Argentino Systems, Inc. et al v. Subin Associates, LLP

Filing 23

OPINION re: 20 CROSS MOTION to Amend/Correct 1 Complaint, 19 Declaration in Opposition to Motion to Dismiss filed by Argentto Systems, Inc., Nick Santino, 6 MOTION to Dismiss Complaint filed by Subin Associates, LLP. As further set forth herein, both motions are granted. Leave to file First Amended Complaint is granted. (Signed by Judge Robert W. Sweet on 6/22/2011) (tro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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----­

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---X

ARGENTTO SYSTEMS, INC. t and
NICK SANTINO t
Pla

iffs t

10 Civ. 8174

-against

OPINION

SUBIN ASSOCIATES t LLP t
Defendants.

USDC SONY
-X

\ DOClJMENT

A P PEA RAN C E S:

ELECTRONiCALLY FILED
DOC #:
.

DATE F]-LE-~D-: -Z;rrq"-=1-rI'--~
fQ:.f-.

Attorney for Plaintiffs
THOMAS M. LANCIA PLLC

22 Cortlandt Streett 16th Floor

New York t NY 10007

By: Thomas M. Lancia t Esq.

Attorney for Defendants
SMITH VALLIERE t PLLC

75 Rocke
ler
aza t 21st Floor

New York t NY 10019

By: Mark W. Smith t Esq.

Sweet, D. J.

The

fendant Subin Associates, LLP ("Subin" or the

"Defendant") has moved under Federal Rule of Civil Procedure
12(b) (6) to dismiss the complaint of Argentto Systems, Inc. and
Nick Santino ("Argentto" or the"
cross-moved for leave to fi
Complaint.

aintiffs").

Plaintiffs have

a Proposed First Amended

As set forth below, both motions are granted.

Prior Proceedings

The Plaintiffs filed their complaint on October 28,
2010 alleging copyright violations and state law claims of
misappropriation of confidential business information, breach of
contract and unjust enrichment.

According to the Complaint, in or around 2000 Nick
Santino ("Santino" or the "Individual Plaintiff") met Herbert
Subin, the name partner of Subin, which is a New York
personal injury law firm.

(Compl. ~ 20.)

ty

Santino and Subin

scussed developing a case management system, which also would
link to Subin's accounting database.
Santino.

(Compl.

~

20-21.)
1

Subin agreed to work with

After meeting with Subin in 2000, Plaintiffs began
programming the customized legal case management software at
issue over approximately a nine month period.

(Compl. ~ 22.)

At that time, Plaintiff, which was founded in 2001, did not
exist, and Santino initially provided services to Subin through
PE Services.

(Compl.

~~

8, 20.)

The Plaintiffs completed their

work on the customized software over a nine month period.
(CompI.

~

22.)

late 2001 or early 2002, the customized

software was operational.

(Compl.

~

22.)

Shortly after

receiving the completed operational customized software, Subin
decided to no longer use Plaintiffs' services.

(Compl.

~

23.)

In 2008 Plaintiffs learned of the continued use of the
software.

(CompI.

~

24.)

aintif

have not alleged that they

told Subin to stop using the customized software, that they
demanded the return of the software, or that they terminated any
purported license agreement.

For more than eight years,

Plaintiffs never sent an invoice to Subin for its use of
software.

Only the Plaintiffs' own authorized programmers had
access to the passwords source code or object code, which was
2

(Compl. ~~ 17-18.)

protected by a guard dog.

Subin paid

Plaintiffs for their work on the software (Compl. ~ 26.)
Plaintif

assert that they had assumed Subin had stopped using

the software

(Compl. ~ 23).

2002.

The Complaint contains certain terms and conditions of
a purported license agreement and excerpts from an End User
Agreement, which it states were included with every invoice
~26

Plaintiffs sent to Subin (Compl.

27), but does not allege

that Subin agreed to such terms or that Subin saw such terms and
conditions or the End User Agreement.
PIa

iffs

(Compl. ~ 26-27).

lege that Subin misappropriated the software

(Compl. ~ 41), reverse engineered it (Compl. ~ 28), and/or
disclosed

to third parties.

(Compl. ~ 54.)

stered with

Plaintiffs
Office in March 2009.

fede

Copyright

In 2008, Plaintiffs discussed working

with Subin to upgrade the nearly ten-year-old customized
software program.
work with

aintif

(Compl.

~

25.)

Only after Subin declined to

did Plaintiffs invoice Subin for a license
(Compl.

fee for the use of the software.

~

25.)

This invoice

covered usage in 2009 and 2010 at the annual license
$1,200.

(CompI. ~ 25.)
3

rate of

Plaintiffs allege copyright

ringement and state law

claims of misappropriation of confidential business information,
breach of contract and unjust enrichment arising out of Subin's
use of the customized software.

(Compl. ~~ 19 58).

The instant motion and cross-motion were heard on
February 2, 2011.

The Rule l2(b) Standard

In considering a
12 (b) (6) ,

the

Court

motion to di

construes

the

ss pursuant
complaint

to Rule

liberally,

"accepting all factual allegations in the complaint as true, and
drawing

all

reasonable

Chambers v. Time Warner,
(citing
Though

inferences
Inc.,
243

the

court

complaint as true,

must

in

the

plaintiff's

282 F.3d 147, 152
F. 3d

accept

the

687,

691

factual

Corp.

v.

dismissal,

129 S.Ct.
Twombly,

(2d Cir. 2002)

(2d

Cir.

2001)).

allegations

of

a

it is "not bound to accept as true a legal

conclusion couched as a factual allegation."
U.S.

favor."

550

1937,

1949

(2009)

U.S.

544,

555

Ashcroft v.
(quot

(2007)).

Bell Atl.
To

survive

"a complaint must contain sufficient factual matter,
4

accepted as true,
on

s

U.S.

129 S. Ct.

at 570).
S

face.'

to 'state a claim to relief that is plausible

II

In other words,

to "nudge[]

to plausible.

at 1949

(quoting Twombly,

550

aintiff must allege sufficient

their claims across the line from conceivable

II

550 U.S. at 570.

,

The Copyright Claim Is Dismissed

In order to properly seek statutory damages and
attorney fees

l

the plaintiff must have

prior to the infringement.
v .l:Jo11yt og s Ltd.

( Inc. )

(denying attorneys

1

See 17 U.S.C.

Tixz

1

§

infringing activit

1

Inc'

----~------------------~-----

1996)

412; Knitwaves

Inc.

l

s for copyright infringement claim where

412 would

Inc. v. Hit-

§

71 F. 3 d 996 1 10 12 ( 2 d Ci r. 1995 )

stration occurred
that 17 U.S.C.

istered its copyright

and noting

so preclude statutory damages)
l

919 F. Supp. 728

1

i

Ez-

735-36 (S.D.N.Y.

(dismissing statutory damages and attorney fees claims

where plaintiff's own complaint alleges infringement prior to
registration and pleadings requested such award).
alleged infringement begins before
after

Where the

stration and continues

stration, statutory damages and attorney fees are

still unavailable.

Ez-Tixz, 919 F. Supp. at 736 ("The alleged

acts of infringement that occurred
5

the copyright was

registered do not constitute new acts of infringement but a
continuation of the infringement that \ commenced
registration.")

1

prior to

{citing Singh v. Famous Overseas 1 680 F. Supp.
H~me

Entm/tl Inc. v.

535 36 (E.D.N.Y. 1988))

i

see also U2

Hong Wei Int/l Trading 1 Inc'

l

04 Civ. 6289 1 2008 U.S. Dist.

533

1

LEXIS 64297 1 at *44 51 (S.D.N.Y. Aug. 211 2008)
same conclusion even where substant

pe

(court reached

od lapsed between

initial incident of pre-registration infringement and post
registration resumption of infringement).

Here

l

Plaintiffs allege that the purported

infringement of the
the software.

tware began before the registration of

(Compl. ~ 24

(

leged infringing use occurred in

2008 and during the preceding seven years) i Compl.

~

13 and

Copyright Registration annexed to Complaint (copyright
registration effective March 13 1 2009).)

Plaintiffs contend

that it is premature to decide the issue because they have an
election of remedies.

However 1 Plaintiffs cannot obtain

statutory damages because the

leged infringement

unquestionably began before the copyright registration of the
work at issue.

There is nothing \\premature" about deciding this

issue on a Rule 12(b) (6) motion to dismiss.

See Irwin

8027 1 2006 U.S. Dist. LEXIS 6156, at *19 20, *47-48.
6

l

04 Civ.

Because the alleged infringement began before
effective date of the copyright registration of the software at
issue, the motion to dismiss Plaintiffs' claims for statutory
damages and attorney

is granted.

The State Law Claims Are Dismissed Without Prejudice

The failure of

copyright claims deprives the Court

of original jurisdiction, and given the early stage of this
litigation, denial of supplemental jurisdiction is appropriate,
pursuant to 28 U.S.C.

§

1367 (c) (3).

The period of limitations

any claim asserted against the remaining defendant shall be
tolled for a period of 30 days after the issuance of this order,
unless state law provides for a longer tolling period.
U.S.C.

§

28

1367(d).

Leave To File First Amended Complaint Is Granted

Rule 15(a) (2) states that "a party may amend its
pleading only with the opposing party's written consent or the
court's leave.
so requires."

The court should freely give leave when justice
Fed. R. Civ. Pro. 15 (a) (2).
7

The United States

Supreme Court [ the Second Circuit and this Court have adhered to
this liberal standard in granting requests to amend [ especially
where, as here, an answer has not been filed and discovery has
not commenced.

See AIU Insurance Co. v. Mit

O.S.K.

Ltd., 897 F. Supp. 724, 726 (S.D.N.Y. 1995); State Teachers
Retirement Bd. v.

, 654 F.2d 843, 856

(2d Cir. 1984).

Indeed, in response to a 12(b) (6) motion to dismiss in
copyright actions, this Court has repeatedly given leave to
amend the complaint

leging copyright infringement and

supplemental claims where the original

aims were dismissed.

~~~~~~~. • .~,~_L~L~C~v~.__
T~h~o_m_s~o~nc._R~e~u~t~e~r~s~~~,
.

No. 09

Civ. 8099, 2011 WL 855872, at *8(S.D.N.Y. March 8, 2011); Irwin,
04 Civ. 8027, 2006 U.S. Dist. LEXIS 6156, at *19 20, *47-48.

It is so ordered.

New York[ NY
June

J-?/'

ROBERT W. SWEET

2011

U.S.D.J.

8