Opinion
15 Civ. 7721 (LTS)(HBP)
09-16-2019
INTREPIDUS, LLC, Plaintiff, v. GLENN J. BIVINS and ERIC MONSE, Defendants.
REPORT AND RECOMMENDATION
:
TO THE HONORABLE LAURA TAYLOR SWAIN, United States District Judge,
I. Introduction
By Order dated April 28, 2017, the Honorable Laura Taylor Swain, United States District Judge, referred this matter to me to conduct an inquest with respect to plaintiff's damages against defendants. Pursuant to Judge Swain's Order, I issued a Scheduling Order on May 4, 2017 (Docket Item ("D.I.") 84). My Scheduling Order provided, in pertinent part:
1. Plaintiff shall submit proposed findings of fact and conclusions of law concerning damages no later than July 5, 2017. All factual assertions made by plaintiff are to be supported by either affidavit or other material of evidentiary weight.
2. Defendant shall submit its response to Plaintiff's submissions, if any, no later than August 4, 2017. IF DEFENDANT (1) FAILS TO RESPOND TO PLAINTIFFS' SUBMISSIONS, OR (2) FAILS TO CONTACT MY CHAMBERS BY AUGUST 4, 2017 AND REQUEST AN IN-COURT HEARING, IT IS MY INTENTION TO ISSUE A REPORT AND RECOMMENDATION CONCERNING DAMAGES ON THE BASIS OF PLAINTIFFS' WRITTEN SUBMISSIONS ALONE WITHOUT AN IN-COURT HEARING. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997); Fustok v. ContiCommodity Services Inc., 873 F.2d 38, 40 (2d Cir. 1989) ("[I]t [is] not necessary for the District Court to hold a hearing, as long as it ensured that there was a basis for the damages specified in the default judgment.")(Scheduling Order, dated May 4, 2017 (D.I. 84)).
Plaintiff timely submitted Proposed Findings of Fact and Conclusions of Law on June 30, 2017 (Proposed Findings of Fact and Conclusions of Law in Support of Plaintiff's Inquest as to Damages, dated June 30, 2017 (D.I. 86) ("Pl. Findings")), along with the Declaration of Brian Engelbert (D.I. 87) ("Engelbert Decl.").
Copies of my May 4, 2017 Scheduling Order were mailed to Mr. Glenn Bivins at 301 West 29th St., Apt. 1L, New York, New York 10001 and to Mr. Eric Monse at 252 South 4th St., Apt. 3E, Brooklyn, New York 11211. Neither has been returned as undeliverable. Defendants have not made any submission in response to plaintiff's submission, nor have they contacted my chambers in any way. Accordingly, on the basis of plaintiff's submissions alone, I make the following findings of fact and conclusions of law.
II. Findings of Fact
1. Plaintiff Intrepidus LLC ("Plaintiff" or "Intrepidus") is a Wyoming limited liability company authorized to do business in New York, with its principal place of business in New York, New York (Amended Complaint, dated Dec. 9, 2015 (D.I. 33) ("Am. Compl.") ¶ 31).
As a result of defendants' default, all the allegations of the complaint, except as to the amount of damages, must be taken as true. Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158-59 (2d Cir. 1992); Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 69-70 (2d Cir. 1971), rev'd on other grounds sub nom., Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363 (1973).
2. Intrepidus is the non-managing member of Seductive Approach LLC ("Seductive Approach"), a Wyoming limited liability company with its principal place of business in New York, New York (Am. Compl. ¶¶ 30-31).
3. Defendant Bivins, the former managing member of Seductive Approach, is a citizen of the State of New York (Am. Compl. ¶ 32).
4. Defendant Monse is a citizen of the State of New York (Am. Compl. ¶ 33).
5. Seductive Approach provides "consultations, in-field training, and seminars and workshops nationwide to individuals who want to improve their social and dating skills" (Am. Compl. ¶ 41).
6. In 2012, plaintiff and Bivins agreed that plaintiff would invest $68,000.00 in Seductive Approach in exchange for a 15 percent ownership interest in the company and a position as a non-managing member (Am. Compl. ¶ 44; Operating Agreement of Seductive Approach LLC, Pl. Findings, Ex. C (D.I. 86-3) ("Operating Agreement"), Art. IV, § 4.1(a) and Schedule A).
7. The Operating Agreement provided that Seductive Approach's net operating cash flow would be allocated first to repay plaintiff's $68,000.00 capital contribution (Operating Agreement, Art. VIII, § 8.1(a)), and that in the event of a dissolution of the company, plaintiff would be entitled to repayment of the outstanding balance of its capital contribution after the company's expenses and debts were paid (Am. Compl. ¶ 45; Operating Agreement, Art. XIII, § 13.2(a)).
8. As of 2012, Bivins was the sole managing member and the only employee of Seductive Approach (Am. Compl. ¶¶ 42, 46).
9. Bivins agreed to provide "all of the company's services," as well as knowledge, trade secrets and the domain name www.seductiveapproach.com in exchange for an 85 percent ownership interest in the company (Am. Compl. ¶¶ 46-47).
10. However, Bivins mismanaged Seductive Approach in several respects:
• He failed to document the coaching services he rendered or to create sales invoices for those services (Am. Compl. ¶¶ 54-55).
• He accepted payments from clients into his personal accounts and failed to deposit the revenues into the company's bank account (Am. Compl. ¶¶ 54-55, 59-61).
• He failed to pay sales tax, to withhold payroll taxes from his own salary payments and to file income tax returns on behalf of the company (Am. Compl. ¶¶ 56, 64-65).
11. After becoming aware of Bivins's mismanagement, plaintiff and Bivins attempted to negotiate a buyout of plaintiff's interest in Seductive Approach (Am. Compl. ¶ 72).
12. On May 29, 2013, Bivins purchased the domain name attractiveapproach.com for the purpose of starting his own business to compete with Seductive Approach (Am. Compl. ¶¶ 73-74, 94).
13. Bivins paid $11,800.00 from Seductive Approach's bank account to Profitable Media to complete the development of the Seductive Approach website, which Bivins converted into the Attractive Approach website (Am. Compl. ¶¶ 75, 88, 92, 97, 106).
14. Monse provided "assistance and financial support" to Bivins's efforts to convert the Seductive Approach website into the Attractive Approach website (Am. Compl. ¶ 106).
15. Bivins resigned from Seductive Approach on August 21, 2013 and used Seductive Approach's business plan to form Attractive Approach (Am. Compl. ¶¶ 76, 78).
16. The Attractive Approache website promoted "the exact same products, services, and content that were actively created and developed by Seductive Approach," including several e-books copyrighted by Seductive Approach (Am. Compl. ¶¶ 96, 108-09, 112, 115-19).
17. Monse's own website, ApproachAnxiety.com, promoted and linked directly to products sold on the Attractive Approach website (Am. Compl. ¶ 113).
18. Plaintiff commenced this action against defendants on September 30, 2015 (Complaint, dated Sept. 30, 2015 (D.I. 1)) and filed an amended complaint on December 9, 2015. The amended complaint asserts claims against Bivins for copyright infringement, misappropriation of corporate opportunities, conversion tortious interference with business relationships, fraud and fraud in the inducement and seeks a declaratory judgment that plaintiff owns certain copyright registrations (Am. Compl. ¶¶ 133-77). As to Monse, the amended complaint asserts a claim for copyright infringement and seeks a declaration that plaintiff is the owner of certain copyright registrations (Am. Compl. ¶¶ 133-42, 159-62).
19. Former counsel for defendants moved to withdraw from the case on February 5, 2016 (D.I. 50). Judge Swain granted the motion to withdraw on March 9, 2016 and directed defendants to retain new counsel within 60 days (Order, dated Mar. 9, 2016 (D.I. 56)).
20. On May 31, 2016, Judge Swain extended defendants' time to retain new counsel and gave them a second 60-day period either to retain new counsel or to file a notice that they would proceed pro se (Order, dated May 31, 2016 (D.I. 59)). Judge Swain's May 31, 2016 Order further provided that if defendants did not timely retain new counsel or file a notice that they were going to proceed pro se, their motion to dismiss the complaint would be deemed abandoned and a default would be entered against them (D.I. 59).
21. Thereafter, defendants failed to appear or defend this action. On August 16, 2016, Judge Swain deemed defendants' motion to dismiss abandoned, directed the Clerk of the Court to issue a certificate of default and ordered plaintiff to move for a default judgment (Order, dated Aug. 16, 2016 (D.I. 65)). Plaintiff moved for a default judgment on August 30, 2016 (Notice of Motion for Default Judgment Pursuant to F.R.C.P. 55(b)(2), dated Aug. 30, 2016 (D.I. 69)).
22. On April 28, 2017, Judge Swain granted plaintiff's motion for a default judgment with respect to plaintiff's claims against Bivins for misappropriation and conversion. Intrepidus, LLC v. Bivins, 15 Civ. 7721 (LTS)(HBP), 2017 WL 1608896 at *4-*5 (S.D.N.Y. Apr. 28, 2017) (Swain, D.J.).
23. Plaintiff sought only statutory damages with respect to its claim for copyright infringement, and because plaintiff did not register its copyrights before defendants' infringement, Judge Swain found that plaintiff could not recover statutory damages. Intrepidus, LLC v. Bivins, supra, 2017 WL 1608896 at *3. Because the only claim against Monse that could support an award of money damages is plaintiff's claim for copyright infringement and because Judge Swain has already ruled that the only damages sought with respect to this claim -- statutory damages -- are not recoverable in this action, I do not recommend the award of any damages against Monse. Thus, the remainder of this Report and Recommendation relates to defendant Bivins only.
III. Conclusions of Law
A. Jurisdiction and Venue
24. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 because plaintiff alleges violations of the Copyright Act of 1976. The Court also has supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a) with respect to plaintiff's state law claims because they are part of the "same case or controversy" as his federal claim.
25. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(1) because Bivins is a resident of the Southern District of New York.
B. Damages
26. Judge Swain found that plaintiff sufficiently demonstrated that Bivins "misappropriat[ed] [Seductive Approach's] capital, confidential information, coaching services, trade secrets, logo, copyrighted material, and other property" and converted "the Seductive Approach website, bank account and financial assets, design, logos, and other intellectual property." Intrepidus, LLC v. Bivins, supra, 2017 WL 1608896 at *5. She referred the matter to me to conduct an inquest with respect to plaintiff's damages on its claims for misappropriation and conversion. Intrepidus, LLC v. Bivins, supra, 2017 WL 1608896 at *7.
27. Plaintiff seeks an award of $304,358.74 in damages for Bivins's misappropriation and conversion, consisting of a portion of plaintiff's capital contribution to Seductive Approach of $31,000.00, deposits into Bivins's bank account totaling $165,615.77, payments made to Bivins's PayPal account totaling $57,694.97 and $50,048.00 in salary and bonuses Bivins received from Attractive Approach (Engelbert Decl. ¶¶ 31-35).
Although plaintiff's capital contribution to Seductive Approach totalled $68,000.00, it only seeks here the return of $31,000.00.
28. Plaintiff does not articulate any legal theory that would support the return of a portion of its capital investment of $31,000.00. To the extent plaintiff is asserting a claim for misappropriation of a corporate opportunity, the more correct remedy is a constructive trust imposed on the proceeds of Bivins's competing business or some similar restitutionary remedy. See Camrex (Holdings) Ltd. v. Camrex Reliance Paint Co., 90 F.R.D. 313, 325 (E.D.N.Y. 1981). Similarly, the appropriate remedy for conversion is the value of the thing converted at the time and place of conversion. Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326, 402 N.E.2d 122, 125, 425 N.Y.S.2d 783, 786 (1980). However, as a result of Bivins's default and his abandonment of this litigation, he has made it impossible for plaintiff to discover the extent to which his competing business has succeeded, thereby rendering the most appropriate remedies unprovable. Nevertheless, no litigant should be able to benefit from his wrongdoing, and a party's abandonment of an action should not operate to frustrate his adversary's recovery. Accordingly, I recommend that plaintiff recover the $31,000.00 of its initial capital contribution that it is seeking. By his conduct, Bivins has destroyed the value of plaintiff's investment. Although rescission is not ordinarily the remedy for misappropriation of a corporate opportunity or conversion, I conclude it is appropriate given the facts that Bivins has abandoned this litigation and rendered plaintiff's investment worthless.
29. In addition, Bivins acknowledged in his deposition that certain payments into his PayPal account were fees for his coaching services. Specifically, he admitted charging Jason Lebel $2,400.00, Paul Rossi $800.00, Ilya Novak $300.00 and Rahul Bhati $1,000.00 for coaching services (Bivins Dep. at 712, 751). These charges are reflected in Bivins's unauthenticated PayPal transaction history (Pl. Findings, Ex. Q). Accordingly, plaintiff should be awarded $4,500.00 in damages for these misappropriated client fees.
Bivins also acknowledged charging Deepak Rajshekar Null $1,400.00 (Bivins Dep. at 708), but it appears from Bivins's PayPal transaction history that this invoice was never paid (Pl. Findings, Ex. Q).
30. However, plaintiff has failed to sufficiently connect the rest of the deposits made to Bivins's PayPal account and Bivins's bank account to Bivins's misappropriation and conversion. Plaintiff merely provides a list of names appearing in the PayPal transaction history, along with the assertions that "the amounts that were received were all consistent with the coaching prices Bivins had previously charged for coaching" and that the amounts exceeded "the amounts that [Bivins] charged for a haircut" (Engelbert Decl. ¶ 33). However, the amounts that plaintiff claims were "consistent" with Bivins's coaching fees range from $50.00 to $2,912.70 (Pl. Findings, Ex. Q), and plaintiff provides no further explanation of Bivins's fees for coaching services. Similarly, plaintiff claims that "Bivins received payment for some of Seductive Approach's products from Gotham Club" (Engelbert Decl. ¶ 34), but it offers no details concerning the nature of these "products," nor any identification of which Gotham Club payments were for Seductive Approach products or services.
31. Plaintiff has provided no information regarding the sources of the deposits into Bivins's bank account, other than the unsupported assertion that the deposits "include funding from his partner, Schloss, from Salsbury Fortress (Attractive Approach), and from customers" (Engelbert Decl. ¶ 32); Bivins's unauthenticated bank statements provide only dates and deposit amounts (Pl. Findings, Ex. P). This skeletal "evidence" is insufficient to connect the deposits to Bivins's tortious activity.
32. Plaintiff has also failed to substantiate its claim for $50,048.00 based on the salary and bonuses Bivins allegedly received from Attractive Approach. Plaintiff asserts that "Bivins was paid by Attractive Approach $50,048.00 (per their agreement) plus bonuses" (Engelbert Decl. ¶ 35). However, the putative agreement between Bivins and Attractive Approach is not signed by Bivins (Pl. Findings, Ex. R), and only two of the five payments listed in the "Contributions" section of the agreement correspond with deposits recorded in Bivins's unauthenticated bank statements (Pl. Findings, Ex. P). Plaintiff's conclusory assertion that Bivins received certain payments from a competitor of Seductive Approach, without more, is insufficient to award plaintiff the alleged amount of those payments.
33. Thus, I recommend that plaintiff be awarded a total of $35,500.00 in damages.
C. Attorneys' Fees and Costs
34. Plaintiff also seeks $157,000.00 in attorneys' fees and costs (Pl. Findings at 9-10, 15, 17, 19). However, plaintiff fails to articulate a legal basis on which fees may be awarded. The Copyright Act does not entitle plaintiff to recover attorneys' fees because, as Judge Swain found, defendants' infringement commenced almost a year before plaintiff registered its copyrights. 17 U.S.C. § 412(2) ("[N]o award . . . of attorney's fees . . . shall be made for . . . any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work."). Furthermore, the Operating Agreement provides that "[t]he prevailing party in any action . . . to enforce the provisions of this Agreement shall be entitled to reimbursement from the non-prevailing party for the prevailing party's reasonable attorney's fees and costs . . . ." (Operating Agreement, Art. XIV, § 14.13 (emphasis added)). Plaintiff has not asserted a claim for breach of the Operating Agreement in this action, and, therefore, the Operating Agreement's attorney's fees provision does not entitle plaintiff to an award. Accordingly, I recommend that plaintiff's request for an award of attorneys' fees and costs be denied.
IV. Conclusion
Accordingly, for all the foregoing reasons, I respectfully recommend that judgment be entered against defendant Bivins awarding plaintiff $35,500.00 in damages.
V. OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from receipt of this Report to file written objections. See also Fed.R.Civ.P. 6(a). Such objections (and responses thereto) shall be filed with the Clerk of the Court, with courtesy copies delivered to the Chambers of the Honorable Laura Taylor Swain, United States District Judge, 500 Pearl Street, Room 1640, New York, New York 10007 and to the Chambers of the undersigned, 500 Pearl Street, Room 1670, New York, New York 10007. Any requests for an extension of time for filing objections must be directed to Judge Swain. FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. Thomas v. Arn, 474 U.S. 140, 155 (1985); United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983) (per curiam). Dated: New York, New York
September 16, 2019
Respectfully submitted,
/s/_________
HENRY PITMAN
United States Magistrate Judge Copy transmitted to: Counsel for Plaintiff Copies mailed to: Mr. Glenn J. Bivins
301 West 29th St., Apt. 1L
New York, New York 10001 Mr. Eric Monse
252 South 4th Street, Apt. 3E
Brooklyn, New York 11211