iGambit Inc. v. Digi-Data Corporation
Filing
31
MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 12/13/13. (mps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IGAMBIT INC.,
:
Plaintiff,
:
v.
:
DIGI-DATA CORPORATION,
:
Defendant.
Civil Action No. GLR-12-2906
:
MEMORANDUM OPINION
THIS MATTER is before the Court on Plaintiff’s, iGambit
Inc. (“iGambit”), Motion for Summary Judgment.
(ECF No. 23).
The issues have been fully briefed and no hearing is necessary.
See Local Rule 105.6 (D.Md. 2011).
For the reasons that follow,
iGambit’s Motion for Summary Judgment will be granted.
I. BACKGROUND1
On February 23, 2006, iGambit and the Defendant, Digi-Data
Corporation
(“Digi-Data”),
entered
into
an
Asset
Purchase
Agreement governing the sale of iGambit’s business assets to
Digi-Data (the “Agreement”).
Pursuant to the Agreement, Digi-
Data agreed to pay certain ongoing commissions to iGambit in
connection
with
agreed
jointly
1
to
the
purchase
and
of
severally
iGambit’s
indemnify
assets.
and
hold
iGambit
harmless
Unless otherwise noted, the following facts are taken from
the Complaint and the parties’ briefings on the instant motion, and
are viewed in the light most favorable to the nonmoving party.
Digi-Data in respect of “any damage or loss resulting from any
misrepresentation,
breach
of
warranty
or
breach
fulfillment of any agreement or covenant . . . .”
of
non-
(Compl.
1 [“Asset Purchase Agreement”], at 35, ECF No. 1-2).
Ex.
iGambit
represented and warranted that the intellectual property sold to
Digi-Data
(1)owned
“consists
by
rightfully
the
used
solely
Seller;
by
the
of
(2)
Seller
items
in
the
and
rights
public
pursuant
to
that
domain;
a
valid
are:
or
(3)
license,
sublicense, consent or other similar written agreement . . . .”
(Asset Purchase Agreement at 23).
that
it
“has
not
infringed
iGambit further warranted
upon
or
misappropriated
any
Intellectual Property Rights or personal right of any person
anywhere in the world.”
(Id.).
iGambit agreed that Digi-Data
shall have the right to set off against any payment
otherwise due to [it] the amount of loss, liability or
damages (including reasonable attorneys’ fees and
expert fees) sustained by Purchaser due to the breach
. . . of any representation or warranty or other
provision contained in [the] Agreement . . . .
(Id. at 10-11).
On February 22, 2012, iGambit issued a statement to DigiData identifying commissions payable to iGambit in the amount of
$820,590.
The account statement was signed by a representative
of Digi-Data and returned to iGambit.
In a letter dated April
24, 2012, Digi-Data acknowledged unpaid commissions payable to
iGambit
in
the
amount
of
$645,590.
2
Thereafter,
Digi-Data
submitted partial payments to iGambit in the amounts of $50,000
and
$25,000,
but
subsequently
failed
to
pay
the
remaining
balance of $570,590.
On April 30, 2012, a third party, Titanide Ventures, LLC
(“Titanide”), filed suit against Verizon Online, LLC (“Verizon”)
alleging patent infringement (the “Verizon Litigation”).2
complaint,
Storage,
Titanide
a
product
Titanide’s patents.
to
iGambit’s
asserted
that
sold
Digi-Data
by
Verizon
to
Online
In its
Backup
Verizon,
and
infringed
The allegedly infringing product is subject
indemnity
obligations
under
the
Agreement.
By
letter dated July 20, 2012, Digi-Data provided notice to iGambit
of its indemnity obligations under the Agreement and of DigiData’s intent to set off monies due from iGambit against any
sums due under the Agreement.
On October 1, 2012, iGambit filed this action against DigiData.
(ECF
No.
1).
In
its
three-count
Complaint,
iGambit
alleges Breach of Contract (Count I), Account Stated (Count II),
and Unjust Enrichment (Count III) concerning Digi-Data’s failure
to pay monies due to it pursuant to the Agreement.
On December
3, 2012, Digi-Data filed an Answer and Counterclaim alleging
Breach of Contract and seeking to invoke its right to set-off
payment to iGambit in an amount equal to iGambit’s indemnity
2
On April 4, 2013, the Verizon Litigation was dismissed
with prejudice.
(Pl.’s Mot. Summ. J. Ex. 4 [“Order of
Dismissal”], ECF No. 23-7).
3
obligation.
(ECF No. 9).
On May 24, 2013, iGambit moved for
summary judgment as to each count of its Complaint.
Digi-Data
filed a Response in opposition (ECF No. 26), and iGambit filed a
Reply (ECF No. 30).
II. DISCUSSION
A.
Summary Judgment
Under Federal Rule of Civil Procedure 56, the Court must
grant summary judgment if the moving party demonstrates that
there is no genuine issue as to any material fact, and that the
moving
party
is
entitled
to
judgment
as
a
matter
of
law.
Fed.R.Civ.P. 56(a).
In reviewing a motion for summary judgment, the Court views
the facts in a light most favorable to the non-moving party.
Anderson
v.
Liberty
Lobby,
Inc.,
477
U.S.
242,
255
(1986)
(citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970)).
Once
a
motion
for
summary
judgment
is
properly
made
and
supported, the opposing party has the burden of showing that a
genuine dispute exists.
Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 586-87 (1986).
“[T]he mere existence
of some alleged factual dispute between the parties will not
defeat
an
otherwise
properly
supported
motion
for
summary
judgment; the requirement is that there be no genuine issue of
material fact.”
Anderson, 477 U.S. at 247-48.
4
A “material fact” is a fact that might affect the outcome
of a party’s case.
Id. at 248; see also JKC Holding Co. v.
Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001)
(citing Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir.
2001)).
Whether
a
fact
is
considered
to
be
“material”
is
determined by the substantive law, and “[o]nly disputes over
facts
that
governing
judgment.”
might
law
affect
will
the
properly
outcome
of
preclude
the
the
suit
entry
under
of
the
summary
Anderson, 477 U.S. at 248; Hooven-Lewis, 249 F.3d at
265.
A “genuine” issue concerning a “material” fact arises when
the evidence is sufficient to allow a reasonable jury to return
a verdict in the nonmoving party’s favor.
248.
Anderson, 477 U.S. at
Rule 56(c) requires the nonmoving party to go beyond the
pleadings and by its own affidavits, or by the depositions,
answers to interrogatories, and admissions on file, designate
specific facts showing that there is a genuine issue for trial.
Celotex
Corp.
v.
Catrett,
477
U.S.
317,
324
(1986).
The
nonmoving party “cannot create a genuine issue of material fact
through mere speculation or the building of one inference upon
another.”
Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985)
(quoting Barwick v. Celotex Corp., 736 F.2d 946, 963 (4th Cir.
1984)).
5
Because
this
case
arises
under
the
Court’s
diversity
jurisdiction, the substantive law to be considered is that of
the state in which the action arose.
Francis v. Allstate Ins.
Co., 709 F.3d 362, 369 (4th Cir. 2013) (citing Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 79 (1938)).
In this case, Maryland law
applies.
B.
Analysis
iGambit argues it is entitled to summary judgment based on
Digi-Data’s admission that it owes iGambit $570,590 and because
any set-off amount alleged by Digi-Data was not liquidated or
capable
of
Further,
iGambit
Data’s
alleged
quantify
first
computation
set-off
previously
time
Judgment.
argues
in
its
prior
the
Court
damages
undisclosed
Response
to
to
the
discovery
should
because
not
consider
Digi-Data
unliquidated
iGambit’s
deadline.
attempts
damages
Motion
Digi-
for
for
to
the
Summary
iGambit argues even if the Court were to consider
such damages, it is still entitled to summary judgment because
Digi-Data
damages.
set-off
falls
short
of
establishing
legitimate
set-off
Moreover, in the event the Court concludes the alleged
damages
create
issues
of
fact
precluding
summary
judgment, iGambit consents, for the purposes of this motion and
without waiving any future objection to the validity of such
alleged damages and/or Digi-Data’s entitlement to set-off based
6
thereon,
to
the
set-off
amount
alleged
by
Digi-Data
in
its
Response to the Motion for Summary Judgment.
Digi-Data admits the outstanding amount due to iGambit is
$570,590
as
[“Request
of
for
August
31,
2012
Admissions”],
(Pl.’s
Req.
No.
Mot.
1,
ECF
Summ.
No.
J.
Ex.
23-5),
2
but
argues it is entitled to set off this amount by damages stemming
from the Verizon Litigation.
Digi-Data further admits that as
of March 11, 2013, the damages incurred as a result of iGambit’s
breach of its indemnity obligations were not liquidated.
Digi-
Data states, however, that it has since liquidated much of its
damages.
to
set
To the extent iGambit disputes Digi-Data’s entitlement
off
these
damages,
Digi-Data
genuine issue of material fact.
Under
Maryland
law,
the
argues
there
remains
a
The Court disagrees.
right
to
set-off
“may
only
be
exercised pursuant to statutory authority or as an incident of a
court's equity jurisdiction.”
Cearfoss Const. Corp. v. MMSG
Ltd. P'ship, 904 F.Supp. 450, 453 (D.Md. 1995) (citing Ghingher
v. Fanseen, 172 A. 75, 78 (Md. 1934)).
“In the absence of
insolvency or some other special ground for equitable relief,
the general rule is that unliquidated legal damages cannot be
set off . . . .”
Sinclair Ref. Co. v. Midland Oil Co., 55 F.2d
42, 47 (4th Cir. 1932) (applying North Carolina law) (citing
Norwood Paper Co. v. Columbia Paper Bag Co. of Balt. City, 185
F. 454, 456 (4th Cir. 1911) (applying Maryland law)); see also
7
Schlens
v.
Poe,
97
A.
649,
657
(Md.
1916)
(explaining
that
amounts to be set off should be liquidated and certain).
Moreover, if a party fails to provide information during
discovery the party is not allowed to use that information to
supply evidence on a motion unless the failure was substantially
justified
or
is
harmless.
Fed.R.Civ.P.
37(c)(1);
Blankson-
Arkoful v. Sunrise Sr. Living Servs., Inc., 449 F.App'x 263, 265
(4th Cir. 2011) (applying Rule 37(c)(1) to non-expert evidence).
A district court has broad discretion in determining whether a
party's nondisclosure of evidence was substantially justified or
harmless.
Blankson-Arkoful, 449 F.App'x at 265.
The Court must
consider five factors in exercising such discretion.
Id.
Those
factors are: (1) the surprise to the party against whom the
evidence would be offered; (2) the ability of that party to cure
the surprise; (3) the extent to which allowing the evidence
would disrupt the trial; (4) the importance of the evidence; and
(5) the nondisclosing party's explanation for its failure to
disclose
the
evidence.
Id.
(citing
Southern
States
Rack
&
Fixture, Inc. v. Sherwin–Williams Co., 318 F.3d 592, 597 (4th
Cir. 2003)).
On February 6, 2013, iGambit propounded its First Request
for Production of Documents and First Set of Interrogatories.
These requests sought, among other things, all documents related
to the alleged damage or loss suffered by Digi-Data for which
8
Digi-Data seeks set off or indemnification and an itemized list
and computation of claimed damages related to the alleged set
off and Counterclaim.
(Pl.’s Reply Def.’s Resp. Pl.’s Mot.
Summ. J. Ex. 1 [“Request for Production”], at 5, ECF No. 30-1;
Pl.’s Mot. Summ. J. Ex. 3 [“Interrogatories”], at 6, 8, ECF No.
23-6).
In response, Digi-Data admits that none of the alleged
damages were liquidated in amount.
(Interrogatories at 6).
On
June 11, 2013, Digi-Data filed its Response to iGambit’s Motion
for Summary Judgment (“Response”), in which Digi-Data reports
liquidated damages for the first time.
(Def.’s Resp. Pl.’s Mot.
Summ. J. [“Def.’s Resp.”] at 6).
Attached to the Response is the Affidavit of Dave Crowther
which
outlines
categories
associated
with
both
indemnity
the
obligations,
of
damages
Verizon
and
including
Litigation
internal
legal
and
costs
iGambit’s
incurred
researching issues related to the Verizon Litigation.
Resp. Ex. A, ECF No. 26-1).
fees
in
(Def.’s
On June 12, 2013, one day after it
filed its Response, Digi-Data supplemented its response to the
Interrogatories
Crowther
for
referring
an
itemized
iGambit
list
of
to
the
Affidavit
liquidated
of
damages.
Dave
(Pl.’s
Reply Def.’s Resp. Pl.’s Mot. Summ. J. Ex. 3, at 3, ECF No. 303).
Digi-Data
failed
to
produce
documents
or
responses
to
interrogatories to support liquidated set-off damages prior to
9
the filing of its Response.
damages
was
a
surprise
to
The itemized list of liquidated
iGambit.
Digi-Data’s
failure
to
produce documentary evidence to support its liquidated set-off
damages
prejudices
undertaking
iGambit
discovery
with
because
respect
it
to
precludes
the
it
alleged
from
damages.
Further, Digi-Data’s argument that it has been able to liquidate
much
of
the
attorney’s
dismissal
of
the
persuasive
to
excuse
fees
Verizon
its
and
costs
Litigation
failure
to
incurred
is
not
disclose
since
the
sufficiently
those
damages
because the Verizon Litigation was dismissed with prejudice on
April 4, 2013, prior to the discovery deadline in this case.
Accordingly, the Court declines to consider the itemized list of
liquidated damages.3
Because
Digi-Data
admits
the
outstanding
amount
due
to
iGambit is $570,590, the Court finds there is no genuine issue
3
“Contract clauses that provide for the award of attorney's
fees generally are valid and enforceable . . . subject to a
trial court's examination of the prevailing party's fee request
for reasonableness.”
Nova Research, Inc. v. Penske Truck
Leasing Co., 952 A.2d 275, 283 (Md. 2008) (citing Myers v.
Kayhoe, 892 A.2d 520, 532 (Md. 2006)).
“[A] request for fees
must specify the services performed, by whom they were
performed, the time expended thereon, and the hourly rates
charged . . . .”
Long v. Burson, 957 A.2d 173, 188
(Md.Ct.Spec.App. 2008) (quoting Maxima Corp. v. 6933 Arlington
Dev. Ltd. P'ship, 641 A.2d 977, 982 (Md.Ct.Spec.App. 1994)).
Accordingly, even if the Court were to consider the itemized
list of liquidated damages, Digi-Data failed to meet their
burden of providing the Court with the necessary information to
determine the reasonableness of the fees.
10
of material fact and iGambit is entitled to judgment as a matter
of law.4
Further, as a result of Digi-Data’s present inability
to prove liquidated damages with respect to iGambit’s indemnity
obligations, Digi-Data’s Counterclaim will be dismissed without
prejudice.
III. CONCLUSION
For the reasons given above, the Court will, by separate
order, GRANT iGambit’s Motion for Summary Judgment (ECF No. 23)
and DISMISS WITHOUT PREJUDICE Digi-Data’s Counterclaim (ECF No.
9).
The Clerk will be directed to close the case.
Entered this 13th day of December, 2013
/s/
___________________________
George L. Russell, III
United States District Judge
4
iGambit is entitled to pre-judgment interest from August
31, 2012 because their damages were certain, definite, and
See First Va. Bank v. Settles, 588
liquidated as of that date.
A.2d 803, 807 (Md. 1991) (“the obligation to pay and the amount
due had become certain, definite, and liquidated by a specific
date prior to judgment so that the effect of the debtor's
withholding payment was to deprive the creditor of the use of a
fixed amount as of a known date.” (quoting Sloane, Inc. v. House
& Associates, 532 A.2d 694, 702-03 (Md. 1987))).
11
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