Chadha et al v. Tech Matrix Infosolutions, Inc. et al
Filing
121
AMENDED REPORT AND RECOMMENDATION. This document is the same as DE 119 except for the correction of the two typographical errors. Ordered by Magistrate Judge A. Kathleen Tomlinson on 3/2/2020. (Ameri, Mana)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------X
MUNISH CHADHA and
CERNO TECHNOLOGIES PVT. LTD.,
Plaintiffs,
-againstSANJAY CHADHA,
SANTUSHT BHATIA,
TECH MATRIX INFOSOLUTIONS, INC., and
CERNO TECHNOLOGIES, INC.,
AMENDED
REPORT AND
RECOMMENDATION
CV 16-3739 (ENV) (AKT)
Defendants.
--------------------------------------------------------------X
A. KATHLEEN TOMLINSON, Magistrate Judge:
I.
PRELIMINARY STATEMENT
Plaintiffs Munish Chadha (“Munish”) and Cerno Technologies Pvt. Ltd. (“CT India”)
(collectively, “Plaintiffs”) commenced this action against Defendants Sanjay Chadha (“Sanjay”),
Santusht Bhatai (“Santusht”), Tech Matrix Infosolutions, Inc. (“Tech Matrix”), and Cerno
Technologies, Inc. (“CT, Inc.”) (collectively, “Defendants”) on July 6, 2016 alleging violations
of the Defend Trade Secrets Act, 18. U.S.C. § 1836 et seq. (“DTSA”), the Copyright Act of
1976, 17 U.S.C. § 101 et seq. (“Copyright Act”), and state law claims for breach of contract,
tortious interference of contracts, fraud, breach of fiduciary duty, breach of duty of loyalty,
conversion, unjust enrichment, and account stated. See generally Complaint [DE 1].
Defendants’ counsel entered an appearance in this action on July 29, 2016, see DE 15,
and subsequently filed an Answer, see DE 18. Defendants actively defended this action until
February 5, 2018, when the Court granted the motion of the Certilman Balin law firm to be
relieved as counsel of record for the individual Defendants and the corporate Defendants. The
Court gave the corporate Defendants 30 days to retain new counsel since a corporation can only
proceed by counsel. The individual Defendants were given 30 days to notify the Court whether
they were retaining counsel or proceeding pro se. See DE 73.
On February 13, 2018, Plaintiffs filed an Amended Complaint, pursuant to Judge
Bianco’s February 2, 2018 Order granting Plaintiffs leave to amend to add a claim for copyright
infringement. See Amended Complaint (“Am. Compl.”) [DE 75]. Notwithstanding their prior
participation in the action, Defendants failed to answer or otherwise respond to the Amended
Complaint. Likewise, Defendants never responded to Judge Bianco’s February 5, 2018 Order
regarding retention of new counsel. On April 30, 2019, Plaintiffs filed a Request for a
Certificate of Default with the Clerk of the Court. See DE 86. The Clerk of the Court entered
defaults against all of the Defendants on May 10, 2018, pursuant to Federal Rule of Civil
Procedure (“FED. R. CIV. P.” or “Rule”) 55(a). See DE 87. On October 1, 2018, Plaintiffs filed a
motion for entry of default judgment and permanent injunctive relief against the Defendants.
See 95.
Judge Bianco granted in part and denied in part Plaintiffs’ motion for default judgment on
December 18, 2018, solely as to liability. See DE 100. He then referred the matter to this Court
for the calculation of damages and the request for a permanent injunction. Id. Approximately
two months later, the law firm of Altman & Company, P.C., by Steven Altman, Esq., filed a
Notice of Appearance on behalf of all Defendants. DE 104. Defendants’ new counsel filed a
letter motion on February 14, 2019, requesting to be heard on Plaintiffs’ pending motion as to the
issue of damages only. See DE 105, 109. During the March 22, 2019 Status Conference, the
Court established a new briefing schedule for all parties, limited to the issue of damages and
permanent injunctive relief. See DE 110. As a result, Plaintiffs re-filed their motion for default
2
judgment and permanent injunctive relief, to which Defendants filed opposition. See Plaintiffs’
Motion for Default Judgment and Entry of Permanent Injunction, Motion to Damages and
Attorneys’ Fees (“Pls.’ Mem.”) [DE 113]; Defendants’ Memorandum of Law in Opposition to
Plaintiffs’ Claim For Damages (“Defs.’ Opp’n”) [DE 111]; Plaintiffs’ Reply Memorandum of
Law in Further Support of Motion for Default Judgment and Request for Damages and
Attorney’s Fees (“Pls.’ Reply”) [DE 114]; Defendants’ Response to the Documents Submitted
by Plaintiffs in Reply on Their Claim for Damages and Attorneys’ Fees (“Defs.’ Sur-Reply”)
[DE 117].
On June 3, 2019, Judge Vitaliano1 referred Plaintiffs’ motion to this Court for a Report
and Recommendation, pursuant to 28 U.S.C. § 636(b). See June 3, 2019 Electronic Order. For
the reasons which follow, this Court respectfully recommends to Judge Vitaliano that Plaintiffs’
motion be GRANTED in part and DENIED in part.
II.
BACKGROUND
In light of the fact that Judge Bianco previously found the Defendants in default and, as a
result, liable for damages, this Court is limiting its discussion of the facts to those necessary to a
determination of damages.
A.
Amended Complaint
The following facts are taken from the Amended Complaint and are assumed to be true
for purposes of this motion.
1.
2012 Business Agreement with Sanjay Chadha
In 2012, Munish, a citizen of India, entered into what appears to be a verbal business
agreement with his cousin, Sanjay, a citizen of New York, to form a business known as Tech
1
This case had been reassigned to District Judge Vitaliano on March 8, 2019.
3
Matrix (the “2012 Agreement”). See Am. Compl. ¶¶ 12-13. Tech Matrix, a corporation
organized and existing under the laws of the State of New York, markets and sells “proprietary
software, including software called Yoda Care and Yoda Shield, to provide paid-for computer
services” in the United States, and also markets and sells technical repair services for software
related issues. Id. ¶ 16; see also Declaration of Munish Chadha (“Chadha Decl.”) [DE 115-1]
¶ 8, annexed to the Declaration of Kalpana Nagampallli in Support of Plaintiff’s Motion for
Damages and Attorney’s Fees (“Nagampalli Decl.”) [DE 115-1]. Tech Matrix was allegedly
modeled after a business Munish owned and operated in India at the time. Am. Compl. ¶ 12.
The proprietary software sold by Tech Matrix was provided by Munish from his business in
India. Id. ¶ 13. Under the terms of the 2012 Agreement, Munish provided the business plan,
trade secrets, propriety business information, and capital to organize and operate Tech Matrix.
Id. In exchange, Sanjay managed the day-to-day operations of Tech Matrix. Id. Munish and
Sanjay further agreed that the two were to serve as co-directors of Tech Matrix, sharing equally
in the ownership and profits of the business. Id.
Sometime toward the end of 2013, Tech Matrix’s bookkeeper advised Munish that
Sanjay was transferring the profits earned by Tech Matrix exclusively to himself -- instead of
evenly distributing them between Munish and Sanjay in accordance with the Agreement. Id.
¶ 18. As Munish was attempting to recoup his share of Tech Matrix’s profits, he discovered that
Sanjay had made himself the sole principal and owner of Tech Matrix when he incorporated the
business. Id. ¶¶ 18, 19. To date, Sanjay has allegedly failed to share with Munish any profits
earned by Tech Matrix. Id. ¶ 20.
4
2.
2014 Business Agreement with Santusht Bhatia
In February 2014, Munish, along with non-party Guarav Sharma (“Sharma”) and
Santusht, all citizens of India, entered into a verbal agreement to form a business known as
Cerno Technologies Pvt. Ltd. (“CT India”) (the “2014 Agreement”). Id. ¶ 21. CT India, a
private limited company organized and existing under the laws of India, is “an information
technology company [that] develop[s] mobile applications and legal customer relationship
management applications.” Id. Under the terms of the 2014 Agreement, Munish, Sharma, and
Santusht served as the directors and shareholders of CT India. See id. The three agreed that
Munish would own 50% of CT India’s shares, Sharma would own 25% of the shares, and
Santusht would own the remaining 25%. Id. ¶ 23. Santusht developed CT India’s software
applications based on ideas conceived from the three directors, id. ¶ 22, while Munish provided
the capital for the company’s operations, id. ¶¶ 22, 24. Although not a shareholder or director of
CT India, Sanjay was hired to market CT India’s software applications. Id. ¶ 22.
Sometime in 2014, while serving as a director and shareholder of CT India, Santusht
developed two software applications referred to as CT Live and CT Legal. Id. ¶ 25. The source
codes for CT Live and CT Legal were in the sole possession of Santusht, who also had access to
all of CT India’s management, administrative, business, and proprietary information. Id. ¶¶ 3132. Notwithstanding never having had access to source codes, CT India, as the author and owner
of the source codes of CT Legal and CT Live, allegedly possesses a foreign copyright in India
for the source codes. Id. ¶¶ 106-107.2
2
As the District Court previously entered default judgment as to liability, the Court
is bound by the allegations in Plaintiffs’ Amended Complaint and must accept them as true.
Implicit in the entry of default judgment is Judge Bianco’s assessment that the allegations
sufficiently state a claim for relief.
5
In June 2014, Sanjay and Santusht allegedly colluded to launch CT Live and CT Legal
internationally through another company, Cerno Technologies, Inc. (“CT, Inc.”). Id. ¶¶ 28, 45.
CT, Inc., a corporation organized and existing under the laws of the State of New York, was
formed by Sanjay who serves as the sole shareholder and director of the company. Id. ¶ 27. In
January 2015, while Munish and Sharma protested the launch of CT Live and CT Legal,
Santusht ceased working for CT India and began working for CT, Inc. out of an office which CT,
Inc. established in India. Id. ¶ 29. Not only did Santusht take the source codes for CT Live and
CT Legal with him to CT, Inc., id. ¶ 32, but he also allegedly “coerced and/or influenced all the
Indian employees of [CT India]” to begin working for CT, Inc., id. ¶ 30. CT, Inc. has since
launched and marketed CT Live and CT Legal without the consent of CT India under the name
Lex Rex. Id. ¶ 45. To date, none of the profits from the sale of Lex Rex (i.e., CT Live and CT
Legal) have allegedly been shared with CT India, see id. ¶ 46; nor have the source codes for CT
Live and CT Legal been returned to CT India. Id. ¶ 34.
3.
2015 Settlement Agreement
Based on the foregoing conduct, Munish filed a criminal complaint against Defendants in
India in September 2015. Id. ¶ 37. In December 2015, Munish and Defendants executed a
settlement agreement in which Defendants agreed to remit to Munish $111,000, in six
installments of $18,500, in exchange for Munish agreeing to relinquish his interest and shares in
CT India and withdrawing the criminal complaint against Defendants (the “2015 Settlement
Agreement”). Id. ¶¶ 39-40. In accordance with the 2015 Settlement Agreement, Munish ceased
pursuing the criminal complaint, and, as a result, the criminal investigation was closed. Id. ¶ 43.
However, Defendants tendered only one payment of $18,500, and failed to tender the remaining
$92,500 owed to Munish under the terms of the 2015 Settlement Agreement. Id. ¶ 43.
6
B.
Procedural History
Plaintiffs commenced the instant action against Defendants on July 6, 2016, asserting
claims for: (1) misappropriation of trade secrets in violation of DTSA; (2) breach of contract;
(3) fraud; (4) breach of fiduciary duty; (5) breach of duty of loyalty; (6) conversion; (7) tortious
interference of contracts; (6) unjust enrichment; and (7) an account stated. DE 1. On July 29,
2016 and August 12, 2016, Defendants’ counsel entered an appearance in this action and filed an
Answer [DE 18]. The parties exchanged limited discovery, after which Plaintiff sought leave to
file an Amended Complaint to add claims for copyright infringement and breach of contract
arising from the 2015 Settlement Agreement. See DE 31, 64. On February 22, 2017, the Court
set a briefing scheduled for Plaintiff’s motion seeking leave to file an Amended Complaint. See
DE 34. Prior to the parties fully briefing the motion, Plaintiff filed a different motion on
August 2, 2017 to enforce the 2015 Settlement Agreement. See DE 51. Defendants opposed that
motion. See DE 54.
On September 19, 2017, the Court denied Plaintiff’s motion to enforce the 2015
Settlement Agreement. See DE 59. Thereafter, the parties resumed their briefing and filed the
motion seeking leave to file an Amended Complaint on November 20, 2017. See DE 31, 64-65,
67. On February 5, 2018, the Court granted Plaintiffs leave to file an Amended Complaint to
assert a claim for copyright infringement, but denied Plaintiffs’ motion as to the claim for breach
of contract arising from the 2015 Settlement Agreement. See DE 73. That same day, the Court
permitted Defendants’ counsel to withdraw as counsel of record based on Defendants’ failure to
respond to counsel’s attempts to contact them. See DE 71, 73. The individual Defendants
Sanjay and Santusht were directed to advise the Court within 30 days whether they intended to
retain counsel or proceed pro se. DE 73. The corporate Defendants Tech Matrix and CT, Inc.
7
were directed to advise the Court within 30 days of their new counsel since the corporations
could not proceed on a pro se basis. See id. Neither the individual nor the corporate Defendants
complied with the Court’s Order.
On February 13, 2018, Plaintiffs filed an Amended Complaint. See DE 75. Defendants
failed to answer or otherwise respond to the Amended Complaint. Plaintiffs filed a Request for a
Certificate of Default with the Clerk of the Court on April 30, 2019. DE 86. On May 10, 2018,
the Clerk of the Court entered a default against Defendants, pursuant to FED. R. CIV. P. 55(a).
DE 87. On October 1, 2018, Plaintiffs filed a motion for default judgment and permanent
injunctive relief against the Defendants. See DE 95. On December 18, 2018, Judge Bianco
found that Plaintiffs had properly effected service of the Amended Complaint on Defendants and
granted Plaintiffs’ motion for default judgment as to liability only. See DE 100. Judge Bianco
also advised Plaintiffs that in order to obtain damages related to a default, they must “present
admissible evidentiary proof of [their] alleged damages, unless the claimed amount is liquidated
or susceptible to mathematical calculation.” Id. (quoting In re Suprema Specialties, Inc., 330
B.R. 40, 54 (S.D.N.Y. 2005)).
Judge Bianco referred the remainder of the motion to this Court for a Report and
Recommendation on the issue of damages and injunctive relief. Id. No opposition to Plaintiffs’
motion was filed. However, approximately two months later, Defendants obtained new counsel,
who appeared in this action on February 14, 2019 and requested to be heard on Plaintiffs’
pending motion as to the issue of damages only. See DE 105. In light of this appearance, the
Court established a new briefing schedule “on the amount of damages to which Plaintiffs assert
they are entitled.” DE 110. The Court reminded Plaintiffs again that they were required “to
attach all underlying documentation for the damages claims as exhibits to [their] papers.” Id.
8
The motion for default judgment and permanent injunctive relief was re-filed on May 31,
2019.3 See DE 113-115. The motion seeks damages, attorneys’ fees and costs, prejudgment and
post judgment interest and permanent injunctive relief. Judge Vitaliano referred Plaintiffs’ refiled motion to this Court for a Report and Recommendation, pursuant to 28 U.S.C. § 636(b).
See June 3, 2019 Electronic Order.
IV.
RELIEF REQUESTED
A.
Compensatory Damages4
“When a default is entered, the defendant is deemed to have admitted all of the wellpleaded factual allegations in the complaint pertaining to liability.” Bravado Int'l Grp. Merch.
Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound
Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). Because a
default judgment has already been entered, the issue of liability on the claims raised in the
Amended Complaint has been established. However, “while a default judgment constitutes an
admission of liability, the quantum of damages remains to be established by proof unless the
amount is liquidated or susceptible of mathematical computation.” Flaks v. Koegel, 504 F.2d
702, 707 (2d Cir. 1974) (citations omitted); see also Bravado Int'l, 655 F. Supp. 2d at
189(citation omitted). “[E]ven upon default, a court may not rubber-stamp the non-defaulting
party’s damages calculation, but rather must ensure that there is a basis for the damages that are
3
On June 3, 2019, the Court granted Defendants leave to submit a limited surreply. See June 3, 2019 Electronic Order.
The Court notes that Plaintiffs’ submissions in support of the instant motion are,
at times, unclear, inconsistent, and lacking sufficient detail. In several instances, Plaintiffs failed
to adequately explain and/or support their theories and calculations of damages with legal
authority. The Court has endeavored to decipher Plaintiffs’ submissions to the extent possible to
identify and address all of the damages requested. However, the Court has not addressed any
theory of damages not explicitly and intelligibly stated.
4
9
sought.” Overcash v. United Abstract Grp., Inc., 549 F. Supp. 2d 193, 196 (N.D.N.Y.
2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)).
The burden is on plaintiff to establish entitlement to recovery. See Bravado Int'l, 655 F. Supp.
2d at 189 (citation omitted).
While a court must “take the necessary steps to establish damages with reasonable
certainty,” Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111
(2d Cir. 1997), a court need not hold a hearing “as long as it ensure[s] that there [is] a basis for
the damages specified in a default judgment.” Fustok v. ContiCommodity Services, Inc., 873
F.2d 38, 40 (2d Cir. 1989); see also McLean v. Wayside Outreach Dev. Inc., 624 Fed. App’x. 44,
45 (2d Cir. 2015) (observing that a district court did not abuse its discretion by failing to hold a
hearing to determine damages where the court relied on “a single affidavit only partially based
upon real numbers”). “If a plaintiff fails to demonstrate its damages to a reasonable certainty,
then the court should decline to award any damages, even where liability has been established
through default.” Culajay v. P.M.F. Steel Corp., No. 16-CV-6597, 2018 WL 1936457, at *2
(Feb. 21, 2018) (citation and internal quotation marks omitted), adopted by No. 16-CV-6597,
2018 WL 1796222 (E.D.N.Y. Mar. 20, 2018).
Plaintiffs’ motion seeks $855,0005 in damages, $131,701.50 in attorneys’ fees, and $9676
in costs. Pls.’ Mem. at 4-5; Chadha Decl. ¶ 46. Specifically, Plaintiffs seek: (1) statutory
Plaintiffs’ damages chart reflects Plaintiffs’ position that they are entitled to
$885,500 in damages; however, the sum of the monetary damages listed in that same chart adds
up to $855,000, not $885,500. See Pls.’ Mem. at 4-5. This is one of several inconsistencies in
Plaintiffs’ submissions.
5
Plaintiffs’ Memorandum of Law states that Plaintiffs are entitled to $1,250 in
costs; however, the Declaration of Nagampalli states that Plaintiffs’ are entitled to $967 in costs.
See Nagampalli Decl. ¶ 9. The Court relies here on the Nagampalli sworn declaration.
6
10
damages in the amount of $150,000, pursuant to the Copyright Act; (2) statutory damages in the
amount of $150,000, pursuant to the DTSA; (3) compensatory damages in the amount of
$330,000 in connection with the state law claims arising from the 2012 Agreement; (4)
compensatory damages in the amount of $100,000 in connection with the breach of contract and
conversion claims arising from the 2014 Agreement; (5) compensatory damages in the amount of
$25,000 arising from the 2015 Agreement; and (6) punitive damages in the amount of $100,000
in connection with the fraud claims. See generally Pls.’ Mem. At the outset, the Court points
out that Plaintiffs initially failed to provide any admissible documentary evidence in support of
the requested damages and attorneys’ fees and costs. After Defendants pointed out this
deficiency, Plaintiffs submitted the Declaration of Munish7 in support of their claim for
compensatory damages as well as the Nagampalli Attorney Declaration, with contemporaneous
time/billing records annexed to the declaration, in support of their claim for attorneys’ fees and
costs.8 See Chadha Decl.; Nagampalli Decl., Ex. C. Munish’s sworn declaration attests to the
facts underlying the Amended Complaint and the compensatory damages sought in connection
with the 2012 Agreement, 2014 Agreement, and 2015 Settlement Agreement. See generally
Chadha Decl.
Defendants assert that Munish’s signature page of his declaration is suspicious in
appearance, and, accordingly, Defendants request that the declaration be stricken. See Defs.’
Opp’n at 2-3. Defendants contend that the declarant must submit a supplemental declaration
attesting to the execution of the initial declaration before the Court may consider the initial
declaration. Id. Defendants fail to provide any legal authority in support of such a request. In
any event, the Court is not considering the declaration because, as discussed, infra, it does not
adequately provide a basis for the damages requested.
7
Although it is “plainly improper to submit on reply evidentiary information which
was available to the moving party at the time that it filed its motion and that is necessary in order
for that party to meet its burden,” the Court cured any asserted prejudice to Defendants by
permitting them to file a sur-reply. See Perez v. Manna 2nd Ave. LLC, No. 15-CV-655, 2016
WL 7489040, at *4 (S.D.N.Y. Dec. 28, 2016) (citing Church & Dwight Co. v. Kaloti Enterprises
of Michigan, LLC., No. 07-CV-612, 2011 WL 4529605, at *1 n.1 (E.D.N.Y. Sept. 28, 2011)).
8
11
As discussed below, Plaintiffs are entitled only to the compensatory damages sought in
connection with 2014 Agreement. Since the only damages the Court recommends awarding to
Plaintiffs are based on a claim for breach of contract for a sum certain, the Court finds that no
evidentiary hearing is necessary. See LG Capital Funding, LLC v. Ubiquity, Inc., No. 16-CV3102, 2017 WL 3173016, at *4 (E.D.N.Y. May 12, 2017) (concluding no evidentiary hearing
necessary to determine damages after granting motion for default judgment in a sum certain
breach of contract action). With these standards in mind, the Court will address the damages
sought by Plaintiffs in turn.
1.
Copyright Infringement
CT India seeks statutory damages in the maximum amount of $150,000 for what it
characterizes as Sanjay, Santusht, and CT, Inc.’s “willful and deliberate” infringement of CT
India’s copyrighted software, CT Live and CT Legal, under the name Lex Rex. See Am. Compl.
¶¶ 102-115; Pls.’ Mem. at 9-13. In seeking statutory damages, CT India acknowledged that it is
unable to quantify the profits realized from Sanjay, Santusht, and CT, Inc.’s infringement due to
their default and the corporation does not proffer evidence of damages in any other form. See
Pls.’ Mem. at 9-10.
The Copyright Act provides that “[a] copyright owner may elect ... to recover, instead of
actual damages and profits, an award of statutory damages for all infringements involved in the
action[.]” 17 U.S.C. § 504(c)(1); see also N.A.S. Import Corp. v. Chenson Enter., Inc., 968 F.2d
250, 252 (2d Cir. 1992). Section 504(c)(1) of the Copyright Act permits a court to award
statutory damages “with respect to any one work ... in a sum of not less than $750 or more than
$30,000 as the court considers just.” Id. If a court finds willful infringement, “the court in its
discretion may increase the award of statutory damages to a sum of not more than
12
$150,000.” Id. § 504(c)(2). Within these statutory limits, the Court has broad discretion in
determining the appropriate statutory damages award. See Fitzgerald Publ'g Co., Inc. v. Baylor
Publ'g Co., Inc., 807 F.2d 1110, 1116 (2d Cir. 1986).
No proof of actual damages or, in fact, any damages, is necessary for the award of
statutory damages. See All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F. Supp. 2d 613, 626
(S.D.N.Y. 2011) (quoting Nat'l Football League v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d
458, 472 (S.D.N.Y. 2001); see also UMG Recordings, Inc. v. Griffin, No. 08–CV–00274, 2008
WL 4974856 at *2 (N.D.N.Y. Nov. 24, 2008) (“[A] plaintiff may elect statutory damages
regardless of the adequacy of the evidence offered as to his actual damages and the amount of
the defendant's profits.”) (quotations omitted). Indeed, “[t]he award of statutory damages is
especially fitting in the default judgment context where Plaintiffs are without the benefit of any
disclosure by the infringer, leaving damages uncertain.” Tu v. TAD Sys. Tech. Inc., No. 08-CV3822, 2009 WL 2905780, at *2 (E.D.N.Y. Sept. 10, 2009) (citation omitted).
This case involves copyrighted works created and published in India. India is a
contracting party/signatory to the Berne Convention. See Berne Convention for the Protection of
Literary and Artistic Works art. 3, Sept. 9, 1886–Nov. 16, 1988, S. Treaty Doc. No. 99–27, 1161
U.N.T.S. 30 (entered into force Mar. 1, 1989) (“Berne Convention”); see also Contracting
Parties, Berne Convention, WORLD INTELLECTUAL PROPERTY ORGANIZATION,
http://www.wipo.int/treaties/en/Show Results.jsp?lang=en&treaty_id=15 (last visited
February 28, 2020). The Berne Convention “does not require the owner of a foreign copyright to
register in the United States before seeking redress for infringement of works originating in
foreign nations . . . that are signatories to the convention.” Super Express USA Publ'g Corp. v.
Spring Publ'g Corp. (“Super Express USA Publ'g Corp. I”), No. 13-CV-2814, 2017 WL
13
1274058, at *9 (E.D.N.Y. Mar. 24, 2017) (quoting Sadhu Singh Hamdad Trust v. Ajit Newspaper
Advert. Mktg. & Commc'ns, Inc., 503 F. Supp. 2d 577, 584 (E.D.N.Y. 2007)). Although the
Berne Convention spares owners of foreign copyrights from having to register a copyright in the
United States before bringing suit, failing to register does preclude certain remedies.
Under the Copyright Act “no award of statutory damages or of attorney’s fees ... shall be
made for ... any infringement of copyright in an unpublished work commenced before the
effective date of its registration.” 17 U.S.C. § 412. Therefore, “unregistered foreign copyright
holders can bring infringement claims, but they may only seek actual damages.” Super Express
USA Publ'g Corp. v. Spring Publ'g Corp. (“Super Express USA Publ'g Corp. II”), No. 13-CV2814, 2018 WL 1559764, at *3 (E.D.N.Y. Mar. 30, 2018); see The Football Ass'n Premier
League Ltd. v. YouTube, Inc., 633 F. Supp. 2d 159, 164 (S.D.N.Y. 2009) (“[O]ne could bring an
infringement suit (although not obtain statutory damages) based on an unregistered foreign Berne
Convention work”); Haddley v. Next Chapter Tech., Inc., No. 16-CV-1960, 2017 WL 1483333,
at *3, n.6 (D. Minn. Apr. 25, 2017) (“The holder of a foreign copyright does not need to register
before filing suit, unless he is seeking statutory damages or attorney fees.”) (citations omitted).
Here, it is not alleged that the foreign copyrights at issue have been registered in the
United States. See Am. Compl. ¶¶ 102-109. Having failed to register the foreign copyrights
with the U.S. Copyright Office, CT India is not entitled to any statutory damages. See 17
U.S.C. § 412; Super Express USA Publ'g Corp. II, 2018 WL 1559764, at *3 (“In declining to
register their [foreign] copyrights, Plaintiffs foreclosed the possibility of statutory damages.”);
The Football Ass'n, 633 F. Supp. 2d at 162 (“Section 412 [of the Copyright Act] has no
exception excusing foreign works from its mandate: it requires registration to obtain statutory
damages for both domestic and foreign works.”).
14
Accordingly, the Court respectfully recommends that CT India’s request for statutory
damages in the amount of $150,000 against Sanjay, Santusht, and CT, Inc. for copyright
infringement be DENIED.9
2.
Misappropriation of Trade Secrets
Plaintiffs each seek, without citation to any supporting legal authority, “statutory
damages [in the amount] of $150,000” against Sanjay and Tech Matrix for their unlawful
distribution of Yoda Care and Yoda Shield, and against Sanjay, Santusht, and CT, Inc., for their
unlawful distribution of CT Live and CT Legal. See Pls.’ Mem. at 9, 13.
The DTSA allows the Court to award: (1) “damages for actual loss caused by the
misappropriation of the trade secret;” (2) “damages for any unjust enrichment caused by the
misappropriation of the trade secret that is not addressed in computing damages for actual loss;”
or (3) “in lieu of damages measured by any other methods, the damages caused by the
misappropriation measured by imposition of liability for a reasonable royalty for the
misappropriator’s unauthorized disclosure or use of the trade secret.” 18 U.S.C. § 1836(b)(3)(B).
Based on the plain language of the statute, the DTSA does not permit the Court to award
statutory damages as a remedy for the misappropriation of a trade secret. See id. While the
DTSA also provides for an award of exemplary damages, this should not be conflated with the
9
Plaintiff CT India only elected to seek statutory damages for its copyright claim,
and thus, the Court need not analyze whether actual damages are appropriate. See Getaped, Inc.,
v. Cangerni, 188 F. Supp. 2d. 398, 406 (S.D.N.Y. 2002) (“Once a plaintiff elects statutory
damages, he or she gives up the right to seek actual damages.”); see also Latin American Music
Co. v. Spanish Broadcasting Systems, Inc., 866 F. Supp. 780, 782 (S.D.N.Y. 1994) (“Although
the election may be made at any time before final judgment is rendered, once a plaintiff elects
statutory damages he may no longer seek actual damages”); Homkow v. Musika Records,
Inc., No. 04-CV-3587, 2008 WL 508597, at *3 (S.D.N.Y. Feb. 26, 2008) (precluding plaintiff
from seeking actual damages prior to final judgment after plaintiff elected to pursue statutory
damages in first inquest submission).
15
“statutory damages” sought by Plaintiffs here. Exemplary damages are awarded “in an amount
not more than 2 times the amount of damages” when the trade secret is willfully and maliciously
misappropriated. 18 U.S.C. § 1836(b)(3)(C). However, there can be no exemplary damages
without there first being an award of actual damages, which Plaintiffs did not request. See id.
The Court draws the conclusion here that Plaintiffs have conflated the remedies permitted under
the Copyright Act -- which provides for statutory damages -- with that of the DTSA, which does
not.
Accordingly, the Court respectfully recommends that Plaintiffs’ request for statutory
damages in the amount of $150,00 against Defendants for their violation of the DTSA be
DENIED.10
3.
Breach of Contract, Conversion, Fraud, Unjust Enrichment, Breach of
Fiduciary Duty, and Account Stated11
a. Sanjay, Santusht, Tech Matrix, and CT, Inc.
Plaintiffs seek damages in the amount of $125,000 for Defendants’ purported breach of
the 2015 Settlement Agreement. See Pls.’ Mem. at 15-17. The Court has twice rejected
Plaintiffs’ attempts to assert any rights and remedies arising from the 2015 Settlement
Agreement. On September 19, 2017, the Court denied Plaintiffs’ motion to enforce the 2015
Plaintiffs also seek “at least $330,000 [for Defendants’] common law
misappropriation of trade secrets, withheld profits and distribution.” See Pls.’ Mem. at 15. Since
Plaintiffs failed to plead any common law claim for misappropriation of trade secrets, they are
not entitled to any damages arising from such a claim. See Joint Stock Co. Channel One Russia
Worldwide v. Infomir LLC, No. 16-CV-1318, 2018 WL 4760345, at *1 (S.D.N.Y. Sept. 28,
2018) (“[A] plaintiff cannot recover damages against a defaulted defendant for claims never
alleged in its pleading”); FED. R. CIV. P. 54(c) (A default judgment “must not differ in kind
from, or exceed in amount, what is demanded in the pleadings”).
10
11
Plaintiffs do not seek damages for any other state law claims pled in the Amended
Complaint.
16
Settlement Agreement. See DE 59. Thereafter, on February 5, 2018, the Court denied Plaintiffs
leave to amend their Complaint to assert a claim for breach of contract arising from the 2015
Settlement Agreement. See DE 73. Consequently, the Amended Complaint does not plead a
claim for breach of contract arising from the 2015 Settlement Agreement, and, thus, Plaintiffs are
not entitled to damages based on such a claim. See FED. R. CIV. P. 54(c) (“A default judgment
must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”); Joint
Stock Co. Channel One Russia Worldwide, 2018 WL 4760345, at *1 (“[A] plaintiff cannot
recover damages against a defaulted defendant for claims never alleged in its pleading”).
Accordingly, the Court respectfully recommends that Plaintiffs’ request for an award of
$125,000 in compensatory damages against Defendants for their purported breach of the 2015
Settlement Agreement be DENIED.
b. Sanjay and Tech Matrix
Munish seeks $330,00 in damages against Sanjay and Tech Matrix for their failure to
distribute 50% of Tech Matrix’s profits to Munish in accordance with the 2012 Agreement. See
Pls.’ Mem. at 10. These damages are sought in connection with Munish’s claims for breach of
contract, fraud, conversion, breach of fiduciary duties, an account stated, and unjust enrichment
against Sanjay. See generally Chadha Decl. Although Munish seeks damages for the same
injury under different legal theories, he is only entitled to a single recovery.12 See, e.g., Seifts v.
Plaintiffs’ fraud claim, for example, is barred because it is duplicative of
Plaintiffs’ breach of contract claim. RJ Kitchen Assoc. Inc. v. Skalski, 16-1436, 2019 WL
2436092, at *5 (E.D.N.Y. Feb. 25, 2019) (citing Feel Better Kids, Inc. v. Kids in Need, Inc., No.
06-CV-0023, 2012 WL 4483000, at *9 (E.D.N.Y. Aug. 28, 2012) (internal quotation marks and
citation omitted), report and recommendation adopted by 2012 WL 4483874 (E.D.N.Y. Sept. 27,
2012). Generally, New York law requires that a fraud claim raised in the context of a contract
dispute be “sufficiently distinct from the breach of contract claim.” Bridgestone/Firestone, Inc.
v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996) (quoting Papa’s–June Music, Inc.
v. McLean, 921 F.Supp. 1154, 1162 (S.D.N.Y. 1996)). With limited exceptions, none of which
12
17
Consumer Health Sols. LLC, 61 F. Supp. 3d 306, 326 (S.D.N.Y. 2014) (“Where a plaintiff seeks
recovery for the same damages under different legal theories, only a single recovery is allowed.”)
(citation omitted); Shamrock Power Sales, LLC v. Scherer, No. 12-CV-8959, 2016 WL 7647597,
at *14 (S.D.N.Y. Dec. 8, 2016), report and recommendation adopted, No. 12-CV-8959, 2017
WL 57855 (S.D.N.Y. Jan. 4, 2017) (“To further award damages here for the same amount
granted above would be redundant and excessive.”) (citation omitted). As such, the Court will
only evaluate Munish’s entitlement to the requested damages under his breach of contract claim.
Under New York law,13 the party injured by a breach of contract may generally seek “two
distinct categories of damages:” (1) general or market damages, and (2) special or consequential
damages. Schonfeld v. Hilliard, 218 F.3d 164, 175 (2d Cir. 2000) (citation omitted). General
damages compensate the injured party for the “value of the very performance promised.” Id.
(citation omitted). “A party injured by breach of contract is entitled to be placed in the position
it would have occupied had the contract been fulfilled according to its terms.” Merrill
Lynch, 500 F.3d at 185 (citing Boyce v. Soundview Tech. Grp., Inc., 464 F.3d 376, 384 (2d
Cir.2006)); see also Menzel v. List, 24 N.Y.2d 91, 298 N.Y.S.2d 979, 983, 246 N.E.2d 742
apply here, a fraud claim will not lie if it arises “out of the same facts as plaintiff’s breach of
contract claim.” Telecom Int'l Am., Ltd. v. AT & T Corp., 280 F.3d 175, 196 (2d Cir. 2001).
Here, Plaintiffs’ fraud claim arises out of the same facts as the breach of contract claim and as
such is duplicative of Plaintiff’s breach of contract claim. See R.J. Kitchen Associates, Inc.,
2019 WL 2436092, at *5.
Where, as here, the parties do not raise choice-of-law as an issue, “it can be said
that they have consented to the application of the forum state’s law.” Mangual v. Pleas, No. 02CV-8311, 2005 WL 2179083, at *2, n.1 (S.D.N.Y. Sept. 8, 2005); see also Jin Young Chung v.
Yoko Sano, No. 10-CV-2301, 2011 WL 1303292, at *7 (E.D.N.Y. Feb. 25, 2011), report and
recommendation adopted sub nom., No. 10-CV-2301, 2011 WL 1298891 (E.D.N.Y. Mar. 31,
2011) (finding New York law applies where plaintiff “has not taken any position” and the
defendant defaulted). The parties’ citation to New York law further serves as “implied consent
... sufficient to establish choice of law.” Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 138
(2d Cir. 2000) (internal quotation marks and citations omitted).
13
18
(1969). Unlike general damages, consequential damages “seek to compensate a plaintiff
for additional losses (other than the value of the promised performance) that are incurred as a
result of the defendant's breach.” Schonfeld, 218 F.3d at 176 (citing 3 Dan B. Dobbs, Dobbs
Law of Remedies § 12.2(3) (1993)).
Although Munish is silent as to the specific category of damages he seeks, it appears that
he is seeking general damages to compensate him for the “value of the very performance
promised” (i.e., 50% of the profits earned by Tech Matrix). According to Munish, $330,000
represents the value of the performance promised. See Pls.’ Mem. at 10; Chadha Decl. ¶ 46. In
support of the damages sought, Munish’s Declaration purports to attach a “true and correct
reproduction of [Tech Matrix’s] QuickBooks Ledger showing [his and] Sanjay’s withdrawals
from [Tech Matrix] in 2013.”14 Chadha Decl. ¶ 11. Munish contends the ledger demonstrates
that he “withdrew” a total of $10,411.89 from Tech Matrix’s business account while Sanjay
“withdrew” a total of $175,156.75 from the account, resulting in a net benefit of $165,156.75
being conferred on Sanjay. Id. Based on this difference, Munish concludes that he “is owed at
least $82,500 … from 2013 calendar year” which, if extrapolated over the four years during
which Tech Matrix was profitable, would amount to $330,000. Id. ¶¶ 11-13.
As an initial matter, the Court cannot consider the purported ledger in any calculation of
damages because Munish failed to attach the ledger to his sworn declaration in support of the
instant motion. Id. Although Munish included the ledger in a prior filing which appears on the
docket, see DE 75, Ex. A, the ledger was not attached to any signed declaration attesting to its
The 2013 QuickBooks ledger is for the corporate entity named “My Tech Bays,
Inc.” See Am. Compl. at ¶ 15. However, according to the allegations in the Amended
Complaint, which are deemed admitted for purposes of the instant motion, Tech Matrix was
originally incorporated as “My Tech Bays, Inc.” See id.
14
19
authenticity and accuracy; thus, the ledger is not admissible. See FED. R. EVID. 901(a); House v.
Kent Worldwide Mach. Works, Inc., 359 Fed. App'x 206, 207 (2d Cir. 2010) (summary order)
(“The Federal Rules of Evidence require that documents be authenticated before they can be
admitted into evidence.”) (citing FED. R. EVID. 901(a)); Glassman-Brown v. Pouring Wine, LLC,
No. 14-CV-03763, 2015 WL 5853802, at *3 (S.D.N.Y. Aug. 5, 2015), report and
recommendation adopted in part, No. 14-CV-3763, 2015 WL 5853807 (S.D.N.Y. Oct. 7, 2015)
(“The Federal Rules of Evidence require that an item of evidence must be authenticated and that
requirement is satisfied by ‘evidence sufficient to support a finding that the item is what the
proponent claims it is.’ ”) (citing FED. R. EVID. 901(a)). In light of Plaintiffs’ failure to submit
any admissible supporting documentary proof to substantiate a calculation of damages, the Court
cannot award Munish the $330,000 in damages which Plaintiffs seek. See Granados v. Gold
Coast Tennis, Inc., No. 12-CV-4016, 2013 WL 3766582, at *3 (E.D.N.Y. July 16, 2013) (“To
obtain damages related to a default judgment, a plaintiff must present admissible evidentiary
proof of his alleged damages, unless the claimed amount is liquidated or susceptible to
mathematical calculation”) (internal quotation marks and citation omitted); House v. Kent
Worldwide Mach. Works, Inc., 359 Fed. App'x 206, 207 (2d Cir. 2010) (finding that a damages
award must be based on admissible evidence).
Even assuming the ledger was properly before the Court, this ledger reveals nothing more
than Tech Matrix’s expenditures. See DE 93, Ex. A. The ledger does not disclose any
information regarding Tech Matrix’s revenues and/or profits. See id. Moreover, the amount of
damages Munish seeks based on the ledger is completely arbitrary and lacking in foundation.
Munish has failed to explain how he arrived at the sum of $82,500, and why extrapolating that
number over four years would not be anything more than speculation. See, e.g., Tamarin v.
20
Adam Caterers, Inc., 13 F.3d 51, 53 (2d Cir. 1993) (noting that plaintiff's “estimates” that “were
at best undocumented, and at worst, speculative” failed to establish damages with reasonable
certainty); Harris v. Fairweather, No. 11-CV-2152, 2012 WL 5199250, at *4 (denying claim for
damages that was speculative and “not supported by any citations to authority or evidence’);
Anglo–Iberia Underwriting Management Co. v. Lodderhose, 282 F. Supp. 2d 126, 130 (S.D.N.Y.
2003) (finding that certain damages set forth by the plaintiffs were speculative and therefore not
recoverable). It appears that for some unknown reason, Munish halved the difference of Tech
Matrix’s expenditures caused to be incurred by Sanjay and Munish ($165,156.75 ÷ 2 = $82,500).
However, Munish failed to provide any explanation or legal authority in support of this
calculation. Munish’s calculation of damages is still based on Tech Matrix’s expenditures,
which, taken alone, shed no light on the profits earned by Tech Matrix.
Accordingly, Munish has failed to provide an adequate basis for the damages sought.
Therefore, the Court respectfully recommends that Munish’s request for an award of $330,000 in
damages for the breach of contract claim and other state law claims against Sanjay and Tech
Matrix be DENIED.
c.
Santusht
Based on the damages chart provided in Plaintiffs’ submissions, it appears that Munish
seeks $100,000 in damages against Santusht for his failure to distribute 50% of the profits earned
from the sale of CT India’s software in accordance with the 2014 Agreement.15 See Pls.’ Mem.
Plaintiffs’ damages chart states that $100,000 is sought for “lost investments in
developing CT India” based on the breach of contract and conversion claims. See Pls.’ Mem. at
10. This capital investment was made in accordance with terms of the 2014 Agreement entered
into between Munish, Santusht, and Sharma. See Am. Compl. at ¶ 24. Since Santusht is the
only named defendant who is a party to the 2014 Agreement, the Court concludes that the
damages sought are by Munish against Santusht.
15
21
at 10. The damages chart shows that these damages are sought in connection with Munish’s
claims against Santusht for breach of contract and conversion. Id. Again, since Munish “seeks
recovery for the same damages under different legal theories, only a single recovery is allowed,”
and the claim will be evaluated under Munish’s breach of contract theory. See Seift, 61 F. Supp.
3d at 326.
Under the 2013 Agreement, Munish agreed to contribute capital in the sum of $100,000
to CT India in exchange for 50% of the profit earned from any software developed by Santusht
for CT India. See Am. Compl. ¶¶ 22-24. Santusht developed the CT Live and CT Legal
software for CT India but did not share any of the profits earned from the sale of that software.
Id. ¶¶ 25, 46. Here, however, Munish concedes that he is unable to quantify the profits earned
from the sale of the software because of Defendants’ default. See Pls.’ Mem. at 10. Presumably
in the absence of such evidence, Munish seeks an award of $100,000 in damages representing
the capital he invested under the terms of the 2013 Agreement. Id. Although Munish fails to
categorize or articulate the legal basis for his requested damages, it is clear that he is seeking to
be put in the same position as he was prior to the execution of the 2014 Agreement. Specifically,
Munish is seeking the return of his investment instead of the profits from the sale of the software
he would have received in accordance with the 2014 Agreement.
Under New York law, where the traditional measure of damages for breach of
contract cannot be precisely calculated, reliance or restitution damages may be an appropriate
remedy. See Nature’s Plus Nordic A/S v. Nat. Organics, Inc., 98 F. Supp. 3d 600, 605 (E.D.N.Y.
2015), aff'd, 646 Fed. App'x 25 (2d Cir. 2016) (citation omitted). Both reliance and restitution
damages are intended to “place plaintiffs in the same position as they were prior to the execution
of the contract[.]”. See Summit Properties Int'l, LLC v. Ladies Prof'l Golf Ass'n, No. 07-CV-
22
10407, 2010 WL 4983179, at *5 (S.D.N.Y. Dec. 6, 2010) (citing V.S. Intern., S.A. v. Boyden
World Corp., 862 F.Supp. 1188, 1198 (S.D.N.Y.1994). Reliance damages “allow a plaintiff to
recover [its] expenses of preparation and of part performance, as well as other foreseeable
expenses incurred in reliance upon the contract.” Summit Properties Int'l, LLC, 2010 WL
4983179, at *5 (quoting Bausch & Lomb Inc. v. Bressler, 977 F. 2d 720, 729 (2d Cir. 1992)).
“Reliance damages are available only for efforts ‘rendered useless’ as a consequence of the
breach.” Puebla Palomo v. DeMaio, 403 F. Supp. 3d 42, 71 (N.D.N.Y. 2019) (citing Summit
Properties Int'l, LLC, 2010 WL 4983179, at *5 (S.D.N.Y. Dec. 6, 2010)).
Alternatively, “[u]pon a demonstration that a defendant is liable for material breach, the
plaintiff may recover” “restitution” equal to “the reasonable value of services rendered, goods
delivered, or property conveyed less the reasonable value of any counter-performance received
by him.” Id. “A material breach is one that has been defined as one that would justify the other
party to suspend his own performance of the contract.” Id. (citing Lanvin Inc. v. Colonia, Inc.,
739 F. Supp. 182, 195 (S.D.N.Y. 1990)).
Here, Santusht developed the CT Live and CT Legal software for CT India utilizing the
resources (i.e., equipment, personnel, etc.) funded by Munish’s $100,000 investment in CT India.
See Am. Compl. ¶¶ 22, 24-25. Santusht thereafter sold the software, but did not distribute any of
the profits to Munish (or Sharma) in accordance with the 2014 Agreement. Id. ¶ 46. Santusht
has withheld the source codes for the CT Live and CT Legal software from Plaintiffs while
bringing all personnel and resources funded by Munish’s investment to CT, Inc. Id. ¶¶ 24, 30,
32-33. These actions constitute a material breach of the 2014 Agreement, rendering worthless
Munish’s investment. Therefore, Munish is entitled to recover his $100,000 investment as either
“expenses of preparation and of part performance ... incurred in reliance upon the contract” or as
23
“the reasonable value of…property conveyed.” See Summit Properties Int'l, LLC, 2010 WL
4983179, at *4-5; Puebla Palomo v. DeMaio, 403 F. Supp. 3d at 71 (finding that defendants
could recover their capital investment rendered useless by plaintiff’s breach of contract through
either reliance damages or restitution damages); Intrepidus, LLC v. Bivins, No. 15-CV-7721,
2019 WL 4911190, at *4 (S.D.N.Y. Sept. 16, 2019), report and recommendation adopted, No.
15-CV-7721, 2019 WL 4805761 (S.D.N.Y. Oct. 1, 2019) (recommending that plaintiff recover
its capital investment rendered worthless by defendant’s misappropriation and conversion
because “[defendant’s] default and [his] abandonment of [the] litigation … render[ed] the most
appropriate remedies unprovable.”)
Defendants argue that Munish is not entitled to the requested damages because he has not
presented any proof of having invested $100,000 in CT India. See Defs.’ Opp’n at 14. However,
Munish’s proof of damages is inextricably bound to his allegations of liability. Munish alleged
in his Amended Complaint (see Am. Compl. ¶ 24) and signed declaration (Chadha Decl. ¶ 12)
under penalty of perjury, that he invested $100,000 in CT India under the terms of the 2014
Agreement. Since this allegation is deemed admitted by virtue of Defendants’ default, no
additional proof is necessary. See Amusement Indus., Inc. v. Stern, No. 07-CV-11586, 2016 WL
7016855, at *3 (S.D.N.Y. Nov. 30, 2016), report and recommendation adopted, No. 07-CV11586, 2017 WL 57851 (S.D.N.Y. Jan. 4, 2017), aff'd, 721 Fed. App'x 9 (2d Cir. 2018)
(awarding damages and noting “[P]laintiffs alleged that they wired $13,000,000 to the escrow
account and that [defendants] misappropriated the funds in that account. By its default,
[defendant] admitted those allegations. Thus, additional proof of damages is arguably not even
necessary.”) (citation omitted).
24
Accordingly, the Court respectfully recommends that Munish’s request for an award of
$100,000 in damages against Santusht for the breach of contract claim be GRANTED.16
B.
Punitive Damages
Plaintiffs seek punitive damages in the amount of $100,000 in connection with their fraud
claims against Defendants. See Pls.’ Mem. at 12-13. Before punitive damages may be awarded,
“New York law requires a finding of actual or nominal damages.” Juniper Entm't, Inc. v.
Calderhead, No. 07-CV-2413, 2012 WL 1106929, at *7 (E.D.N.Y. Mar. 31, 2012) (collecting
cases). Here, the only damages sought in connection with any claim for fraud was by Munish
against Sanjay for compensatory damages in the amount of $330,000 arising from the 2012
Agreement. See Pls.’ Mem. at 10. However, as explained supra, the Court recommends against
awarding compensatory damages for this claim. Moreover, since Plaintiffs did not request
nominal damages for any of its claims,17 the Court does not recommend awarding any such
damages. Because the Court does not recommend awarding either actual or nominal damages
for Plaintiffs’ fraud claims, Plaintiffs are not entitled to punitive damages arising from those
claims. See Action House, Inc. v. Koolik, 54 F.3d 1009, 1013 (2d Cir. 1995) (“The district
court's instructions on punitive damages were not consistent with New York law, which requires
a finding of actual damages before punitive damages may be awarded.”); Conner v. Kira Int'l,
16
Plaintiffs did not identify which Defendants they sought to hold jointly and
severally liable, and for which claims they sought to hold them jointly and severally liable.
17
Even if nominal damages had been requested, it is questionable whether Plaintiffs
would be entitled to such damages since the parties did not address whether Plaintiffs sufficiently
demanded such damages in their Complaint. See Fed. R. Civ. P. 54(c) (“A default judgment
must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”); Fox v.
Board of Trustees of State University of New York, 148 F.R.D. 474, 478-82 (N.D.N.Y. 1993)
(finding that nominal damages cannot be “read into the complaint” and that plaintiffs could not
rely upon the request for “other reliefs as the Court deems just and proper”).
25
Inc., No. 13-CV-0417, 2015 WL 4656530, at *6 (E.D.N.Y. July 14, 2015), report and
recommendation adopted, No. 03-CV-417, 2015 WL 4656536 (E.D.N.Y. Aug. 5, 2015)
(“Punitive damages [premised on fraud] … are not available when compensatory or nominal
damages are not awarded.”).
Even assuming Plaintiffs were entitled to nominal or actual damages for their fraud
claims, or that Plaintiffs did not limit their request for punitive damages solely to those claims,
the Court nonetheless recommends against awarding punitive damages in this action. “[I]n order
to state a claim for punitive damages, a claimant must allege conduct which (1) is aimed at the
public generally, (2) involves a fraud evincing a high degree of moral turpitude and (3)
demonstrates such wanton dishonesty as to imply a criminal indifference to civil obligations.”
Manning v. Utilities Mut. Ins. Co., 254 F.3d 387, 400 (2d Cir. 2001) (citation and internal
quotation marks omitted). Punitive damages must be proven by clear and convincing
evidence. Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d
489, 526 (S.D.N.Y. 2011).
Here, Plaintiffs have failed to allege any facts demonstrating that Defendants’ conduct
was aimed at the public generally. See Manney v. Reichert, No. 13-CV-4413, 2014 WL
4805046, at *16 (E.D.N.Y. Sept. 26, 2014) (“A court evaluates whether a plaintiff is entitled
to punitive damages for fraud related to a contract claim using the same test as for punitive
damages in a contract claim. This requires, inter alia, that the fraudulent “conduct must be part
of a pattern directed at the public.”) (citation omitted). Plaintiffs allege that Defendants
committed a breach of contract and fraud only as to Plaintiffs, and make no allegation that
Defendants were engaged in a larger scheme to defraud the public. Where, as here, damages are
plainly sought to “remedy private wrongs” rather than “vindicate public rights,” an award of
26
punitive damages is not warranted. Kruglov v. Copart of Connecticut, Inc., 771 F. App'x 117,
120 (2d Cir. 2019) (“[T]he purpose of punitive damages ‘is not to remedy private wrongs but to
vindicate public rights.’ ”) (citing Rocanova v. Equitable Life Assurance Soc’y of the U.S., 83
N.Y.2d 603, 613, 612 N.Y.S.2d 339, 634 N.E.2d 940 (1994)).
Accordingly, the Court respectfully recommends that Plaintiffs’ request for punitive
damages in the amount of $100,000 be DENIED.
C.
Pre-Judgment Interest
Plaintiffs seeks pre-judgment interest on the damages awarded in connection with their
breach of contract claim from July 6, 2016, the date this action was commenced. See Pls.’ Mem.
at 15. “Under New York law, a plaintiff that prevails on a claim for breach of contract is
entitled, as a matter of right, to prejudgment interest from the date of breach until the entry of
final judgment.” Boyce v. Soundview Tech. Grp., Inc., No. 03-CV-2159, 2005 WL 627780, at *2
(S.D.N.Y. Mar. 17, 2005) (citing, inter alia, U.S. Naval Inst. v. Charter Commc'ns, Inc., 936
F.2d 692, 698 (2d Cir. 1991)); see N.Y. C.P.L.R. § 5001. The statutory rate of “[i]nterest shall
be at the rate of nine per centum per annum.” N.Y. C.P.L.R. § 5004. “Where ... damages for
breach of contract are incurred at various times after the date of the breach, ‘interest shall be
computed upon each item from the date it was incurred or upon all of the damages from a single
reasonable intermediate date.’” Danaher Corp. v. Travelers Indem. Co., No. 10-CV-121, 2015
WL 409525, at *8 (S.D.N.Y. Jan. 16, 2015) (quoting N.Y. C.P.L.R. § 5001(b)).
Here, Munish does not request that interest be computed from the date his damages
accrued, but instead requests that interest be computed from the date this action was commenced
on July 6, 2016. See Pls.’ Mem. at 15. Accordingly, the Court respectfully recommends that
Munish be awarded prejudgment interest on his award of compensatory damages at the statutory
27
rate of 9% per annum from July 6, 2016 through the date of entry of judgment. See H.Daya Int'l
Co. v. Arazi, 348 F. Supp. 3d 304, 312 (S.D.N.Y. 2018) (granting plaintiff’s request to apply
prejudgment interest from the date the action was instituted instead of the date the damages
accrued).
D.
Post-Judgment Interest
Munish also requests and is entitled to an award of post-judgment interest on his breach
of contract damages18, which “shall be allowed on any money judgment in a civil case recovered
in a district court.” See 28 U.S.C. § 1961(a); Pls.’ Mem. at 15-16. Accordingly, the Court
respectfully recommends that Munish be awarded post-judgment interest on his award of
compensatory damages at the statutory rate set forth in 28 U.S.C. § 1961(a) from the date of
entry of judgment until the date of payment. See Fermin v. Las Delicias Peruanas Rest., Inc., 93
F. Supp. 3d 19, 53 (finding that post-judgment interest is mandatory).
E.
Attorney’s Fees and Costs
Plaintiffs seek $131,701.50 in attorneys’ fees and $967 in costs incurred in the
prosecution of this action. See Pls.’ Mem. at 14; Nagampalli Decl. ¶¶ 9, 10. The sole basis
asserted by Plaintiffs for the recovery of attorneys’ fees and costs is the Copyright Act which
permits courts to award prevailing plaintiffs their fees and costs incurred in litigation. See Pls.’s
Mem. at 14 (citing 17 U.S.C. § 505, 1203(b)(4-5). However, as explained supra, a foreign
copyright holder is not entitled to recover either statutory damages or attorneys’ fees under the
18
Pre-judgment interest is mandatory for judgments on claims over which the court
exercises supplemental jurisdiction. See Khurana v. JMP USA, Inc., No. 14-CV-4448, 2017 WL
1251102, at *17 (E.D.N.Y. Apr. 5, 2017) (“[A]lthough the Court has exercised supplemental
jurisdiction over Plaintiff’s state-law claims, any judgment awarded would, nevertheless,
constitute a federal judgment. Therefore, that judgment would be governed by the plain
language of 28 U.S.C. § 1961.”) (citing Cappiello v. ICD Publications, Inc., 720 F.3d 109, 112
(2d Cir. 2013)).
28
Copyright Act unless the foreign copyright has been registered in the United States. See, e.g.,
The Football Ass'n, 633 F. Supp.2d at 162 (“The holder of a foreign copyright does not need to
register before filing suit, unless he is seeking statutory damages or attorney fees.”); Super
Express USA Publ'g Corp. II, 2018 WL 1559764, at *3 (“[U]nregistered foreign copyright
holders can bring infringement claims, but they may only seek actual damages.”); Master Sound
Int'l, Inc. v. PolyGram Latino U.S., No. 98-CV-8468, 1999 WL 269958, at *3 (S.D.N.Y. May 4,
1999) (“Registration is a prerequisite to bringing suit for recovery of [statutory] damages and
[attorney's] fees, and [Section 412] does not incorporate an exception for works originated in
countries outside the United States.”); Rudnicki v. WPNA 1490 AM, 580 F. Supp. 2d 690, 694
(N.D. Ill. 2008) (“Registration is only a prerequisite when the foreign copyright holder seeks
statutory damages and attorney's fees.”). Because the Amended Complaint does not allege that
the foreign copyrights at issue are registered in the United States, Plaintiffs are not entitled to an
award of attorneys’ fees and costs under the Copyright Act.
Although Plaintiffs fail to make any reference to the DTSA in support of its request for
attorneys’ fees and costs, the DTSA permits courts to “award reasonable attorneys’ fees to the
prevailing party” for the misappropriation of a trade secret “if the trade secret was willfully and
maliciously misappropriated.” 18 U.S.C. § 1836(b)(3)(D). Plaintiffs do not cite any legal
authority interpreting or explaining the “willful” or “malicious” requirement under the DTSA in
the context of attorneys’ fees awards for trade secret misappropriation. While Plaintiffs routinely
characterize Defendants’ conduct as “willful” throughout their submissions, they do so in a
29
conclusory manner, without citing any factual allegations or legal authority which would support
such a conclusion under the DTSA. 19
Generally, courts in this circuit find that trademark and copyright infringement may be
deemed willful by virtue of a defendant’s default, without a further showing by the plaintiff. See
Innovation Ventures, LLC v. Ultimate One Distrib. Corp., No. 12-CV-5354, 2017 WL 10088143,
at *5 (E.D.N.Y. Mar. 21, 2017). While this Court is not aware of any legal authority in this
Circuit applying this same principle to the misappropriation of trade secrets under the DTSA,
that does not mean that such support does not exist. Notwithstanding that fact, Plaintiffs have
still failed to demonstrate, with reference to any factual allegations and/or legal authority, that
the alleged misappropriation was also “malicious” – a factor essential to awarding attorneys’ fees
under the statute. Absent a showing that Defendants acted “maliciously,” the Court cannot
recommend an award of attorneys’ fees under the DTSA. See 18 U.S.C.
§ 1836(b)(3)(D).
Accordingly, the Court respectfully recommends that Plaintiffs’ request for attorneys’
fees and costs be DENIED, without prejudice, and with leave to renew their request if they are
able to make an adequate showing that they are legally entitled to such fees and costs. Plaintiffs
should not interpret this decision as an open-ended third opportunity to seek damages since
Plaintiffs have had ample notice from both this Court and Judge Bianco of their obligation to
provide legal and evidentiary support for their damages claims and have already had two
Plaintiffs made no meaningful attempt to support the argument that a defendant’s
default may be viewed as willful misappropriation under the DTSA, but for a single citation to
an inapposite case, Jemine v. Dennis, 901 F. Supp. 2d 365 (E.D.N.Y. 2012). See Pls.’ Mem. at 3.
The court in Jemine observed that a defendants’ default may support a finding of willfulness in
the context of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., not the DTSA. Jemine,
901 F. Supp. 2d at 389.
19
30
opportunities to do so. As such, this Court respectfully recommends that any renewed request
should be limited to Plaintiffs’ request for attorneys’ fees and costs. The Court points out that
Defendants’ counsel spent time arguing that the hourly rate and the number of hours expended
by Plaintiffs’ counsel in this action are not reasonable. See Defs.’ Sur-Reply at 3-4. Since the
request for fees has been denied at this juncture, the Court need not address these contentions at
this time.
F.
Injunctive Relief
Plaintiffs also seek a permanent injunction, pursuant to the Copyright Act and DTSA,
enjoining Defendants from engaging in any future infringement and use of Plaintiffs’ copyrights
and trade secrets. See Pls.’ Mem. at 8-9. “A court may issue an injunction on a motion for a
default judgment provided that the moving party shows that (1) it is entitled to injunctive relief
under the applicable statute and (2) it meets the prerequisites for the issuance of an
injunction.” Kingvision Pay–Per–View Ltd. v. Lalaleo, 429 F. Supp. 2d 506, 516 (E.D.N.Y.
2006) (citation and internal quotation marks omitted). As to the first requirement, both the
Copyright Act and DTSA entitle Plaintiffs to injunctive relief. The Copyright Act authorizes the
court to “grant ... final injunctions on such terms as it may deem reasonable to prevent or restrain
infringement of a copyright.” 17 U.S.C. § 502(a). Similarly, the DTSA authorizes the court to
“grant an injunction ... to prevent any actual or threatened misappropriation ... on such terms as
the court deems reasonable.” 18 U.S.C. § 1836(b)(3)(A). As to the second requirement,
Plaintiffs must demonstrate: “(1) that [they have] suffered an irreparable injury; (2) that
remedies available at law, such as monetary damages, are inadequate to compensate for that
injury; (3) that, considering the balance of hardships between the plaintiff[s] and defendant, a
remedy in equity is warranted; and (4) that the public interest would not be disserved by a
31
permanent injunction.” See eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Each
of these factors militate in favor of issuing a permanent injunction against the Defendants’
conduct here.
First, Plaintiffs have demonstrated that they have suffered an irreparable injury. “Harm
might be irremediable, or irreparable, for many reasons, including that a loss is difficult to
replace or difficult to measure.” EMI Apr. Music Inc. v. 4MM Games, LLC, No. 12-CV-2080,
2014 WL 325933, at *9 (S.D.N.Y. Jan. 13, 2014), report and recommendation adopted, No. 12CV-2080, 2014 WL 1383468 (S.D.N.Y. Apr. 7, 2014) (citing Salinger v. Colting, 607 F. 3d 68,
81 (2d Cir. 2010). Irreparable harm may also be established by the “threat of continuing
violations.” See Korzeniewski v. Sapa Pho Vietnamese Rest. Inc., No. 17-CV-5721, 2019 WL
312149, at *9 (E.D.N.Y. Jan. 3, 2019), report and recommendation adopted, No. 17-CV-05721,
2019 WL 291145 (E.D.N.Y. Jan. 23, 2019) (“[T]he ‘threat of continuing violations’ establishes
the necessary irreparable harm.”) (citing Ideavillage Prod. Corp. v. Bling Boutique Store, No.
16-CV-9039, 2018 WL 3559085, at *5 (S.D.N.Y. July 24, 2018)). Defendants’ default and
failure to defend this action not only makes actual damages extremely difficult to measure, but
also creates a threat that they will continue to infringe on and use Plaintiffs’ copyrights and trade
secrets without any future redress available to Plaintiffs. See Ideavillage Prod. Corp., 2018 WL
3559085, at *5 (“Defaulting Defendants’ refusal to defend this action creates a threat that they
will continue to infringe … unless permanently enjoined from doing so”); Mint, Inc. v. Amad,
No. 10-CV-9395, 2011 WL 1792570, at *3 (S.D.N.Y. May 9, 2011) (holding that irreparable
injury existed in part because “determining the amount of damages from [the] infringing conduct
[would be] especially difficult, if not impossible”). Where, as here, a defendant may continue to
distribute and use a plaintiff’s product, preventing the plaintiff from controlling the distribution
32
of its products and recovering any damages, irreparable harm exists. See, e.g. McGraw-Hill
Glob. Educ. Holdings, LLC v. Khan, 323 F. Supp. 3d 488, 499–500 (S.D.N.Y. 2018) (finding
irreparable harm where “[i]n the absence of a permanent injunction, defendants may continue to
distribute unauthorized copies of plaintiffs' [products], thus preventing plaintiffs from controlling
the distribution of their products and recovering associated profits.”); Howarth v. FORM BIB,
LLC, No. 18-CV-7047, 2019 WL 1986594, at *2 (S.D.N.Y. May 6, 2019) (same) (citation
omitted); EMI Apr. Music Inc., 2014 WL 325933, at *9 (“[Plaintiff] has successfully established
its irreparable harm on the following bases: [] its actual damages are extremely difficult to
measure; … and [plaintiff] has no control over [defendants’] illegal use of the copyrighted songs
because [defendant] has refused to properly license the sound recordings.”).
Second, Plaintiffs have demonstrated that there are no adequate remedies available at law
to compensate them for their injuries. “Monetary damages [are] inadequate where the defendant
poses a significant threat of future infringement.” See Broad. Music, Inc. v. Prana Hosp., Inc.,
158 F. Supp. 3d 184, 195 (S.D.N.Y. 2016) (citation omitted). Where, as here, “default is
entered, a court may infer from a defendant's default that it is willing to, or may continue its
infringement.” Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., No. 11-CV-5980, 2013 WL
5977440, at *11 (S.D.N.Y. Nov. 12, 2013), report and recommendation adopted, No. 11-CV5980, 2014 WL 112397 (S.D.N.Y. Jan. 8, 2014) (citing Pearson Educ., Inc. v. Vergara, No. 09CV-6832, 2010 WL 3744033, at *4 (S.D.N.Y. Sept. 27, 2010)). Given the threat of future
infringement, Plaintiffs cannot be compensated by monetary relief alone.
Third, the balance of hardships tips in Plaintiffs’ favor where Defendants have not
identified any hardship imposed by the issuance of a permanent injunction. See, e.g. Wealth
Mgmt. Assocs. LLC v. Farrad, No. 17-CV-1924, 2019 WL 5725044, at *7 (S.D.N.Y. June 21,
33
2019), report and recommendation adopted, No. 17-CV-1924 , 2019 WL 6497424 (S.D.N.Y.
Dec. 3, 2019) (finding balance of hardships weighs in favor of plaintiff where defaulting
defendant failed to identify any hardships); Pearson Educ., Inc., 2010 WL 3744033 at
*5 (finding balance of hardships weighs in favor of plaintiff where defaulting defendant failed to
identify any hardships). Rather than present any “hardship” the Defendants would experience if
the injunction were granted, Defendants’ counsel asserts that the Defendant companies are
defunct and the individual Defendants “are not involved in any business that concerns or relates
in any way to the matters in which they were previously engaged that are or were in issue in this
action.” Defs.’ Opp’n at 15. Significantly, Defendants have presented no documentation nor
any sworn affidavits from the Individual Defendants that such is the case. Further, “it is
axiomatic that an infringer ... cannot complain about the loss of ability to offer its infringing
product.” Rovio Entm't, Ltd. v. Allstar Vending, Inc., 97 F. Supp. 3d 536, 547 (S.D.N.Y. 2015).
Fourth and finally, the Court finds that the public interest would not be disserved by the
issuance of an injunction. “[T]he public has a compelling interest in protecting copyright
owners' marketable rights to their work and the economic incentive to continue creating ...
creative work.” WowWee Grp. Ltd. v. Haoqin, No. 17-CV-9893, 2019 WL 1316106, at *6
(S.D.N.Y. Mar. 22, 2019) (quoting WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012)).
There is also “a substantial public interest in the protection of trade secrets and proprietary
information as well as the enforceability of contracts.” Aventri, Inc. v. Tenholder, No. 18-CV2071, 2018 WL 7348013, at *1 (D. Conn. Dec. 18, 2018).
For the foregoing reasons, the Court respectfully recommends that a permanent
injunction be entered against all Defendants enjoining them from (1) misappropriating Plaintiffs’
trade secrets, (2) infringing Plaintiffs’ copyrighted source code, (3) marketing or selling CT Live,
34
CT Legal and any other products developed by CT India, including those CT India developed
products which are masked with a different superficial name. See Pls.’ Mem. at 9.
V.
CONCLUSION
For the foregoing reasons, the Court respectfully recommends to Judge Vitaliano that
Plaintiffs’ motion be GRANTED, in part, and DENIED, in part. The Court respectfully
recommends that:
1.
Plaintiff CT India’s request for statutory damages in the amount of $150,000
against Sanjay, Santusht, and CT, Inc. for copyright infringement be DENIED;
2.
Plaintiffs’ request for statutory damages in the amount of $150,00 against
Defendants for their violation of the DTSA be DENIED;
3.
Plaintiffs’ request for an award of $125,000 in compensatory damages against
Defendants for their purported breach of the 2015 Settlement Agreement be
DENIED;
4.
Plaintiff Munish’s request for an award of $330,000 in damages for the breach of
contract claim and other state law claims against Sanjay and Tech Matrix be
DENIED;
5.
Plaintiffs’ request for punitive damages in the amount of $100,000 against
Defendants be DENIED;
6.
Plaintiff Munish’s request for an award of $100,000 in damages for the breach of
contract claim against Santusht be GRANTED;
7.
Plaintiff Munish’s request for prejudgment interest at the statutory rate of 9% per
annum from July 6, 2016 through the date of entry of judgment be GRANTED;
8.
Plaintiff Munish’s request for post-judgment interest at the statutory rate set forth
in 28 U.S.C. § 1961(a) from the date of entry of judgment until the date of
payment be GRANTED;
9.
Plaintiffs’ request for attorneys’ fees and costs be DENIED with leave to renew
consistent with the directives set forth in this Report and Recommendation; and
10.
Plaintiffs’ request for a permanent injunction enjoining Defendants from
infringing on or using their copyrights or trade secrets be GRANTED, consistent
with the language set forth in Section IV(F) of this Report and Recommendation.
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VI.
OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1)(c) and Rule 72 of the Federal Rules of Civil Procedure,
the parties shall have fourteen (14) days from entry of this Report and Recommendation to file
written objections. See also FED. R. CIV. P. 6(a), (e). Such objections by an attorney of record
shall be filed with the Clerk of the Court via ECF. A courtesy copy of any objections filed is to
be sent to the Chambers of the Honorable Eric N. Vitaliano. Any requests for an extension
of time for filing objections must be directed to Judge Vitaliano prior to the expiration of
the 14-day period for filing objections. Failure to file objections will result in a waiver of
those objections for purposes of appeal. See, e.g., Thomas v. Arn, 474 U.S. 140, 155 (1985);
Beverly v. Walker, 118 F.3d 900, 901 (2d Cir. 1997), cert. denied, 522 U.S. 883 (1997); Savoie v.
Merchants Bank, 84 F.3d 52, 60 (2d Cir. 1996).
SO ORDERED:
Dated: Central Islip, New York
March 2, 2020
/s/ A. Kathleen Tomlinson
A. KATHLEEN TOMLINSON
United States Magistrate Judge
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