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REOL Services, LLC v. BLL, LLC

Sup Ct, New York County

August 2, 2013

BLL, LLC d/b/a THE RE SKUNKWORKS, Defendant. Index No. 652297/2013

Unpublished Opinion

Motion Date 07/22/13



In this action arising out of a services contract, plaintiff REOL Services, LLC (REOL), a New York limited liability company, seeks a preliminary injunction enjoining defendant software developer, BLL, LLC, d/b/a, The Re Skunkworks (Skunkworks), from allowing a program developed by defendant for plaintiff to expire. The court grants the motion in part and denies it in part.

I. Background

By an agreement dated January 23, 2011, REOL retained Skunkworks to develop an application for an iPad (the app) (affidavit of Greg Clements, sworn to on June 28, 2013, exhibit A [the Service Contract]). In particular, REOL wanted Skunkworks to develop an iPad app that could be used by real estate owners to streamline the leasing process (Clements affidavit, ¶ 13). The Service Contract provides that, unless otherwise specified, Skunkworks would be compensated on a time and materials basis, to be billed monthly, with payment due within thirty days of the presentation of the invoice (Service Contract ¶ 3). Either party could terminate the contract, with or without cause, in writing (Service Contract ¶ 4), and dissatisfaction with Skunkworks' performance was to be immediately reported to Skunkworks in writing (Service Contract ¶ 2). All materials and intellectual property, including source and object code, created by Skunkworks and delivered to REOL would become the property of REOL "[u]pon satisfaction of all payments due to" Skunkworks (id. at ¶ 7.1). Finally, Skunkworks" s liability to REOL for . any claim arising from the product or service is limited to monetary damages and "shall in no event exceed $100 (Service Contract ¶ 9).

A version of the app was delivered in May 2013, and REOL promptly licensed it to a client for a "substantial license fee, as well as fixed monthly payments" (Clements affidavit, ¶¶ 14-15). However, while Skunkworks sent monthly bills to REOL and REOL never questioned, the monthly invoices, REOL failed to pay any of the invoices issued from January 2013 and on, (affidavit of Ivana Stjepanovic, sworn to on July 8, 2013, ¶¶ 4-6, exhibit C). After delivery of the app, REOL refused to pay the outstanding bill of $160, 268.75, claiming that the charges, were "grossly inflated" (id. at ¶¶ 5-11, exhibit C; complaint ¶¶ 12-13). During the course of negotiations concerning the bills, Skunkworks advised REOL that the version of the app delivered to REOL would expire on June 29, 2013, and that, absent payment, Skunkworks would I render no assistance in replacing or renewing the program (Stjepanovic affidavit, ¶11).

To forestall this result, REOL commenced the instant action, seeking a declaratory judgment that REOL owes Skunkworks nothing, an order directing Skunkworks to deliver the I source code for the app to plaintiff and to refrain from deactivating the program, and an award of attorneys' fees. The complaint was accompanied by an order to show cause seeking a preliminary injunction forbidding Skunkworks from "taking any action ... that prevents or interferes with REOL's, or its licensees', full and uninterrupted use of the iPad app" (REOL Servs., LLC v BLL, LLC, Sup Ct NY County, June 28, 2013, Kapnick, J., index No. 652297/2013). The court issued a temporary restraining order against Skunkworks granting the requested injunction pending argument on the preliminary injunction, which was scheduled for July, 2 (id.). By stipulation, the parties agreed to adjourn the argument date until July 9. Moreover, defendant agreed to keep the app working for ten days following the expiration or termination of the temporary restraining order. Defendant then set the expiration date of the app to July 10 (transcript, July 9, 2013, 15:19-21).

II The Nature of the Time Limit

At oral argument, the parties were directed to submit affidavits explaining the nature of the expiration date at issue in this action. Defendant submitted an affidavit from an employee named Jedediah Micka, who identifies himself as "Project Lead and Architect" for Skunkworks (affidavit of Jedediah Micka, sworn to on July 12, 2013, ¶ 1). Micka avers that the app in question was created for use on iPads and iPhones under the standard developer's agreement, with Apple (id. at ¶ 3). He states that under this agreement, a developer is allowed to test an app on a limited basis for a certain period of time; in this case, REOL's test apps were limited to a duration of "less than 2 months" (id. at ¶¶ 3-4). Micka further states, however, that Skunkworks also imposes its own time limit on test apps "to gain better control over the trial period" (id. at ¶ 5). After the app has been tested, a finished version is submitted to Apple to be made available through the developer's chosen distribution mechanism (id. at ¶¶ 2, 6-8). Skunkworks would create that final version, which would have no expiration date (id).

Plaintiff failed to submit an acceptable affidavit on the issue of the expiration date, Instead, pleading time constraints, plaintiffs counsel has submitted a summary of what he has learned about the subject from a variety of sources (affidavit of David Ebert, sworn to July 11, 2013). As counsel concedes, such a statement cannot be accepted as evidence, but in any event [ Mr. Ebert's findings largely agree with Mr. Micka's affidavit. Accordingly, a further hearing on the subject is unnecessary.

III. Standard

To succeed on a motion for a preliminary injunction, the movant must demonstrate a likelihood of ultimate success on the merits, that irreparable injury would result in the absence of injunctive relief, and that a balancing of the equities to effect substantial justice and to preserve the status quo warrants the grant of this extraordinary relief (CPLR 6301; Key Drug Co. v Luna Park Realty Assoc, 221 A.D.2d 598, 599 [2d Dept 1995]; Pilgreen v91 Fifth Ave. Corp., 91 A.D.2d 565, 567 [1st Dept 1982] app dismissed, 58 N.Y.2d 1113 [1983]). The movant "must demonstrate a clear right to relief which is plain from the undisputed facts, " to establish its likelihood of success (Blueberries Gourmet Inc. v Aris Realty Corp., 255 A.D.2d 348, 349-50 [2d Dept 1998]). Where questions of fact exist which would ...

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