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Broadspring, Inc. v. Congoo, LLC

United States District Court, S.D. New York

December 29, 2014

CONGOO, LLC, d/b/a Adiant, et al., Defendants.


JESSE M. FURMAN, District Judge.

Trial in this case is scheduled to begin on January 12, 2015. Now pending are five motions in limine and a motion to strike filed by Plaintiff Broadspring, Inc. ("Broadspring") (Docket Nos. 202, 242) and six motions in limine filed by Defendants Congoo, LLC ("Congoo"), Ashraf Nashed, and Rafael Cosentino (together, "Defendants"). (Docket Nos. 199, 204, 206, 211, 217, 219). The Court assumes familiarity with the facts relevant to the motions, and provides the following rulings and comments in advance of the final pretrial conference.

I. Plaintiff's Motions

As noted, Plaintiff filed a motion to strike and five motions in limine. The Court will address each in turn.

A. Plaintiff's Motion To Strike

First, Plaintiff moves, pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, to strike Defendant's unclean hands defense. ( See Pl.'s Mem. Supp. Mot. To Strike Defs.' Aff. Defense Unclean Hands ("Pl.'s Strike Mem.") (Docket No. 243); see also Mem. Law Supp. Pl.'s Mots. In Limine 10-11 (Docket No. 203)).[1] The motion is GRANTED. To prevail on an unclean hand defense, a defendant must demonstrate that the plaintiff has engaged in "inequitable conduct or bad faith where the misconduct has a material relation to the equitable relief that plaintiff seeks." Stokely-Van Camp, Inc. v. Coca-Cola Co., 646 F.Supp.2d 510, 532-33 (S.D.N.Y. 2009) (internal quotation marks omitted); see also Pedinol Pharmacal, Inc. v. Rising Pharm., Inc., 570 F.Supp.2d 498, 505 (E.D.N.Y. 2008) (stating that the unclean hands defense is available only for "truly unconscionable and brazen behavior" (internal quotation marks omitted)). Defendants argue that Plaintiff has engaged in three types of misconduct (1) "systematic presentation of ad units on publishers' websites without disclosing that the units were advertisements that linked to long form fake reviews"; (2) "the posting of fake reviews on websites owned by Broadspring without disclosing that the reviews were actually paid advertisements"; and (3) "systemic false statements about Congoo and its advertisers to publishers." (Defs.' Mem. Opp'n Pl.'s Mot. To Strike Defs.' Affirmative Defense Unclean Hands (Docket No. 255) 7-8).

The Court has already held that there is no evidence to support the third contention. In granting Plaintiff summary judgment on Congoo's counterclaims, the Court found that "Congoo fails to adduce any evidence suggesting that Plaintiff's conduct was improper'... or that Plaintiff acted in bad faith.'" Broadspring, Inc. v. Congoo, LLC, No. 13-CV-1866 (JMF), 2014 WL 4100615, at *13 (S.D.N.Y. Aug. 20, 2014). The Court further found that "no rational jury" could conclude that Plaintiff's statements about Congoo were false or misleading. Id. It follows that no rational jury could find, on the basis of Plaintiff's statements, that it had engaged in the kind of unconscionable behavior that would support a defense of unclean hands. As for the first and second categories, even if Defendants could prove that (1) Plaintiff posted advertisements and product reviews without disclosing that they were advertisements and (2) doing so was egregious misconduct (which the Court highly doubts), they cannot prove that the alleged misconduct is "directly related to the subject matter in litigation." PenneCom B.V. v. Merrill Lynch & Co., Inc., 372 F.3d 488, 493 (2d Cir. 2004) (internal quotation marks omitted). Plaintiff claims that Defendants created fake profiles to disseminate knowingly false information in an effort to persuade publishers not to do business with Plaintiff. Plaintiff's supposed failure to identify content as paid advertising is simply not related to Congoo's alleged conduct, let alone so "directly" related that it could support a defense of unclean hands.

Accordingly, the Court finds that there is no question of law or fact that could allow Defendants' unclean hands defense to succeed. In addition, Plaintiff has adequately demonstrated prejudice. See, e.g., UMG Recordings, Inc. v. Lindor, 531 F.Supp.2d 453, 458 (E.D.N.Y. 2007) (stating that motions to strike an affirmative defense should be granted if "(1) there is no question of fact that might allow the defense to succeed; (2) there is no substantial question of law, the resolution of which would allow the defense to succeed and (3) plaintiff shows prejudice if the defense is allowed to stand" (internal quotation marks omitted)). Among other things, allowing the defense to move forward "would expand the length and scope of the trial, " Coach, Inc. v. Kmart Corps., 756 F.Supp.2d 421, 425-26 (S.D.N.Y. 2010); see United States v. Manhattan-Westchester Medical Servs., PC, No. 06-CV-7905 (WHP), 2008 WL 241079, at *3 (S.D.N.Y. Jan. 28, 2008), even if, as Defendants contend, some of the same evidence may be admissible for other purposes.

For the foregoing reasons, the unclean hands defense is stricken. In light of that ruling, the parties shall confer with respect to which, if any, of the challenged exhibits are admissible for another purpose and, to the extent an advance ruling on the issue is warranted, shall bring any disagreements to the Court's attention at or before the final pretrial conference.

B. Plaintiff's Motion In Limine No. 1

Plaintiff's first motion in limine seeks to preclude certain defense exhibits on the ground that they are hearsay. The motion is DENIED with respect to any documents or materials that Cosentino or Nashed viewed prior to their conduct at issue in this case. Such materials are relevant to their state of mind, which is, in turn, relevant to their care or lack thereof and the appropriateness of punitive damages. (Upon Plaintiff's request, the Court will give a limiting instruction that any such exhibits are to be considered, not for the truth of their contents, but solely for their effects on Cosentino and Nashed.) The motion is also DENIED with respect to any documents or materials to which the allegedly defamatory statements include a hyperlink, as they are relevant to the jury's consideration of the allegedly defamatory statements in context. See, e.g., Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 158 (2d Cir. 2007) (stating that "a district court evaluating whether an advertisement is literally false" under the Lanham Act "must analyze the message conveyed in full context" (internal quotation marks omitted)); Balzaga v. Fox News Network, LLC, 93 Cal.Rptr.3d 787, 793 (Cal.Ct.App. 2009) ("In reviewing an alleged defamatory meaning, the context in which the statement was made must be considered." (internal quotation marks omitted)). (Again, upon Plaintiff's request, the Court will give a limiting instruction that such materials are not to be considered for the truth.)

The motion is GRANTED, however, with respect to any documents or materials that do not fall within the two foregoing categories, substantially for the reasons stated in Plaintiff's memorandum of law. (Mem. Law Supp. Pl.'s Mots. In Limine 2-5). Although Defendants argue that the documents are relevant to the truth or falsity of the statement that Broadspring was "a notorious spyware company" (Pl.'s Trial Ex. 47; Defs.' Mem. Law Opp'n Pl.'s Mots. In Limine (Docket No. 232) 1, 4), that argument depends on the documents and materials being taken as true (to support the conclusion that Broadspring was generally known to be a spyware company), which - as out-of-court statements - they cannot be. See Fed.R.Evid. 801 (defining hearsay, which is generally inadmissible, as an out-of-court statement offered "to prove the truth of the matter asserted in the statement").

The parties are directed to confer with respect to how the foregoing rulings apply to the exhibits subject to Plaintiff's first motion in limine and to bring any disagreements to the Court's ...

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