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JBCHoldings NY, LLC v. Pakter

United States District Court, S.D. New York

March 20, 2013

JBCHOLDINGS NY, LLC, JANOU PAKTER, LLC, Plaintiffs,
v.
JANOU PAKTER, JANOU TALENT ADVISORY INTERNATIONAL, JERRY TAVIN, GINGER PUGLIA, and RYAN THEOBALT, Defendants

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[Copyrighted Material Omitted]

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For JBCHoldings NY, LLC, Janou Pakter, LLC, Plaintiffs: Frank Michael Esposito, Esposito Partners, New York, NY.

For Janou Pakter, Janou Talent Advisory International, Defendants: William Brian Kerr, William B. Kerr, Esq., New York, NY.

For Jerry Tavin, Defendant: Harry Joseph Petchesky, Scheichet & Davis, P.C., New York, NY.

For Ginger Puglia, Defendant: Joseph Lee Matalon, LEAD ATTORNEY; Jeremy Charles Bates, Jeremy C. Bates, Esq., New York, NY.

OPINION

Paul A. Engelmayer, United States District Judge.

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OPINION AND ORDER

In this action, plaintiffs JBCHoldings NY, LLC and Janou Pakter, LLC bring federal claims arising under the Computer Fraud and Abuse Act (" CFAA" ), 18 U.S.C. § § 1030 et seq., and the Lanham Act, 15 U.S.C. § § 1051 et seq., and common law claims of fraud, breach of contract, tortious interference with contract, tortious interference with business relations, and an accounting. Defendants Janou Pakter, Janou Talent Advisory International, and Jerry Tavin each move to dismiss some, but not all, of the claims against them. These motions are granted in part and denied in part. Defendant Ginger Puglia moves to dismiss all claims against her. That motion is granted in its entirety.[1]

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I. Background

A. Factual Background[2]

The central figure in this case is defendant Janou Pakter (" Janou" ), who is alleged to be a prominent figure in the executive search industry. Together with defendant Jerry Tavin, Janou was the owner of Janou Pakter Inc. (" JPI" ), an executive search firm. Am. Compl. ¶ ¶ 17-18.

Plaintiff JBCHoldings NY, LLC (" JBC" ) is a holding company for a number of entities in the same industry. Id. ¶ ¶ 2, 24. In mid-2011, JBC, seeking to expand its global recruitment operations, contacted JPI to discuss a possible transaction between the companies. Id. ¶ 27. In October and November 2011, JBC, through its managing member Bryan Zaslow, engaged in negotiations with Janou and Tavin. Id. ¶ ¶ 32-33. During these negotiations, Janou and Tavin made detailed projections regarding the amount of revenue JPI could earn with their assistance. Id. ¶ ¶ 33-37. For 2013, Janou and Tavin projected that JPI's American operations could earn between $4.2 and 6.375 million. Id. ¶ 35.

In January 2012, after months of negotiation, JBC purchased substantially all the assets of JPI pursuant to an Asset Purchase Agreement (" APA" ). Id. ¶ ¶ 39-41, 53; see also Am. Compl. Ex. A (the APA). The APA was signed by Janou, Tavin, and Zaslow. Am. Compl. ¶ 53; APA 29. The nominal purchase price paid by JBC was $450,000. Am. Compl. ¶ 46.[3] JBC paid the cash portion of this purchase price to Rosenthal and Rosenthal, a finance company that held a note on JPI's accounts receivable. Id.

To effectuate the purchase, JBC created Janou Pakter, LLC (" JP" and, collectively with JBC, " plaintiffs" ), a wholly owned subsidiary, which would take on JPI's assets and thereafter continue in the executive search business. Id. ¶ ¶ 5, 16. Under the APA, plaintiffs purchased from JPI " everything from goodwill, customer lists, post closing accounts receivable, personal property owned by JPI and JPI's lease, to intellectual property, amongst other things." Id. ¶ 40.

Under the APA, Janou was required to continue to participate in the business. She agreed to help plaintiffs build their executive search business, and both Janou and Tavin agreed not to compete with plaintiffs and to make reasonable efforts to induce clients to work with plaintiffs. Id. ¶ ¶ 28, 30-31, 42; APA § 9.13. For her efforts, Janou was to be paid a commission-based salary, with a $120,000 salary guaranteed. She was also to receive a $20,000 signing bonus, and equity options that would vest at certain milestones. Am. Compl. ¶ 49. This compensation structure was based on Janou's representations that she could build a lucrative business for JP. Id. ¶ ¶ 34-38.

Janou's performance, however, fell short of these expectations: By May 2012, Janou had not signed a single new account for JP. Id. ¶ 56.

Plaintiffs allege that Janou failed to book any revenue for JP because, from the moment she sold JPI to JBC, she had been setting up and operating a competing enterprise, Janou Talent Advisory International (" JTAI" ), in direct violation of her employment agreement. Plaintiffs allege

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that Janou did so with the aid of with her co-defendants: Tavin; Ryan Theobalt, a lower level employee of JP; and Ginger Puglia, the owner and operator of another executive search firm, Ginger Finds.[4] Id. ¶ ¶ 60, 63.

In June 2012, plaintiffs discovered Janou's infidelity when she left her personal email account open on a JP computer. Id. ¶ 62. Upon searching Janou's electronic communications, JBC and JP management found an array of emails that allegedly show that Janou: (1) had been in contact with present and former JBC clients; (2) had received fees from at least one client pursuant to an invoice marked " JTAI" ; (3) had referred clients to Puglia, rather than retaining them for JP; and (4) had discussed fee-sharing arrangements with Puglia and Theobalt. Id. ¶ 64; see also id . Exs. 3-6. In essence, plaintiffs allege, these emails show that Janou was working with Tavin, Puglia, and Theobalt to steal business opportunities belonging to JBC and JP, and to divert them to her competing enterprise, JTAI. Plaintiffs further allege that Janou, Puglia, and JTAI presented their business to consumers so as to falsely trick consumers into thinking that they were receiving services from plaintiffs. Id. ¶ 65.

Plaintiffs further allege that Janou and her co-conspirators misappropriated JBC and JP's proprietary information, including client lists, and used these to advance their competing business. Plaintiffs theorize that Janou (or a co-defendant) obtained this information either by (1) copying it to her personal laptop and sharing it with her co-defendants; (2) lifting it from JBC's computers using a flash drive; and/or (3) obtaining it remotely via spyware. Id. ¶ ¶ 70-74.

On July 18, 2012, JP terminated Janou's employment. Id. ¶ 76.

B. Procedural History

On October 10, 2012, plaintiffs filed the original Complaint in this case. Dkt. 1. The Complaint alleged a violation of the CFAA, and state law causes of action for fraud, breach of contract, tortious interference with contract, and an accounting. On November 13, 2013,[5] plaintiffs moved ex parte for a temporary restraining order, which the Court denied, and for a preliminary injunction. Dkt. 2-6.

On November 21, 2012, Puglia moved to dismiss the Complaint. Dkt. 17. On November 26, 2012, Janou, Tavin, and JTAI filed an opposition to plaintiffs' request for a preliminary injunction, Dkt. 21-24. On November 29, 2012, the Court held a preliminary injunction hearing. In an opinion read from the bench at the conclusion of that hearing, the Court denied plaintiffs' motion for a preliminary injunction. Among other things, the Court noted, plaintiffs could not show a likelihood of success on the merits of their only federal claim, based on the CFAA, because that claim appeared deficient as a matter of law. Dkt. 33.

On December 3, 2012, plaintiffs filed the Amended Complaint. Dkt. 40. It added an additional federal cause of action under the Lanham Act, as well as a state law claim of tortious interference with business relations. On January 3, 2013, Puglia moved to dismiss the Amended Complaint, Dkt. 45 (" Puglia Br." ), as did Janou and

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JTAI, Dkt. 50 (" Janou Br." ). On January 4, 2013, Tavin joined these motions. Dkt. 53. On January 22, 2013, plaintiffs filed a consolidated opposition to defendants' motions. Dkt. 54 (" Pl. Br." ). On January 31, 2013, Janou and JTAI filed a reply, Dkt. 55 (" Janou Reply Br." ), in which both Puglia and Tavin joined, Dkt. 56-57. On March 7, 2013, the Court heard argument on defendants' motions.

II. Applicable Legal Standard

In resolving a motion to dismiss, the Court must " construe the Complaint liberally, accepting all factual allegations in the Complaint as true, and drawing all reasonable inferences in plaintiff['s] favor." Galiano v. Fid. Nat'l Title Ins. Co., 684 F.3d 309, 311 (2d Cir. 2012). Nevertheless, the " [f]actual allegations must be enough to raise a right of relief above the speculative level," and the complaint must plead " enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [plaintiff's claim]." Bell A. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Put differently, " [t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570).

" The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). " A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (quoting Twombly, 550 U.S. at 555). " Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

In applying these principles, the Court " must confine its consideration to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Tarshis v. Riese Org., 211 F.3d 30, 39 (2d Cir. 2000) (citing Allen v. Westpoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991)). Here, this includes the APA, as well as the emails attached as exhibits to the Amended Complaint. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002).

III. Discussion

The Court begins by addressing plaintiffs' two federal claims, under the CFAA and the Lanham Act. The Court then addresses plaintiffs' five state law claims.

A. CFAA Claim

1. Statutory Framework

Plaintiffs' first claim, against all defendants, arises under the CFAA, which prohibits an enumerated list of computer crimes. See 18 U.S.C. § 1030(a)(1)-(7). The CFAA is primarily a criminal statute, but it also creates a private cause of action allowing compensatory and equitable relief for any person who suffers one of several classes of damages, including losses exceeding $5,000. 18 U.S.C. § 1030(g).

The Amended Complaint alleges violations of CFAA subsections 1030(a)(2)(C), (a)(4) & (a)(5)(C). See Am. Compl. ¶ ¶ 81-83. These subsections provide a cause of action against a person or entity who:

(2) intentionally accesses a computer without authorization or exceeds authorized

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access, and thereby obtains . . . (C) information from any ...

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