SCHOLAR INTELLIGENT SOLUTIONS, INC. v. THE NEW JERSEY EYE CENTER, P.A. et al
Filing
125
OPINION. Signed by Judge Stanley R. Chesler on 9/30/16. (cm )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
SCHOLAR INTELLIGENT SOLUTIONS,
:
INC.,
:
Plaintiff,
Civil Action No. 13-642 (SRC)(CLW)
:
v.
:
THE NEW JERSEY EYE CENTER, P.A.,
:
et al.
OPINION
:
Defendants.
CHESLER, District Judge
This matter comes before the Court upon the parties’ cross-motions for summary
judgment [Docket Entries 102 & 109]. The parties have opposed one another’s motions [Docket
Entries 114 & 121]. The Court has considered the parties’ submissions and proceeds to rule
without oral argument, pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth
below, the Court will grant in part and deny in part Plaintiff/ Third-Party Defendants’ motion for
summary judgment and grant in part and deny in part Defendants/ Third-Party Plaintiffs’ motion
for summary judgment.
1
I.
BACKGROUND
This case arises out of a commercial dispute between a group of laser eye surgery centers
and a vendor who had agreed, among other things, to provide advertising, production, media
buying, and administrative support to the centers. Plaintiff Scholar Intelligent Solutions, Inc.
(“SIS”) complains that under the terms of a contract, it is owed money for services rendered and
50% more in commissions than it received. In the alternative, SIS argues that it deserves
compensation under the theory of quantum meruit. Defendants The New Jersey Eye Center,
P.A. (a/k/a The Vision Center of New Jersey, a/k/a Dello Russo Vision), Stephanie Dello Russo,
Laser Eye Practice of Brooklyn, PLLC, Laser Eye Practice of Long Island, PLLC, and Laser Eye
Practice of New York, PLLC (collectively “Defendants” 1) dispute that a contract existed
between the parties at all. Defendants have counterclaimed against SIS and also filed a Third–
Party Complaint against its owners, William and Mitchell Scholar, and SIS employee Karl
Stearns. The general thrust of the Counterclaims/Third–Party Complaint is that after the parties’
business relationship began to sour, Plaintiffs 2 engaged in a pattern of hostile and threatening
behavior, including sabotaging Defendants’ website, promoting the filing of frivolous and untrue
complaints with federal authorities, and threatening to disclose Defendants’ confidential patient
leads to Defendants’ competitors.
On June 5, 2013, this Court denied Defendants’ motion for a preliminary injunction
restraining Plaintiffs from disseminating the Defendants’ confidential information on the grounds
1
In the interest of simplicity, the Court will refer only to “Defendants” and avoid using the terms
“Counterclaimants” and/or “Third-Party Plaintiffs.”
2
The Court will also refer to SIS, William Scholar, Mitchell Scholar, and Karl Stearns
collectively as “Plaintiffs.” The Court recognizes that Karl Stearns has not joined the crossmotion or opposition motions.
2
that there had been no showing of immediate irreparable injury [Docket Entry 38]. On the same
day, this Court dismissed Count Four of the Complaint. Plaintiffs thereafter abandoned Court
Three of its Complaint. (Pls.’ Opp. at 2). 3
Plaintiffs’ remaining claims are Counts One and Two, both breach of contract claims, and
Count Five, a claim under quantum meruit. Defendants’ Counterclaims and Third-Party
Complaint includes claims of breach of contract, breach of fiduciary duty, conversion, replevin,
misappropriation of confidential information, tortious interference with prospective business
relations, violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and violation of the
Computer–Related Offense Act, N.J.S.A. § 2A:38A–3. 4 Plaintiffs move for summary judgment
on Counts One and Two of their Complaint and on the Defendants’ Counterclaims and ThirdParty Complaint. Defendants cross-move on the Complaint in its entirety.
II.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate under Fed. R. Civ. P. 56(c) when the moving party
demonstrates that there is no genuine issue of material fact and the evidence establishes the
moving party’s entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for
the non-movant, and it is material if, under the substantive law, it would affect the outcome of
the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “In considering a motion
for summary judgment, a district court may not make credibility determinations or engage in any
weighing of the evidence; instead, the non-moving party’s evidence ‘is to be believed and all
3
Because Plaintiffs concede that they have abandoned Count Three of the Complaint, this Court
grants Defendants’ motion for summary judgment as to Count Three only.
4
With the exception of the claim for breach of contract, which is pled only against SIS, all
claims are asserted against SIS, Karl Stearns, and William and Mitchell Scholar.
3
justifiable inferences are to be drawn in his favor.’” Marino v. Indus. Crating Co., 358 F.3d 241,
247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).
“When the moving party has the burden of proof at trial, that party must show
affirmatively the absence of a genuine issue of material fact: it must show that, on all the
essential elements of its case on which it bears the burden of proof at trial, no reasonable jury
could find for the non-moving party.” In re Bressman, 327 F.3d 229, 238 (3d Cir. 2003)
(quoting United States v. Four Parcels of Real Prop., 941 F.2d 1428, 1438 (11th Cir. 1991)).
“[W]ith respect to an issue on which the nonmoving party bears the burden of proof . . . the
burden on the moving party may be discharged by ‘showing’—that is, pointing out to the district
court—that there is an absence of evidence to support the nonmoving party’s case.” Celotex,
477 U.S. at 325.
Once the moving party has satisfied its initial burden, the party opposing the motion must
establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v.
Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for summary
judgment cannot rest on mere allegations and instead must present actual evidence that creates a
genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; Siegel Transfer, Inc. v.
Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). “[U]nsupported allegations . . . and
pleadings are insufficient to repel summary judgment.” Schoch v. First Fid. Bancorporation,
912 F.2d 654, 657 (3d Cir. 1990); see also Fed. R. Civ. P. 56(e) (requiring the nonmoving party
to “set out specific facts showing a genuine issue for trial”). “A nonmoving party has created a
genuine issue of material fact if it has provided sufficient evidence to allow a jury to find in its
favor at trial.” Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001).
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If the nonmoving party has failed “to make a showing sufficient to establish the existence
of an element essential to that party’s case, and on which that party will bear the burden of proof
at trial, . . . there can be ‘no genuine issue of material fact,’ since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily renders all other facts
immaterial.” Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex,
477 U.S. at 322-23).
III.
ANALYSIS
a. PLAINTIFFS’ MOTION ON DEFENDANTS’ COUNTERCLAIMS AND THIRDPARTY COMPLAINT
The Court will first consider Plaintiffs’ motion for summary judgment 5 on Defendants’
Counterclaims and Third-Party Complaint. Plainly, Defendants bear the burden of proof for
their breach of contract, breach of fiduciary duty, conversion, replevin, misappropriation, tortious
interference, Computer Fraud and Abuse Act, and Computer-Related Offense Act claims.
Plaintiffs point this Court to a dearth of evidence substantiating these claims, and thus the burden
shifts to Defendants to present evidence of their claims. 6
Nevertheless, Defendants have not responded with any evidence whatsoever of the
Plaintiffs’ improper conduct. Defendants have failed to identify any experts, witnesses, or
5
Although Plaintiffs call this section of their opening brief a motion to dismiss, the Court
construes the motion as a motion for summary judgment, in line with the remainder of Plaintiffs’
arguments.
6
Defendants misconstrue the summary judgment standard when they argue that the Court cannot
grant summary judgment based on Plaintiffs’ insistence that Defendants have not presented
enough evidence. (Defs.’ Opp. at 21). Defendants argue that they must still be allowed to
present evidence at trial. (Id.) Because the burden of proof is on the Defendants, Plaintiffs’
argument that Defendants have not presented enough evidence shifts the burden to the
Defendants to show that a genuine issue of material fact exists.
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documents that can support their assertions that Plaintiffs disseminated confidential information,
tampered with the website inappropriately, or that Defendants lost views to their webpage, paid
for a forensic investigator, or hired a consultant to create a new website. (Pls.’ Mov. Br. at 10,
20-26). Rather, Defendants present mere allegations.
Furthermore, the evidence that the Defendants supply cannot be considered evidence of
Plaintiffs’ conduct at all. Defendants present the certification of James Dello Russo, which states
that William Scholar said to James Dello Russo that “Karl [Stearns] possess [sic] certain
information that . . . would have at the very least cause you your family and you [sic] business
disrupted.” (Defs.’ Opp. at 21). The implications of this comment are unclear. It is entirely too
speculative to view this statement as evidence that Plaintiffs actually took action in
disseminating confidential information or tampering with the Defendants’ website. Even if this
statement was viewed as a threat, it is insufficient evidence of Plaintiffs’ conduct without any
further proof. Because Defendants present no actual evidence of Plaintiffs’ improper activity,
the Court grants Plaintiffs’ motion for summary judgment on Defendants’ Counterclaims and
Third-Party Complaint and enters judgment in favor of Plaintiffs.
b. PLAINTIFFS’ MOTION ON THEIR BREACH OF CONTRACT CLAIMS
Next, the Court considers Plaintiffs’ motion for summary judgment on Counts One and
Two of the Complaint. Both counts are breach of contract claims. In the First Count, Plaintiffs
allege that Defendants failed to pay Plaintiffs under the contract. In the Second Count, they
claim that Defendants owe Plaintiffs twice as much as they paid in commissions according to the
specific terms of the contract.
“To prevail on a breach of contract claim, Plaintiff must prove (1) the existence of a valid
contract, (2) its own performance of contractual duty, (3) defective performance by the defendant
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in violation of the contract, and (4) damages from the breach.” Frederico v. Home Depot, 507
F.3d 188, 203 (3d Cir. 2007) (citing Video Pipeline, Inc. v. Buena Vista Entm’t, Inc., 210 F.
Supp. 2d 552, 561 (D.N.J. 2002)). Under New Jersey law, an enforceable contract is created
when two parties “agree on essential terms and manifest an intention to be bound by those
terms[.]” Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992). Importantly, such an
agreement does not have to be evidenced by an express written document, but may be manifested
by conduct and the surrounding circumstances. Troy v. Rutgers, 168 N.J. 354, 365 (2001). The
legal effect of a contract implied in fact is identical to that of an express contract. Wanaque
Borough Sewerage Auth. v. Twp. of W. Milford, 144 N.J. 564, 574 (1996).
Here, there are genuine issues of material fact as to whether a contract was entered into,
and if so, what the terms of that contract were. Plaintiffs present a document that they call the
contract and they argue that this contract took effect. They argue that the contract was formed
because of two documents: (1) an e-mail from Stephanie Dello Russo, the office manager of the
Defendants and (2) an electronic signature page. But, upon closer look, neither item is
dispositive in showing that the parties entered into a contract.
Plaintiffs first rely on an email from Stephanie Dello Russo, but this email does not state
that the Defendants agreed to the terms of a contract. Rather, in the e-mail, Ms. Dello Russo
wrote that “[t]he contract looks fine, however would [sic] like to limit the time to a three months
[sic] trial, which could then take us to the full year. Other then [sic] that provision it looks like it
would be ready for signing.” (Scholar Cert. Ex. B.). Defendants argue that the e-mail shows that
the parties were participating in a trial period, rather than agreeing upon a contract with
reasonably certain terms. (Defs.’ Opp. at 17). Plaintiffs argue that the e-mail was a counteroffer that they accepted. Plaintiffs argue that they accepted this counter-offer in two ways: first,
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they provided a subsequent written contract and second, they began performing services. (Pls.’
Opp. at 13). These actions, however, cannot be taken as definite acceptances of Ms. Dello
Russo’s counter-offer at the summary judgment stage. Plaintiffs do not argue that the written
contract was updated to represent Ms. Dello Russo’s request for a three-month trial, and thus it is
unclear whether the subsequent written contract was actually an acceptance of the new terms.
Moreover, if Ms. Dello Russo’s e-mail was a counter-offer, it may not have invited acceptance
by performance. By stating that a contract “would be ready for signing,” Ms. Dello Russo may
have been inviting acceptance by the signing of an amended contract, not acceptance by
providing services. Because Plaintiffs’ actions may not have been acceptances of an offer, there
remain genuine issues of material fact on whether a contract was formed based on Ms. Dello
Russo’s email.
Additionally, there are genuine issues of material fact as to the electronic signature page
that Plaintiffs rely on. First, Ms. Dello Russo denies signing the document. (Defs.’ Mov. Br. at
5). The question of whether her signature can be verified is a quintessential contested issue of
fact for trial. Furthermore, Defendants argue that the electronic signature page was not attached
to the contract because it did not contain the unique DocuSign barcode that was on the contract
and the document was only one page when the contract was eight pages. (Defs.’ Mov. Br. at 5).
In sum, although Plaintiffs clearly performed services to benefit Defendants, the question of
whether the services were rendered under the controlling terms of a contract remains a question
of fact. Therefore, this Court denies Plaintiffs’ motion for summary judgment on its breach of
contract claims.
Because this Court has decided that there is a genuine issue of material fact as to whether
a contract was formed, it can dismiss Plaintiffs’ request within its partial motion for summary
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judgment on the second breach of contract claim that facts be admitted as to Defendants’
solvency. Plaintiffs ask the Court to deem admitted that Defendants were not operating at a loss
because according to one of the provisions of the contract, SIS deserved a higher percentage in
commissions if Defendants were solvent during their business relationship. Plaintiffs point to the
Certification of James Dello Russo, in which James Dello Russo admitted that the Defendants
were never operating at a loss, and Plaintiffs request that the Court deem this admitted. (Pls.’
Rep. Br. at 10; James Dello Russo Cert. ¶ 18).
Federal Rule of Civil Procedure 56, which sets out the standard for summary judgment,
cannot be read to allow partial summary judgment on only one small portion of a claim. New
Jersey Auto. Ins. Plan v. Sciarra, 103 F. Supp. 2d 388, 396 (D.N.J. 1998); Coffman v. Federal
Lab., 171 F.2d 94, 98 (3d Cir.1948), cert. denied, 336 U.S. 913 (1949); Kendall McGaw Lab.,
Inc. v. Community Mem’l Hosp., 125 F.R.D. 420, 421 (D.N.J. 1989). Courts have used their
inherent discretion to deny summary judgment when a party asks for a ruling on an issue that is
“only a small subset of the ultimate question to be decided in this adversary proceeding . . . [and
it] doesn’t appear that resolution of the present motion would materially advance the litigation in
any way.” In re G-I Holdings Inc., No. 01-30135, 2007 WL 1412294, at *4 (D.N.J. May 14,
2007); Sciarra, 103 F. Supp. 2d at 396-397. Thus, a party moving for summary judgment “may
not ‘play leapfrog’ with his case by seeking a decision whose validity depends on one or more
unresolved issues. . . . A different arrangement would run the law into conceptually-backward
nonsense.” Kendall McGaw, 125 F.R.D. at 421–22.
Here, the question of whether Defendants were operating at a loss is a small portion of
the second breach of contract claim and its relevance depends on whether the contract was valid.
If a jury concludes as it reasonably can that the contract was invalid, the inquiry into Defendants’
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solvency would become irrelevant because the breach of contract claim would fail anyway.
Therefore, this Court denies Plaintiffs’ request for a declaration of Defendants’ solvency on
summary judgment. 7
c. DEFENDANTS’ MOTION ON THE COMPLAINT
The Court next considers Defendants’ motion for summary judgment on the Complaint. 8
With respect to Count One and Two of the Complaint, Defendants argue that “[i]t is clear” that
no contract was formed. (Defs.’ Mov. Br. at 20). Nevertheless, this Court finds that a
reasonable juror could still conclude that a valid contract existed based on the email exchange
with Stephanie Dello Russo, the electronic signature page, or other conduct. Because genuine
issues of material fact remain as to the contract’s validity, this Court denies Defendants’ motion
7
Plaintiffs also argue that because Defendants never produced court-ordered financial
certifications that prove Defendants’ solvency, the Court should impose a sanction under Federal
Rule of Civil Procedure 37(b)(2) and deem admitted that Defendants were solvent. It is well
established in the Third Circuit that decisions regarding the imposition of sanctions under Rule
37 are “committed to the sound discretion of the district court.” DiGregorio v. First Rediscount
Corp., 506 F.2d 781, 788 (3d Cir. 1974). When determining whether to deem facts admitted as a
sanction, this Court uses a sliding scale and balances: “(1) culpability (including willfulness and
bad faith, and whether the client was responsible or solely the attorney); (2) prejudice; and (3)
whether lesser sanctions would have been effective.” Estate of Spear v. C.I.R., 41 F.3d 103, 111
(3d Cir. 1994). When a party’s conduct is unlikely to affect the outcome of the trial, Courts have
concluded that deeming facts admitted is an inappropriate sanction. Id. at 115-117. At this stage
in litigation, Defendants’ actions were not prejudicial because the Defendants’ failure to disclose
their financial information does not matter to the summary judgment motion. Regardless of
whether Defendants were solvent or not, the Court cannot grant the Plaintiffs’ summary
judgment motion as to the Count Two breach of contract claim because the contract’s validity is
still at issue. Because Plaintiffs were not prejudiced by Defendants’ actions at this stage,
Defendants’ actions do not rise to the level of sanctionable conduct and deeming facts admitted
as a sanction under Rule 37(b)(2) is not justified.
8
Plaintiffs argue that Defendants’ motion for summary judgment is procedurally defective
because it lacks a certification of an individual with personal knowledge, a notice of motion, and
a proposed order. Because this Court denies Defendants’ motion for summary judgment
anyway, the Court need not address the procedural defects of the motion.
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for summary judgment on Plaintiffs’ breach of contract claims. 9
Next, Defendants move for summary judgment on Plaintiffs’ quantum meruit claim.
Defendants argue that Plaintiffs’ request for relief on quantum meruit must be denied because
Plaintiffs have failed to prove the amount of damages due. (Defs.’ Opp. at 19). In addition,
Defendants argue that Plaintiffs overstate the amount they deserve because Plaintiffs ask
Defendants to be paid for work done that did not benefit the Defendants and work done in bad
faith after the termination of the business relationship. (Defs.’ Opp. at 20).
Under New Jersey law “[q]uantum meruit is a form of quasi-contractual recovery and
‘rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at
the expense of another.’” Starkey, Kelly, Blaney & White v. Estate of Nicolaysen, 172 N.J. 60,
68 (2002). In quantum meruit “it is well settled that where one performs services for another at
his request, but without any agreement or understanding as to wages or remuneration, the law
implies a promise on the part of the party requesting the services to pay a just and reasonable
compensation.” Canadian Nat. Ry. v. Vertis, Inc., 811 F. Supp. 2d 1028, 1033 (D.N.J. 2011)
(citing Kopin v. Orange Prods., 297 N.J. Super. 353, 367–68 (App. Div. 1997) (emphasis
added)). The plaintiff “must establish that the services were performed with an expectation that
the beneficiary would pay for them, and under circumstances that should have put the
beneficiary on notice that the plaintiff expected to be paid.” Ryan, 128 N.J. at 438. This type of
9
The Court does not address Defendants’ argument in its reply brief that the individual
Defendants in this case should be dismissed because the Court does not consider new arguments
raised in a reply brief for the first time. “The reason for not considering new bases for relief
raised for the first time in a reply brief is self-evident: No sur-reply is permitted, so the opponent
has no opportunity to address the new defense.” Worrall v. City of Atl. City, No. 11-3750, 2014
WL 980575, at *5 (D.N.J. Mar. 13, 2014) (quoting D'Alessandro v. Bugler Tobacco Co., No. 055051, 2007 WL 130798, at *2 (D.N.J. Jan. 12, 2007)).
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quasi-contractual recovery allows the “performing party to recoup the reasonable value of
services rendered.” Id. at 437–38. A plaintiff recovering in quantum meruit is only entitled to
the reasonable value of services rendered; he is precluded from recovering any profit for the
services. Barfield v. Manley, No. A-2264-04T5, 2005 WL 3730516, at *3 (N.J. Super. Ct. App.
Div. Feb. 3, 2006). To prove the reasonable value of services rendered, a plaintiff cannot rely on
an invalid contract or a price quote, but must provide a breakdown of the various tasks
performed and itemize the reasonable monetary value for each of the tasks performed. Id. at *4–
5. Courts often look to customary fees in similar transactions in order to determine the
reasonable value of services rendered. Ryan, 128 N.J. at 441.
Even if there was no binding contract here, Plaintiffs successfully contend that they were
reasonably expecting compensation for performing services that Defendants requested. Plaintiffs
list specific tasks that they performed, including advertisement placement, administrative
services, and technological assistance, and Plaintiffs provide invoices for each service. Mitchell
Scholar claims that the amount requested for each service is based on standard industry rates.
(Scholar Cert. ¶ 5). This itemization is sufficient at the summary judgment stage; any remaining
disagreement between the parties on the specific amount that Plaintiffs would be entitled under
quantum meruit presents genuine issues of material fact. Therefore, this Court denies
Defendants’ motion for summary judgment on Plaintiffs’ quantum meruit claim.
IV.
CONCLUSION
For the foregoing reasons, the Court will grant in part and deny in part Plaintiffs’ motions
and grant in part and deny in part Defendants’ motions. An appropriate Order will be filed
herewith.
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s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: September 30, 2016
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