz that he told the IT department that
he would have Stacy Gallagher (who reported to Schessel at DDS) use his company-issued
laptop and log him into FSS’s and DDS’s CAdRe servers. (Doc. No. 444-1, ¶ 14; Doc. No. S15
512, depo. p. 847-49; Doc. No. 444-8). Schessel contends that he told Dobiesz that he had not
heard back from the IT department about Gallagher logging him in, and Dobiesz responded,
“They know it’s OK.” (Doc. No. 444-1, ¶ 14). However, Plaintiffs dispute this evidence and
take the position that Schessel was not authorized to have Gallagher log him in. (Doc. No. 4448, p. 3; Doc. No. 444-8, p. 8; Doc. No. 469, ¶ 13; Doc. No. 468, ¶ 57).
Schessel states that after the incident, Dobiesz instructed him that other employees had to
log Schessel into the DDS database. (Doc. No. 444-1, ¶ 15). As a result, on May 31, 2012,
while Schessel was doing work for one of DDS’s customers, he had Gallagher use his companyissued laptop and log him into FSS’s and DDS’s CAdRe servers. (Doc. No. 444-1, ¶ 16; Doc.
No. S-512, depo. p. 847-49; Doc. No. 444-8). Plaintiffs dispute that Schessel was allowed to
have Gallagher log him in, and instead, Plaintiffs take the position that Schessel was not
authorized to do this. (Doc. No. 444-8, p. 3; Doc. No. 444-8, p. 8; Doc. No. 469, ¶ 18; Doc. No.
468, ¶ 57). Thereafter, Steve Platti from the IT department instructed Gallagher that she could
no longer log Schessel into the computer. (Doc. No. 444-1, ¶ 16).
Neither Schessel nor Gallagher were reprimanded for accessing the computer in May.
(Doc. No. 444-1, ¶ 19-20). Gallagher has stated that when she logged Schessel into the
computer, they were both performing services for DDS and using the computer access in order to
perform those services and for nothing else. (Doc. No. 444-15, ¶ 5). The first time that Schessel
learned that he had allegedly violated any access limitations was via this lawsuit.
By June 1, 2012, Dobiesz and Schessel agreed that they could no longer work together,
and Schessel worked with their attorney to try to form a transition plan. (Doc. No. S-512, depo.
p. 582, 586). However, on July 30, 2012, Dobiesz, as CEO and Chairman of DDS, sent Schessel
16
a letter terminating his employment with DDS for cause, effective June 1, 2012.8 (Doc. No. 4446). Dobiesz states in the letter that Schessel’s termination was due to: (1) Schessel’s failure to
follow the policies and directives of DDS, (2) Schessel’s breach of his fiduciary duties as
president of DDS (including contacting DDS’s customers in order to provide services to them
that are competitive with DDS), (3) Schessel’s failure to report to DDS’s Florida office, and (4)
Schessel’s failure to carry out the directions of the Chairman of DDS. (Doc. No. 444-6).
Additionally, Dobiesz states in the letter that Schessel was expelled with cause as a member of
DDS, and as a result, all rights and membership interests that Schessel may have been entitled to
were terminated and forfeited. (Doc. No. 444-6). Finally, Dobiesz states in the letter that
Schessel was directed to immediately return all computers paid for or made available to him by
DDS. (Doc. No. 444-6).
Prior to receiving the termination letter, Schessel had been accessing DDS materials (and
asking other employees to do so for him) and using hotmail, dropbox, and zoho to transfer such
materials to himself. (Doc. No. S-511, depo. p. 180-81, 194, 201-02, 356-57; Doc. No. S-504,
depo. p. 307-12, 328, 334-37). Plaintiffs contend that Schessel did this in order to steal DDS’s
trade secrets (consisting of its confidential information, database, global catalog of information,
and CAdRe software). According to Dobiesz, there are emails between Schessel and Todd
Bennett regarding the transfer of computer codes. (Doc. No. S-504, depo. p. 246-50, 254-56,
266-67).
After his termination, Schessel kept the laptop computer that he used while employed at
DDS, because he believed that he had purchased it himself. (Doc. No. 444-1, ¶ 21). Schessel
8
The letter does not mention termination of Schessel’s position as president of FSS.
(Doc. No. 444-6; Doc. No. S-507, depo. p. 274-75).
17
was asked during his deposition if he altered any of the information on his laptop after July 1,
2012, and he responded that he “potentially” did because he did not know that the laptop
belonged to DDS. (Doc. No. S-512, depo. p. 846). Plaintiffs contend that after his termination,
Schessel accessed confidential information from his company-issued laptop on numerous
occasions. (Doc. No. 444-8, p. 3; Doc. No. 444-8, p. 8). Plaintiffs also contend that Schessel
deleted company emails that had attachments that contained proprietary information. (Doc. No.
444-16).
Additionally, Plaintiffs contend that on January 23, 2013, Schessel used another
employee’s credentials (Phil Maneri) and accessed DDS’s and FSS’s software and ran reports.
(Doc. No. 444-8, depo. p. 3; Doc. No. 444-8, p. 8; Doc. No. 469, ¶ 20). Schessel disputes this.
(Doc. No. 444-1, ¶ 22).
On January 24, 2014, DDS provided Schessel with the serial numbers of the computers
that it claimed to own. (Doc. No. 444-1, ¶ 21). The laptop that Schessel had kept was one of the
computers that DDS claimed to own, and as a result, Schessel turned the laptop over to his
attorney. (Doc. No. S-512, depo. p. 844-46).
Primrose Investments
In June through October of 2012, Schessel did work as a consultant for a company called
Primrose Investments. (Doc. No. S-513, depo. p. 7). Todd Bennett’s brother, Brad Bennett, was
also a consultant for Primrose Investments. (Doc. No. S-513, depo. p. 17). Manny Losada
owned Primrose Investments. (Doc. No. S-513, depo. p. 7).
Schessel describes Primrose Investments as a precursor to a company that Schessel later
formed, Defendant Primrose Solutions, LLC (“Primrose”). (Doc. No. S-511, depo. p. 19).
According to Schessel and Primrose, Primrose Investments and Primrose are completely separate
18
companies with separate ownership. However, from June 2012 until Primrose was formed, there
are several emails that exist that refer simply to “Primrose” without specifically identifying
Primrose Investments, which Plaintiffs contend relate to Primrose Solutions.
For example, Darryl Long, who worked for OSF (a former DDS customer), testified that
he received emails on behalf of Primrose in June of 2012 from people named Emily Brown and
Brad Thompson. (Doc. No. 476-2; Doc. No. 476-4; Doc. No. 476-5). It is undisputed that
Schessel and his wife used those aliases. OSF entered into an agreement for work with a
Primrose entity in June of 2012, but it is unclear which Primrose entity (Primrose Investments or
Primrose Solutions) was the party to that agreement. (Doc. No. 476-2; Doc. No. S-510, depo. p.
404-09; Doc. No. S-513, depo. p. 71).
Over the 4th of July weekend in 2012, Schessel and his brother, Larry Schessel, met in
New York to discuss the formation of Primrose. (Doc. No. S-511, depo. p. 41-43). Todd
Bennett, Manny Losada, and a man from FTI were also there.9 (Doc. No. S-511, depo. p. 42-43).
After the July meeting, Schessel approached Todd Bennett’s brother, Brad Bennett, to discuss
the formation of Primrose. (Doc. No. S-511, depo. p. 101-02).
The Formation of Primrose Solutions, LLC
On October 4, 2012, Schessel, Larry Schessel, and Brad Bennett formed Defendant
Primrose. (Doc. No. S-511, depo. p. 16; Doc. No. 445-3). Schessel is CEO and owns 80% of
Primrose, while Larry Schessel and Brad Bennett each own 10% of Primrose. (Doc. No. S-511,
depo. p. 16, 60).
Schessel and Brad Bennett started developing Primrose’s software and database in
9
FTI had provided consulting services to DDS. (Doc. No. S-511, depo. p. 53).
19
August of 2012, and by December of 2012, Primrose had the capability to normalize data. (Doc.
No. S-511, depo. p. 80-81, 88-89, 92; Doc. No. S-510, depo. p. 399). According to Schessel,
Primrose, like DDS, has a database that helps hospitals analyze their purchasing costs. However,
Schessel contends that: (1) unlike DDS, Primrose focuses on the surplus market; and (2)
Primrose did not copy DDS’s software. (Doc. No. S-513, depo. p. 287; Doc. No. 445-9, ¶ 6;
Doc. No. 445-14, ¶ 10). Todd Bennett has stated that he created Primrose’s database from
scratch for Schessel after Schessel left DDS. (Doc. No. 445-14, ¶ 5, 10, 14). Plaintiffs, on the
other hand, contend that Primrose directly competes with DDS using software that is very
similar to DDS’s software.
IDMS
In 2012, Brad Bennett owned a company named Innovative Data Management Systems
(“IDMS”). (Doc. No. S-511, depo. p. 94; Doc. No. S-513, depo. p. 139-40, 231). Todd Bennett
worked as a consultant for IDMS, and through that company, Todd Bennett provided his services
to Primrose. (Doc. No. S-513, depo. p. 140-41). In 2012 and 2013, Todd Bennett was providing
consulting services for IDMS to Primrose while he was still employed by FSS. (Doc. No. S-512,
depo. p. 829). Todd Bennett’s employment with FSS did not end until June 28, 2013. (Doc. No.
445-14, ¶ 4).
Primrose’s Customers
At the time of Schessel’s deposition in June of 2013, Primrose had seven or eight
customers, four of which were formerly DDS’s customers. (Doc. No. S-511, depo. p. 64-65;
Doc. No. S-510, depo. p. 392). Those four former DDS customers were NorthShore-LIJ, Valley
Health, BayCare, and Geisinger. (Doc. No. S-510, depo. p. 392).
20
Schessel began soliciting work from Geisinger in July of 2012, and Geisinger became a
Primrose customer in November of 2012. (Doc. No. S-512, depo. p. 629-30; Doc. No. S-511,
depo. p. 61; Doc. No. S-510, depo. p. 475). Schessel began soliciting work from BayCare in
November or December of 2012, and BayCare became a Primrose customer in December of
2012. (Doc. No. S-510, depo. p. 470-73). Schessel began soliciting work from NorthShore-LIJ
in September of 2012, and NorthShore-LIJ became a Primrose customer in March of 2013.
(Doc. No. S-510, depo. p. 392-93). Schessel began soliciting work from Valley Health in
September or October of 2012, and Valley Health became a Primrose customer in November of
2013. (Doc. No. S-510, depo. p. 396-97).
During 2013, Primrose and FTI were in discussions regarding forming a company
together. (Doc. No. S-510, depo. p. 508-09; Doc. No. S-513, depo. p. 246-47). However, by
September of 2013, Dobiesz allegedly had said something to FTI that caused FTI to end their
discussions with Primrose. (Doc. No. S-510, depo. p. 506-10; Doc. No. S-513, depo. p. 245-48;
Doc. No. 445-6; Doc. No. 472-4, ¶ 11).
DDS, FSS, and FSS-Corp.’s Claims Against Schessel and Primrose
On November 14, 2012, Plaintiffs DDS, FSS, and FSS-Corp. filed suit against
Defendants Schessel and Primrose. The following ten claims remain pending against Defendants
(Doc. No. 413, 147): In Count I, DDS and FSS assert a claim for violation of the Computer
Fraud and Abuse Act against Schessel and Primrose. In Count II, DDS, FSS, and FSS-Corp.
assert a misappropriation of trade secrets claim against Schessel and Primrose. In Count III,
DDS asserts a claim to enforce the RCA against Schessel. In Count IV, DDS, FSS, and FSSCorp. assert a civil theft claim, pursuant to Florida Statute § 772.11, against Schessel and
21
Primrose. In Count V, DDS asserts a tortious interference claim against Schessel and Primrose.
In Count VI, DDS asserts a civil conspiracy claim against Schessel and Primrose. In Count VII,
DDS asserts a breach of fiduciary duty claim against Schessel. In Count VIII, DDS asserts a
fraud claim against Schessel regarding his alleged failure to disclose the details surrounding the
termination of his prior employment with Continuum and his involvement in the fraudulent
scheme while employed by Continuum. In Count IX, DDS asserts a claim against Schessel for
breach of paragraph 9.1 of the 2003 Employment Agreement. In Count X, DDS asserts a claim
against Schessel for failure to repay $165,000 under the promissory notes he executed.
Schessel and Primrose’s Counterclaims Against DDS and FSS
In response to Plaintiffs’ claims, Schessel and Primrose asserted ten counterclaims, six of
which remain10 (Doc. No. 89, 165, 472): In Count I, Primrose asserts a tortious interference
claim against DDS and FSS regarding FTI.11 In Count IV, Schessel asserts a breach of loyalty
claim against FSS, as manager of DDS. In Count V, Schessel asserts a claim for declaratory
relief against DDS and FSS regarding the validity of the purported 2011 Amendment to the DDS
Operating Agreement. In Count VI, Schessel asserts an alternative claim against DDS for breach
of the purported 2011 Amendment to the DDS Operating Agreement. In Count VII, Schessel
asserts a claim against FSS for breach of paragraph 4.5 of the 2003 Operating Agreement. In
10
Defendants have dropped their defamation counterclaim (Count II) in their response to
Plaintiffs’ motion for summary judgment. (Doc. No. 472, p. 14). As a result, the Court grants
Plaintiffs summary judgment on the defamation counterclaim.
11
In their response to Plaintiffs’ motion for summary judgment, Defendants have dropped
their tortious interference counterclaim (Count I) to the extent that it was based on interference
with ROI. (Doc. No. 472, p. 12). As a result, the Court grants Plaintiffs summary judgment on
this portion of the tortious interference counterclaim.
22
Count IX, Schessel asserts an unpaid wages claim against DDS.
III. Schessel’s Motion for Summary Judgment
Schessel moves for summary judgment on five of the claims asserted against him: (1)
violation of the Computer Fraud and Abuse Act, (2) enforcement of the RCA, (3) breach of
fiduciary duty, (4) fraud, and (5) breach of paragraph 9.1 of the 2003 Employment Agreement.12
Additionally, Schessel moves for summary judgment on his counterclaim for declaratory relief
regarding the purported 2011 Amendment to the Operating Agreement. Accordingly, the Court
will analyze each claim.
A. Computer Fraud and Abuse Act
In Count I, DDS and FSS assert a claim for violation of the Computer Fraud and Abuse
Act (“CFAA”) against Schessel and Primrose.13 Plaintiffs contend that Schessel violated the
CFAA by doing the following:
C
intentionally accessing a computer without authorization or by exceeding
authorized access and thereby obtaining confidential information (in violation of
18 U.S.C. § 1030(a)(2)(C));
C
knowingly and with the intent to defraud, accessing a protected computer without
authorization, or exceeding authorized access, and by means of such conduct
furthering the intended fraud and obtaining anything of value (in violation of
§ 1030(a)(4));
C
knowingly causing the transmission of a command, and as a result, intentionally
12
Schessel also moves for summary judgment on other claims by stating that he is
incorporating Primrose’s arguments into his motion by reference. (Doc. No. 486, p. 26). The
Court will analyze such claims when analyzing Primrose’s motion for summary judgment.
13
The relevant provisions of the CFAA applicable to this case reference “protected
computers,” which includes computers used in or affecting interstate or foreign commerce or
communication. 18 U.S.C. § 1030(e)(2)(B). The parties do not dispute that the computers at
issue in this case are protected computers.
23
causing damage without authorization to a protected computer (in violation of
§ 1030(a)(5)(A)); and/or
C
intentionally accessing a protected computer without authorization, and as a
result, causing damage and loss (in violation of § 1030(a)(5)(C)).
Plaintiffs have identified six instances in which they contend that Schessel violated the
CFAA: (1) when Schessel connected to FSS’s and DDS’s server and started to download 67 files
from his hotel room on May 7-8, 2012; (2) when Schessel had Stacy Gallagher use his companyissued laptop and log him into FSS’s and DDS’s CAdRe servers on May 9, 2012; (3) when
Schessel had Gallagher use his company-issued laptop and log him into FSS’s and DDS’s
CAdRe servers on May 31, 2012; (4) when Schessel used the laptop that he kept after his
termination and continued to access confidential company information; (5) when Schessel
allegedly used another employee’s credentials (Phil Maneri) and accessed DDS’s and FSS’s
software and ran reports on January 23, 2013; and (6) when Schessel deleted company emails
that had attachments that contained proprietary information. Accordingly, the Court will analyze
each identified instance under the CFAA.
1. May 7-8, 2012 Hotel Download of Files
Plaintiffs contend that Schessel violated the CFAA when he connected to FSS’s and
DDS’s server and started to download 67 files from his hotel room on May 7-8, 2012. In support
of this contention, Plaintiffs point out that one of the files downloaded on May 7, 2012 was a file
with a name that includes “OSF,” which is a DDS customer. Thereafter, on June 18th and 25th
of 2012, Brad Thompson and Emily Brown (the aliases used by Schessel and his wife) sent
emails to Darryl Long of OSF regarding an agreement for work by a Primrose entity. As such,
Plaintiffs contend that Schessel’s download on May 7th must have been for the improper
24
purpose of soliciting OSF’s business for a competitor. Plaintiffs base that contention on the fact
that Long stated that he had heard of Primrose for a few months prior to those June emails.
(Doc. No. 476-2, depo. p. 31).
The Court is not willing to make the leap that the May 7th and 8th downloads were for an
improper purpose of soliciting OSF. On May 7th and 8th, Schessel had the authority to access
DDS’s and FSS’s computers as part of his employment with both companies. Schessel was
president of both DDS and FSS, and he was also treated by everyone involved as being a 1/3
owner of DDS. While Plaintiffs contend that Schessel’s access was only authorized to the extent
that it was for the benefit of DDS and/or FSS (and therefore, he exceeded his authority when he
accessed files for the improper purpose of soliciting OSF’s business for a competitor), there is no
evidence before the Court that Schessel’s access on May 7th and 8th was for such an improper
purpose. Instead, Plaintiffs ask the Court to assume that an improper purpose existed for the
specific access on May 7th and 8th simply because Schessel solicited OSF for a competitor via
email in June. The Court declines Plaintiffs’ invitation to find a genuine issue of material fact
regarding a CFAA violation for Schessel’s download on May 7th and 8th. Accordingly,
Schessel is granted summary judgment on Plaintiff’s CFAA claim to the extent that it is based on
his download on May 7th and 8th.
2. May 9th and May 30th Incidents - Gallagher Logging In Schessel
Next, Plaintiffs contend that Schessel violated the CFAA when he had Gallagher use his
company-issued laptop and log him into FSS’s and DDS’s CAdRe servers on May 9, 2012 and
May 31, 2012. There is a genuine issue of material fact regarding whether these incidents were
CFAA violations. To begin with, the parties dispute whether Dobiesz authorized Schessel to
25
have Gallagher log him in; if Dobiesz did authorize Gallagher, then Schessel’s access via
Gallagher would have been authorized access that did not violate the CFAA. Furthermore, the
parties have not sufficiently briefed the issue of whether Schessel could violate the CFAA by
accessing a computer that was owned, at least in part, by a company (DDS) that he contends that
he was an owner of at the time of access.14 Finally, the parties dispute whether Schessel was, in
fact, an owner at the time of his access, because they dispute whether he met the conditions set
forth in the Subscription Agreement. Accordingly, the Court denies Schessel’s motion for
summary judgment on Plaintiffs’ CFAA claim to the extent that it is based on the May 9th and
30th access.
3. Post-Termination Use of Laptop for Continued Access
Next, Plaintiffs contend that Schessel violated the CFAA when he used the laptop that he
kept after his termination and continued to access confidential company information. During
their depositions of Schessel, Plaintiffs asked Schessel about emails and documents Schessel
sent after June 1, 2012 that were allegedly based on PowerPoint presentations and other
confidential information belonging to DDS and/or FSS. However, Schessel’s testimony is
unclear regarding what information he accessed, when he accessed the information, and who the
information belonged to. As such, genuine issues of material fact exist regarding whether
Schessel did engage in unauthorized access after his termination such that he violated the CFAA.
Accordingly, the Court denies Schessel’s motion for summary judgment on Plaintiffs’ CFAA
claim to the extent that it is based on post-termination use of the laptop.
14
The parties are directed to brief this issue and include such briefing in their joint pretrial
statement.
26
4. Alleged Use of Phil Maneri’s Credentials
Next, Plaintiffs contend that Schessel violated the CFAA when he allegedly used Phil
Maneri’s credentials and accessed DDS’s and FSS’s software and ran reports on January 23,
2013. Plaintiffs base this contention on two things: (1) Plaintiffs contend that Maneri’s
credentials were used at 11:36 p.m. from a Marriott hotel (and not from the Montefiore Hospital
headquarters where Maneri worked); and (2) Schessel sent an email to his brother, Larry
Schessel, on October 15, 2012 stating: “In terms of Phil, he has nothing to do with anything
other than we were setting up a goto meeting with him so he could get us on the latest dds
application—me and Todd could then take it over and review where dds was in terms of
development.” (Doc. No. 476-11).
Plaintiffs’ contention is flawed. To begin with, Plaintiffs rely on Steve Platti’s
declaration to show that Maneri’s credentials were used to access DDS’s and FSS’s software
from a Marriott hotel room. (Doc. No. 469, ¶ 20). However, Plaintiffs do not explain how Platti
could know that Maneri accessed the software from a hotel. Instead, Platti includes a computer
printout as an exhibit to his declaration, which shows that Maneri gained access at 11:36 p.m.,
but it does not indicate where Maneri was when he gained such access. (Do. No. 469, Ex. E).
Furthermore, even assuming that Platti somehow had first-hand knowledge that Maneri’s
credentials were used to access DDS’s and FSS’s software from a Marriott hotel room, Plaintiffs
are merely assuming that Schessel was in the hotel room using Maneri’s credentials to access the
software. Plaintiffs base that assumption on the fact that three months earlier, Schessel told
Larry Schessel that Maneri was going to help them access DDS’s software. There is no evidence
that Maneri, in fact, allowed Schessel to use his credentials to access the DDS software on
27
January 23, 2013. As such, the Court declines Plaintiffs’ invitation to find a genuine issue of
material fact regarding a CFAA violation for the access on January 23rd. Accordingly, Schessel
is granted summary judgment on Plaintiff’s CFAA claim to the extent that it is based on his
alleged access using Maneri’s credentials on January 23rd.
5. Deletion of Company Emails
Next, Plaintiffs contend that Schessel violated the CFAA when he deleted company
emails that had attachments that contained proprietary information. Plaintiffs base this claim on
two things. First, Schessel’s admitted that he had “potentially” altered information on his laptop
after July 1, 2012, because he did not realize that the laptop he retained after his termination
belonged to DDS. Second, Platti has testified that his review of the email system shows “gaps,
months’ worth of emails being deleted.” (Doc. No. 444-16, depo. p. 166). Platti specifically
identified a June 18, 2012 email as being deleted. (Doc. No. 444-16, depo. p. 165). Given this
evidence, the Court finds that genuine issues of material fact exist regarding whether Schessel
did delete emails containing proprietary information in violation of the CFAA. If there are other
alleged deletions, it is unclear when any additional deletions occurred, and the timing of the
deletions (i.e., whether it occurred before or after Schessel’s termination) would likely affect
whether a CFAA violation occurred. Accordingly, the Court denies Schessel’s motion for
summary judgment on Plaintiffs’ CFAA claim to the extent that it is based on the deletion of
emails.
B. Enforcement of the RCA
In Count III, DDS asserts a claim to enforce the RCA against Schessel. Specifically, in
Count III, DDS alleges that Schessel breached the RCA in two ways: (1) by
28
enticing/inducing/influencing and/or attempting to entice/induce/influence any person employed
by DDS to leave DDS for the purpose of engaging in a business that competes with DDS; and
(2) by disclosing and/or exploiting for Schessel’s own benefit the confidential information of
DDS. Accordingly, the Court will analyze each alleged breach.
1. Enticing, Inducing, and/or Influencing DDS’s Employees
With respect to DDS’s contention that Schessel breached the RCA by
enticing/inducing/influencing and/or attempting to entice/induce/influence any person employed
by DDS to leave DDS for the purpose of engaging in a business that competes with DDS, DDS
points to the following evidence: First, DDS contends that Primrose competes with DDS.
Second, DDS identifies the following three DDS employees that Schessel allegedly
enticed/induced/influenced and/or attempted to entice/induce/influence to leave DDS and work
for Primrose: Todd Bennett, John Decker, and Richard Croy. (Doc. No. 444-10). Schessel
disputes DDS’s evidence. (Doc. No. S-511, depo. p. 118-23; Doc. No. 444-17, depo. p. 514).
In moving for summary judgment, Schessel makes three arguments: (1) the RCA is not
enforceable after January 3, 2005;15 (2) his conduct cannot be characterized as enticing,
inducing, or influencing DDS’s employees; and (3) DDS cannot obtain any relief for Schessel’s
unsuccessful attempts. Accordingly, the Court will analyze each argument.
a. Enforceability
Schessel first argues that the RCA is not enforceable after January 3, 2005—the date on
15
This argument applies to both alleged breaches of the RCA—regarding (1)
enticing/inducing/influencing DDS employees and (2) exploiting DDS’s confidential
information. The Court’s analysis with regard to the first alleged breach
(enticing/inducing/influencing DDS employees) applies equally to the second alleged breach
(exploiting DDS’s confidential information).
29
which the separate Employment Agreement expired by its own terms. In making this argument,
Schessel relies on the case of Sanz v. R.T. Aerospace Corp., 650 So. 2d 1057 (Fla. 3d DCA
1995), and his contention that the RCA and Employment Agreement should be construed
together as a single document because they are part of the same transaction. The Court is not
persuaded by Schessel’s argument.
In Sanz, the employee entered into a three-year employment agreement that contained
restrictive covenants that ran “during the existence of his employment and for a period of
twenty-four (24) months immediately following the termination of his employment.” Id. at
1058-59. After his three-year employment term ended, the employee continued working for the
employer. See id. at 1059. When the employee later terminated his employment, his employer
attempted to enforce the restrictive covenants. See id. The court, however, found that the
restrictive covenants could not be enforced, because the three-year employment agreement had
been fully performed and had expired by its own terms. See id. The court stated that the
restrictive covenants would be implicated only if the employee’s employment had been
terminated during the three-year employment term. See id. Furthermore, the court stated
that—despite the fact that the restrictive covenants portion of the employment agreement
specifically stated that, regarding the restrictive covenants, the employee “independently
covenants and agrees, which covenants shall be independent of all other covenants”—the
covenants did not survive the expiration of the employment agreement “in the absence of an
express provision to that effect.” Id. at 1059.
Based on Sanz, Schessel contends that the RCA cannot be enforced after the two-year
term of the 2003 Employment Agreement expired. However, the RCA in the instant case is a
30
separate agreement entered into by Schessel and DDS, and as such, Sanz is not directly on point,
given that the restrictive covenants were contained within the employment agreement in Sanz.
Therefore, since Schessel has not pointed the Court to case law regarding enforcement of a
restrictive covenant agreement that was contained in a document separate from the employment
agreement, the Court is not convinced that the RCA cannot be enforced. Should Schessel find
such a case, he is directed to include it in the parties’ pretrial statement.
b. Enticing, Inducing, or Influencing
Next, Schessel argues that he did not breach the RCA, because his conduct cannot be
characterized as enticing, inducing, or influencing DDS’s employees. Instead, he argues that
DDS contends that he solicited DDS’s employees, but “soliciting” is not the same as enticing,
inducing, or influencing. In support of this argument, Schessel points to a different provision in
the RCA in which DDS specifically uses the word “solicit,” and as such, Schessel argues that
DDS’s use of the words entice, induce, or influence in the provision at issue must be an
intentional effort to prohibit conduct that is different than soliciting (otherwise, DDS would have
included “solicit” among the prohibited conduct in the provision at issue). The Court is not
persuaded by this argument and instead concludes that an issue of fact remains regarding
whether Schessel enticed, induced, or influenced DDS’s employees.
c. Unsuccessful Attempts
Next, Schessel argues that DDS cannot obtain any relief for Schessel’s unsuccessful
attempts to entice, induce, or influence Decker and Croy to leave DDS’s employment. Given
that Count III seeks injunctive relief for Schessel’s breaches of the RCA, the Court agrees that
no injunctive relief is warranted for Schessel’s alleged past, unsuccessful attempts to entice,
31
induce, or influence Decker and Croy to leave DDS’s employment. Accordingly, to the extent
that Count III is based on such unsuccessful conduct, the Court grants Schessel’s motion for
summary judgment on that count.
2. Exploiting DDS’s Confidential Information
With respect to DDS’s contention that Schessel breached the RCA by disclosing and/or
exploiting for Schessel’s own benefit the confidential information of DDS, DDS contends that
Schessel copied and used the CAdRe software for his own benefit (and for the benefit of
Primrose). Schessel disputes this allegation. As such, the Court concludes that a genuine issue
of material fact exists regarding this alleged breach, and as such, summary judgment judgement
is denied.
C. Breach of Fiduciary Duty
In Count VII, DDS asserts a breach of fiduciary duty claim against Schessel.
Specifically, DDS alleges that Schessel owed DDS duties of loyalty and due care, which he
breached “by intentionally, willfully and maliciously refusing to perform the duties assigned to
him as president and as an employee of DDS, including, refusing to attend meetings of DDS and
report to work at the offices of DDS, and by refusing to follow the policies and directives
established by DDS.” (Doc. No. 419, ¶ 79).
Schessel moves for summary judgment on this claim, arguing that refusing to perform the
duties assigned to him may be grounds for termination, but such is not a breach of fiduciary duty.
In response, DDS argues that Schessel breached his fiduciary duty to DDS by failing to fully
disclose, when repeatedly asked by Dobiesz during his employment with DDS, his involvement
32
in the fraudulent scheme while employed by Continuum and the tax evasion charge. While
failing to disclose certain information when specifically asked in order to protect himself and
simultaneously putting DDS in danger by employing a person with a fraudulent background may
be a breach of fiduciary duty, such conduct is not alleged as the breach of fiduciary duty within
Count VII of the third amended complaint. (Doc. No. 419). Instead, the breach alleged in Count
VII is simply Schessel’s refusal to perform the duties assigned to him as president and as an
employee of DDS. As such, the Court concludes that summary judgment on Count VII should
be granted.
D. Fraud
In Count VIII, DDS asserts a fraud claim against Schessel regarding his alleged failure to
disclose the details surrounding the termination of his prior employment with Continuum and his
involvement in the fraudulent scheme while employed by Continuum. In the summer of 2003,
Schessel was charged tax evasion for his failure to recognize income he received from fraudulent
activities he was engaged in while employed at Continuum. When Schessel pled guilty to the tax
evasion charge, he acknowledged his role in the fraudulent activity.
Plaintiffs contend that Schessel committed fraud by failing to disclose: (1) his
involvement in the fraudulent activity, and (2) that he was fired by Continuum for his role in the
fraudulent activity. To the extent that Plaintiffs’ claim is based on Schessel’s failure to disclose
that he was fired by Continuum for his role in the fraudulent activity, the claim fails, because the
evidence before the Court shows that Schessel was not fired by Continuum. The only contrary
evidence comes from Schessel’s friend, Jane Girling.
When asked what she knew about what happened at Continuum, Girling responded, “I
33
know that a whole group of people at Continuum were brought up on charges and there was a
whole big to do, and [Schessel] was part of that group that—he ended up getting fired with that
whole group.” (Doc. No. 476-18, depo. p. 24). Additionally, Girling stated, “It was a big . . . it
was in the paper. I mean, everybody knew what was going on.” (Doc. No. 476-18, depo. p. 25).
However, there is no evidence that Girling had first-hand knowledge of Schessel’s alleged
termination, and as such, her testimony that Schessel was fired is based on hearsay. Both
Schessel and the person that he reported to at Continuum have stated that Schessel was not fired
from Continuum. Furthermore, there is no evidence that Continuum even knew about Schessel’s
fraudulent conduct prior to his leaving Continuum in 2000. Accordingly, the Court grants
Schessel’s motion for summary judgment to the extent that Plaintiffs’ fraud claim is based on the
contention that Schessel failed to disclose that he was fired by Continuum for his role in the
fraudulent activity.
Plaintiffs also contend that Schessel fraudulently failed to disclose his involvement with
the fraudulent activity and the tax evasion charge and guilty plea, when asked by Dobiesz on five
occasions whether he (Schessel) had ever done anything that could embarrass or reflect
adversely on the integrity of DDS.16 There is a genuine issue of material fact regarding what
Schessel disclosed about his involvement with the fraudulent activity and the tax evasion charge
and guilty plea, as well as when any such disclosure by Schessel was made. Accordingly, the
16
The five occasions on which Dobiesz questioned Schessel were: (1) prior to signing the
2003 Employment Agreement, (2) in May 2004 when Schessel asked Dobiesz for $100,000 to
pay his alleged tax debt, (3) on May 18, 2004 when DDS was about to sign a license agreement
with McKessen, (4) in November 2008, prior to visiting Cardinal Health, and (5) in a June 13,
2012 email, in which Dobiesz stated that he was being questioned by Cardinal Health regarding
what happened at Continuum. (Doc. No. 468, ¶ 16-30).
34
Court denies Schessel’s motion for summary judgment on Plaintiffs’ fraud claim to the extent
that it is based on the contention that Schessel failed to disclose his involvement with the
fraudulent activity and the tax evasion charge and guilty plea when asked by Dobiesz whether he
had ever done anything that could embarrass or reflect adversely on the integrity of DDS.
E. Breach of Paragraph 9.1 of the 2003 Employment Agreement
In Count IX, DDS asserts a claim against Schessel for breach of paragraph 9.1 of the
2003 Employment Agreement. Paragraph 9.1 of the Employment agreement provides the
following:
[Schessel] agrees that any Inventions (as hereinafter defined) that he,
alone or with others, may conceive, develop, make or perfect, in
whole or in part, during the term of this Agreement and for a period
of one (1) year after any termination of his employment, which ever
shall occur last, which relate to the existing scope of [DDS’s]
business, or that he, alone or with others, may conceive, develop,
draw, design, draft, make or perfect, in whole or in part, in the
performance of the duties of his employment by [DDS], . . . shall be
and hereby is assigned exclusively to [DDS] . . . and shall become the
sole property of [DDS] or its nominee. For purposes hereof, the term
"Inventions" shall mean . . . ideas, concepts, systems, designs,
product toolings, architectures, product composition and formula,
programming sequences and codes, works, trade secrets, know-how,
[and] intellectual property . . . .
(Doc. No. 419-1, p. 4). In the third amended complaint, DDS alleges that Schessel breached the
work made for hire restriction in paragraph 9 of the Employment Agreement “through his
impermissible use” of DDS’s software.
Schessel moves for summary judgment on this claim, arguing that: (1) his alleged
unauthorized use of DDS’s software (i.e., the Invention under paragraph 9.1) cannot be a breach
of this paragraph; and (2) the limitations period has expired on this claim. As explained below,
the Court rejects these arguments.
35
Schessel first argues that his alleged unauthorized use of DDS’s software is not a breach
of paragraph 9.1. Instead, this provision sets forth the ownership of the improvements made to
DDS’s software by Schessel during his employment. While Schessel’s alleged use of the
software (by Primrose) may be unauthorized due to the ownership rights set forth in paragraph
9.1, Schessel argues that his alleged use of the software is not a breach of paragraph 9.1.
DDS appears to respond that Schessel has breached paragraph 9.1 by using and thereby
implicitly claiming ownership to DDS’s software. The Court agrees with DDS that such
conduct—Schessel using and thereby implicitly claiming ownership to DDS’s software—would
be a breach of paragraph 9.1's ownership provision. As such, the Court rejects Schessel’s
argument that summary judgment is warranted on this claim because his alleged unauthorized
use of the software could not establish a breach of paragraph 9.1.
Schessel next argues that the limitations period to assert this claim has expired. The
Court rejected this argument in its December 19, 2013 order denying Schessel’s motion to
dismiss this claim based on the statute of limitations. (Doc. No. 147, p. 8). For the same
reasons, the Court rejects this argument once again. Accordingly, the Court denies Schessel’s
motion for summary judgment as to Count IX.
F. Declaratory Relief Regarding 2011 Amendment
In Count V of their counterclaim, Schessel asserts a claim for declaratory relief against
DDS and FSS regarding the validity of the purported 2011 Amendment to the DDS Operating
Agreement. The 2011 Amendment provides two things: First, the 2011 Amendment provides
that a member can be expelled from DDS without cause by a vote or written consent of DDS
members who hold at least a majority of the DDS membership interests. If a member is expelled
36
without cause, the member is required to surrender his membership interest in DDS in exchange
for payment of the book value of the surrendered membership interest. Second, the 2011
Amendment provides that a member can be expelled from DDS with cause by a vote or written
consent of DDS members who hold at least a majority of the DDS membership interests. If a
member is expelled with cause, the member is required to surrender his membership interest in
DDS in exchange for payment of 50% of the book value of the surrendered membership interest.
A member can be expelled with cause if the member fails or refuses to carry out the directions of
the Manager of DDS (i.e., FSS) or the Chairman of DDS (i.e., Dobiesz).
Pursuant to paragraph 11.2 of the 2003 Operating Agreement, an amendment to the
Operating Agreement was required to be in writing and executed by the holders of a majority of
the outstanding membership interests in DDS. FSS executed the 2011 Amendment to the
Operating Agreement as the holder of a majority of the membership interests in DDS. However,
the facts show that FSS was not, in fact, a holder of a majority of the membership interests in
DDS on August 30, 2011.17 Therefore, the 2011 Amendment does not comply with the
amendment procedure set forth in paragraph 11.2 of the 2003 Operating Agreement.
To the extent that Plaintiffs intend to argue that there was technical compliance because
IHC implicitly consented to the 2011 Amendment due to the fact that Dobiesz was an owner of
IHC and Dobiesz signed the 2011 Amendment, the Court rejects the argument. Dobiesz signed
the 2011 Amendment as Chairman of DDS and as the Chairman of FSS; he did not expressly
sign the 2011 Amendment on behalf of IHC.
Furthermore, even if FSS was a holder of a majority of the membership interests in DDS
17
Instead, FSS and IHC were each 1/3 owners of DDS.
37
and could amend the Operating Agreement, the Court agrees with Schessel that enforcement of
the provisions at issue in the 2011 Amendment (requiring the payment of book value, instead of
fair value, to the expelled member) would not be equitable. “Equity abhors forfeiture, and a
party entitled to a forfeiture may be estopped from asserting that right, if the result would be
unconscionable.” Torres v. K-Site 500 Associates, 632 So. 2d 110, 112 (3d DCA
1994)(citations omitted).
Plaintiffs fail to cite any case law showing that the provisions at issue in the 2011
Amendment could be enforced against Schessel. Instead, Plaintiffs cite to Florida Statute
§ 608.4211(5), which provides in relevant part, that an “operating agreement of a limited liability
company [such as DDS] may provide that the interest of any member who fails to make any
contribution that the member is obligated to make shall be subject to specified penalties[, such
as] . . . the forfeiture of the defaulting member's membership interest.” Paragraph 6.1 of the
Operating Agreement provides that each member shall make the capital contribution that is set
forth in Exhibit B, and Exhibit B provides that Schessel’s capital contribution is described in the
Subscription Agreement. Furthermore, paragraph 3a of the Subscription Agreement provides
four conditions that must be met before Schessel’s membership units are deemed issued to him.
While these documents may support the forfeiture of Schessel’s membership interest in DDS due
to non-compliance with the Subscription Agreement, these documents and § 608.4211(5) do not
support Plaintiffs’ position that Schessel could be expelled (for reasons other than compliance
with the Subscription Agreement) and would forfeit the fair market value of 100% of his
membership interest.
Accordingly, the Court concludes that the 2011 Amendment was not done in compliance
38
with paragraph 11.2 of the 2003 Operating Agreement. Therefore, the Court grants Schessel
summary judgment on his declaratory judgment claim. However, the Court notes that a genuine
issue of material fact still exists regarding whether Schessel complied with the conditions set
forth in paragraph 3a of the Subscription Agreement.
IV. Primrose’s Motion for Summary Judgment
Primrose moves for summary judgment on five of the claims asserted against it: (1)
violation of the CFAA, (2) misappropriation of trade secrets, (3) civil theft, (4) tortious
interference, and (5) civil conspiracy.18 Accordingly, the Court will analyze each claim.
A. Computer Fraud and Abuse Act
In Count I, DDS and FSS assert a claim for violation of the CFAA against Schessel and
Primrose. Primrose moves for summary judgment to the extent that the CFAA violations
occurred prior to October 4, 2012—the date that Primrose’s certificate of formation was filed
with the Secretary of State of Delaware.19 Thus, argues Primrose, it cannot be held liable for any
CFAA violations that occurred before it came into existence.
Plaintiffs fail to respond with any case law showing that such liability is possible. As a
result, the Court grants Primrose’s motion for summary judgment on the CFAA claim to the
extent that the CFAA violations occurred prior to October 4, 2012.
18
These claims were also brought against Schessel, and Schessel joins in Primrose’s
arguments as to the claims of (1) misappropriation of trade secrets, (2) civil theft, (3) tortious
interference, and (4) civil conspiracy. (Doc. No. 486, p. 26). Therefore, the Court’s rulings on
those four claims apply to both Schessel and Primrose.
19
Primrose joined in Schessel’s motion for summary judgment as to the CFAA claim, and
the Court’s rulings regarding Schessel’s motion apply to Primrose.
39
B. Misappropriation of Trade Secrets
In Count II, DDS, FSS, and FSS-Corp. assert a misappropriation of trade secrets claim
under Florida’s Uniform Trade Secrets Act (“FUTSA”) against Schessel and Primrose. A trade
secret is defined under FUTSA in the following way:
“Trade secret” means information, including a formula, pattern,
compilation, program, device, method, technique, or process that:
(a)
Derives independent economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use; and
(b)
Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Fla. Stat. § 688.002(4).
Plaintiffs allege that Defendants misappropriated the following trade secrets: (1) their
proprietary software, and (2) their confidential data (which the proprietary software has
“enriched” via a process in which the data is cleansed, mapped, normalized, aliased, classified,
equivalenced, cross-referenced, blinded, aggregated, and commingled) that is stored within their
global catalog within their proprietary software.20 Defendants move for summary judgment,
arguing that: (1) Plaintiffs have not sufficiently identified the trade secrets at issue; and (2)
Defendants did not misappropriate Plaintiffs’ computer code or software functionality. As
explained below, the Court concludes that summary judgment is not warranted on this claim.
Defendants first argue that Plaintiffs have not sufficiently identified the trade secrets at
issue. The Court rejects this argument, because Plaintiffs have identified the following trade
secrets: (1) their proprietary software, and (2) their confidential data that is stored within their
20
Plaintiffs agree that their customers and customer data are not trade secrets.
40
global catalog within their proprietary software. Furthermore, Plaintiffs disclosed their data
normalization and mapping processes to Defendants for their review by producing the software,
source code, and databases that implement these processes. (Doc. No. 469, ¶ 21). Accordingly,
summary judgment is not warranted on this basis.
Next, Defendants argue that the evidence shows that they did not misappropriate
Plaintiffs’ computer code or software functionality. However, the evidence on this issue is
disputed, and as such, summary judgment is not warranted on this basis.
C. Civil Theft
In Count IV, DDS, FSS, and FSS-Corp. assert a civil theft claim relating to Defendants’
alleged theft of Plaintiffs’ trade secrets, pursuant to Florida Statute § 772.11. Defendants move
to dismiss this claim, arguing that: (1) because the misappropriation of trade secrets claim fails,
this theft claim fails; (2) Plaintiffs failed to comply with their required pre-suit notice
obligations; (3) Plaintiffs cannot show that Defendants deprived them of a right to, or a benefit
from, their property; and (4) Plaintiffs cannot show that FSS-Corp. suffered any damages. As
explained below, the Court rejects these arguments.
1. Trade Secrets Claim
First, Defendants argue that they are entitled to summary judgment on the civil theft
claim, because it is based on the theft of trade secrets, and Defendants have shown that
Plaintiffs’ claim for misappropriation of trade secrets fails. However, the Court denied
Defendants’ motion as to the misappropriation of trade secrets claim, and as such, this argument
fails.
41
2. Pre-Suit Notice Requirements
Next, Defendants argue that they are entitled to summary judgment on the civil theft
claim, because Plaintiffs failed to comply with their required pre-suit notice obligations.
Specifically, Florida Statute § 772.11 provides the following:
Before filing an action for damages [for civil theft under § 772.11],
the person claiming injury must make a written demand for $200 or
the treble damage amount of the person liable for damages under this
section. If the person to whom a written demand is made complies
with such demand within 30 days after receipt of the demand, that
person shall be given a written release from further civil liability for
the specific act of theft or exploitation by the person making the
written demand.
Fla. Stat. § 772.11(1).
Defendants contend that Plaintiffs failed to comply with the pre-suit notice requirements
in four ways: (1) Plaintiffs failed to make a written demand on either defendant; (2) to the extent
that the Court finds that a written demand was made, the demand was only made to Schessel; (3)
to the extent that the Court finds that a written demand was made, the demand referred to an
amount stolen—$10 million—that has no basis in fact; and (4) to the extent that the Court finds
that a written demand was made, the demand was made on behalf of Plaintiffs and Dobiesz, yet
Dobiesz is not a plaintiff in this case. As explained below, the Court rejects these arguments.
Defendants first argue that Plaintiffs failed to make a written demand on either defendant.
Instead, they contend that the purported pre-suit demand letter was first produced in discovery a
year after this suit was filed. (Doc. No. 445-9, ¶ 9). The return receipt indicates that the demand
letter was sent via certified mail, but it does not contain a signature confirming delivery. (Doc.
No. 445-11).
The Court accepts Defendants’ contention that Plaintiffs did not strictly comply with the
42
pre-suit notice provision, as the evidence is unclear that the letter was received by Schessel. The
purported pre-suit demand letter is dated November 14, 2012 (two days before the date this
lawsuit was filed), is addressed to Marc Schessel only, and indicates that it was sent in reference
to this lawsuit (specifically naming both defendants). (Doc. No. 445-11).
However, it is undisputed that this letter was produced during discovery and
approximately one year before the third amended complaint (Doc. No. 419) was filed. While
Defendants denied in their answer the allegation that written demand was made (Doc. No. 419,
¶ 65; Doc. No. 449, 450), they did not assert the failure to comply with the pre-suit notice
requirement as an affirmative defense or in their motions to dismiss (Doc. No. 449, 450, 56,
147). Given the specific procedural background in this case, the Court concludes that this failure
to strictly comply with the pre-suit notice requirement was harmless and was waived, and as
such, it does not entitle Defendants to summary judgment on this claim. See Pushko v.
Klebener, 2010 WL 3910228, at *4-5 (11th Cir. Oct. 7, 2010)(affirming rejection of the
defendants’ argument that they were entitled to a directed verdict on the civil theft claim against
them because the plaintiffs did not strictly comply with § 772.11, noting that the defendants
failed to raise the issue as an affirmative defense or move for dismissal on that basis). While the
Court could require Plaintiffs to now send a demand letter to both defendants that strictly
complies with the notice requirements, to do so would accomplish nothing and simply elevate
form over substance given Defendants’ clear notice of the existence of this claim. Instead, the
Court considers the production of the letter during discovery to be sufficient, under the specific
43
facts of this case, to comply with the notice requirement in § 772.11 as to both defendants.21
Finally, the Court rejects Defendants’ contention that the written demand was defective
because it sought $10 million and was made on behalf of Dobiesz. These features do not make
the demand insufficient.
3. Deprivation of a Right, or a Benefit from, the Property
Next, Defendants argue that they are entitled to summary judgment on the civil theft
claim, because Plaintiffs cannot show that Defendants deprived them of a right to, or a benefit
from, their property. Defendants, however, fail to acknowledge that Florida defines theft as
either: (1) depriving someone of a right to the property or a benefit from the property; or (2)
appropriating the property to his own use or to the use of any person not entitled to the use of the
property. Fla. Stat. § 812.014(1). Plaintiffs have shown that a genuine issue of material fact
exists regarding whether Defendants have appropriated Plaintiffs’ trade secrets for their own use.
Accordingly, summary judgment is not warranted on this basis.
4. FSS-Corp.’s Damages
Next, Defendants argue that they are entitled to summary judgment on the civil theft
claim to the extent that it is asserted by FSS-Corp., because Plaintiffs cannot show that FSSCorp. suffered any damages. In response, Plaintiffs simply state that FSS-Corp. owns the
software that was allegedly stolen. However, mere ownership of the stolen property is not
21
As stated by the court in the case of In re Tadlock, 2010 WL 8320065, at *5 (Bankr.
M.D. Fla. Sept. 1, 2010): “[I]t appears that the purpose of the demand requirement is to provide
an opportunity for, and thereby encourage, settlement negotiations prior to the commencement of
litigation. Consequently, it is generally held that plaintiffs who have not complied with the
demand requirement should be allowed to cure the omission, provided the cause of action is not
barred by the statute of limitations.”
44
sufficient to support a civil theft claim for damages; instead, FSS-Corp. must show that it
suffered damages from the theft. See Winters v. Mulholland, 33 So. 3d 54, 57 (Fla. 2d DCA
2010)(reversing civil theft judgment because the plaintiff did not show that he suffered any
damages from the theft). FSS-Corp. has not shown that it has suffered any damages from the
alleged theft, and as such, Defendants are entitled to summary judgment to the extent that FSSCorp. asserts the civil theft claim. This claim remains to the extent that it is asserted by DDS
and FSS.
D. Tortious Interference
In Count V, DDS asserts a tortious interference claim against Schessel and Primrose
regarding the following six DDS customers: (1) Geisinger, (2) FTI, (3) Mt. Sinai, (4)
NorthShore-LIJ, (5) CentraState, and (6) BayCare.22 In order to establish a claim for tortious
interference, DDS must show: (1) the existence of a business relationship; (2) Defendants’
knowledge of the business relationship; (3) Defendants’ intentional and unjustified interference
with the business relationship; and (4) damage to DDS as a result of the interference. See Ethan
Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812, 814 (Fla. 1995)(citation omitted).
Not all interference will support this claim. As explained by one court:
The general rule is that an action for tortious interference will not lie
where a party tortiously interferes with a contract terminable at will.
This is so because when a contract is terminable at will there is only
an expectancy that the relationship will continue. In such a situation,
a competitor has a privilege of interference in order to acquire the
business for himself. If a competitor proves that the interference was
22
Primrose moved for summary judgment to the extent that this claim was also based on a
seventh customer, ROI. However, Plaintiffs did not respond to Primrose’s arguments that it did
not tortiously interfere with ROI, and as a result, the Court presumes that Plaintiffs’ tortious
interference claim does not implicate ROI.
45
lawful competition he will not be found to have committed the tort.
Greenberg v. Mount Sinai Medical Center of Greater Miami, Inc., 629 So. 2d 252, 255 (Fla. 3d
DCA 1994)(internal citations omitted).
In order to establish the competition privilege, Defendants must show that they did not
employ improper means to interfere with the business relationships between DDS and its
customers identified above. See BlueSky Greenland Environmental Solutions, LLC v. 21st
Century Planet Funds, LLC, 985 F. Supp.2d 1356, 1367 (S.D. Fla. 2013). Ultimately, the
determination of whether the interference was done by improper means “requires a
commonsense consideration of whether the conduct was ‘sanctioned by the rules of the game’
and what is ‘right and just’ under the circumstances.” Id. (citations omitted). With this
framework in mind, the Court analyzes DDS’s tortious interference claim with respect to each
customer identified above.
1. Geisinger
DDS contends that Defendants tortiously interfered with its business relationship with
Geisinger, arguing that Defendants caused Geisinger to terminate its contract with DDS.
Defendants respond that this claim fails because as of the April 2014 deposition of Geisinger’s
corporate representative, Geisinger still had a month-to-month contract with DDS and had been
paying DDS’s monthly invoices for the same amount as before the alleged interference. (Doc.
No. 445-19, depo. p. 214). Thus, DDS cannot show that its has been damaged.
DDS argues that Geisinger contracted with Primrose to pay less for the same services that
DDS provided, and Geisinger intends to drop DDS once it was fully using Primrose’s software.
46
However, there is no evidence that Geisinger ever ended its relationship with DDS.
Furthermore, the hearsay evidence that DDS relies on for its contention that Geisinger intends to
end its relationship with DDS is an email from October of 2012, in which Geisinger states that it
intended to go “full Primrose in Dec.” (Doc. No. 475-7). To the extent that such email
evidenced Geisinger’s intent to end its relationship with DDS in December of 2012, there is no
evidence before the Court that such occurred. Accordingly, the Court grants Primrose’s motion
for summary judgment on the tortious interference claim against both defendants to the extent
that it relates to Geisinger.
2. FTI
Next, DDS contends that Defendants tortiously interfered with its business relationship
with FTI. Defendants move for summary judgment, arguing that: (1) there was no business
relationship between DDS and FTI, and (2) Primrose could not have committed tortious
interference prior to October 4, 2012—the date it came into existence.
DDS responds by arguing that a business relationship did, in fact, exist and pointing to a
consulting agreement between DDS and FTI. (Doc. No. 475-11). Additionally, DDS points to a
November 2012 license agreement between Primrose and FTI .
The parties do not provide many facts regarding this claim, such as when the alleged
tortious interference occurred and whether the consulting agreement between DDS and FTI was
still in effect at that time. Accordingly, the Court concludes that genuine issues of material fact
that exist that preclude summary judgment on this claim. As such, the Court denies Primrose’s
motion for summary judgment on the tortious interference claim to the extent that it relates to
FTI.
47
3. Mt. Sinai
Next, DDS contends that Defendants tortiously interfered with its business relationship
with Mt. Sinai. Primrose argues that to the extent that DDS contends that the tortious
interference occurred in June of 2012, it could not be held liable because Primrose did not exist
at that time. In response, DDS concedes that Primrose is not liable for the alleged interference
by Schessel with DDS’s relationship with Mt. Sinai. Accordingly, the Court grants Primrose’s
motion for summary judgment on the tortious interference claim to the extent that it relates to
Mt. Sinai. This claim remains as to Schessel’s alleged tortious interference with Mt. Sinai.
4. NorthShore-LIJ
Next, DDS contends that Defendants tortiously interfered with its business relationship
with NorthShore-LIJ by improperly copying DDS’s software and then using the improperly
copied software to solicit NorthShore-LIJ and gain it as a customer at the expense of DDS.
Genuine issues of material fact exist regarding the origin of Primrose’s software. Accordingly,
the Court denies Primrose’s motion for summary judgment on the tortious interference claim to
the extent that it relates to NorthShore-LIJ.
5. CentraState
Next, DDS contends that Defendants tortiously interfered with its business relationship
with CentraState. Specifically, DDS contends that CentraState intended to end its relationship
with DDS once it could obtain the same services from Primrose.
However, the CentraState corporate representative stated in her deposition that
CentraState was having a “huge” problem with DDS’s product and that CentraState “was never
48
even offered assistance from DDS.” (Do. No. 445-16, depo. p. 45). When CentraState’s
contract with DDS was set to expire in April of 2014, CentraState did not renew its contract.
(Doc. No. 445-16, depo. p. 309, 316-17). Instead, CentraState requested a month-to-month
contract with DDS, to which DDS did not respond, and as a result, CentraState did not renew its
contract with DDS. (Doc. No. 445-16, depo. p. 309, 313-14).
While the evidence reveals that CentraState chose Primrose after its contract ended with
DDS, there is no evidence that CentraState would have continued its relationship with DDS in
the absence of Primrose. Accordingly, the Court grants Primrose’s motion for summary
judgment on the tortious interference claim against both defendants to the extent that it relates to
CentraState.
6. BayCare
Next, DDS contends that Defendants tortiously interfered with its business relationship
with BayCare by improperly copying DDS’s software and then using the improperly copied
software to solicit BayCare and gain it as a customer at the expense of DDS. Genuine issues of
material fact exist regarding the origin of Primrose’s software. Accordingly, the Court denies
Primrose’s motion for summary judgment on the tortious interference claim to the extent that it
relates to BayCare.
E. Civil Conspiracy
In Count VI, DDS asserts a civil conspiracy claim against Schessel and Primrose for their
alleged tortious interference with the DDS customers identified above. Primrose argues that the
conspiracy claim fails to the extent that the underlying tortious interference claim fails. The
Court agrees. As such, the Court grants Defendants summary judgment on the civil conspiracy
49
claim to the extent that it relates to the tortious interference with Geisinger and CentraState.
Additionally, since the Court granted Primrose summary judgment on the tortious
interference claim to the extent that it relates to Mt. Sinai (because Primrose did not exist at the
time of the alleged tortious interference), Primrose could not have conspired with Schessel to
tortiously interfere for the same reason. As such, the Court grants both defendants summary
judgment on the civil conspiracy claim to the extent that it relates to the tortious interference
with Mt. Sinai.
V. Plaintiffs’ Motion for Summary Judgment
Plaintiffs move for summary judgment on several of Defendants’ affirmative defenses to
Plaintiffs’ claims, as well as on most of Defendants’ counterclaims. Accordingly, the Court
addresses Plaintiffs’ arguments below.
A. Affirmative Defenses
Plaintiffs move for summary judgment on ten of Defendants’ affirmative defenses to
Plaintiffs’ claims.23 As such, the Court analyzes each of the challenged affirmatives defenses.
1. Failure to State a Claim
Plaintiffs challenge Defendants’ first affirmative defense that the complaint fails to state
a claim. While Plaintiffs are correct that this is a denial rather than a true affirmative defense,
the assertion of this defense (which no longer has any bearing in this case) has not prejudiced
Plaintiffs, and the Court questions why Plaintiffs would waste this Court’s limited judicial
resources to point out something that does not affect the outcome of this case.
23
The affirmative defenses are contained in documents 449 and 450.
50
2. Schessel’s Alleged Ownership of DDS
In their second affirmative defense, Defendants assert that Schessel has been the owner
of DDS, and as an owner, he had the right and permission to access DDS’s computers, software,
and data. Plaintiffs contend that this affirmative defense fails, because FSS is the manager of
DDS, and Florida law provides that any matter relating to the business of the limited liability
company may be exclusively decided by the manager unless the operating agreement or articles
of organization provide otherwise. Fla. Stat. § 608.422(4).
This affirmative defense relates to Plaintiffs’ CFAA claim. Plaintiffs, however, have
failed to cite any case law that supports their contention that an owner of a limited liability
company does not have the right and permission, via their status as an owner, to access the
limited liability company’s computers such that their access can be considered a violation of the
CFAA. If Plaintiffs find such case law, they should include it in their pretrial statement;
otherwise, the Court denies Plaintiffs’ motion for summary judgment on this affirmative defense.
3. Mitigation of Damages
In their twelfth affirmative defense, Defendants allege that Plaintiffs’ claims are barred
by their failure to mitigate damages and by the doctrine of avoidable consequences. Plaintiffs
argue that summary judgment should be granted as to this affirmative defense, because
Defendants do not identify any actions that Plaintiffs could have taken to avoid the damages that
they suffered. In response, Defendants identify actions that Plaintiffs could have taken. As
such, the Court concludes that summary judgment on this affirmative defense is not warranted.
4. Estoppel
In their nineteenth affirmative defense, Defendants allege that Plaintiffs’ claims are
51
barred by estoppel. Plaintiffs argue that summary judgment should be granted as to this
affirmative defense, because Defendants do not identify any representations that Defendants
relied on to their detriment. In response, Defendants identify the representations that they relied
on, which they contend support estoppel. As such, the Court concludes that summary judgment
on this affirmative defense is not warranted.24
5. Prior Material Breach
In their twentieth affirmative defense, Defendants allege that Plaintiffs’ breach of
contract claims are barred by their own prior material breaches. Plaintiffs argue that summary
judgment should be granted as to this affirmative defense, because there is no evidence of a prior
breach by Plaintiffs. In response, Defendants point to evidence that Plaintiffs materially
breached the 2003 Employment Agreement by failing to pay Schessel the required $200,000
annual salary and reimburse him for all of his expenses in 2003.25 (Doc. No. 472-4, ¶ 10). As
such, the Court concludes that summary judgment on this affirmative defense is not warranted.
6. Hindrance of Schessel’s Performance
In their twenty-first affirmative defense, Defendants allege that Plaintiffs’ breach of
contract claims are barred by their hindrance of Schessel’s performance, by refusing to
reimburse his travel expenses and cutting off his access to DDS’s computers. The breach of
contract claims asserted against Schessel relate to his alleged breach of: (1) paragraph 9.1 of the
24
However, to the extent that Defendants’ estoppel affirmative defense is based, in part,
on the theory that the two-year term set forth in the Employment Agreement estopps Plaintiffs
from pursuing their breach of employment agreement claim, the Court rejects this argument.
25
Furthermore, Defendants allege that this breach was also a breach of the RCA, which
provided that Schessel’s covenants were given in consideration of the benefits of employment
with DDS.
52
Employment Agreement (i.e., the work-made-for-hire provision); (2) the RCA by soliciting
employees and using DDS’s confidential information; and (3) the promissory notes by failing to
repay them.
Plaintiffs argue that summary judgment should be granted as to this affirmative defense,
because even assuming that Plaintiffs refused to reimburse Schessel’s travel expenses and cut off
his access to DDS’s computers, such would not have affected Schessel’s ability to perform under
those contracts. The Court agrees with Plaintiffs and concludes that summary judgment is
warranted on this affirmative defense.
7. Agreements Barring Fraud Claim
In their twenty-fifth and twenty-sixth affirmative defenses, Defendants allege that
Plaintiffs’ fraud claim is barred by the language in the Operating Agreement and Subscription
Agreement (specifically, the merger and integration clauses). Plaintiffs argue that summary
judgment should be granted as to these affirmative defenses, because these agreements are not
implicated by the fraud claim. Defendants respond that the agreements represented the parties’
full understanding of all relevant facts, and the failure to include an assertion regarding
Schessel’s background bars Plaintiffs’ fraud claim.
The Court rejects Schessel’s argument and agrees with Plaintiffs. The fraud claim
remains to the extent that Schessel failed to disclose his involvement with the alleged fraudulent
activity while employed by Continuum when specifically asked by Dobiesz whether Schessel
had been involved in anything that could embarrass or adversely affect the integrity of DDS.
The merger and integration clauses contained within the Operating Agreement and Subscription
Agreement do not undermine Plaintiffs’ remaining fraud claim. Accordingly, the Court
53
concludes that summary judgment is warranted on these two affirmative defenses.
8. Statute of Limitations
In their twenty-seventh affirmative defense, Defendants allege that the claim for breach
of paragraph 9.1 of the 2003 Employment Agreement (i.e., the work-made-for-hire provision) is
time-barred. The Court has already rejected this argument, and as a result, the Court agrees with
Plaintiffs that summary judgment is warranted on this affirmative defense.
9. Estoppel
In their twenty-ninth affirmative defense, Defendants allege that DDS is estopped from
enforcing paragraph 9.1 of the 2003 Employment Agreement (i.e., the work-made-for-hire
provision). Plaintiffs move for summary judgment on this affirmative defense, arguing that
Defendants have not shown that estoppel is warranted with respect to their claim for breach of
paragraph 9.1 of the 2003 Employment Agreement. Defendants’ response is vague and
completely lacking of any explanation. As a result, the Court concludes that summary judgment
is warranted on this affirmative defense.
B. Counterclaims
Plaintiffs move for summary judgment on most of Defendants’ counterclaims. As such,
the Court will analyze each of the challenged counterclaims.
1. Tortious Interference
In Count I of their counterclaims, Primrose asserts a tortious interference claim against
DDS and FSS regarding FTI. In support of this count, Defendants argue that Plaintiffs interfered
with Primrose’s relationship with FTI (who was in talks with Primrose to form a new company
together) when Dobiesz interfered with, and successfully quashed, their deal. To do so, Dobiesz
54
allegedly told FTI that Schessel was subject to a covenant not to compete. However, this Court
has held in a prior order on Defendants’ motion to dismiss that the covenant not to compete did
not bar Schessel from competing with DDS. (Doc. No. 56, p. 12). As a result, Defendants
contend that Plaintiffs tortiously interfered with Primrose’s relationship with FTI by lying about
Schessel being subject to a non-compete agreement.
Plaintiffs move for summary judgment on this claim, arguing that it is not tortious
interference to engage in competition. The Court agrees that the competition privilege allows
competition not to be characterized as tortious interference as long as Plaintiffs did not employ
improper means to interfere with the business relationship between Primrose and FTI. See
BlueSky, 985 F. Supp.2d at 1367 (S.D. Fla. 2013). In this case, Defendants argue that Plaintiffs
used improper means by lying about the non-compete agreement, given that the Court has held
that it did not bar Schessel from competing with DDS. The flaw in Defendants’ argument is that
there is no evidence that Plaintiffs and/or Dobiesz knew that the statement that Schessel was
subject to a non-compete agreement was false when the statement was made to FTI. In fact,
Schessel did not even appear to notice the basis for the Court’s conclusion that the covenant not
to compete did not bar Schessel from competing with DDS. Instead, the Court brought the poor
drafting of the non-competition provision to the parties’ attention by stating:
Plaintiffs contend that Schessel violated the restrictive covenants by
improperly competing with DDS. Defendants argue that this portion
of the claim must be dismissed, and the Court agrees, but for a
different reason than that suggested by Defendants. The provision at
issue states that for a period of 36 months after termination of
Schessel’s employment with DDS, “neither [Schessel] or any affiliate
of [Schessel] . . . will not . . . directly or indirectly, own, manage,
operate, control, invest or acquire an interest in, or otherwise engage
or participate in . . . any business which competes with [DDS’s
business].” (Doc. No. 28, Ex. D & E). Because this provision contains
55
a double negative—stating that neither Schessel or Schessel’s
affiliate will not compete with DDS—this provision does not prohibit
Schessel from competing with DDS. Therefore, the Court dismisses
DDS’s claim in Count III to the extent that it is based on Plaintiffs’
contention that Schessel improperly competed with DDS.
(Doc. No. 56, p. 12).
Thus, it appears that prior to the Court’s order, neither party realized that the covenant
not to compete was drafted in such a way as to not prevent Schessel from competing with DDS.
As a result, there is no basis for concluding that Dobiesz intentionally lied to FTI about Schessel
being subject to a non-competition agreement. Therefore, there is no evidence that Plaintiffs
employed improper means to compete with Primrose, and summary judgment for Plaintiffs is
warranted on the tortious interference counterclaim.
2. Breach of Loyalty
In Count IV of their counterclaims, Schessel asserts a breach of loyalty claim, pursuant to
Florida Statute § 608.4225, against FSS (as the manager of DDS). Specifically, Defendants
allege that FSS breached its duty of loyalty by: (1) taking money and profits that DDS owed to
Schessel and diverting it to Dobiesz; (2) causing DDS to employ Dobiesz’s family members (his
wife and son) and paying them more than the value of their services; (3) causing DDS to enter
into contracts with entities owned directly or indirectly by Dobiesz and paying those entities
money without receiving reasonably equivalent value in return; (4) failing to act in good faith
and to deal fairly with Schessel; and (5) purporting to amend the Operating Agreement without
Schessel’s consent and then expelling Schessel as an owner without a legal basis to do so.
Plaintiffs move for summary judgment on this claim, arguing: (1) FSS did not owe a duty
of loyalty to Schessel, because he was never a member of DDS due to his failure to fulfill the
56
conditions set forth in the Subscription Agreement; and (2) Schessel failed to show that FSS
breached a duty of loyalty by: (a) diverting money to Dobiesz; (b) employing Dobiesz’s family
members; (c) entering into contracts with entities owned by Dobiesz; and (d) failing to act in
good faith and to deal fairly with Schessel. Accordingly, the Court will address each argument.
a. Schessel’s Membership in DDS
Plaintiffs move for summary judgment on the breach of loyalty claim, arguing that FSS
did not owe Schessel such a duty of loyalty, because Schessel never became a member of DDS
due to his failure to fulfill the conditions set forth in the Subscription Agreement. The
Subscription Agreement provides the following conditions on Schessel’s purchase of 1/3 of the
membership units in DDS:
The consideration which must be fully and finally paid, performed
and delivered by [Schessel] in order to receive the [DDS
Membership] Units (prior to which the Units shall be deemed not
issued) shall be the following:
1.
Receipt by [FSS] of all Fees and reimbursements of costs
under the License Agreement with [DDS].
2.
Payment of approximately $85,000 of [FSS’s] start up
expenses (to be paid from distributions to [Schessel]).
3.
Assignment to [DDS] of all contracts and contract
opportunities related to the business of [DDS] by [Schessel]
and his affiliates (including, specifically but not exclusively
Innovative Supply Strategies, Inc.).
4.
Operations of [DDS] for two years within the Budgets
attached as Exhibit B to this Agreement.
(Doc. No. 419-2, p. 3).
Plaintiffs contend that the evidence shows that Schessel did not fulfill these conditions.
However, as explained below, the Court concludes that a genuine issue of material fact exists as
to whether Schessel fulfilled the conditions set forth in the Subscription Agreement.
Plaintiffs contend that Schessel did not meet the first requirement that FSS receive the
57
required fees and reimbursements. However, this is a fact in dispute.
Next, Plaintiffs contend that Schessel did not meet the second requirement that he pay the
start-up expenses from his distributions. However, Schessel contends that DDS made a profit of
more than $900,000 in 2003, which provided the necessary funds to comply with this
requirement. (Doc. No. 472-10, ¶ 6, 7).
Next, Plaintiffs contend that Schessel did not meet the third requirement that he assign all
contracts and contract opportunities to DDS, because he did not assign certain intellectual
property rights to DDS. However, the Subscription Agreement provides that there is an “Exhibit
A” attached to the Subscription Agreement that lists all of the “contracts, customers and
contract/customer opportunities” relating to the healthcare/supply chain material management
business of DDS, which are “unconditionally and fully assigned” to DDS by Schessel and ISS.
(Doc. No. 419-2, p. 2). Exhibit A to the Subscription Agreement is titled “Budgets of the
Company.” Additionally, there is an Exhibit B to the Subscription Agreement, which is titled
“Contracts, Customers and Contract/Customer Opportunities,” but that exhibit is blank beyond
its title. The Court rejects Plaintiffs’ argument that intellectual property rights are contracts and
contract opportunities contemplated in this requirement. Instead, that requirement contemplates
the assignment of customer contracts and contract opportunities that Schessel and ISS had. As
such, the Court concludes that there is no evidence that Schessel did not comply with this third
requirement.
Next, Plaintiffs contend that Schessel did not meet the fourth requirement of operating
within the budgets. However, there is a dispute regarding whether any budgets were even
attached to the Subscription Agreement.
58
Accordingly, genuine issues of material fact exist as to whether Schessel fulfilled the
conditions set forth in the Subscription Agreement. As such, summary judgment is not
warranted on this basis.
b. Alleged Breaches
Next, Plaintiffs move for summary judgment arguing that Schessel fails to show that
FSS: (1) diverted money to Dobiesz; (2) employed Dobiesz’s wife and son and paid them more
than the value of the services that they provided; and (3) entered into contracts with entities
owned by Dobiesz and paid those entities money without receiving reasonably equivalent value
in return. The Court finds that genuine issues of material fact exist with regard to this alleged
conduct.
Additionally, Plaintiffs move for summary judgment on the breach of loyalty claim,
arguing that the failure to act in good faith and to deal fairly with Schessel is not a breach of the
duty of loyalty under Florida Statute § 608.4225. Specifically, Plaintiffs argue that § 608.4225
does not require a manager to act in good faith and to deal fairly with its members. The Court
rejects this argument, because § 608.4225(1)(c) provides that each manager “shall discharge the
duties to the limited liability company and its members under this chapter or under the articles of
organization or operating agreement and exercise any rights consistent with the obligation of
good faith and fair dealing.” Accordingly, the Court concludes that summary judgment on the
breach of loyalty counterclaim is not warranted.
3. The 2011 Amendment
In Count V of the counterclaims, Schessel asserts a claim for declaratory relief against
DDS and FSS regarding the validity of the purported 2011 Amendment to the DDS Operating
59
Agreement. The Court has already granted Schessel’s motion for summary judgment that this
amendment was not done in compliance with paragraph 11.2 of the 2003 Operating Agreement.
As such, Plaintiffs are not entitled to summary judgment on the declaratory judgment
counterclaim.
Because the Court has found that the 2011 Amendment was not properly done, there can
be no breach of the 2011 Amendment (as claimed in Count VI—the alternative counterclaim for
breach of the 2011 Amendment). As such, Plaintiffs are entitled to summary judgment that there
was no breach of the purported 2011 Amendment.
4. Breach of Paragraph 4.5 of the Operating Agreement
In Count VII of the counterclaims, Schessel asserts a claim against FSS for breach of
paragraph 4.5 of the 2003 Operating Agreement. Paragraph 4.5 provides the standards for FSS’s
management of DDS:
The Manager [FSS] shall perform . . . its duties in good faith, in a
manner . . . it reasonably believes to be in the best interest of [DDS]
and with such care as an ordinary prudent person in a similar position
would use under similar circumstances. . . . The Manager shall not be
liable to . . . any Member for any loss or damage sustained by . . . any
Member, unless the loss or damage shall have been the result of the
gross negligence or willful misconduct of such Manager.
(Doc. No. 419-3, p. 4).
Schessel alleges that FSS breached this provision by failing to manage DDS’s money in
good faith and with such care as an ordinary prudent person in a similar position would use
under similar circumstances. Plaintiffs move for summary judgment on this claim, arguing that
Schessel never became a member of DDS due to his failure to fulfill the conditions set forth in
the Subscription Agreement. However, as previously stated, the Court concludes that whether
60
Schessel became a member of DDS is a disputed issue of fact, and as such, summary judgment
on this counterclaim is not warranted.
VI. Claims Remaining for Trial
Based on the rulings above, the following claims and counterclaims remain for trial. The
following nine claims of Plaintiffs remain for trial:
C
Violation of the CFAA (Count I) by FSS and DDS: This claim remains against
Schessel to the extent it is based on: (i) his May 9th and 30th access; (ii) his posttermination use of the laptop; and (iii) his deletion of emails. This claim also
remains against Primrose to the extent that it is based on: (i) Schessel’s posttermination use of the laptop that occurred on or after October 4, 2012; and (ii)
Schessel’s deletion of emails that occurred on or after October 4, 2012.
C
Misappropriation of trade secrets (Count II) by DDS, FSS, and FSS-Corp. against
Schessel and Primrose.
C
Enforcement of the RCA (Count III) by DDS against Schessel for: (i) enticing,
inducing, or influencing Todd Bennett to leave DDS’s employment; and (ii)
disclosing and/or exploiting the confidential information of DDS.
C
Civil theft (Count IV) by DDS and FSS against Schessel and Primrose.
C
Tortious Interference (Count V) by DDS: This claim remains against Schessel to
the extent it is based on interference with FTI, Mt. Sinai, NorthShore-LIJ, and
BayCare. This claim also remains against Primrose to the extent that it is based
on interference with FTI, NorthShore-LIJ, and BayCare.
61
C
Civil conspiracy (Count VI) by DDS against both defendants for interference with
FTI, NorthShore-LIJ, and BayCare.
C
Fraud (Count VIII) by DDS against Schessel regarding his alleged failure to
disclose his involvement with the fraudulent activity while employed at
Continuum, as well as the tax evasion charge and guilty plea, when asked by
Dobiesz on five occasions whether he had ever done anything that could
embarrass or reflect adversely on the integrity of DDS.
C
Failure to repay the promissory notes (Count X) by DDS against Schessel.26
Additionally, the following three counterclaims of Schessel remain for trial:
C
Breach of loyalty (Count IV) against FSS.
C
Breach of paragraph 4.5 of the 2003 Operating Agreement (Count VII) against
FSS.
C
Unpaid wages claim (Count IX) against DDS.27
VII. Conclusion
Accordingly, it is ORDERED AND ADJUDGED that:
(1)
Defendant Schessel’s Motion for Summary Judgment (Doc. No. 486) is
GRANTED IN PART AND DENIED IN PART. The motion is GRANTED as
follows:
(a)
Schessel is granted summary judgment on Plaintiffs’ CFAA claim (Count
I) to the extent that it is based on: (i) his download on May 7th and 8th;
26
No one moved for summary judgment on this claim.
27
No one moved for summary judgment on this claim.
62
and (ii) his alleged access using Maneri’s credentials on January 23rd.
(b)
Schessel is granted summary judgment on Plaintiffs’ claim to enforce the
RCA (Count III) to the extent it is based on the contention that Schessel
attempted to entice, induce, or influence Decker and Croy to leave DDS’s
employment.
(c)
Schessel is granted summary judgment on Plaintiffs’ breach of fiduciary
duty claim (Count VII).
(d)
Schessel is granted summary judgment on Plaintiffs’ fraud claim (Count
VIII) to the extent it is based on the contention that Schessel failed to
disclose that he was fired by Continuum for his role in the fraudulent
activity.
(e)
Schessel is granted summary judgment on his declaratory judgment
counterclaim (Count V) regarding the invalidity of the 2011 Amendment.
Schessel’s motion for summary judgment is DENIED as follows:
(a)
The Court denies Schessel’s motion for summary judgment on Plaintiffs’
CFAA claim (Count I) to the extent that it is based on: (i) his May 9th and
30th access; (ii) his post-termination use of the laptop; and (iii) his
deletion of emails.
(b)
The Court denies Schessel’s motion for summary judgment on Plaintiffs’
claim to enforce the RCA (Count III) to the extent it is based on the
contention that: (i) Schessel enticed, induced, or influenced Todd Bennett
to leave DDS’s employment; and (ii) Schessel disclosed and/or exploited
63
the confidential information of DDS.
(c)
The Court denies Schessel’s motion for summary judgment on Plaintiffs’
fraud claim (Count VIII) to the extent that it is based on the contention
that Schessel failed to disclose his involvement with the fraudulent
activity while employed at Continuum, as well as the tax evasion charge
and guilty plea, when asked by Dobiesz on five occasions whether he had
ever done anything that could embarrass or reflect adversely on the
integrity of DDS.
(d)
The Court denies Schessel’s motion for summary judgment as to the claim
that he breached the work made for hire provision contained in paragraph
9.1 of the Employment Agreement (Count IX).
(2)
Defendant Primrose Solutions’ Motion for Summary Judgment (Doc. No. 487) is
GRANTED IN PART AND DENIED IN PART. The motion is GRANTED as
follows:
(a)
Primrose is granted summary judgment on Plaintiffs’ CFAA claim (Count
I) to the extent that it is based on any CFAA violations that occurred prior
to October 4, 2012.
(b)
Both defendants are granted summary judgment on Plaintiffs’ civil theft
claim (Count IV) to the extent that the claim is asserted by FSS-Corp.
(c)
Both defendants are granted summary judgment on Plaintiffs’ tortious
interference claim (Count V) to the extent that it relates to Geisinger and
CentraState. Additionally, the Court grants summary judgment to
64
Primrose to the extent that Plaintiffs’ tortious interference claim relates to
Mt. Sinai.
(d)
Both defendants are granted summary judgment on Plaintiffs’ civil
conspiracy claim (Count VI) to the extent that it relates to Geisinger,
CentraState, and Mt. Sinai.
Primrose’s motion for summary judgment is DENIED as follows:
(a)
Plaintiffs’ CFAA claim (Count I) remains against Primrose for any CFAA
violations that occurred on or after October 4, 2012.
(b)
The Court denies Primrose’s motion for summary judgment as to
Plaintiffs’ misappropriation of trade secretes claim against both
defendants (Count II).
(c)
The Court denies Primrose’s motion for summary judgment as to
Plaintiffs’ civil theft claim against both defendants (Count IV) to the
extent that the claim is asserted by DDS and FSS.
(d)
The Court denies Primrose’s motion for summary judgment as to
Plaintiffs’ tortious interference claim against both defendants (Count V) to
the extent that it relates to FTI, NorthShore-LIJ, and BayCare.
Additionally, Plaintiffs’ tortious interference claim, as it relates to Mt.
Sinai, remains against Schessel.
(e)
The Court denies Primrose’s motion for summary judgment as to
Plaintiffs’ civil conspiracy claim against both defendants (Count VI) to
the extent that it relates to FTI, NorthShore-LIJ, and BayCare.
65
(3)
Plaintiffs’ Motion for Partial Summary Judgment (Doc. No. 441) is GRANTED
IN PART AND DENIED IN PART. The motion is GRANTED as follows:
(a)
Plaintiffs are granted summary judgment on Defendants’ twenty-first,
twenty-fifth, twenty-sixth, twenty-seventh, and twenty-ninth affirmative
defenses. Additionally, the Court grants Plaintiffs summary judgment on
the nineteenth affirmative defense to the extent that it is based on the
theory that the two-year term set forth in the Employment Agreement
estopps Plaintiffs from pursuing their breach of employment agreement
claim.
(b)
Plaintiffs are granted summary judgment on Primrose’s tortious
interference counterclaim (Count I).
(c)
Plaintiffs are granted summary judgment on Defendants’ defamation
counterclaim (Count II).
(d)
Plaintiffs are granted summary judgment on Defendants’ alternative
counterclaim for breach of the 2011 Amendment to the Operating
Agreement (Count VI).
Plaintiffs’ motion for summary judgment is DENIED as follows:
(a)
The Court denies Plaintiffs’ motion for summary judgment as to
Defendants first, second, twelfth, and twentieth affirmative defenses. The
Court also denies Plaintiffs’ motion with respect to the nineteenth
affirmative defense to the extent it was not granted above.
(b)
The Court denies Plaintiffs’ motion for summary judgment as to the
66
breach of loyalty claim (Count IV).
(c)
The Court denies Plaintiffs’ motion for summary judgment as to the
counterclaim for declaratory relief regarding the purported 2011
Amendment to the DDS Operating Agreement (Count V).
(d)
The Court denies Plaintiffs’ motion for summary judgment as to the
counterclaim for breach of paragraph 4.5 of the 2003 Operating
Agreement (Count VII).
DONE AND ORDERED at Tampa, Florida, this 1st day of December, 2014.
Copies to:
Counsel of Record
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