Scienton Technologies, Inc. et al v. Computer Associates International Inc.

Filing 573

MEMORANDUM & ORDER finding as moot 551 Motion for New Trial; finding as moot 554 Motion for Damages; granting 557 Motion for Judgment as a Matter of Law; Defendant's motion for judgment as a matter of law (Docket Entry 557) is GRANTED, and Plaintiff's motions (Docket Entries 551, 554) are DISMISSED AS MOOT. Also, with the exception of the October 20th transcript, the remaining trial transcripts are currently unavailable on the Electronic Case Filing System. To ensure complet eness of the electronic record, Defendant is ORDERED to file the remaining portions of the transcript on the docket. After Defendant has done so, the Clerk of the Court is directed to mark this matter CLOSED. So Ordered by Judge Joanna Seybert on 5/17/2016. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
SCIENTON TECHNOLOGIES, INC.,
Plaintiff,
-againstCOMPUTER ASSOCIATES INTERNATIONAL,
INC.,

MEMORANDUM & ORDER
04-CV-2652(JS)(ARL)

Defendant.
---------------------------------------X
APPEARANCES
For Plaintiff:
Alexander Orlowski, Esq.
Dennis P. Stolle, Esq.
Lynn C. Tyler, Esq.
Matthew S. Barr, Esq.
Robert Dean MacGill, Esq.
Barnes & Thornburg LLP
11 South Meridian Street
Indianapolis, Indiana 46204
Panagiota Betty Tufariello, Esq.
The Law Offices of P.B. Tufariello, P.C.
25 Little Harbor Road
Mt. Sinai, New York 11766
For Defendant:

Jonathan N. Francis, Esq.
Michael D. Schissel, Esq.
Anthony D. Boccanfuso, Esq.
Carmela T. Romeo, Esq.
Erik Christopher Walsh, Esq.
Pamela Addison Miller, Esq.
Arnold & Porter LLP
399 Park Avenue
New York, New York 10022
Kevin Patrick Mulry, Esq.
Sarah M. Baird, Esq.
John P. McEntee, Esq.
Farrell Fritz, P.C.
1320 RXR Plaza
Uniondale, New York 11556

SEYBERT, District Judge:
Scienton Technologies, Inc. (“Scienton” or “Plaintiff”)
filed this lawsuit against Computer Associates International, Inc.
(“CA” or “Defendant”) alleging that CA stole Scienton’s idea for
security-related software products.

On November 12, 2015, the

jury delivered a verdict in favor of Scienton. (Docket Entry 545.)
Three motions are pending before the Court.

First, CA

moves to set aside the jury verdict under Federal Rule of Civil
Procedure 50(b).

(Docket Entry 557.)

Second, Scienton moves for

a new trial to determine compensatory damages. (Docket Entry 551.)
Third,

Scienton

interest.

moves

for

damages

(Docket Entry 554.)

relating

to

prejudgment

For the following reasons, this

Court GRANTS CA’s motion based on Scienton’s lack of standing, and
thus Scienton’s motions are DISMISSED AS MOOT.
BACKGROUND1
The Court assumes familiarity with the facts of this
case, which are chronicled in the Court’s previous orders.

(See

generally Sept. 25, 2012 Order, Docket Entry 347; Jan. 7, 2015
Order, Docket Entry 395.) The salient details are discussed below.
CA is a New York software company, and Scienton is a
Canadian software development and consulting company.

(See SAC,

These facts are drawn from the Second Amended Complaint
(“SAC”), the testimony at trial (“Tr.”), and CA’s trial
exhibits, which are labeled “DX.”
1

2

Docket Entry 82, ¶¶ 2, 5.)

Scienton has maintained that it is the

successor-in-interest to fellow Canadian corporation, NI Group
Inc. (“NI Group”), which is the successor-in-interest to SecureIT Inc. (“Secure-IT”).
Secure-IT,

NI

Group,

(SAC ¶¶ 2–3.)
and

Scienton;

This action was filed by
however,

before

closing

arguments, Plaintiff’s counsel selected Scienton as its “proper
plaintiff” and voluntarily terminated Secure-IT and NI Group as
Plaintiffs in this case.

(Tr. 2166:12–17.)

By way of background, NI Group conveyed its idea for
security-related software products (the “Idea”) to CA in 2000.
(SAC ¶¶ 53, 57.) Four years later, this action ensued. Plaintiffs
argue, in pertinent part, that CA misappropriated the Idea and
repurposed it for CA’s new security programs.

After a decade-long

dispute, three claims were left for trial: (1) breach of a Mutual
Non-Disclosure Agreement (“MNDA”), (2) misappropriation of an
idea, and (3) unfair competition.
I.

Scienton’s Evidence at Trial
The trial began in October 2015.

Before jury selection,

CA’s counsel advised the Court that Scienton may lack standing to
bring this case and stated:
We have seen in the record in this case that
Secure-IT was merged into NI Group.
We’ve
never seen anything that suggests that NI
Group was merged into Scienton or that
Scienton somehow became the successor in
interest to NI Group. . . . I don’t know how
we can describe [the plaintiffs] as related
3

when there’s nothing to suggest that Scienton
is a proper party in this case . . . .
(Tr.

9:24–10:12

(emphasis

added).)2

Scienton’s

counsel

acknowledged that it was Scienton’s responsibility to prove the
connection at trial.

(Tr. 11:3–5 and 17–18.)

During the trial, Scienton presented evidence--for the
first time--that in 2000, NI Group entered into an oral agreement
with

Scienton

to

transfer

certain

assets

(the

“Agreement”).

In 2004, the parties memorialized this Agreement in writing:
This agreement is to specify that NI-Group
sold all its contacts, contracts, and clients
to Scienton Technologies Inc for the total of
$10.00 CDN. Therefore Scienton has inherited
all NI Group’s contacts, contracts, clients
and all future revenues and profits arising
from the said contracts, contacts, and clients
will go to Scienton Technologies Inc.
(Agreement, DX DR, Pl.’s Decl. Ex. 13, Docket Entry 566-14, at 2
(emphasis omitted).)3 Two trial witnesses played an important role
in

this

agreement:

(1) Predrag

Zivic,

a

then-executive

of

Scienton, and (2) Jovan Miladinovic, a then-executive of NI Group.

The following is a list of the transcripts that the Court cites
throughout this Order: 10/20/15 pp. 1–95 D.E. 559; 10/27/15
pp. 535–754; 10/29/15 pp. 1008–1218; 11/6/15 pp. 2129–2213;
11/9/15 pp. 2214–2384; and 11/12/15 pp. 2416–28. With the
exception of the October 20th transcript, the remaining
transcripts are currently unavailable on the Electronic Case
Filing System (“ECF”). To ensure completeness of the electronic
record, CA is ORDERED to file the remaining portions of the
transcript on the docket.
2

For the purposes of this Order, the Court will use the page
numbers generated by ECF when referring to any trial exhibits.
3

4

(See

Agreement

at

2.)

Scienton’s

lead

witness,

Mr.

Zivic,

clarified the scope of the Agreement during his testimony:
Q:

And
in
[the
Agreement],
NI
Group
transfers its contracts, clients and
future revenues and profits to Scienton.
Right?

A:

Yes.

Q:

What was not transferred was any claim NI
Group had in this litigation, right?

A:

No.

Q:

That’s correct, right?

A:

That’s correct, yes.

(See Tr. 682:20–683:4.)
Agreement,

retained

the

In fact, Mr. Miladinovic, a party to the
right

to

use

the

“NI

Group”

name.

(Tr. 1025:21–22.)
Also relevant to this case is that Scienton and NI Group
are apparently two distinct entities.

Mr. Zivic testified that

after NI Group made its transfer to Scienton under the Agreement,
he

is

unaware

of

(Tr. 596:19–597:25.)

what

Mr.

Miladinovic

did

with

NI

Group.

The following exchange between CA’s counsel

and Mr. Zivic illustrates this point:
Q:

Does the NI Group exist today?

A:

I don’t know.

Q:

Who would know?

A:

Jovan [Miladinovic].
* * *
5

Q:

So today NI Group is not an entity that
is merged into Scienton. Correct?

A:

It was merged with a [sic] clients and
stuff. What Mr. Miladinovic decided to
do afterwards, I don’t know.

Q:

But it’s fair to say that NI Group is
currently not merged into Scienton, fair?

A:

No.

Q:

That’s correct, right?

A:

I think so.

(Tr. 596:2–5, 597:20–598:5.)
II.

CA’s Rule 50(a) Motion
After both parties had rested but before the case went

to the jury, CA moved for judgment as a matter of law under Federal
Rule of Civil Procedure 50(a).
then

scheduled

oral

argument

(Docket Entry 523.)
to

hear

the

Rule

The Court
50

motion,

(Tr. 1874:22–23), but before that hearing took place, CA filed a
letter motion identifying the grounds on which it was moving. (See
Def.’s Nov. 5, 2015 Ltr., Docket Entry 533.)

CA argued, in

pertinent part, that (1) Plaintiffs failed to prove damages on
their breach of the MNDA claim and (2) Scienton lacked standing.
(See Def.’s Nov. 5, 2015 Ltr. ¶¶ 4, 5(a).)

Ultimately, the Court

dismissed the MNDA claim because Scienton “elected to not present
evidence of compensatory damages” and incorrectly pursued damages
under an unjust enrichment theory.

(See Tr. 2172:11–14, 2206:1–

13; Nov. 6, 2015 Min. Order, Docket Entry 534.)
6

As for the standing issue, Scienton’s counsel requested
that the Court limit the verdict sheet to a single plaintiff:
Scienton.

(Tr. 2162:9–11.)

CA’s counsel then reserved its

arguments on this issue:
SCIENTON:

[W]hat we want to do is have
one verdict form, and have it
be for Scienton, and on the
basis that Scienton owns the
claim as it was transferred.
* * *

CA:

[T]he contract does not [ ]
include claims, and the claim
is not included. That may be an
issue.
But if [Scienton’s
counsel] want[s] to pick one
plaintiff, fine. But I don’t
want to suggest that, I want to
make sure we’re reserving on
that.

(Tr. 2162:9–11, 2164:11–15.)

The Court granted Scienton’s request

and dismissed Secure-IT and NI Group:
THE COURT:

You’ve selected a plaintiff
and you may be subjected to a
standing
issue
as
the
defendant[] argue[s].

(Tr. 2164:9–15, 2166:16–17.)

To reflect this change, the verdict

sheet stated that the jury is “directed to assume that Scienton
Technologies, Inc. is the proper Plaintiff” and that “[t]he Court
will

determine

if

Scienton

Technologies,

7

Inc.

is

the

proper

Plaintiff after the verdict, if necessary.”

(Verdict Sheet, Court

Exhibit 12, Docket Entry 547, at 2.)4
III. The Pending Motions
On November 12, 2015, the jury delivered a verdict in
favor of Scienton.

(Docket Entry 545.)

CA then reserved its

rights to file post-trial motions within the permitted timeframe.
(Tr. 2427:4–13.)
CA now renews its motion for judgment as a matter of
law.

(Docket Entry 557.)

CA asserts, in pertinent part, that the

Court no longer has subject matter jurisdiction because Scienton
lacks standing.

(Def.’s Br., Docket Entry 558, at 2–6.)

As CA

argues, neither the plain text nor the surrounding circumstances
of the Agreement indicate that NI Group transferred any tort claims
or intellectual property rights, such as the Idea, to Scienton.
Rather,

the

contracts,
profits.

Agreement
clients,

transferred

and

any

only

associated

(Def.’s Br. at 5.)

NI

Group’s

future

contacts,

revenues

and

In other words, NI Group--not

Scienton--suffered an injury, and the Agreement failed to assign
NI Group’s claims against CA to Scienton.
Scienton

shrugs

off

this

standing

requirement

by

invoking the “real party in interest” theory under Federal Rule of
Civil Procedure 17.

4

(Pl.’s Br., Docket Entry 563, at 4–9.)

The Verdict Sheet can be found at Docket Entry 547 at 1–8.
8

Scienton argues that “the real issue is whether Scienton has a
valid assignment of ‘the idea’ from NI Group and thus is the real
party in interest.”

(Pl.’s Br. at 4.)

First, Scienton asserts

that CA waived this real party in interest argument by failing to
include it in CA’s Rule 50(a) application.

(Pl.’s Br. at 3–4.)

Second, Scienton contends that “NI Group transferred all it had
with

respect

to

CA,”

including

NI

Group’s

tort

claims

and

intellectual property rights, and thus Scienton is the proper
plaintiff.

(Pl.’s Br. at 9.)
Separately, Scienton filed a motion for a new trial to

determine compensatory damages and another motion for damages
related to prejudgment interest. (Docket Entries 551, 554.) These
motions, however, are moot, as the Court must grant CA’s motion
for lack of standing.
DISCUSSION
As a preliminary matter, the Court will address CA’s
motion first, as the standing issue implicates this Court’s subject
matter jurisdiction. First Cap. Asset Mgmt., Inc. v. Brickellbush,
Inc., 218 F. Supp. 2d 369, 377 (S.D.N.Y. 2002); see also Rhulen
Agency, Inc. v. Ala. Ins. Guar. Ass’n, 896 F.2d 674, 678 (2d
Cir. 1990) (recognizing that a court must consider a motion to
dismiss for lack of subject matter jurisdiction first because, if
granted, “the accompanying defenses and objections become moot and
do not need to be determined” (internal quotation marks and
9

citations omitted)).

Based on the facts above, and further

elaborated below, the Court finds that Scienton lacks standing to
maintain this suit.
I.

Rule 50(b) Standard
“Under Rule 50(a), a party may move for judgment as a

matter of law . . . during trial at any time prior to the submission
of the case to the jury.”

Galdieri-Ambrosini v. Nat’l Realty &

Dev. Corp., 136 F.3d 276, 286 (2d Cir. 1998) (citing FED. R. CIV.
P. 50(a)(2)).

In doing so, the party must “‘specify the judgment

sought and the law and the facts on which the moving party is
entitled to the judgment.’” Id. (quoting FED. R. CIV. P. 50(a)(2)).
The purpose of this specificity requirement is “‘to give the other
party an opportunity to cure the defects in proof that might
otherwise preclude him from taking the case to the jury.’”

Id.

(quoting Baskin v. Hawley, 807 F.2d 1120, 1134 (2d Cir. 1986)).
If

the

Rule

50(a)

motion

is

denied,

the

movant

may

file

a

Rule 50(b) motion to renew its arguments after the jury verdict.
Id. Thus, any arguments not included in the Rule 50(a) application
are waived.

See Protostorm, LLC v. Antonelli, Terry, Stout &

Krauss, LLP, No. 08-CV-0931, 2015 WL 3605143, at *3 (E.D.N.Y.
June 5,

2015),

appeal

docketed,

No.

15-2199

(2d

Cir.

July 10, 2015).
When reviewing a Rule 50 motion, courts must consider
the evidence in the light most charitable to the non-moving party.
10

Tolbert v. Queens Coll., 242 F.3d 58, 69 (2d Cir. 2001) (citing
Smith v. Lightning Bolt Prods., Inc., 861 F.2d 363, 367 (2d
Cir. 1988)).

Put differently, “‘the court should give credence to

the evidence favoring the nonmovant as well as that evidence
supporting

the

moving

unimpeached . . . .’”

party

that

is

uncontradicted

and

Id. (quoting Reeves v. Sanderson Plumbing

Prods., Inc., 530 U.S. 133, 151, 120 S. Ct. 2091, 2110, 147 L.
Ed. 2d 105 (2000)).
Before reaching the Article III challenge, the Court
must first dispense with Scienton’s waiver argument.

To begin,

Scienton argues that CA failed to reserve its standing argument.
(Pl.’s Br. at 3–4.)

However, at the close of all evidence, CA

filed a letter motion identifying the grounds on which it was
moving for judgment as a matter of law and expressly addressed the
issue of Scienton’s standing.
¶ 5(a).)

(See Def.’s Nov. 5, 2015 Ltr.

What is more, the Court specifically reserved its

decision on the standing argument.

(Tr. 2332:6–8 (“[T]he Court

will determine if Scienton Technology, Inc., is a plaintiff after
the verdict, if necessary.”).)
The Court acknowledges that CA failed to comply with
Local Civil Rule 7.1, which requires that motion papers contain
“[a]

memorandum

and

other

authorities relied upon in support of the motion . . . .”

Local

Civ. R. 7.1.

of

law,

setting

forth

the

cases

Specifically, at the close of Plaintiff’s case-in11

chief, CA submitted a memorandum of law that focused on certain
issues, but did not include an argument based on Scienton’s
standing.

(Def.’s Rule 50(a) Br., Docket Entry 524.)

Then at the

close of all evidence, CA submitted its letter motion, which
challenged Scienton’s standing, among other things, but lacked any
support based on fact or case law.
2015 Ltr.)

(See generally Def.’s Nov. 5,

Nevertheless, “[a] district court has broad discretion

to determine whether to overlook a party’s failure to comply with
local

court

rules.”

Holtz

v.

Rockefeller

&

Co.,

Inc.,

258

F.3d 62, 73 (2d Cir. 2001); Somlyo v. J. Lu-Rob Enters., Inc., 932
F.2d 1043, 1048 (2d Cir. 1991) (noting that a district court has
“the inherent power to decide when a departure from its Local Rules
should be excused or overlooked” (citations omitted)). Thus, since
the parties were “fairly and adequately apprised of the nature and
basis of the application,” the Court will consider CA’s Rule 50(a)
motion.

See Sentry Ins. A Mut. Co. v. Brand Mgmt., Inc., No. 10-

CV-0347, 2013 WL 5725987, at *2 (E.D.N.Y. Oct. 21, 2013).

The

Court will now turn to CA’s standing argument.
II.

Article III Standing
“Standing is ‘the threshold question in every federal

case,’ and implicates the Court’s subject matter jurisdiction.”
Cohan v. Movtady, 751 F. Supp. 2d 436, 439 (E.D.N.Y. 2010) (quoting
Ross v. Bank of Am., N.A. (USA), 524 F.3d 217, 222 (2d Cir. 2008)).
To establish standing under Article III, a would-be litigant must
12

show, among other things, that he or she “‘suffered an injury in
fact.’” Digizip.com, Inc. v. Verizon Servs. Corp., --- F. Supp. 3d
----, 2015 WL 6076532, at *2 (S.D.N.Y. Oct. 16, 2015) (quoting
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130,
2136, 119 L. Ed. 2d 351 (1992)).

Unless that showing is made, “a

court has no subject matter jurisdiction to hear [the] claim.”
Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco
Managed Care, L.L.C., 433 F.3d 181, 198 (2d Cir. 2005).
As the “party invoking federal jurisdiction,” Scienton
“bears the burden of establishing these elements.”
U.S. at 561, 112 S. Ct. at 2136.

Lujan, 504

Further, standing must be

“assessed as of the time the lawsuit is brought.”

Comer v.

Cisneros, 37 F.3d 775, 787 (2d Cir. 1994) (citations omitted).
As an initial point, NI Group--not Scienton--suffered an
injury in fact because NI Group was the plaintiff that conveyed
the Idea to CA.

But that fact is not a complete roadblock for

Scienton because “[c]ourts may permit a party with standing to
assign its claims to a third party, who will stand in the place of
the injured party and satisfy the constitutional requirement of an
‘injury-in-fact.’”

W.R. Huff Asset Mgmt. Co., LLC v. Deloitte &

Touche LLP, 549 F.3d 100, 107 (2d Cir. 2008) (citation omitted).
The question, then, is whether NI Group successfully assigned the
Idea and any tort claims to Scienton under the Agreement.

The

Court will use Canadian law to resolve this issue because both
13

Scienton and NI Group are Canadian corporations and they executed
the Agreement in Canada.

(SAC ¶¶ 2-3; Agreement at 2); see also

Fredericks v. Chemipal, Ltd., No. 06-CV-0966, 2007 WL 1310160, at
*3 (S.D.N.Y. May 3, 2007) (Under a choice of law analysis, “factors
to consider include where the contract was signed; the places of
negotiation and performance; the location of the subject matter;
and

the

domicile

or

place

of

business

of

the

contracting

parties.”).
A.

Assignment
Canadian courts, like their American counterparts, are

reluctant to “stray beyond the four corners of [an] agreement”
where the parties’ intentions are clear and unambiguous.

KPMG

Inc. v. Canadian Imperial Bank of Commerce, 1998 CarswellOnt 4422
at ¶ 5 (Can. Ont. C.A.) (WL). Yet the emerging trend is to consider
the contractual language alongside the “surrounding circumstances
of the agreement, whether or not any ambiguity is found.” Canadian
Encyc. Digest IX.2.(b)--Contracts § 565 (collecting cases).

This

approach reflects the understanding that “[n]o contracts are made
in a vacuum: there is always a setting in which they have to be
placed.”

Ky. Fried Chicken Can. v. Scott’s Food Servs. Inc., 1998

CarswellOnt 4170 at ¶ 25. (Can. Ont. C.A.) (WL) (internal citation
omitted).

It bears emphasizing, however, that the surrounding

circumstances “must never be allowed to overwhelm the words of
that agreement” and “courts cannot use them to deviate from the
14

text such that the court effectively creates a new agreement.”
Creston Moly Corp. v. Sattva Cap. Corp., 2014 CarswellBC 2267 at
¶ 57 (Can. S.C.C.) (WL).
Under Canadian law, both intellectual property rights
and tort claims are assignable.5

No magic words are required, but

the parties must at least evince an intent to transfer their claims
or rights.

See, e.g., Int’l Powertech Sys. Inc. v. Chato, 1992

CarswellBC 1458 at ¶¶ 15, 37 (Can. B.C. S.C.) (WL) (upholding an
agreement that transferred all “right[s], title and interest in
and to all applications and uses of [an invention] including all
patents, patents pending,” and so on); Fredrikson v. Ins. Corp. of
B.C., 1986 CarswellBC 131 at ¶¶ 3, 19, 42 (approving an assignment
that conferred “any and all rights of action or actions” the
assignor possessed arising out of a car accident) (Can. B.C. C.A.)
(WL), affirmed, 1988 CarswellBC 759 (Can. S.C.C.) (WL).
Here, all roads lead to the same conclusion.

When

considering both the plain text and the surrounding circumstances
of the Agreement, it is clear that only contractual rights were

See, e.g., Canadian Encyc. Digest X.2--Patents § 530 (“The
Patent Act now provides that every patent shall be assignable in
law, either as to the whole interest or as to any part thereof,
by an instrument in writing.”); PSC Indus. Servs. Inc. v.
Ontario (Ministry of the Env’t), 2005 CarswellOnt 3452 at ¶ 9
(Can. Ont. C.A.) (WL) (permitting the assignment of tort claims,
for example, “where the assignee has either a pre-existing
property interest in the enforcement of the claim or a
legitimate commercial interest in its enforcement”).
5

15

transferred, not any tort claims or intellectual property rights.
Thus, Scienton is not an aggrieved party and does not have standing
to maintain this suit.6
Looking first to the plain language, the Court notes
that the Agreement does not expressly assign any causes of action
based on tort or intellectual property rights from NI Group to
Scienton:
This agreement is to specify that NI-Group
sold all its contacts, contracts, and clients
to Scienton Technologies Inc for the total of
$10.00 CDN. Therefore Scienton has inherited
all NI Group’s contacts, contracts, clients
and all future revenues and profits arising
from the said contracts, contacts, and clients
will go to Scienton Technologies Inc.
(See Agreement at 2.)

Rather, NI Group transferred only its

“contacts, contracts, [and] clients” and any associated “future

Under New York law, the Court would reach the same conclusion.
As the Second Circuit made clear, “the assignment of the right
to assert contract claims does not automatically entail the
right to assert tort claims arising from that contact.” Banque
Arabe et Internationale D’Investissement v. Md. Nat’l Bank, 57
F.3d 146, 151 (2d Cir. 1995); Dexia SA/NV, Dexia Holdings, Inc.
v. Stanley, 41 Misc. 3d 1214(A), at *3, 980 N.Y.S.2d 275 (Sup.
Ct. N.Y. Cty. 2013) (“Under New York law, absent language
demonstrating an intent to do so, tort claims do not
automatically pass to an assignee.”). That same rationale
applies to intellectual property rights. Shugrue v. Continental
Airlines, Inc., 977 F. Supp. 280, 284-86 (S.D.N.Y. 1997)
(finding no ambiguity in an agreement that transferred “all
right, title and interest . . . in and to all programs and
software”); see also Prince of Peace Enters., Inc. v. Top
Quality Food Mkt., LLC, 760 F. Supp. 2d 384, 391 (S.D.N.Y. 2011)
(concluding that the “assignment of a trademark under the Lanham
Act requires [a] sale or transfer of all rights in the
mark . . . .” (emphasis in original) (citations omitted)).
6

16

revenues and profits”--not all of NI Group’s rights, title, and
interest.

(Agreement at 2.)

Scienton argues that when the

Agreement was reached, “NI Group did not have any claims against
CA,” (Pl.’s Br. at 8), but that fact does not mean that any tort
claims

were

automatically

conferred.

Accord

Canadian

Encyc.

Digest IX.2.(b)--Contracts § 564 (“Where . . . the wording of a
written contract is clear and unambiguous, the contract itself
should

be

all

that

is

required

to

determine

the

parties’

intentions.”); cf. Commonwealth of Pa. Pub. Sch. Emps.’ Ret. Sys.
v. Morgan Stanley & Co., 25 N.Y.3d 543, 551, 35 N.E.3d 481, 486,
14 N.Y.S.3d 313 (2015) (applying New York law) (dismissing an
assignor’s argument that “in the absence of language to the
contrary,

[the]

tort

claims

necessarily

transferred

to

[the

assignee]” because New York law requires “either some expressed
intent or reference to tort causes of action, or some explicit
language evidencing the parties’ intent to transfer broad and
unlimited rights and claims”). If the parties intended to transfer
any tort claims or intellectual property rights, NI Group should
have used explicit language to transfer all of its assets.7

Thus,

the plain text of the Agreement makes clear that only contractual
rights were transferred.

Cf. Int’l Design Concepts, LLC v. Saks Inc., 486 F. Supp. 2d 229,
237 (S.D.N.Y. 2007) (finding that an assignment included tort
claims where one party transferred “all assets . . . without
limitation” (emphasis in original)).
7

17

That
circumstances.

conclusion

accords

with

the

surrounding

There is no indication that the parties discussed

or negotiated an assignment of tort claims or intellectual property
rights.

Mr. Miladinovic, for example, testified that he retained

the right to use the name NI Group.

(Tr. 1025:21–22.)

Elsewhere,

he agrees that Scienton bought only some of NI Group’s property.
(Tr. 1066:11–14.)

Mr. Zivic even admitted that the Agreement did

not transfer any tort claims or intellectual property rights. (See
Tr. 682:20–683:4.)

Further undermining Scienton’s position is

that NI Group appears to be a separate entity.8

(Tr. 596:2–5,

597:20–598:5.) Scienton asserts that Mr. Zivic and Mr. Miladinovic
“no longer have any financial interest in this case” and that “they
sold their interest in Scienton to [other parties],” (Pl.’s Br.
at 9), but those facts do not change the analysis.

The issue is

whether NI Group transferred any tort claims or intellectual
property rights to Scienton.

NI Group did not do so.

The Court also notes that the Agreement was made for ten
Canadian dollars. (Agreement at 2.) In opening statements,
however, Scienton’s counsel estimated that the Idea could have
been a “billion dollar product.” (Tr. 59:18–19.) During
closing arguments, he stated that the Idea was worth “over $60
million.” (Tr. 2350:20–24.) Even if the value of the Idea
changed between 2000 and 2015--that is, the time between the
Agreement and the trial, this fact offers persuasive evidence
that NI Group did not intend to transfer the Idea because of the
wide disparity between the value of the Idea and the price of
the Agreement.
8

18

All in all, Scienton cannot stand in the shoes of NI
Group because the latter did not transfer its tort claims or
intellectual property rights.

Thus, Scienton has failed to meet

the injury in fact requirement under Article III.
B.

Real Party in Interest
Scienton cannot overcome this obstacle by invoking the

“real party in interest” theory.

(Pl.’s Br. at 4–9.)

Rule 17

mandates that “[a] court may not dismiss an action for failure to
prosecute in the name of the real party in interest until, after
an objection, a reasonable time has been allowed for the real party
in interest to ratify, join, or be substituted into the action.”
FED. R. CIV. P. 17(a)(3).

The purpose of Rule 17 is “‘to protect

the defendant against a subsequent action by the party actually
entitled to recover, and to insure generally that the judgment
will have its proper effect as res judicata.’” Cortlandt v. Street
Recovery Corp. v. Hellas Telecomm., 790 F.3d 441, 421 (2d Cir.
2015) (quoting FED. R. CIV. P. 17 advisory committee’s note, 1966
Amendment); Gogolin & Stelter v. Karn’s Auto Imports, Inc., 886
F.2d 100, 102 (5th Cir. 1989) (observing that Rule 17 “prevent[s]
multiple or conflicting lawsuits by persons such as assignees,
executors, or third-party beneficiaries, who would not be bound by
res judicata principles”).
“Confusions

of

standing

doctrine occur with some frequency.”
19

with

real-party-in-interest

13A Charles Alan Wright, et

al., Federal Practice and Procedure § 3531 (3d ed. 2008); accord
Bausch & Lomb Inc. v. Sonomed Tech. Inc., 780 F. Supp. 943, 946–
47, 966 (E.D.N.Y. 1992) (observing that “‘standing’ requirements,
in terms of ‘constitutional’ and ‘prudential’ considerations, are
wholly distinct concepts”), judgment aff’d in part & vacated in
part sub nom. Bausch & Lomb Inc. v. Bressler, 977 F.2d 720 (2d
Cir. 1992).

For example, suppose a pedestrian is struck by a

driver. To make matters worse, the pedestrian is forced to declare
bankruptcy before she is able to file suit.

Now it is important

to note that in the bankruptcy context, a trustee “has a duty to
collect and liquidate all nonexempt property from the bankrupt’s
estate,” which includes “any causes of action possessed by the
debtor.”

Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989)

(citations omitted).

Thus, in a lawsuit against the driver, the

pedestrian has standing because she suffered an injury from the
car accident, but the pedestrian’s bankruptcy trustee is the real
party in interest because only the trustee can file a lawsuit.9
Under Rule 17 principles, courts in this Circuit have
held that a standing defect may be cured through the substitution
of another plaintiff “when a mistake has been made as to the person
entitled to bring suit and such substitution will not alter the

See Kotbi v. Hilton Worldwide, Inc., No. 11-CV-3550, 2012
WL 914951, at *4 (S.D.N.Y. Mar. 19, 2012), for a similar
example.
9

20

substance of the action.”

Park B. Smith, Inc. v. CHF Indus.

Inc., 811 F. Supp. 2d 766, 773 (S.D.N.Y. 2011) (collecting cases);
see also Abu Dhabi Com. Bank v. Morgan Stanley & Co. Inc., 888 F.
Supp. 2d 478, 485–86 (S.D.N.Y. 2012); Berisford Metals Corp. v.
M/V Copiapo, 653 F. Supp. 419, 421 (S.D.N.Y. 1986) (“A suit may
proceed to its conclusion even where the plaintiff initially filing
a complaint is not the real party in interest, if this party is
subsequently

joined.”)

(citations

omitted).

The

Court

also

acknowledges that “the bar for granting leave to join real parties
is low.”

Wiwa v. Royal Dutch Petroleum Co., No. 96-CV-8386, 2009

WL 464946, at *10 (S.D.N.Y. Feb. 25, 2009). In fact, “[a]ttorneys’
mere

ignorance,

incompetence,

preclude granting joinder.”
Here,
substitution.

Scienton

or

lack

of

diligence

need

not

Id.

has

not

requested

a

ratification

or

Unlike most cases, NI Group was a plaintiff in this

action from the start but was ultimately dismissed at the end of
the trial in favor of Scienton.

(Tr. 2166:16–17.)

But even if

Scienton could request that the Court substitute NI Group, “a
reasonable time has been allowed for [NI Group] to ratify, join,
or be substituted into the action.”

See FED. R. CIV. P. 17(a).

The Second Circuit has recognized that “when defendants
assert that a party other than plaintiff has standing, their
unspoken premise [is] that [plaintiffs] lacked standing because
the non-party remained . . . the real party in interest.”
21

Abu

Dhabi, 888 F. Supp. 2d 478, 485–86 (S.D.N.Y. 2012) (alterations in
original; internal quotation marks and citation omitted).

CA

alerted Scienton of its lack of standing multiple times throughout
the trial.

(See, e.g., Tr. 9:24–10:12 (before jury selection);

682:20–683:4 (during Mr. Zivic’s cross-examination); 2164:11–16
(before closing arguments).)

On that basis, Scienton had ample

opportunity throughout the trial to coordinate its plaintiffs.10
Thus, Rule 17 could not save Scienton’s case.
Digizip.com, Inc. v. Verizon Services Corp., a case
relied upon by Scienton, is not to the contrary.
WL 6076532 at *5.

See 2015

There, Digizip agreed to resell Verizon’s

telephone services under a service agreement that exempted Digizip
from paying certain surcharges and taxes.
accidentally

paid

these

exemptions.

Digizip, however,

Before

learning

of

overpayments, Digizip sold its business to a third-party.

the
When

Digizip later filed suit against Verizon to receive a credit for
the overpayments, Verizon moved to dismiss the claims based on
Digizip’s lack of standing.

Id. at *1.

Ultimately, the U.S. District Court for the Southern
District of New York allowed the third-party to assign the claims
back

to

Digizip,

in

part,

because

“the

factual

and

legal

As discussed above, the Agreement is free from ambiguity; only
contractual rights were transferred. Thus, Scienton was likely
the proper plaintiff for the now-dismissed MNDA claim, but NI
Group is the proper plaintiff for the remaining tort claims.
10

22

allegations of the complaint would remain unaltered if the suit
continues.”
omitted).

Id. at *7 (internal quotation marks and citation
As the Southern District noted, “the concern over who

is the real party in interest under Fed. R. Civ. P. 17(a) addresses
only

the

prudential

aspect

of

the

standing

rule,

and

therefore . . . the application of Rule 17 does not implicate
Article

III

standing.”

Id.

at

*6.

But

critically,

that

“prudential strand of the standing doctrine” was not present in
that case because Digizip “‘suffered an injury in fact’--that is,
it erroneously paid certain taxes and surcharges from which it was
exempt.”

Id. at *5.

In other words, Digizip.com had no issue

with standing requirements; this case does.

Scienton did not

suffer an injury, nor did the Agreement transfer any tort claims
or intellectual property rights to allow Scienton to stand in the
shoes of NI Group.11

The Court is mindful of the intra-district split on this
issue. Compare Clarex Ltd. v. Natixis Secs. Am. LLC, No. 12-CV0722, 2012 WL 4849146, at *7–8 (S.D.N.Y. Oct. 12, 2012)
(“‘[W]hile Rule 17(a) allows for the substitution of a real
party in interest, a plaintiff must have Article III standing at
the outset of the litigation.’” (quoting In Re SLM Corp. Sec.
Litig., 258 F.R.D. 112, 115 (S.D.N.Y. 2009))) with In re Vivendi
Universal, S.A. Secs. Litig., 605 F. Supp. 2d 570, 584 (S.D.N.Y.
2009) (“[A] standing defect at the commencement of suit does not
require dismissal of the action with prejudice.”). Likewise,
the U.S. Court of Appeals for the Sixth Circuit has held that if
a plaintiff lacks standing at the outset of the litigation, he
or she may not “make a motion to substitute the real party in
interest.” Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528,
531 (6th Cir. 2002). The Second Circuit, however, has
11

23

Furthermore, other decisions cited by Scienton do not
involve parties that lacked standing under Article III. See, e.g.,
Ensley v. Cody Res., Inc., 171 F.3d 315, 319 (5th Cir. 1999) (“[The
plaintiff] suffered a concrete injury sufficient to meet the
constitutional justiciability requirement.”); Malamud v. Sinclair
Oil Corp., 521 F.2d 1142, 1152 (6th Cir. 1975) (“[T]he district
court correctly concluded that this particular group of plaintiffs
had standing.”); Iowa Pub. Serv. Co. v. Med. Bow Coal Co., 556
F.2d 400, 405 (8th Cir. 1977) (“[A]ll four plaintiffs are real
parties in interest and have standing to maintain the suit.”); KB Trucking Co. v. Riss Int’l Corp., 763 F.2d 1148, 1154 n.7 (10th
Cir. 1985) (“[The plaintiff] had standing to bring the fraudulent
misrepresentation claim against defendants.”).
In sum, Scienton has not met its burden to establish
Article III standing, and thus, the Court is deprived of subject
matter jurisdiction.

CA’s motion to set aside the jury verdict

under Federal Rule of Civil Procedure 50(b) is GRANTED, and it
follows that the Court need not address Scienton’s motions, as
they are now moot.
CONCLUSION
Defendant’s motion for judgment as a matter of law
(Docket Entry 557) is GRANTED, and Plaintiff’s motions (Docket

recognized that Zurich’s categorical approach has been “met with
some criticism.” Cortlandt, 790 F.3d at 423.
24

Entries 551, 554) are DISMISSED AS MOOT.

Also, with the exception

of the October 20th transcript, the remaining trial transcripts
are currently unavailable on the Electronic Case Filing System.
To ensure completeness of the electronic record, Defendant is
ORDERED to file the remaining portions of the transcript on the
docket.

After Defendant has done so, the Clerk of the Court is

directed to mark this matter CLOSED.

SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

May
17 , 2016
Central Islip, New York

25