Lightbox Ventures, LLC v. 3rd Home Limited
OPINION AND ORDER.....Third Home is liable to Lightbox for $67,088.19 on Lightboxs breach of contract claim. Third Home and Shealy are jointly and severally liable to Lightbox for $26,250 on Lightboxs breach of fiduciary duty claim. Light box and Ellner are jointly and severally liable to Third Home and Shealy for $10,000 for one violation of ACPA. Lightbox is accordingly awarded $83,338.19, plus prejudgment interest of 9% per annum running from January 1, 2016. The C lerk of Court is directed to enter final judgment in favor of Lightbox. Lightbox is also awarded its reasonable attorneys fees for the period before October 28, 2016, and is directed to file an application for its fees, with supporting documentation , as directed by a Scheduling Order filed contemporaneously with this Opinion. The Clerk of Court is directed to release funds deposited by Third Home on March 5, 2018 in the amount of $38,888.01 to Lightbox pursuant to the Courts March 12, 2018 Order. (Signed by Judge Denise L. Cote on 4/13/2018) Copy Emailed By Chambers to Cashier's Office, SDNY. (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
LIGHTBOX VENTURES, LLC,
3RD HOME LIMITED and WADE SHEALY,
RD HOME LIMITED and WADE SHEALY,
For the plaintiff and third-party defendant:
Brem Moldovsky, LLC
411 Lafayette Street, 6th Floor
New York, NY 10003
For the defendants:
Philip Byron Jones
Evans, Jones & Reynolds, P.C.
401 Commerce Street, Suite 710
Nashville, TN 37219
DENISE COTE, District Judge:
Plaintiff Lightbox Ventures, LLC (“Lightbox”) commenced
this suit on March 31, 2016, bringing claims of breach of
contract and breach of fiduciary duty against defendants 3rd Home
Limited (“Third Home”) and Wade Shealy, the CEO of Third Home.
Defendants bring three claims against Lightbox and against Third
Home investor and Lightbox founder Andrew Ellner (“Ellner”),
arising out of Ellner’s use of the Third Home name and email
address after this lawsuit was filed.
jurisdiction over this action.
There is diversity
This Opinion contains the
Court’s findings of fact and conclusions of law following a
bench trial on submission.
The following constitutes the Court’s findings of fact.
This case arises out of a failed joint venture (the “Joint
Venture”) between the parties.
Familiarity with the Court’s two
prior Opinions in this matter is assumed.
Ventures, LLC v. 3RD Home Ltd., No. 16cv2379(DLC), 2017 WL
5312187 (S.D.N.Y. Nov. 13, 2017) (the “Summary Judgment Opinion”
or “Lightbox II”); Lightbox Ventures, LLC v. 3RD Home Ltd., No.
16cv2379(DLC), 2016 WL 6562107 (S.D.N.Y. Oct. 28, 2016) (the
“Preliminary Injunction Opinion” or “Lightbox I”).
Third Home operates a website, www.3rdhome.com, for owners
of luxury homes to exchange time in their homes.
Third Home was
created in 2011, and in 2011 Third Home registered two
3rdhome and 3rdhome with the image of a house
replacing the letter “o.”
Exchanges of time on Third Home’s
platform are facilitated by the use of points, referred to as
“keys,” which is the currency used to reserve time in users’
In 2015, Third Home had 6,500 members.
Ellner is a former managing director at Lehman Brothers,
and is a member of and investor in Third Home.
Lightbox in 2015 to be an online real estate listing and sales
Ellner proposed forming a joint venture with Third
Home in 2015, hoping that Lightbox would earn commissions and
fees from the sale of vacation homes on a real estate listing
website (the “Website”).
The Website would be promoted by Third
Home placing a link to the Website on the Third Home main
I. The Agreement
The parties entered a joint venture agreement (the
“Agreement”) on July 13, 2015.
The Agreement’s stated purpose
is “to establish a joint venture between the parties to create
an online platform for the resale of vacation homes, fractional
ownership properties and other properties eligible to be listed
on 3RDHOME.COM, which is to be linked to the existing 3RD HOME
Paragraph 1 of the Agreement describes Lightbox’s
obligations as follows:
a. [Lightbox] shall be responsible for fronting the
cost for the technology build-out of the 3RD Home
website including an interface for [Lightbox] use.
Fronting the cost of the creating a [Lightbox] website
at a level equivalent to the 3RD Home site is also the
financial responsibility of [Lightbox].
. . .
c. [Lightbox] shall be fully responsible for managing
any and all interactions with buyers and sellers and
potential buyers and sellers, as well as all
intermediaries required for any sale, including local
real estate brokers, property management companies and
local attorneys as needed.
. . .
f. [Lightbox] agrees that it will share evenly with
3RD Home (50 % / 50 %) all profits realized from this
business venture after deducting reasonable direct
costs of doing business, which costs will be
documented and records presented to 3RD Home upon
request. However, this profit share will begin only
after the outlay for the technology build-out has been
recouped, as described in paragraph 2b below.
Paragraph 2 of the Agreement describes Third Home’s
a. 3RD Home agrees to keep an active link on their
site to the [Lightbox] site, this link shall be in a
prominent place which is easily recognizable and
usable by potential buyers and sellers of properties
through the site. The location and visibility of the
link shall be agreed upon between the parties with
final determination by 3RD HOME.
b. 3RD Home agrees that the first profits of
[Lightbox] will go toward reimbursing [Lightbox] for
the technology build-out mentioned earlier in
paragraph 1 (a). After that amount has been
reimbursed, the 50%/50% profit sharing will begin and
continue as long as this Agreement remains in full
force and effect.
c. 3RD Home agrees to forward all inquiries related to
the buying and selling of vacation homes, residence
clubs, fractionals and the like to [Lightbox] and that
3RD Home will be a passive partner in the sales and
marketing of these homes, with its only active role
being the maintenance of the links on the 3RD HOME
site with [Lightbox]. It will forward all inquiries
regarding sales and purchases of vacation homes,
residence clubs, fractionals and the like to
[Lightbox] exclusively and in a timely manner.
d. 3RD Home agrees to that this [sic] arrangement is
exclusive and that they will not enter into any
similar arrangement with another sales and marketing
organization without the permission of [Lightbox].
e. 3RD Home will be responsible for all relationships
with the affiliates. In the interest of maintaining
these relationships, 3RD Home retains the right to
determine that certain affiliate properties may not be
able to be sold through [Lightbox], 3RD Home will
inform [Lightbox] in writing of such an exclusion,
should it occur.
f. 3RD HOME will make the final determination of the
name and the URL of the resale business. All 3RD HOME
names, marks, and other proprietary assets that may be
used in conjunction with the marketing of this program
will remain the exclusive property of 3RD HOME at all
times during the term and after.
The Agreement also provides that New York law applies.
Paragraph 4 includes a provision shifting attorneys’ fees as
(c) Attorneys’ Fees. If either party employs
attorneys to enforce any rights arising out of or
relating to this agreement, the losing party shall
reimburse the prevailing party for its reasonable
attorneys’ fees and costs.
The Agreement also includes a placeholder termination
provision that states as follows:
This is a temporary interim agreement to indicate the
intent of the parties, and will remain in effect until
July 13, 2017 or earlier if superseded by a later
agreement. If 3RD HOME should desire to terminate
because of unanticipated issues before July 13, 2017
then it will promptly reimburse LightBox for any
unreimbursed costs of the technology build out.
Additional terms regarding termination of this
agreement and the rights and steps to terminate it are
expected before August 31, 2015.
II. The Amended Termination Provision
Ellner and Shealy signed an amended termination provision
in December 2015 (the “Amendment”).
That document provides as
(a) The Agreement shall be for a term of thirty (30)
months, expiring on July 1, 2018, unless terminated
earlier in accordance with the provisions set forth
below. . . .
(b) LIGHTBOX VENTURES may terminate this Agreement in
advance of its expiration upon thirty (30) days’
written notice. In the event LIGHTBOX VENTURES
terminates this Agreement pursuant to this clause, it
waives any claim it has or may have for reimbursement
of the technology costs referenced in Paragraph 1(a),
herein, and the fees referenced in 1(d), herein.
Furthermore, in the event LIGHTBOX VENTURES so
terminates this Agreement in advance of its
expiration, without selling its portion of the joint
venture to either 3RD HOME or a third party, in
accordance with the terms of Paragraph 16 herein, it
thereby waives any claim it has or may have to its
share of the joint venture between the parties as set
forth in this Agreement.
(c) 3RD HOME may terminate this Agreement in advance
of its expiration upon a upon [sic] thirty (30) days
written notice without cause. In the event of an
early termination pursuant to this clause, 3RD HOME
agrees to reimburse LIGHTBOX VENTURES for the
technology costs referenced in Paragraph 1(a) herein,
to the extent those costs are not already fully
recouped at the time of said termination, pursuant to
Paragraph 1(f), herein. Furthermore, in the event 3RD
HOME elects to terminate this Agreement in accordance
with this Paragraph 15(c), it agrees that it will not
re-enter the business of or otherwise operate, in any
manner, an online platform for the sale and resale of
vacation homes and fractional ownership properties or
otherwise engage in any venture which is intended to
compete with or does compete with LIGHTBOX VENTURES in
the business contemplated by this Agreement for a
period of time totaling two (2) years following the
date of termination of this Agreement. Nothing herein
however shall restrict, prohibit or otherwise restrain
3RD HOME from the continued operation of its other
business activities, including but not limited to its
operation of a vacation property management and home
exchange website and those matters related hereto.
(d) Either party may terminate this agreement due to
cause as follows. In the case of LIGHTBOX VENTURES,
they may terminate this Agreement due to cause if 3RD
HOME does not adequately create an attractive
inventory of homes and/or generate adequate sales
leads. If 3RD HOME is unable to cure such poor
performance within a reasonable period of time, and
LIGHTBOX VENTURES decides to exercise its right to
terminate the Agreement due to cause, 3RD HOME agrees
not to re-enter the business of or otherwise operate,
in any manner, an online platform for the sale and
resale of vacation homes and fractional ownership
properties or otherwise engage in any venture which is
intended to compete with or does compete with LIGHTBOX
VENTURES in the business contemplated by this
Agreement for a period of two (2) years following the
date of termination of this Agreement. In the case of
3RD HOME, they may terminate due to cause if LIGHTBOX
VENTURES does not expeditiously follow up on leads
generated and otherwise make a good faith effort to
generate sales as contemplated by this Agreement. If
LIGHTBOX VENTURES is unable to cure such poor
performance within a reasonable period of time, 3RD
HOME will promptly reimburse LIGHTBOX VENTURES for any
unreimbursed costs of the technology build out and may
continue to operate the business independently.
(e) In addition, in the event 3RD HOME wishes to
terminate this Agreement with LIGHTBOX VENTURES but
continue to operate the business of the joint venture
contemplated by this Agreement independently of
LIGHTBOX VENTURES, 3RD HOME will buy out LIGHTBOX
VENTURES from the joint venture, and the price of such
buyout will be determined by averaging three (3)
separate prices determined by three separate and
independent accredited business valuation
professionals who will each value the joint venture
created by this Agreement. 3RD HOME will pay all
costs of such valuations. At the conclusion of these
valuations 3RD HOME will pay to LIGHTBOX VENTURES an
amount equal to fifty percent (50%) of the average of
the three (3) values as determined by the
aforementioned business valuation professionals. Upon
such payment the joint venture between the parties
(f) In the event of a termination of this Agreement
pursuant to Paragraph 15 above (by LIGHTBOX VENTURES)
or 15(c), above (by 3RD HOME), it is agreed and
understood that the operation of the joint venture
shall cease within a reasonable time thereafter. In
such event, the parties agree to cooperate with one
another to wrap up the affairs of the joint venture in
an appropriate and orderly manner, and to sign any and
all documents necessary to effectuate the termination
and dissolution of the joint venture. As part of the
winding up of the affairs of the joint venture, it is
agreed and understood that each party will take those
steps necessary, and within a reasonable period of
time, to deactivate any links to their respective
websites that identify the remaining party.
(g) Other than as set forth herein, neither party
shall have the right to use the other party’s
trademarks or name in any manner whatsoever other than
in the materials that are approved in writing by the
party whose trademarks or name is being used, and only
for the express purposes set forth herein. Any such
permission to use the aforementioned names and/or
marks shall cease upon the expiration or termination
of this Agreement, in accordance herewith.
III. The Exclusive Brokers
In late 2015 and early 2016, Third Home began negotiating
and entering agreements with other real estate brokers (the
In these contracts, Third Home
principally agrees to offer complimentary membership to Third
Home’s exchange program to owners and buyers sponsored by the
Exclusive Broker and to promote the Exclusive Broker’s business
on Third Home’s website.
In return, the Exclusive Broker agrees
to pay Third Home an upfront fee and promote the Third Home
luxury home exchange program to its owners and buyers.
upfront fee, which ranged from $2,500 to $10,000, generally
gives the Exclusive Broker “the agreed territory for exclusive
representation for one year.”
Of particular relevance to the
instant dispute, some of these contracts also include a
provision indicating that the Exclusive Broker “will receive all
the leads generated by [Third Home’s] inbound members and by our
real estate posting site and as part of this agreement agrees to
pay a referral fee of 25% on any real estate transaction that
takes place based on that referral buying or selling.”
(Emphasis in original.)
A December 2015 draft of one such contract required the
Exclusive Broker to pay the 25% referral fee to Third Home’s
A later version of this contract omitted
the duty to pay Lightbox.
Third Home received $52,500 from the
Exclusive Brokers, all in the form of upfront fees.
has not received any of these funds.
IV. Lightbox’s Costs Creating the Joint Venture
In 2015 and 2016, Lightbox spent money to build the Website
and to pay consultants to help develop the Joint Venture’s
The Website was ready to be linked to Third Home’s
website in January 2016.
Third Home does not contest that
Lightbox is entitled to reimbursement for $62,158.
seeks an additional $4,930.19, for a total of $67,088.19.
The total of $67,088.19 consists of the following:
$63,658.00 for website development,1 $593.75 for website
maintenance and preservation, $634.03 for the Joint Venture’s
toll-free number, $1,914.41 for website staging, and $288.00 for
recording of communications and documents related to the Joint
Venture’s anticipated transactions.
Although some of these
expenses do not seem directly related to the “technology buildout of the 3RD Home website,” as contemplated in Paragraph 1(a)
of the Agreement, the sole argument Third Home advances to avoid
Ellner states that $62,158 of this amount is the portion of
Lightbox’s expenses that Third Home does not contest.
payment of $4,930.19 is that such expenses were incurred after
its March 8, 2016 Notice of Termination.
Of the $4,930.19 in dispute, $1,919.75 reflects work
performed before March 8, 2016.2
The $1,919.75 is composed of
website development work done by The Agile Leage LLC in February
2016, in the amount of $1,500, as reflected in its invoice.
Another $7.76 reflects work done by Grasshopper Group, LLC in
February 2016 and billed to Lightbox on March 6, 2016.
Grasshopper Group set up a toll-free number for the Joint
Next, Lightbox paid Heroku $267.99 for “website
staging” work performed before the March 8 Notice of
Finally, Lightbox paid $144.00 to Zoho CRM on
October 3, 2015, which was paid to “record all communications
and document trails related to the Joint Venture’s anticipated
transactions, from listings through closings.”
The remaining $3,010.44 reflects work performed after March
This amount includes additional amounts paid to the
companies named above.
Lightbox paid $626.27 to Grasshopper
Group, $1,646.42 to Heroku, and $144.00 to Zoho CRM for work
done after March 8.
Lightbox additionally paid $593.75 to
As explained in the Summary Judgment Opinion, Lightbox Capital
Management LLC is a company run by Ellner that paid some of the
Website-related expenses. See Lightbox II, 2017 WL 5312187, at
*5 n.3. Third Home does not contest that plaintiffs should be
reimbursed regardless of whether Lightbox Capital paid in the
Cuttlesoft, LLC for performing several technical tasks relating
to the Website after March 8.3
Lightbox also seeks $115,000, comprised of $60,000 due to
David Graff and $55,000 due to Susan Stein.
None of these
expenses constitute reimbursable payments for the “technology
build-out” of the Website directed in Paragraph 1(a) of the
Graff worked as a consultant for Lightbox beginning from an
unspecified date in early 2015 and extending to February 2016.
He provided consulting services to Lightbox in the following
branding and trademarking; strategic partnerships
within the travel industry; advising on the use of
virtual-reality augmented technology that would be
used to market existing real estate properties and new
developments; website design and search engine
optimization; revenue opportunities in online
advertising; co-branding and other marketing efforts
to with [sic] business in related industries such as
the vacation and travel sectors; and establishing
relationships with online and print mediate outlets.
He also “advised on how to build a user friendly web site in
order to facilitate and improve the user experience,” which
“included using modern technologies such as virtual and
Lightbox submitted one invoice in its trial submissions, for
$375.00, but did not include in those papers a second invoice
for $218.75 that it had submitted in connection with its summary
judgment motion. Third Home only challenges the additional
$218.75 on the ground that the work was performed after Third
Home terminated the Agreement, so the Court will consider the
combined amount of $593.75.
augmented reality systems to allow the user to take a 360 degree
tour of a property.”
Stein is an attorney who worked as a consultant for
Lightbox from early 2015 through Fall 2016.
included “assisting in the researching and creating forms for
listing agreements and referral agreements and other
documentation and similarly helping to design the [Joint
Venture] website interfaces.”
In addition, she “participated in
. . . a conference call training session for use of the fullyoperational [Joint Venture] website.”
As noted, the Website became operational in January 2016.
The principal services provided by Graff and Stein do not
constitute work performed as part of the “technology build-out”
of the Website.
To the extent their services supported the
technology build-out, Lightbox has not provided a way to measure
or value that portion of their services.
V. The Joint Venture’s Operations
In January 2016, the Website became operational at
Third Home provided Ellner with the
email address email@example.com, for Ellner to use in
connection with the Joint Venture.
Ellner has shown that he procured two listing agreements
from two property owners before this litigation began.
other purported listing agreements he has submitted only reflect
negotiations or inquiries from interested realty companies and
are not executed contracts to have property listed on the
In the listing agreements, the property owners retained the
Joint Venture “for the purpose of marketing and/or selling” the
properties on the Website.
The owners agreed to give the Joint
Venture a commission upon the sale of their properties “when
such sale is either directly or indirectly the result of the
Buyer, or a broker representing the Buyer, contacting
3rdHomeRealEstate.com to inquire about this or another property
listed on 3rdHomeRealEstate.com.”
The commission percentage
ranged from 6% to 10% depending on the price at which the
property was sold.
The agreements expired after one year unless
a contract was signed during that time.
There is no evidence
that either property has been sold since the listing agreements
Although the Website was operational, Third Home never
activated the link to the Website from the Third Home website.
By February 2016, the relationship between Ellner and Shealy had
Ellner repeatedly raised concerns with Shealy about
Third Home’s arrangements with the Exclusive Brokers.
21, Ellner received an email from a broker stating that Shealy
had expressed concern with her listing certain real estate
property on the Website because one of the Exclusive Brokers
“has an exclusive.”
On March 8, counsel for Third Home sent Lightbox a written
notice of termination, which stated that Third Home was
exercising its termination rights under Paragraph 15 and subparagraph 15(e) (the “March 8 Termination Notice”).
sent a second letter to Lightbox on March 21 insisting on its
“unconditional right to terminate under Section 15(e)” and to
arrange a time for the parties to discuss valuation of the Joint
Third Home never hired or paid the cost of the
appraisals of the Joint Venture specified in Paragraph 15(e) of
Lightbox filed this lawsuit on March 31.
VI. Ellner’s Use of Third Home Trademarks
Shealy ordered that the Website be taken down on or around
July 19, 2016.
After the Website was taken down, on July 21 and
July 22, Ellner used his firstname.lastname@example.org email
address to inform Joint Venture clients that “there is a
temporary problem with the 3rdhomerealestate.com website,” and
apologizing on behalf of “Wade and I.”
On July 21, Shealy wrote
Ellner “please do not include me or my name on any more emails.”
On July 21, Ellner registered the domain 3rdhomerealty.com.
Ellner then published the Website and its real estate listings
to the new domain.
With the new domain name registered, on July
27 and July 28, Ellner informed clients with properties listed
on the Website that their listings are “again live” on the
The 3rdhomerealty.com website
depicted the “3RD HOME” trademark, which had been registered to
Third Home since 2011.
On August 8, counsel for Third Home sent Lightbox and
Ellner a letter indicating that their use of websites and email
addresses using Third Home’s name and marks constituted
violations of law because the Agreement had been terminated.
The letter demanded that Lightbox and Ellner “immediately cease
and forever desist from the use of the Marks and confusingly
similar variations of the Marks in any form, including the
Domain Names, in website content, email addresses, and in any
On or around July 28, the domain name
thirdhomerealestate.com was registered in Shealy’s name.
not until March 2017 that Third Home deactivated Ellner’s
email@example.com email address.
Ellner states that he took the Website down “within
approximately 24 hours of creating it, which was also within 24
hours of notifying Mr. Shealy of it by the e-mails to the Joint
Venture clients.” It is unclear whether he means that the
Website was taken offline from the 3rdhomerealty.com domain
within 24 hours of registering the domain on July 21, within 24
hours of the emails he sent on July 27 and 28, 2016, or within
24 hours of the cease and desist letter sent by Third Home’s
counsel on August 8.
This case was filed on March 31, 2016.
In its original
complaint, Lightbox sued for breach of contract and breach of
fiduciary duty arising out of Third Home’s decision to terminate
the Joint Venture and pursue relationships with the Exclusive
The original complaint also sought declarations that
Third Home had breached the Agreement and that Lightbox had
validly terminated the Agreement for cause.
On July 13, 2016, Lightbox filed a motion for a preliminary
injunction to prevent Third Home from entering brokerage
agreements or promoting brokerage services other than with
This motion was denied on October 28, 2016.
Lightbox I, 2016 WL 6562107.
The Preliminary Injunction Opinion explained that Lightbox
“failed to show that it will suffer irreparable harm” if an
injunction did not issue.
Id. at *10.
The Opinion explained
that “damages will largely compensate [Lightbox] for Third
Home’s violations of the Agreement since the Joint Venture never
got off the ground,” and Lightbox had only shown that it was
“entitled to compensation for some” of the “preparatory work” it
In addition, the Opinion noted that Lightbox
failed to show “that a viable, profitable business was about to
launch” before Third Home breached the Agreement.
Id. at *11.
The Opinion also observed that “Lightbox’s argument that the
Joint Venture was poised to capture a large share of the
vacation homes sales business is . . . too speculative to
warrant a preliminary injunction.”
Finally, in his
affidavit submitted in opposition to the preliminary injunction,
Shealy noted that Lightbox “had expended $62,158” to create the
Website before the March 8 Notice of Termination and that “3rd
Home never disputed that [Lightbox] would be entitled . . . to
reimbursement for those technology costs.”
In October 2016, Lightbox informed the Court that Third
Home had not produced in discovery communications in its
possession between Third Home and the Exclusive Brokers, as well
as related agreements.
On November 1, 2016, the Court ordered a
forensic examination of defendants’ computers and other
electronic devices, and on November 15, the Court approved a
protocol to govern the examination.
The examination revealed a
number of relevant documents that the defendants had not
previously produced to Lightbox.5
Lightbox sought reimbursement for the cost of the Fall 2016
forensic examination under Rule 37, Fed. R. Civ. P, on September
15, 2017. Lightbox’s motion was granted on November 15, 2017.
See Lightbox Ventures, LLC v. 3RD Home Ltd., No. 16cv2379(DLC),
2017 WL 5526073 (S.D.N.Y. Nov. 15, 2017). After briefing on the
cost of the examination, Lightbox was granted $38,888.01 in an
Order dated January 18, 2018. Third Home then sought a stay of
the payment until after trial. This request was denied by Order
of February 12, where the Court directed payment to the Clerk of
Court. Third Home paid $38,888.01 to the Clerk of Court on
On January 12, 2017, the Court stayed proceedings so the
parties could enter mediation.
The stay was lifted April 3,
On April 20, the parties stipulated to an injunction
ordering Lightbox and Ellner not to use Third Home’s trademarks,
including domain names and email addresses, which was so ordered
On June 13, 2017, Third Home moved to exclude, under Rule
703, Fed. R. Evid., two valuations of the Joint Venture obtained
by Lightbox in support of its claim for lost profits, and moved
for summary judgment.
Lightbox moved for summary judgment on
On November 13, 2017, the Court granted Third Home’s
motion to exclude Lightbox’s valuations, and partially granted
each party’s motion for summary judgment.
See Lightbox II, 2017
The Summary Judgment Opinion resolved the motions for
summary judgment as follows.
Lightbox’s two valuations were
excluded because neither valuation was reliable.
See id. at *9-
Lightbox was granted summary judgment on its three breach
of contract claims:
“Third Home’s (1) failure to activate a
link to the Website on the Third Home webpage, (2) failure to
act as a ‘passive partner’ in the sales and marketing of homes,
and (3) entering into competition against the Joint Venture.”
Id. at *11.
Lightbox was also granted summary judgment on its
motion for damages in the amount of the costs it incurred for
the “technology build-out” of the Website.
See id. at *12.
Lightbox was also granted summary judgment on its causes of
action seeking declarations that Third Home breached the
Agreement and that Lightbox could validly terminate the
Agreement for cause.
See id. at *13.
Finally, Lightbox was
granted summary judgment on its claim that Third Home violated
its fiduciary duty to Lightbox, and that Shealy aided and
abetted this breach.
See id. at *13-*14.
Third Home, however, was granted summary judgment regarding
certain theories of damages sought by Lightbox under its breach
of contract claim.
Specifically, Third Home was granted summary
judgment on Lightbox’s claim for “any portion of the $52,500
that Third Home received from its Exclusive Broker contracts” as
damages for Third Home’s breach of contract, as well as on
Lightbox’s request for “consequential damages based on lost
profits or the overall value of the joint venture.”
Id. at *12-
Summary judgment was denied to Lightbox and Ellner as to
Third Home’s counterclaims.
See id. at *14-*17.
Following the issuance of the Summary Judgment Opinion, the
Court outlined the remaining issues for trial (the “November 14
The November 14 Order explained that the remaining
issues were “(1) the determination of Lightbox’s costs in excess
of $60,000 incurred in building the Website . . . , (2) whether
Lightbox is entitled on its breach of fiduciary duty claims to
the amount or a share of the amount paid to Third Home by the
Exclusive Brokers; and (3) Third Home’s counterclaims and thirdparty claims against Lightbox and Ellner.”
On January 29, 2018, Lightbox informed that Court that it
believed the parties had agreed to a settlement on January 18,
which Third Home refused to confirm.
Lightbox’s motion to
enforce the settlement was denied on February 14.
A jury trial was scheduled for March 12, 2018.
14, 2018, the parties waived their jury demand.
submitted motions in limine on February 16 and Lightbox did so
on February 26.
An Order of February 27 directed the parties to
file oppositions by March 5 and to address whether the remaining
issues could be tried on submission to the Court.
On March 9,
the parties informed the Court that they consented to trial on
submission, and proposed a schedule for filing reply affidavits
and supplemental proposed findings of fact and conclusions of
The parties filed their final submissions on March 16.
I. Lightbox’s Claims
Lightbox has three claims remaining:
damages arising out
At this time, the parties also resolved two motions brought by
Lightbox related to a trial subpoena issued to Richard Scarola,
Lightbox’s former counsel, and the use of the injunction issued
against Lightbox as trial evidence.
of Third Home’s breach of contract, damages arising out of Third
Home’s breach of fiduciary duty, and injunctive relief to
enforce portions of the termination provision of the Agreement.
Each claim is addressed in turn.
A. Breach of Contract Damages
On its breach of contract claim, Lightbox seeks $67,088.19,
which it represents is the amount it spent to create the
Lightbox also seeks an additional $115,000, which it
represents is what it owes to Stein and Graff for their
consultancy work on behalf of the Joint Venture.
To recover damages on a breach of contract claim, a
plaintiff must show “that such damages were actually caused by
the breach, [and] that the particular damages were fairly within
the contemplation of the parties to the contract at the time it
Awards.com, LLC v. Kinko’s, Inc., 834 N.Y.S.2d 147,
152 (1st Dep’t 2007), aff’d, 14 N.Y.3d 791 (2010).
whether the parties to an agreement fairly contemplated a type
of damages, courts use a “commonsense rule to determine what the
parties would have concluded had they considered the subject.”
Fitzpatrick v. Animal Care Hosp., PLLC, 962 N.Y.S.2d 474, 479
(3d Dep’t 2013) (citation omitted).
The Agreement provides that Lightbox is entitled to recoup
the “technology costs” defined as the “technology build-out of
the . . . cost of creating a . . . website at a level equivalent
to the 3RD Home site” in the event of an early termination of
the Agreement by Third Home.
The parties do not dispute that
Lightbox spent $67,088.19 to build-out the Website.
contends that it does not owe $4,930.19 of this amount,
asserting that the costs in excess of $62,158 were incurred
after it sent Lightbox the March 8 Termination Notice.
The invoices submitted by Lightbox regarding the disputed
$4,930.19 indicate that Lightbox incurred expenses of $1,919.75
by March 2016 and expenses of $3,010.44 after March 2016.
Lightbox has thus carried its burden of showing that it incurred
$64,077.75 to build the Website before the March 8 Termination
The $3,010.44 remaining is a modest portion of this
Lightbox has carried its burden to show an entitlement
to this remaining amount as well.
Third Home has not shown that
Lightbox incurred unnecessary expense in building the Website
either before or after March 8.
In the confusion created by the
collapse of the Joint Venture, Lightbox was entitled to spend a
modest sum to complete the Website’s “build-out,” and nothing in
the Agreement provides a basis for denying it recovery of the
The roughly $3,000 represents payments to
four different entities, three of which had begun their work
before March 8.
Accordingly, Lightbox is entitled to the amount
of its costs in building the Website, namely $67,088.19.
While Lightbox has established that Third Home breached its
argument with Lightbox in the three ways described above, it has
not shown that it is entitled to additional damages in the
amount of $115,000 in connection with those breaches.
reflects amounts paid to attorney Stein and consultant Graff.
Lightbox has not shown that they assisted in the “technology
build-out” of the Website.
There is therefore no basis to find
that Lightbox is entitled to reimbursement for $115,000 it owes
to Stein and Graff pursuant to Paragraphs 1(a) and 15(c) of the
Nor has Lightbox shown that it and Third Home contemplated
Lightbox spending over $100,000 on business consultants for the
Joint Venture when they negotiated the Agreement, which would be
reimbursed by Third Home in whole or in part.
Instead, the only
provision under which Lightbox could recoup its costs other than
those derived from the build-out of the Website was the 50-50
profit-sharing provision in Paragraph 1(f).
“commonsense rule” to evaluate the parties’ likely intentions
had they considered the issue, the fact that the Agreement
singles out the technology build-out apart from other costs
indicates that Lightbox would have borne the other costs of
creating the Joint Venture.
Thus, the only expectation Lightbox
had of recovering the $115,000 was based on a division the
future profits of the Joint Venture.
The Joint Venture never
began operation and therefore it made no profits.
of the Joint Venture’s profits, as discussed in the Summary
Judgment Opinion, is too speculative to grant expected profits
As a result, Lightbox is not entitled to recover
any portion of the $115,000 it seeks in connection with Stein
and Graff’s consultancy services.7
B. Breach of Fiduciary Duty Damages
Lightbox next seeks damages for Third Home’s breach of its
fiduciary duty to Lightbox.
It seeks the $52,500 that Third
Home received from the Exclusive Brokers, as well as punitive
Lightbox first seeks disgorgement of the money Third Home
obtained from the Exclusive Brokers.
Disgorgement is available
to the victim of a breach of fiduciary duty.
(Second) of Torts § 874, cmt. b (“In addition to or in
substitution for [tort] damages the beneficiary may be entitled
to restitutionary recovery[;] . . . ordinarily [t]he
[beneficiary] is entitled to profits that result to the
fiduciary from his breach of duty and to be the beneficiary of a
constructive trust in the profits.” (emphasis supplied)); see
Third Home’s motion in limine to preclude Lightbox from seeking
to prove damages arising from Stein and Graff’s work is granted.
Lightbox was granted summary judgment on its claim that Third
Home breached its fiduciary duty to Lightbox. Third Home was
granted summary judgment as to Lightbox’s claim for lost
profits. See Lightbox II, 2017 WL 5312187, at *13-*14.
also Bon Temps Agency Ltd. v. Greenfield, 584 N.Y.S.2d 824, 82526 (1st Dep’t 1992) (awarding plaintiff, on its breach of
fiduciary duty claim, fees earned from third parties by
defendant in course of defendant’s breach).
ordinary tort or contract case,” an award of damages on a breach
of fiduciary duty claim is “not merely to compensate the
plaintiff for wrongs committed by the defendant but to prevent”
City of Binghamton v. Whalen, 32 N.Y.S.3d 727,
729 (3d Dep’t 2016) (citation omitted).
Thus, “a fiduciary may
be required to disgorge any ill-gotten gain even where the
plaintiff has sustained no direct economic loss.”
57th Corp. v. Lerner, 553 N.Y.S.2d 763, 764-65 (1st Dep’t 1990).
One half of the fees Third Home improperly obtained from
the Exclusive Brokers is awarded to Lightbox.
This award is
directly linked to Third Home’s breach of its fiduciary duty to
Lightbox proposed to Third Home a Joint Venture
through which Third Home would share in the profits from
Lightbox’s work as a real estate broker.
If the Joint Venture
were successful, and the Website assisted Lightbox in selling
luxury residences, Lightbox was willing to split brokerage
commissions with Third Home.
Instead of fulfilling its
obligations as a Joint Venture partner, Third Home breached its
fiduciary duty to Lightbox and pocketed $52,500 it received from
Lightbox’s competitors by proposing a similar commission-sharing
arrangement with them.
Third Home argues that the Exclusive Broker fees that it
received were “not contemplate[d]” by the Joint Venture and that
Lightbox was accordingly not damaged by Third Home’s agreements
with the Exclusive Brokers.
In making this argument, Third Home
misunderstands the nature of the claim.
Lightbox is not
entitled to those fees because they should have been split by
the parties pursuant to the Agreement.
Lightbox is entitled to
disgorgement precisely because Third Home went outside of the
Joint Venture and realized profits with competitors to the Joint
That conduct constitutes Third Home’s breach of its
fiduciary duty and it is the profits that stem from the breach
to which Lightbox is entitled.
Lightbox seeks an award of the entirety of the $52,500
Third Home received from the Exclusive Brokers.
Since the Joint
Venture never got off the ground, any award larger than one-half
of this amount is unwarranted.
Lightbox also seeks an accounting to determine whether
Third Home obtained additional profits from the Exclusive
Brokers beyond the fees.
Lightbox did not seek an accounting in
In any case, an accounting is unnecessary.
has had full discovery and has not presented evidence that Third
Home has received more than $52,500 from its Exclusive Broker
For similar reasons, Lightbox has not shown it is entitled
to any punitive damages.9
Under New York law, punitive damages
are available if a plaintiff shows “a high degree of moral
turpitude” by the breaching party and “such wanton dishonesty as
to imply a criminal indifference to civil obligations.”
v. Ottimo, 469 F.3d 278, 283 (2d Cir. 2006) (citation omitted).
Here, Third Home entered agreements with the Exclusive Brokers
that competed with the Joint Venture, but did so before the
Agreement got off the ground.
Third Home also notified Lightbox
of its intention to terminate the Joint Venture in March 2016,
less than eight months after the Agreement was signed and about
three months after the Amendment was executed.
This record does
not demonstrate a remarkable level of dishonesty.
therefore not entitled to punitive damages.
The Summary Judgment Opinion also granted summary judgment
to Lightbox on its claim that Shealy aided and abetted Third
Home’s breach of its fiduciary duty to Lightbox.
Shealy is jointly and severally liable for the damages awarded
to Lightbox on the breach of fiduciary duty claim.
v. Schulman, 770 N.Y.S.2d 48, 53 (1st Dep’t 2003) (“[A]ny one
who knowingly participates with a fiduciary in a breach of trust
Third Home’s motion in limine, seeking to prevent Lightbox from
introducing evidence of Third Home’s finances before the Court
determines whether Lightbox is entitled to punitive damages, is
denied as moot.
is liable for the full amount of the damage caused thereby.”
For the same reason as described above,
punitive damages are not warranted.
Accordingly, Third Home and
Shealy are jointly and severally liable to Lightbox in the
amount of $26,250.
C. Specific Performance
Lastly, Lightbox seeks specific performance of the
valuation and noncompete provisions of the Agreement.
has not shown that it is entitled to either.
The parties have long recognized that their Joint Venture
ended no later than March 2016.
notice of termination.
In March 2016, Third Home gave
In filing this action in March, Lightbox
sought a declaration that Lightbox had validly terminated the
The Summary Judgment Opinion granted Lightbox’s
request for declarations that
(1) [Third Home’s] actions constitute material
breaches of the Agreement and that, therefore,
LightBox may be relieved of any further performance
obligations pursuant to the Agreement, while [Third
Home] would not be entitled to enforce the Agreement
(2) [T]he Agreement may be validly terminated by
Lightbox II, 2017 WL 5312187, at * 13.
Thus, the Joint Venture
was terminated by both parties before it had begun its
There is no basis, therefore, either to order a
valuation of the Joint Venture or to enjoin competition with
that failed venture.
Moreover, the terms of the Agreement do
not support either of those requests.
Paragraph 15(e) of the Agreement applies “in the event
[Third Home] wishes to terminate th[e] Agreement with [Lightbox]
but continue to operate the business of the joint venture . . .
independently of [Lightbox].”
In that situation, Paragraph
15(e) provides that Third Home must obtain three separate
valuations of the Joint Venture and pay Lightbox 50% of the
average of the three valuations.
The Agreement does not provide
for a valuation or an accounting in any other circumstances.
Lightbox is not entitled to a valuation pursuant to
Paragraph 15(e) because there is no evidence that Third Home
wishes to continue operating the Joint Venture.10
Third Home has
never indicated that it wishes to take over the Joint Venture
and, indeed, offered at summary judgment to stipulate that
Lightbox “exclusively own[s] and control[s]” the Website.
Lightbox II, 2017 WL 5312187, at *12.
Nor is Lightbox entitled to an injunction barring Third
Home from competing with the Joint Venture for two years.
party is entitled to a permanent injunction if it shows
(1) that it has suffered an irreparable injury; (2)
In addition, Lightbox has failed to show that any valuation of
the Joint Venture would be reliable. As discussed in the
Summary Judgment Opinion, Lightbox’s two projections of the
Joint Venture’s future profits were entirely speculative. See
Lightbox II, 2017 WL 5312187, at *9-*11.
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 and defendant, a remedy in equity is
warranted; and (4) that the public interest would not
be disserved by a permanent injunction.
Salinger v. Colting, 607 F.3d 68, 77 (2d Cir. 2010) (citation
Here, Lightbox has neither suffered an irreparable
injury nor shown that monetary damages are insufficient to
As Lightbox acknowledges, “[t]his action is, at its heart,
a damages action.”
Lightbox I, 2016 WL 6562107, at *10.
two years have passed since it filed this lawsuit, and Lightbox
offers no explanation why an injunction would be appropriate at
this stage other than to say that it is entitled to an
injunction under Paragraph 15(c) of the Agreement.11
the Court credits the testimony from Third Home’s CEO and from
its CFO that Third Home has never received any real estate
brokerage commissions from the Exclusive Brokers and no longer
wishes to participate in the real estate sales market.
extent Lightbox has been harmed, it has been compensated by the
damages awards granted above.
D. Attorneys’ Fees
Lightbox also seeks an award of its attorneys’ fees as part
Lightbox does not include a request for an injunction in its
proposed findings of fact and conclusions of law.
of its damages on the breach of fiduciary duty claim.
request is denied.
In support of its claim, Lightbox cites a
federal ERISA case that does not discuss New York law, and a New
York case that states that
[t]he general rule is that the legal expenses
necessarily incurred in carrying on a lawsuit may not
be recovered as general or special damages. There is
a well-recognized exception, however, where the
damages are the proximate and natural consequence of
defendants’ tortious act which requires plaintiff to
defend or to bring an action against a third party.
Cent. Trust Co., Rochester, N.Y. v. Goldman, 417 N.Y.S.2d 359,
361 (4th Dep’t 1979).
Lightbox was not forced to bring or
defend a suit against a third party as a result of Third Home’s
breach of fiduciary duty, so this exception is inapplicable.12
Lightbox is awarded $67,088.19 on its breach of contract
claim and $26,250 on its breach of fiduciary duty claim, for a
total of $93,338.19.13
Third Home is liable for the full amount
of $93,338.19, and Shealy is jointly and severally liable for
$26,250 of this amount for aiding and abetting Third Home’s
To the extent Lightbox also seeks attorneys’ fees on a theory
of surcharge, this request is also denied. Surcharge is an
equitable remedy available when a trust beneficiary prevails in
a suit against a trustee for the breach of an investment duty
related to the trust. See Velez v. Feinstein, 451 N.Y.S.2d 110,
114 (1st Dep’t 1982); see also CIGNA Corp. v. Amara, 563 U.S.
421, 441-42 (2011). Third Home was not a trustee.
These awards are in addition to the $38,888.01 awarded in the
January 18 Order as a discovery sanction.
breach of its fiduciary duty to Lightbox.
Judgment is granted
to Third Home, however, on Lightbox’s claims for $115,000 in
consultancy fees, for an accounting, for an injunction barring
Third Home from competing against it for two years, and for
attorneys’ fees arising out of Lightbox’s breach of fiduciary
II. Third Home’s Claims
Third Home brings counterclaims against Lightbox and thirdparty claims against Ellner arising out of Ellner’s use of Third
Home trademarks after this lawsuit was filed.
Third Home brings
claims under the Anticybersquatting Consumer Protection Act
(“ACPA”), 15 U.S.C. § 1125(d), and under the Lanham Act, 15
U.S.C. § 1051, et seq.14
As Lightbox acknowledges in its trial
submissions, it has not contested the validity of Third Home’s
trademarks in this litigation.
A. ACPA Claims
Third Home claims that Lightbox violated its rights under
ACPA in three ways.
First, Lightbox registered a domain name
that used Third Home’s trademark.
“resurrect[ed]” a domain name.
Third, Lightbox communicated
Third Home’s Answer and Third-Party Complaint lists claims
under state trademark infringement law and the Uniform Domain
Name Dispute Resolution Policy. Third Home does not address
those claims in its trial submissions, and they are accordingly
with property owners using Third Home’s trademarks.
Third Home’s counterclaim and third-party complaint list
three domains that it claims Lightbox and/or Ellner used
thirdhomerealestate.com, 3rdhomerealestate.com, and
Lightbox, however, has submitted an internet
domain registration statement that reflects Shealy as the
registrant of thirdhomerealestate.com.
Third Home does not
address this in its trial submissions.
There is thus no
evidence that Lightbox used thirdhomerealestate.com and Third
Home’s counterclaims and third-party claims are dismissed to the
extent that they are based on Lightbox and/or Ellner’s use of
Ellner does not contest that he used the
firstname.lastname@example.org email address after this lawsuit was
Nor does he contest that he registered the domain
3rdhomerealty.com on July 21, 2016, after the Website was taken
down by Shealy on July 19, 2016.
Instead, Ellner explains his
actions as motivated by a desire to further the purposes of the
Joint Venture and to restore the Website after Shealy took the
A party is liable under ACPA if it
(i) has a bad faith intent to profit from [a] mark
Lightbox’s motion in limine to preclude Third Home from
offering evidence that Lightbox or Ellner used the
thirdhomerealestate.com domain is denied as moot.
. . . ; and
(ii) registers, traffics in, or uses a domain name
that-(I) in the case of a mark that is distinctive at
the time of registration of the domain name, is
identical or confusingly similar to that mark.
15 U.S.C. § 1125(d)(1)(A).
Among the non-exhaustive list of factors that a court “may
consider” to determine “whether a person has a bad faith intent”
within the meaning of ACPA are:
(I) the trademark or other intellectual property
rights of the person, if any, in the domain name;
. . .
(III) the person’s prior use, if any, of the domain
name in connection with the bona fide offering of any
goods or services;
. . .
(V) the person’s intent to divert consumers from the
mark owner’s online location to a site accessible
under the domain name that could harm the goodwill
represented by the mark, either for commercial gain or
with the intent to tarnish or disparage the mark, by
creating a likelihood of confusion as to the source,
sponsorship, affiliation, or endorsement of the site;
. . .
(VIII) the person’s registration or acquisition of
multiple domain names which the person knows are
identical or confusingly similar to marks of others
that are distinctive at the time of registration of
such domain names, or dilutive of famous marks of
others that are famous at the time of registration of
such domain names, without regard to the goods or
services of the parties; and
(IX) the extent to which the mark incorporated in the
person’s domain name registration is or is not
distinctive and famous within the meaning of
Id. § 1125(d)(1)(B)(i).
In addition, ACPA provides that “[b]ad faith intent . . .
shall not be found in any case in which the court determines
that the person believed and had reasonable grounds to believe
that the use of the domain name was a fair use or otherwise
Id. § 1125(d)(1)(B)(ii).
A plaintiff bringing an ACPA
claim is entitled to elect to recover “actual damages and
profits” or “statutory damages in the amount of not less than
$1,000 and nor more than $100,000 per domain name, as the court
Id. § 1117(d).
Third Home has failed to show that Ellner acted with a “bad
faith intent to profit” from his use of the
email@example.com email address.16
Ellner briefly used
the email address in July and perhaps August of 2016 to reassure
the Joint Venture’s clients that the business would continue
after the defendants had deactivated the Website.
do not reflect a bad faith intent to profit from the
None of the parties addresses whether Third Home’s marks were
distinctive at the time Ellner used the domain names, which is a
predicate for ACPA liability. See 15 U.S.C.
§ 1125(d)(1)(A)(ii). Accordingly, Lightbox and Ellner have
forfeited any argument that Third Home’s marks are not
Further, it is undisputed that
Third Home had the ability to close the
firstname.lastname@example.org email account at any time -- which it
did in 2017.
The evidence shows that Ellner “believed and had
reasonable grounds to believe that the use of the
[3rdhomerealestate] domain name was a fair use or otherwise
lawful” based on his use of the domain to further the purposes
of the Joint Venture.
15 U.S.C. § 1125(d)(1)(B)(ii).
counterclaim and third-party ACPA claim are dismissed insofar as
they are based on Ellner’s use of the email@example.com
Third Home has carried its burden of showing that Ellner
acted in bad faith to profit from his registration of
3rdhomerealty.com on July 21, 2016.
While Ellner no doubt did
so in a futile hope that the Joint Venture could be revived, the
creation of a domain name that is confusingly similar to the
defendants’ was wrongful.
Ellner knew that he had no right to
As a result, Third Home has shown that Ellner violated
ACPA when he registered the 3rdhomerealty.com domain.
ACPA directs the court to choose an amount of statutory
damages between $1,000 and $100,000, as a court considers just.
Third Home urges that an award of $100,000 is appropriate,
whereas Lightbox contends that $1,000 is appropriate.
An award of $10,000 in statutory damages is appropriate in
Ellner and Lightbox are liable for a single
Defendants have not shown that Ellner made
extensive use of the site or profited from it.
It was used to
communicate with clients of the failed Joint Venture.
award is necessary to serve the purposes of the ACPA.
B. Lanham Act Claims
Third Home contends that the same evidence that supports
its ACPA claim shows three violations of the Lanham Act.
the reasons that follow, judgment is granted to Lightbox and
Ellner on the Lanham Act claims.
Third Home has trademark registrations for “3rd Home” and
“3rd Home” with the letter “o” in Home replaced by the image of
As before, Lightbox does not contest the validity of
Third Home’s trademarks.
Lanham Act claims are analyzed under a two-part test:
first prong looks to whether the senior user’s mark is entitled
to protection; the second to whether the junior user’s use of
its mark is likely to cause consumers confusion as to the origin
or sponsorship of the junior user’s goods.”
Sys. v. ContextMedia, Inc., 826 F.3d 27, 37 (2d Cir. 2016).
first prong is satisfied by showing that a mark is valid and
registered, owned by the registrant, and that the registrant has
the exclusive right to use the mark in commerce.
Because Lightbox does not contest the validity of the
registration of Third Home’s marks, the sole issue is consumer
Consumer confusion is “analyzed with reference to the eight
factors first articulated in Polaroid Corp. v. Polarad Elecs.
Corp., 287 F.2d 492, 495 (2d Cir. 1961).”
Cross Commerce Media,
Inc. v. Collective, Inc., 841 F.3d 155, 168 (2d Cir. 2016).
The eight factors are: (1) strength of the trademark;
(2) similarity of the marks; (3) proximity of the
products and their competitiveness with one another;
(4) evidence that the senior user may “bridge the gap”
by developing a product for sale in the market of the
alleged infringer’s product; (5) evidence of actual
consumer confusion; (6) evidence that the imitative
mark was adopted in bad faith; (7) respective quality
of the products; and (8) sophistication of consumers
in the relevant market.
Int’l Info. Sys. Sec. Certification Consortium, Inc. v. Sec.
Univ., LLC, 823 F.3d 153, 160 (2d Cir. 2016) (citation omitted).
“The application of the Polaroid test is not mechanical, but
rather, focuses on the ultimate question of whether, looking at
the products in their totality, consumers are likely to be
Kelly-Brown v. Winfrey, 717 F.3d 295, 307 (2d Cir.
2013) (citation omitted).
First, for the reasons explained above, there is no
evidence that Ellner ever used the thirdhomerealestate.com
domain, so the Lanham Act claims fail to the extent they are
premised on use of that domain.
Second, also for the reasons
given in discussing the ACPA claim, Ellner did not act with bad
faith intent to deceive when he used his
firstname.lastname@example.org email address, and there is no
likelihood that consumers were confused.
is granted for Ellner and Lightbox on the Lanham Act claims to
the extent they are premised on the thirdhomerealestate.com and
3rdhomerealestate.com domain names and associated email
With regard to the 3rdhomerealty.com domain that Ellner
registered in July 2016, it is assumed that the defendants have
established a violation of the Lanham Act.
The defendants have
not shown, however, that they are entitled to damages for this
Third Home does not attempt to prove actual consumer
confusion, and instead relies on a presumption of confusion
based on its contention that Ellner acted with intent to
Third Home has failed to show confusion.
Third Home has not shown it is entitled to damages.
Third Home requests “statutory damages of $100,000 for each
of the three (3) violations,” apparently referring to its ACPA
claims, and does not separately request damages on its Lanham
The Lanham Act does not provide for statutory
damages, however, for the type of violation at issue here.17
Instead, damages are limited to “(1) defendant’s profits, (2)
any damages sustained by the plaintiff, and (3) the costs of the
action” and are “subject to the principles of equity.”
U.S.C. § 1117(a).
Lightbox and Ellner did not profit from the
3rdhomerealty.com domain, and Third Home has not shown that it
sustained any damages from Ellner’s registration of the domain.
In addition, it would be inequitable on this record to award
Third Home the costs of bringing this action where Third Home
has not shown any damages and where Ellner’s registration of the
3rdhomerealty.com domain, though wrongful, was short-lived.
Judgment is granted to Ellner and Lightbox on Third Home’s
Lanham Act claims.
C. Attorneys’ Fees
Third Home seeks an award of attorneys’ fees on its ACPA
and Lanham Act claims.
15 U.S.C. § 1117(a) provides that “in
exceptional cases” a court “may award reasonable attorney fees
to the prevailing party.”
Third Home prevailed on one of its
As the Supreme Court has explained with regard to
the identically worded fee-shifting provision of the patent
laws, “an ‘exceptional’ case is simply one that stands out from
The Lanham Act provides for statutory damages for two types of
violations: cyberpiracy in violation of ACPA and
counterfeiting. See 15 U.S.C. §§ 1117(c), (d).
others with respect to substantive strength of a party’s
litigating position (considering both the governing law and the
facts of the case) or the unreasonable manner in which the case
Octane Fitness, LLC v. ICON Health & Fitness,
Inc., 134 S. Ct. 1749, 1756 (2014).
There is nothing exceptional about the ACPA claim on which
Third Home prevailed.
Accordingly, its request for an award of
fees is denied.
Third Home has proven one violation of ACPA arising out of
Ellner’s registration of the 3rdhomerealty.com domain.
is granted to Third Home on that claim, and it is awarded
Third Home is not entitled to statutory fee shifting.
Third Home has failed to prove any other violations of ACPA and
failed to prove any violations of the Lanham Act, and judgment
is granted to Lightbox and Ellner on those claims.
The net judgment is $83,338.19 in favor of Lightbox.
Lightbox is also awarded prejudgment interest of 9% per annum
running from January 1, 2016.
See N.Y. C.P.L.R. §§ 5001(a),
IV. Contractual Fee Shifting
The Agreement provides for fee shifting in certain
Each side seeks attorneys’ fees pursuant to the
In addition, Third Home seeks fees paid to its
expert witness in connection with its successful motion to
exclude Lightbox’s valuation experts at summary judgment.18
Paragraph 4(c) of the Agreement provides as follows:
If either party employs attorneys to enforce any
rights arising out of or relating to this agreement,
the losing party shall reimburse the prevailing party
for its reasonable attorneys’ fees and costs.
The Agreement provides in Paragraph 4(a) that New York law
“Under New York law, a contract that provides for an award
of reasonable attorneys’ fees to the prevailing party in an
action to enforce the contract is enforceable if the contractual
language is sufficiently clear.”
NetJets Aviation, Inc. v. LHC
Commc’ns, LLC, 537 F.3d 168, 175 (2d Cir. 2008).
defendant may be a prevailing party and receive fees incurred in
the successful defense of a claim.
See Kessel Brent Corp. v.
Benderson Prop. Dev., Inc., 893 N.Y.S.2d 401, 402 (4th Dep’t
To determine “whether a party is a prevailing party, a
Lightbox moves in limine to preclude Third Home from
introducing the affidavit of its expert, William Chandler,
because he has not been qualified by the Court as an expert and
because there are no remaining issues as to which his testimony
is relevant. Third Home has submitted Chandler’s affidavit
solely to support its claim for fee shifting. As Third Home
does not rely on Chandler as an expert for any of the issues to
be tried, Lightbox’s third motion in limine is denied as moot.
fundamental consideration is whether that party has prevailed
with respect to the central relief sought.”
Lucchino, 942 N.Y.S.2d 735, 736 (4th Dep’t 2012) (citation
In general, “the prevailing or successful party is
the party in whose favor a net judgment was entered.”
Wiederhorn v. Merkin, 952 N.Y.S.2d 478, 481 (1st Dep’t 2012).
“It is not necessary for a party to prevail on all of his claims
in order to be considered prevailing.”
Id. at 863 (citation
omitted); see also Excelsior 57th Corp. v. Winters, 641 N.Y.S.2d
675, 676 (1st Dep’t 1996) (Where landlord sued for 54 months’
rent, tenants claimed constructive eviction for 24 of those
months but only were awarded rent abatement for 4 1/2 months,
the landlord was the prevailing party and entitled to attorneys’
The core of this dispute was assigning fault for the
breakdown of the Joint Venture.
Measuring the parties’ results
in this way, Lightbox prevailed.
The upshot of this litigation
is a determination that Third Home breached the Agreement and
its fiduciary duty to Lightbox.
in Lightbox’s favor.
The net judgment is $83,338.19
Considering the claims numerically,
Lightbox prevailed on all but one of its claims while defeating
all but one of Third Home’s ACPA claims.19
Third Home was not
Although Third Home significantly reduced the damages
available to Lightbox in its successful motion to exclude
successful in resisting the core of the dispute and so it has
not prevailed in this litigation.
As a result, Lightbox is the
Under the Agreement, the prevailing party is entitled to
“reasonable” attorneys’ fees.
Third Home has conceded from at
least the time that the parties litigated the preliminary
injunction motion in the summer of 2016, that it owed Lightbox
at least $62,158 for the build-out of the Website.
Lightbox’s net judgment won it only about $20,000 above the
amount that Third Home conceded almost two years ago that it
owed to Lightbox.
Moreover, from the time the Preliminary
Injunction Opinion was issued, Lightbox was on notice that its
likelihood of recovering anticipated future profits of the Joint
Venture was slim, given how “speculative” those profits were.
See Lightbox I, 2016 WL 6562107, at *10-*11.
Lightbox has shown that it is entitled to its reasonable
attorneys’ fees through the time Lightbox I was issued, it has
not shown it is entitled to attorneys’ fees beyond that date.
Third Home is liable to Lightbox for $67,088.19 on
Lightbox’s expert valuations, New York law does not appear to
recognize nondispositive motion practice as a means of judging
whether a party has prevailed, unless the motion affects the
core relief sought.
Lightbox’s breach of contract claim.
Third Home and Shealy are
jointly and severally liable to Lightbox for $26,250 on
Lightbox’s breach of fiduciary duty claim.
Lightbox and Ellner
are jointly and severally liable to Third Home and Shealy for
$10,000 for one violation of ACPA.
Lightbox is accordingly
awarded $83,338.19, plus prejudgment interest of 9% per annum
running from January 1, 2016.
The Clerk of Court is directed to
enter final judgment in favor of Lightbox.
Lightbox is also
awarded its reasonable attorneys’ fees for the period before
October 28, 2016, and is directed to file an application for its
fees, with supporting documentation, as directed by a Scheduling
Order filed contemporaneously with this Opinion.
The Clerk of
Court is directed to release funds deposited by Third Home on
March 5, 2018 in the amount of $38,888.01 to Lightbox pursuant
to the Court’s March 12, 2018 Order.
New York, New York
April 13, 2018
United States District Judge
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