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Industrial Quick Search, Inc. v. Miller, Rosado & Algois, LLP

United States District Court, S.D. New York

January 2, 2018



          EDGARDO RAMOS, U.S.D.J.

         In this diversity case, Industrial Quick Search, Inc., Michael Meiresonne, and Meiresonne & Associates (collectively, “Plaintiffs” or “IQS”) accuse Chris Rosado, Neil Miller, and their law firm Miller, Rosado & Algois, LLP (collectively, “Defendants”) of legal malpractice and breach of contract, arising under the law of the State of New York. Complaint (“Compl.”), Doc. 1 ¶ 1. Specifically, Plaintiffs contend that Defendants committed numerous negligent acts in their representation of Plaintiffs in an underlying copyright infringement action brought by Thomas Publishing Company (“Thomas Publishing”) and the Product Information Network, Inc. (“PINI”) (collectively, “Thomas”), and that in doing so Defendants breached their contractual obligations to render competent and professional legal services as required by their retainer agreement. Id. ¶¶ 110-18.

         In the underlying action (the “Thomas Action”), Judge Robert Owen of the Southern District of New York entered default judgment against IQS, finding that they had misappropriated and plagiarized materials copyrighted by Thomas, and deliberately destroyed documents central to determining the scope of their violation.[2] Owen Findings of Fact and Conclusions of Law (“Owen Findings”), dated August 2, 2006, Doc. 65, Ex. E at 12, ¶¶ 20-21. As a result, IQS settled with Thomas for $2.5 million. Compl. ¶ 66. IQS then brought the instant action, suing their attorneys, [3] asserting that but for Defendants' negligence, Judge Owen would not have entered default judgment against them and they would not have had to pay Thomas $2.5 million to settle the underlying case. Before the Court are the parties' cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure: Plaintiffs seek partial summary judgment as to their malpractice claim, see Plaintiffs' Memorandum in Support of Partial Summary Judgment (“Pls.' Mem. in Supp.”), Doc. 57, Attach. 3, and Defendants seek summary judgment on both the malpractice and breach of contract claims, as well as claims against Chris Rosado in his individual capacity, Defendants' Memorandum in Support of Summary Judgment (“Defs.' Mem. in Supp.”), Doc. 65, Attach. 8. For the reasons set forth below, Plaintiffs' motion for partial summary judgment is DENIED, and Defendants' motion for summary judgment is GRANTED in part and DENIED in part.


         A. The Thomas Action

         Thomas Publishing is a New York Corporation that publishes the copyright-protected publication known as the Thomas Register of American Manufacturers (the “Thomas Register”). The Thomas Register provides a directory containing listings and descriptions of products, services, companies and executives in the manufacturing industry. Owen Findings at 1, ¶ 2. It is available online, in print, and on CD and DVD. Id. Thomas Publishing generates revenue by selling advertising in its publications to manufacturers and other industrial companies. Id. PINI is a Delaware corporation which, under license from Thomas Publishing, contracts with independent sales managers to market and sell advertising for the Thomas Register. Id. at 2, ¶¶ 3-4.

         Plaintiff Meiresonne & Associates (“M&A”), an Illinois corporation that is owned and operated by Plaintiff Meiresonne, is one such independent sales manager that PINI contracted with to solicit advertising for the Thomas Register. Plaintiffs' Rule 56.1 Statement of Undisputed Material Facts (“Pls.' 56.1”), Doc. 27, ¶¶ 6-7; Owen Findings at 2, ¶ 4. In this capacity, M&A and Meiresonne were privy to Thomas Publishing's confidential and proprietary information, which had been entrusted to Meiresonne by PINI for use in recruiting advertisers to Thomas Publishing. See Thomas Publishing Memorandum of Law in Support of Motion to Strike, Doc. 59, Ex. Q, at 5. M&A worked under contract with PINI as an independent sales manager on a commission basis for over six years, from 1996 to 2002. See Owen Findings at 2, ¶ 4; Spoliation Tr. 19:7-9; Compl. ¶ 57(e).

         Plaintiff Industrial Quick Search, Inc. (“IQS”) is a Michigan corporation that was formed in 2000 and went online in 2001. Meiresonne Affidavit (“Meiresonne Aff.”), Doc. 57, Attach. 2 ¶¶ 36-37. Meiresonne is a principal and investor in IQS. Compl. ¶ 7; Transcript of Spoliation Hearing (“Spoliation Tr.”), Doc. 65, Ex. A at 145:24-25. Like the Thomas Register, IQS operates a web-based provides customers with a listing of industrial products and services, and charges manufacturers seeking to advertise such products and services a fee for inclusion on the web-based directory. Compl. ¶ 5. In this sense, IQS is a direct competitor of Thomas Publishing. Unlike the Thomas Register, the website is organized into “vertical websites.” This means that IQS's website acts as a central homepage that provides customers with links to other websites concerning particular products or services, for example:, or Owen Findings at 2, ¶ 5. By organizing the website in this way, IQS hoped to provide advertisers with high rankings for their products and services on internet search engines in a way that Thomas Publishing at that time could not. Meiresonne Aff. ¶¶ 29-30. Indeed, Meiresonne conceived of IQS precisely to capitalize on this issue, which Thomas Publishing's advertisers had brought to his attention. Id. ¶¶ 31-32. As he plainly admits, and as discussed more fully below, Meiresonne endeavored to keep Thomas Publishing from knowing about his relationship with IQS. Spoliation Tr. at 146:1-3.

         In the Spring of 2001, as IQS rolled out its website, it hired Christopher Terryn, a student at Grand Valley State University in Michigan, as an intern. Pls.' 56.1 ¶ 20; Owen Findings at 3, ¶ 7. Terryn worked for IQS only briefly, from April to May of 2001. While employed there, Terryn was instructed by Meiresonne and IQS office manager Nicole Korthals to copy material from the Thomas Register for use on the IQS website. Id. at 3, ¶¶ 7-10.[5] Terryn was also instructed to use Thomas Publishing's proprietary program ThomAds, which provides a listing of companies that advertise with Thomas Publishing and the amount of money they spend on advertising, “to determine the order in which advertisers would appear on IQS's vertical websites.” Id. ¶¶ 9-10; see Thomas Publishing Memorandum of Law in Support of Motion to Strike, Doc. 59, Ex. Q, at 10.

         Several months following his employment with IQS, in October 2001, Terryn informed Thomas Publishing that IQS had extensively copied the Thomas Register in developing its website. Owen Findings at 3, ¶ 13. In response, on November 6, 2001, attorneys for Thomas sent IQS a cease-and-desist letter, informing IQS that it had “inspected IQS's website and discovered that a great number of product headings on the website were taken directly from The Thomas Register.” Cease-and-Desist Letter, Doc. 25, Ex. C at 1; Defendants' Rule 56.1 Statement of Undisputed Material Facts (“Defs.' 56.1) ¶ 10. The letter further stated that “[m]any of these product headings are unique and distinctive, making any claim of independent creation by your company implausible. Furthermore, descriptive text listed under IQS's product headings were also copied verbatim from The Thomas Register.” Id. Thomas therefore instructed IQS that “continued use of Thomas's original and copyrighted product headings and descriptive text [would] constitute knowing and willful copyright infringement and unfair competition.” Id.

         On November 20, 2001, IQS's then-counsel, Price, Heneveld, Cooper, DeWitt & Litton, responded by letter stating that “[w]hile we disagree with your infringement allegations, in order to avoid further dispute, . . . the descriptive text on each [IQS] Web-page was being rewritten for other reasons even prior to receiving [Thomas Publishing's] letter” and that the “rewriting is scheduled to be completed by mid January 2002.” Response to Cease-and-Desist Letter, Doc. 25, Ex. D at 1; Defs.' 56.1 ¶ 11. IQS rewrote portions of the descriptive text on its websites that were alleged to have been copied from the Thomas Register. Id. ¶ 11; Owen Findings ¶ 15. As part of that process, IQS employees were instructed to ensure that the descriptive text on IQS's website was different from the text contained in the Thomas Register. Owen Findings at 4, ¶ 15. According to Meiresonne, any documentation related to the re-writes-“including the sources that had been used by Terryn to originally create the web sites”-was “discarded in the normal course of business.” Meiresonne Aff. ¶¶ 77, 80.

         At the time the cease-and-desist letter was sent to IQS, Thomas Publishing was not aware that Meiresonne and its independent sales manager, M&A, had any affiliation with IQS. Defs.' 56.1 ¶ 14; Owen Findings ¶ 16. Meiresonne kept his relationship with IQS hidden from Thomas by using false names when calling potential advertisers on behalf of IQS and using a different address for IQS-related matters. Id.; Spoliation Tr. at 146:1-3. A few months later, however, Thomas Publishing discovered Meiresonne's relationship with IQS. Defs.' 56.1 ¶ 14; Owen Findings ¶ 18.

         In April 2002, Thomas Publishing conducted a study comparing the text descriptions of companies included in the print volumes of the 1999-2002 editions of the Thomas Register against the descriptions of the same companies listed on IQS's website. Defs.' 56.1 ¶ 21; Owen Findings at 5, ¶ 20. They discovered that, at least as of March 22, 2001, before Terryn was even hired, IQS's website contained 350 listings for manufacturers and service providers that also appeared in the Thomas Register, and that approximately 82% of those contained product descriptions virtually identical to those appearing in the Thomas Register. Id.

         Accordingly, on April 30, 2002, Thomas sued Plaintiffs in the Southern District of New York alleging that they knowingly and willfully copied content from the Thomas Register to create IQS's website in violation of copyright laws. Pls.' 56.1 ¶ 14; Defs.' Resp. to 56.1 ¶ 14. Thomas also alleged unfair competition based on the inclusion in IQS's website of certain of Thomas's confidential and proprietary marketing information. Id. ¶ 19; Defs.' Resp. to 56.1 ¶ 19.

         Defendants' Representation of Plaintiffs

         On January 28, 2003, by execution of a retainer agreement (the “Retainer Agreement”) and payment of $25, 000, Plaintiffs retained Defendant Miller, Rosado & Algois (“MRA”), a law firm with offices in the Eastern District of New York, to represent them in connection with the Thomas Action. Pls.' 56.1 ¶¶ 11, 29; Defs.' Resp. to 56.1 ¶¶ 11, 29; Defs.' 56.1 ¶ 17. The parties dispute the extent of Defendant Rosado's involvement in the case. Defendants contend that Rosado was only the primary client “contact” with “billing responsibility” for the matter, and that Defendant Miller had primary responsibility for the matter. See Rosado Deposition (“Rosado Dep.”), Doc. 61, at 33:5-7; Miller Deposition (“Miller Dep.”), Doc. 61, Ex. 2 at 30:20-31:3; Rosado Affidavit (“Rosado Aff.”), Doc. 62 Attach. 2, ¶ 9. Plaintiffs, in contrast, assert that Rosado had greater involvement in the case, and note that it was Rosado who signed the Retainer Agreement which stated that “[he] w[ould] have primary responsibility for [Plaintiffs'] representation.” Pls.' 56.1 ¶ 30; Meiresonne Aff. ¶ 27; Rosado Dep. at 33:16-25; Miller Dep. at 28:17-19; Retainer Agreement, Doc. 58, Ex. C at 3, 5. Rosado also asserts that he issued an “oral litigation hold” at the parties' initial meeting in early 2003, but Plaintiffs deny that this occurred. Rosado Dep. at 38:6-25; Meiresonne Aff. ¶¶ 106-07.

         Discovery in the Thomas Action commenced in April 2003, with requests for document production being served on IQS thereafter. See Thomas Publishing, v. Industrial Quick, et al, 02 Civ. 03307 (RO), Docs. 26, 28-29. Thomas requested documents relating to the creation of the IQS websites in 2001 and early 2002 and the use of proprietary Thomas selling aids, among other things. Owen Findings at 6, ¶ 25. As part of discovery, between August 4-6, 2003, counsel for Thomas reviewed documents at IQS's offices in Grand Rapids, Michigan. Owen Findings at 8, ¶ 36; Miller Affidavit (“Miller Aff.”), Doc. 62 ¶ 7. What occurred during the pendency of discovery is hotly disputed by the parties to the instant action.

         According to Meiresonne, he “repeatedly asked Defendant attorneys for legal advice as to how to prepare and respond to the Thomas [P]laintiffs' broad discovery request[s], ” including “advice on the retention, storage, production of, or permissible discarding of non-responsive information, ” among other things. Meiresonne Aff. ¶¶ 92-95. But, Meiresonne asserts, “no advice was ever given to [him]” with respect to these topics. Id. ¶ 96. Meiresonne further avers that Defendant Miller was on trial in another matter at the time of the production and that Defendants “refused” to provide legal advice, answer questions, or “appear in person for the document production.” Id. ¶¶ 98-100. As a result, Plaintiffs claim that no document production procedures or controls, privilege log, Bates stamping, “or other means of tracking documents” were established, and Thomas was permitted to remove approximately 30, 000 un-inventoried documents from IQS's offices. Id. ¶¶ 101-103, 116.

         Meiresonne further avers that in the days prior to the August document production, IQS “t[ook] actions to remove files that they believed were not responsive to [the] Thomas [P]laintiffs' discovery requests” because they believed it would be “helpful to avoid junk papers in the production.” Id. ¶ 109. By way of example, Meiresonne explained that M&A had a cost-saving practice of reusing paper for which only one side had been used for printing. Id. ¶ 88. Consequently, some re-used papers had personal, financial and other confidential information on one side, and information responsive to Thomas's requests on the other. Id. ¶ 90. Specifically, Plaintiffs “removed and discarded: (a) documents printed on recycled scrap paper, with sensitive and non-responsive financial and other data printed on the scrap side, ” but only after making copies of any relevant non-personal information for production; “(b) documents relating to [IQS's] ‘re-rank' efforts;” “(c) documents relating to [IQS's] company listing and product descriptive matter ‘re-writes' that occurred after the alleged infringement had ceased.” Id. ¶¶ 110-112. According to Meiresonne, after IQS “had removed and discarded [the] documents . . ., but before the documents were taken away for permanent disposal by [their] trash service, ” he “sent one final inquiry” to his attorneys informing them what IQS had done and “request[ing] direction as to whether or not such actions were proper, ” but received no response from Defendants. Id. ¶¶ 113-114.

         Defendants, on the other hand, contend that Meiresonne was fully aware that Miller would not be present at the document production. Miller avers that he “advised [Meiresonne] that [he] would be engaged in a trial on another matter during the week of the production” and sought to “open a dialogue as to whether the production should be adjourned.” Miller Aff. ¶ 8. Miller further maintains that “Meiresonne specifically directed that neither [Miller], nor anyone from [Miller, Rosado & Algois], attend the production because [Meiresonne] did not want to incur the cost of an attorney travelling . . . to Michigan.” Id. According to Miller, his presence was not critical to the meeting because he had previously discussed with Meiresonne which documents were responsive to Thomas's demands. Id. ¶¶ 7-8. Among these documents were “advertiser files, ” which contained information regarding companies that advertised with IQS. Although Miller did not conduct a review of each document, he asserts that he and Meiresonne had agreed to make the entire file available to Thomas. Id. ¶¶ 9-10. Finally, Miller asserts that he was “never informed by Mr. Meiresonne, or anyone else, that Plaintiffs were planning on discarding any documents, or that they had in fact discarded documents prior to the document production.” Id. ¶ 11.

         Depositions in the Thomas Action commenced in the fall of 2003. At Meiresonne's October 10, 2003 deposition he admitted that he knew back in October 2001-prior to receipt of the cease-and-desist letter from Thomas-that there was a “possibility” that IQS had copied information from the Thomas Register for inclusion on the IQS website. Owen Findings at 5, ¶ 22 (citing Meiresonne October 2003 Deposition Tr. at 24-31); Spoliation Tr. 157-165:24.

         On November 21, 2003, Lisa Dokter, a former IQS editorial staff member, contacted counsel for Thomas to inform them that she and her IQS colleagues, at Meiresonne's direction, removed relevant documents from IQS's files in the days prior to the August 2003 document production so that Meiresonne could destroy them. Owen Findings at 6-7, ¶¶ 28-33. Subsequently, on November 24, 2003, Dokter submitted a declaration more specifically setting forth that the documents removed from the IQS's files included:

(1) documents relating to the creation of IQS's vertical websites in 2001 and early 2002, including, but not limited to, the copying of the [Thomas Register's] online information for inclusion on IQS's websites; (2) documents relating to IQS's unauthorized use of [the Thomas Register's] selling aids, including, but not limited to, Thom[A]ds:, Thomas's Prospecting CD, and Who's Who in the TR Sales Force; (3) documents that contained instructions concerning the purification/cleansing of IQS's vertical websites; (4) documents reflecting the re-ranking of IQS's advertisers based upon information obtained from [the Thomas Register's] sources; and (5) IQS internal memoranda and correspondence concerning any of the foregoing.

         Declaration of Lisa J. Dokter, Doc. 59, Ex. K ¶ 10.[6]

         Based on the foregoing, on November 24, 2003, Thomas moved the Court for an order to show cause pursuant to Rule 37, to strike IQS's answer, third-party claims, counterclaims, and reply to counterclaims on the basis that IQS had intentionally destroyed relevant discovery. Meiresonne Aff. ¶ 120. According to Meiresonne, it was only in December 2003, the month after the Rule 37 motion was filed and five months after the August document production, that Defendants instructed them not to destroy any potentially relevant information. Meiresonne Aff. ¶ 106.

         At some point between the Fall of 2003 and the Spring of 2004, Nicole Parker, a then-employee of IQS, prepared a report (the “Parker Report”) concluding that in 2001 almost 50% of IQS's product listings contained the “exact wording” or “very similar” wording to language contained in the Thomas Register. Id. at 207:2-13; Owen Findings ¶ 23; Meiresonne Aff. ¶ 130- 32.

         A spoliation hearing was held before Judge Owen between February 14-16, 2006. Defs.' 56.1 ¶ 25; see generally Spoliation Tr. As relevant here, neither party called Terryn during the spoliation hearing. Rather, the parties relied on Terryn's January 2004 deposition testimony, with counsel for Thomas reading significant excerpts into the record over Defendants' objections. Spoliation Tr. 26:6-67:25. IQS's counsel, Defendant Miller, also read excerpts of Terryn's deposition testimony into the record. Id. at 68:1-80:4. In particular, Miller focused on the fact that Terryn had reached an agreement with counsel for Thomas under which they would represent him should any legal action result from filing his affidavit or deposition testimony. Id. at 69:9-24. Miller also read those portions of the deposition transcript in which he pressed Terryn on his precise recollection of conversations with IQS staff regarding IQS's alleged practices and instructions related to the creation and maintenance of its website. See e.g., id. at 74:16-79:80.

         At the spoliation hearing, Meiresonne was examined about the conversations he had with counsel regarding their preparation for the 2003 document production. Miller Aff. ¶ 13. Although Miller objected to the question, asserting attorney-client privilege, Judge Owen warned that a negative inference could be drawn from Meiresonne's refusal to testify on that issue. See Spoliation Tr., at 180:22-181:13. Following consultation with counsel, Meiresonne ultimately testified that he unilaterally determined the scope of the Thomas Plaintiff's document requests. Id. at 181:20-183.

         Meiresonne was also examined about a statement in his June 2002 affidavit in which he said that he was “confident that IQS could prove that it did not copy any of [P]laintiffs' works.” Spoliation Tr. at 206:22-207:4. Counsel for Thomas noted that one year after Meiresonne swore to that affidavit, at his October 2003 deposition, Meiresonne had stated that he knew, in 2001, that there was a “possibility” that IQS copied the Thomas Register in creating IQS's website. Owens Findings ¶ 22; Spoliation Tr. 157-165:24. This revelation prompted considerable questioning from Judge Owen, leaving him to comment that Meiresonne's apparent contradiction left him “distressed.” Spoliation Tr. 162:10. Finally, Meiresonne conceded that he used a different address to “disguise” his connection with IQS from Thomas Publishing. Spoliation Tr. at 146:1-3.

         Following the spoliation hearing, on August 2, 2006, Judge Owen issued his Findings of Fact and Conclusions of Law. In short, Judge Owen found that in 2001 Plaintiffs created IQS's vertical websites by copying information from the Thomas Register, used ThomAds to rank advertisers based on their advertising expenditures with Thomas Publishing, and then destroyed information relevant to the site's creation, all the while attempting to hide Meiresonne's relationship with IQS from Thomas. Owen Findings at 3, ¶¶ 10, 12, at 6, ¶ 24; Defs.' 56.1 ¶ 27. He also found that in the Summer of 2003, after the commencement of the Thomas Action, Meiresonne destroyed documents responsive to Thomas's discovery requests that would have assisted in determining the scope of IQS's copyright infringement and misappropriation of confidential material. Owen Findings at 6-7, ¶¶ 30-36. Judge Owen further concluded that Meiresonne's October 2003 deposition testimony acknowledging that he understood in October 2001 that there was a “possibility” that IQS had copied information from the Thomas Register, “directly contradicted Meiresonne's June 2002 sworn affidavit” in which Meiresonne averred that “IQS did not copy [Thomas Publishing's] material or text” in creating the IQS website and that “IQS [was] confident that it can prove that it did not copy any [such] works.” Id. at 5, ¶¶ 21-22. Based on these factual findings, Judge Owen concluded that IQS had “intentionally destroyed the documents at issue, ” and that the “destroyed documents were likely critical to determining the scope of . . . . [their] copyright infringement and . . . misappropriation of [Thomas'] confidential information.” Id. at 10, ¶ 11, at 12, ¶20. Judge Owen therefore struck IQS's answer, third-party claims and counterclaims, and reply and entered default judgement on liability against them on all of Thomas's allegations. Id. at 12, ¶ 21. Judge Owen also ordered a hearing on damages be held on September 11, 2006, but the parties settled just prior to the hearing, with IQS paying Thomas $2.5 million. Defs.' 56.1 ¶ 40; Compl. ¶ 66.

         According to Meiresonne, it was not until January 18, 2007, over three years after the document production, that counsel first mentioned that IQS should have a formal document retention policy in place. Meiresonne Aff ¶ 107. In September 2007, counsel's representation of IQS terminated. Pls.' 56.1 ¶ 28; Compl. ¶¶ 66-67.

         B. The Instant Litigation

         On March 31, 2009, Plaintiffs initiated the instant litigation against Defendants, asserting claims of malpractice and breach of contract. Compl. ¶ 1. Plaintiffs principally allege that Defendants negligently failed to render competent legal services by failing to properly advise them on the law governing document preservation, to adequately supervise document production, or offer an adequate defense at the spoliation hearing. Id. ¶¶ 80-109. Plaintiffs claim that these failures also provide a basis for their breach of contract claim because of the Retainer Agreement between the parties. Id. ...

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