Schatzki et al v. Weiser Capital Management, LLC et al, No. 1:2010cv04685 - Document 225 (S.D.N.Y. 2013)
Court Description: OPINION re: 168 MOTION in Limine seeking to preclude Plaintiff Debra Schatzki and lay witness, Brian Edelman from testifying as to the value of BPP Wealth, Inc. filed by Hoitsz Michel, Weiser Capital Management, LLC, Weisermazars, LLP, [163 ] MOTION for Partial Summary Judgment filed by Hoitsz Michel, Weiser Capital Management, LLC, Weisermazars, LLP, 190 CROSS MOTION for Partial Summary Judgment filed by Debra Schatzki, 138 MOTION in Limine filed by Debra Schatzki, 156 MOTION Dau bert motion seeking to bar the testimony of Plaintiffs' pro-offered expert witness Edward Donnelly filed by Hoitsz Michel, Weiser Capital Management, LLC, Weisermazars, LLP, 153 MOTION Daubert motion seeking to bar the testimony of Plaintiffs& #039; pro-offered expert witness Richard Childs (Daubert). MOTION Daubert motion seeking to bar the testimony of Plaintiffs' pro-offered expert witness Richard Childs (Daubert) filed by Hoitsz Michel, Weiser Capital Management, LL C, Weisermazars, LLP, 172 MOTION in Limine seeking the Court's permission to inquire into the professional sanctions against Plaintiffs' Pro-offered Expert, Edward Donnelly should the Daubert motion be denied filed by Hoitsz Michel , Weiser Capital Management, LLC, Weisermazars, LLP, 170 MOTION in Limine seeking the Court's permission to inquire into the indictment of Plaintiffs' Pro-offered Expert, Richard Childs, should the motion to bar Mr. Childs' testim ony (Daubert) be denied. MOTION in Limine seeking the Court's permission to inquire into the indictment of Plaintiffs' Pro-offered Expert, Richard Childs, should the motion to bar Mr. Childs' testimony (Daubert) be denied f iled by Hoitsz Michel, Weiser Capital Management, LLC, Weisermazars, LLP, 174 MOTION in Limine seeking to bar Plaintiffs' pro-offered Exhibit 147, which are the expenses allegedly attributable to Jordan Berlin filed by Hoitsz Michel, We iser Capital Management, LLC, Weisermazars, LLP. As set forth above, the motions for summary judgment with respect to the conversion and unjust enrichment claims are denied, the motions to dismiss for civil conspiracy and failure to join an indispensible party is denied and the motion summary judgment and dismissal of the contract claim is granted. (Signed by Judge Robert W. Sweet on 11/25/2013) (rsh)
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STRICT COURT D STATES UN SOUTHERN DISTRICT OF NEW YORK -----------------------------------------x DEBRA SCHATZKI and BPP WEALTH, INC., Pla iffs, 10 . 4685 OPINION -againstWEISER CAPITAL MANAGEMENT, LLC, WEISERMAZARS, LLP and HOITSZ (A/K/A "CARIJN") MICHEL, Defendants. ---x A P PEA RAN C E S: Att aintiff LAWLER MAHON & ROONEY LLP 36 West 44th Street, Suite 1400 New York, NY 10036 Albert K. Lawler, Esq. Christopher S. Rooney, Esq. James J. Mahon, Esq. STARK & STARK, P.C. 993 Lenox Drive Lawrenceville, NJ 08543 By: Scott I. Unger, Esq. ru5DC SDNY IDOCUMENT ~ \ ELECTRONICALLY FILED ! DOC ft.: DATE FI-lE-' 1-t-1_-2G"'n"--~1311111l"'.- , O--t: Sweet, D.J. Defendants Weiser Capital ("Weiser") and WeiserMazars, LLP "Michel") lecti vely, to and e dismissal Contract), V ("Schatzki") Ci v. II racy) and VI intiffs") BPP Wealth, R. the II sand respect to Counts II the TAC are denied, sions is ed, and the failure to join an (Breach of Enrichment) of III Schatzki 19 to ly, the smiss The PIa TAC iffs have r partial summary judgment on (Unjust set forth is Enrichment). and VI Defendants' and summary judgment and di suant (collect able pa (Conversion) Count V (Civil Conspiracy) , (Unjust P. VI (Conversion) ) ("BPP") C an indi or for partial summary judgment Inc. cross-moved under the same rule Counts ("Carijn N ("TAC") of Plaintiffs and under for failure to j ("WCM"), moved (Convers (Civil P. LLC Michel "Defendants") Counts of and Hoitsz R. rd Amended Complaint the " Fed. 56 of the Management, low, the Based upon motions with (Unj ust Enrichment) motion of th respect to ed. The Defendants' motion for ssal of Count III Defendants' spensable motion to dismiss rty is 1 of Contract) ied. the TAC This heavily action lit has in resulted tion and the instant motions. It extensive motion practice, is hoped that the disposition of these motions and the pending in limine motions will Ie to a resolution by settlement or trial in the near future. Prior Proceedings This 16, 2010 action was arising out initiated by of between the parties the the termination PI iffs of on June relationship a disoute over the use of internet- based management program, SmartOffice. A motion preliminary r temporary was inj unct a resolved restraining after con order rence and with a the magistrate. A motion to dismiss the First d Complaint was denied on 1 on 26, 2011. A Second Amended August summary 4, 2011. and j determined by Opinion"). part and 2012 n A motion opinion a on by De cross-motion January A motion to amend by i the 19, s by 2012 2 for partial Plaintiffs (the "January were 2012 aintiffs was granted in part by opinion on June 30, ). The TAC was filed on was filed 2012 23, 2012. (the "June magistrate comp on May 8, 2013 except for one short deposition. been fi discovery cons In limine motions have and the instant motions and cross-motion were heard and mar ember 25, 2013. lly submitted on The Facts cts have been set forth in the De 56.1 Statement, the Plaintiffs' Objection 56.1 Statement, the Plaintiffs' e cts 56.1 Statement described low are Rule s' De to the Plaintiffs' Defendants' Responses and Object Statement. to s' Rule and the 56.1 undisputed as noted. Schatz worked in years. She financial the is is a financial planning professional who has financial services a certified advisor, chartered f try al life estate planner who also holds Series 6, health insurance licenses. 3 for more planner, rwriter and than 30 independent accredit 63 and 65 and life and - _ - - - - - - - ----------... developed compri a portfolio of these clients, insurance, clients and s she career, ients prospective individuals, lly of high net wo princ along with s provided financial planning services several businesses. She to Schatzki's of course Over life, includi health and long term care and investment advisory financial and estate plann services. started working Schatz for Marcum & Kl ("M&K H) in 2000. She ran M&K's investment advis gman, 11P and financial services division until September 2007. In 2002, for wealthy accounting firms. BPP. and on May 3, and consulting Schatzki was a seventy 2010, an urance s insurance and financial planning individuals Defendant Michel was ("EdelmanH) formed BPP which ho se and provi brokerage 1 services Schatz she was (70%) r owner of (20%) owner of BPP an officer of BPP. Brian Edelman (10%) BPP developed a twenty was a ten percent rcent rcent services owner of BPP. systems to provide structure and processes for wealth management businesses in accounting firms. and BPP used this Prior to October 2007, Schatz stem with the accounting firm of M&K. BPP remained an independent entity while Schatzki served as managing 4 rector of M&K's financial services subsidiaries, M&K Financial Se ces LLC and M&K Investment Advisory LLC "M&K Wealth Management Subs to 2010, accountant. prov Weiser WCM is a was ly, the s"). rnational accounting Weiser is an 2007 ar (collect S zki's wholly-owned firm, personal subsidiary and and of from business Weiser, and s financial and wealth management services. In agreement September with advisors Schatz Weiser office and 2007, her and staff, team were zki WCM to and bring 11 reached Schatzki's including Michel, at BPP team an of from M&K to WCM. employees. Details of agreement its form are disputed. service mar and processes were used by WCM are in dispute. While their own commissions" at f WCM, al Schatzki services and clients terms on which the BPP BPP continued collected r policies sold before joining WCM. BPP served M&K financial services clients. to serve "trail Schatzki and services clients and Weiser financial Schatzki did not sell r book of business to WCM, nor did BPP sell its service marks or processes to WCM. 5 - _ . _.. _ - - Schatzki, client with and 75% 65% kept kept by WCM when by WCM when it was Schatzki the was the same share salary to r. All of the plus commission Schatzki I S g compensation it plus $100,000 of against was an of annual commissions those and commissions. Berlin ("Berlin"), and employment base fees In salary with 2008, balance of the earned commissions and Following which channeled all of them an wi th of WCM, $150,000 advance Schatzki of earned r advance, and WCM paid her commissions and fees that exceeded t The licensed sales people had arrangement, year first r source. rcentages. split commissions on the same Our earned by source of the the commissions and fees were paid directly to WCM, Schatzki's s commissions and The parties split termination es. of its former CEO, Jordan Schatzki's compensation in 2009 increased to $400,000. According to Schatzki, llowing Berlin's termination, in duties addition Schatzki to was own directed responsibilities. assigned to Mi incent her s that initial to According assume to many and of Berlin I s Defendants, 1. According to Schatzki, responsibilit those duties duties s, and were she continued to earn uded commissions on her insurance sales and 6 - -----------_ _-_ .. ... - .. ~- .... ----------------- fees for assets under management. Defendants deny that she that was continued to earn commissions. SmartOffice is a licensed to BPP by EBIX, stores SmartOffice Inc. insurance policies, members and notes cl Such data electronic investments, interactions helps program aintiffs, ("EBIX"). According to valuable clients' s. management cl financial rtaining data dates of birth, and family conversations planners identify to with planning and sales opportunities. Schatzki began using ago to store all contact SmartOffice formation more than for clients, contacts. This included personal contact informat clients, such as cell phone numbers, securi ty numbers, their years prospects or for all her email addresses and social as well as notes of conversations, copies of urance policies and records of other financial products that they purchased. SmartOffice reimbursed whi 20 license Schatz Schatzki was pursuant When Schatzki to M&K. or BPP an M&K joined M&K, to a According to the SmartOffice employee. from EBIX, written s licensee of SmartOffice. BPP user Defendants, M&K licensing s licensed agreement. WCM was not a 7 she brought the SmartOf BPP was ce the licensee as of May date 2010, 3, a that Weiser s agreement with as of October I, 2007 te iffs. All of the data in f was property of Schatzki and EPP. action, there were approximately twelve thousand three (12,300) entries in SmartOffice, s. of the date of this ng clients, incl hundred contacts and red the services of a Certain of those clients some required the services of istered investment advisor, a As ker-dealer. Schatzki instruct enter their clients' M&K, data on and later, WCM employees SmartOffice database. October 2007, Schatzki and EPP p to Schatzki I s team of f Prior to ded access to that dat 1 service providers, time were employees of the M&K to who at that nancial Services Subs ries. The database was avail e to those employees who were wor with Schatzki at the M&K ial Services Subsidiaries. Schatz summer of a 2007 of Mi s of course meetings of which with she "her team" joining WCM. possibility of her consisted ser 1, David Weinstock 8 I ("We WCM scus z in ng the the 's "team" tock"), Wendy If) , ("Sie Siegal ("Rivers") and, ("Lentini"). systems. 11 according They were Siegal, ("Maer Maerkle to trained Maerkle, PI by e") and ntiffs, Schatz Weinstock Rivers Paul and and Al Lentini utilized Rivers were BPP not employees of BPP. Schatzki Plaintiffs, WCM on October 1, jo on a i ve basis. Stark & an Stark prepa agreement commissions and speci ng a BPP's ellectual systems produced no and did not s was have detailing a employed & Cave aintiffs' override for WCM's license of 10% nts, signed according to the law firms of B at will. According to Plaint if and Schat z contract with WCM; written empl 1, 2007, property. and The Schatzki shave has no of a final version. s Michel 27, 2007. empl became Siegal, empl rs Maerkle, and on or BPP's sses s for rece implementing accounting S also came According to pursuant to the agreement Siegal became an iffs reached with WCM, about Weinstock s of WCM in or around September 2007. intiffs, divis d by WCM firms training from S successful utilized 9 z on wealth BPP's property, including SmartOffice , clients and used Sma was under Schatz Rivers agreement Weinstock, had his IS her ffice; benefit. Siegel according to PI had her ntiff, own this use supervision. and Weinstock became employees aintiffs t negotiated own to reached Weinstock's clients prior to with WCM. employment joining pursuant to an Schatz terms. WCM. not Weinstock According to aintiffs, most of his clients were developed by Schatz Not all from M&K to WCM. of Schatzki ' s clients decided to follow Schatzki had no agreements with r ients; the clients were free to choose between her or WCM or take their bus ss elsewhere. According to the Plaint iff s I financial clients. planner I The standa individual had Scha t zki I as a with her relationships agreements between clients and financial planners allow clients to change their affiliation at any time. Schatzki understood that the client could always choose their adviser. zki's provided SmartOffice team access needed the access to serve had to access to additional ients that us 10 SmartOf WCM ce , employees and who BPP's systems and processes. The processes. fendants fice Sma avail BPP r access to had systems protected, and, and after e to an employee of M&K. Plaintiffs, SmartOffice was generally to WCM partners or empl s. not made According to s, it was available to all WCM employees. De When Schatzki brought with not on and all of contacts. prospects was that remained passwo the move, it was no According ny SmartOf ce her team moved to WCM, they also paper files on Plaintiffs' clients, Electronic was st a on on the e t clients drive " of WCM's server. During Schatzki's a was added to the Sma affiliation fice dat with se: WCM, some Schatzki; some for clients of WCM or its emp cl s dealing with both enti t affiliation is disputed. own because BPP s. The terms ients of s; and some and form of the Defendants deny BPP had cl collected trail commissions r s of its policies were sold by Schatzki before her affiliation with WCM. 11 additional According to Plaintiffs, for the SmartOf ce system, Michel was the administrator under Schatz's supervision and control. At time no did Schatzki SmartOffice license to any of the Defendants were ever authorized BPP or Defendants, to statement reimbursing stating Plaintiffs that for WCM substitute the paid the monthly the and none of the third parties as the licensee in place of BPP. this transfer themselves or Defendants deny licensing SmartOf s ce by licensing fee. On May 3,2010, Plaintiffs. WCM did WCM terminated its not terminate Michel, Compliance Officer. After Plaintiffs' scussion SmartOffice. with a Weiser After this employee who is termination, about discussion, relationship with WCM's Michel had a Schatzki' s Michel now access instructed EBIX to to change the password on BPP's SmartOffice account and changed the title of the account to "Weiser." changing and Schatzki out clients' data, the of the while passwords database giving WCM 12 and title, and cut employees WCM locked BPP them off from their access to private ion of Schatzki clients with whom WCM had no prior relationship. The Defendants deny that WCM "cut off" Plaintiffs. note that BPP was not "lock red] out" cause Michel still had access to SmartOffice and was a twent rcent owner of BPP. De was s Sma further point out that S to access password, Michel fice on May 19, 2010. After let WCM employees, able z who contacted clients, use the new login information. Michel had been BPP's as such had EBIX change the that she password was at compliance of "primary contact" and s acting her a of for De stating: Weiser ndant 10 WCM deposition, director Deposition as ion. Capital Carijn when Michel admitted she I " changed acted Management." Michel dated June the as a Transcript 16, 2011 (hereinafter "Michel Dep.") at 170:16-20. that Plaintif SmartOffice and Pl they owned the ntiffs' data to Plaintiffs and asserted that entire Defendants, Plaintif Defendants restore access to fice database. According to all the data including WCM data. 13 the In a May 9, Schatzki's attorney, attorney, Nagle immediate access of Debra's onto 2010 email from Robert C. Nagle to wrote: to drive "To achetti facilitate ("Giachet ti") , providing from Weiser's [sic]) and a server duplicate Debra with copy (this of WCM's we need a ient-related information, "F" drive USB Tom ("Nagle"), can be copied the SmartOf ce database maintained by EBIX." In a May 9, wrote: "Separately, 2010 email from Nagle to Debra's former achetti, assistant Nagle Carijn acted improperly when she designated herself as the "Registe [ sic] for permission, then SmartOffice the termination. I terminated request that application Debra's your without access client to it instruct User' Debra's upon her Carijn to restore Debra as the Registered User at once (Monday 5/11)." In a May 9, wrote: "SmartOff ice 2010 email from Nagel to [sic] achetti, database belongs to Debra Please confirm that this will be provided tomorrow - Nagle [Schat z ki] . per below, this can be effectuated with simple email." In a May 10, 2010 email from Nagel to Giachetti, Nagle wrote: "I understand you will speak to 14 [WCM] business people re: su ng phone calls to clients re: I iate." Defendant contends that the email was r Scott on Debra's separat ("UniverU), General Counsel rect to r WCM, who was copied email. In a May 10, wrote: 2010 email from Un I understand that substanti ly s tomorrow, but that may to you) all t the tti, "I am concerned about calls is have you the first cut a little longer." 2010 email from Nagle to Gi Uni ver se and Debra's 'F Drive' a on the disaggregated SmartOffice to Nagle, I made. As I indicated, we will try to email: r "The phone script that was us attached. fi which In a May 10, Nagle responded to Univer's lay in producing the client information I requested. Easy Data could have provided a copy of the SmartOffice database with t been asked. I certain files recei ve more click of a button if they had recognize Weiser from the dat info than protocol t is format, available in electronically tomorrow AM. any or Debra ne to 'scrub' information, but s clients while Weiser has been still does not have access to list. decided se and that ultimately Debra will just busy calling the who has If the protocol-related informat I request available for that it retrieval be provided or this to communicate with her cl 15 kup s. To clear, s request is in a production efforts addres On May 11, addition to, not lieu of, in Scott's email below. achetti wrote to Nagle: "Weiser will a copy of the SmartOffice database by tomorrow. It will take a to go through it and delete the non-Debra entries. whole we are talking about On st May 11, [s to Nagle Weiser wrote to to ti: Gi provide a "I renew my copy of the 11 " On May 13, 2010, Giachetti wrote to Nagle: morning. Weiser is So y, probably." SmartOffice database and F copi 1I getti the SmartOffice but having problems with vendor. "good [sic] data base Not Weiser's [sic] It. This is being expedited as best as Weiser can." Pla the "F" dr iffs on Fr On May 14, Schatzki's attorney, and thout not receive a copy of SmartOffice or y, May 14, 2010. 2010, Justin B. emailed Giachetti: authorization when 16 she Ettelson ("Ettelson") I "Carijn acted improperly designated herself as registered user subsequently [sic] on SmartOffice account Debra's disabled the access the to and when she account Weiser's actions to prevent our client's access to this data is unlawful conversion." Ettelson proposed a effectuate data. an appropriate Pursuant Plaintiffs' advisory with to May 3, ("RIA") Schatzki SmartOffice. poli the "partitioning" propos "scr 2010 departure, of "scr the " to SmartOffice contacts added since Weiser registered investment clients and WCM clients who had no relationship would from let Furthermore, all contacts es created prior to Schatzki' s exception " technical of David Weinstock's Schatz's and copy insurance/annuity date of hire at WCM, clients, of would be with removed from WCM's copy of Smart Office. According to the Defendants, it is not clear whether EBIX or Ettelson proposed the "script." On "Bob, Sunday, May 16, 2010, Giachetti wrote Nagle: if you can confirm that the below [description of what was on SmartOffice] is accurate, I immediately authorizing the Re will speak to Scott subsequent continue to have to the fix unfettered to address ase per Just's proposed Friday PROVIDED that simultaneous access is made that to and Debra's access 17 access thereto." x on Weiser and Weiser According shall to the Giachetti Defendants, was re rring to assertions made by Edelman. On May 17, confirms accuracy 2010 , of Nagle responded to Brian I s description achetti: of what "Debra is on SmartOffice database and information provided and is amenable to proceeding as per below. Scott, 2010, just need OK from this AM, with vendor to effectuate today." [sic] and Brian will inter On May 17, we Nagle emailed Giachetti and Univer a list of Schatzki I s RIA clients, and wrote: "The contacts on the ients referenced below . attached .pdf are the Weiser RIA and Debra is amenable to having them removed from the copy of " Defendants contend that the RIA database r ients had agreements with WCM. Despite its initial interest in partitioning the database, WCM ultimately refused to partake in the proposed fix. According to the Defendants, the refusal resulted from the chronological separation and because the RIA clients had signed agreements with WCM. 18 WCM also refused to deliver Schatzki's clients to her or g on her ients that was Defendants, the refusal was zation from written r files on her a copy of the information on the sto the limited According to "F" to fi s that requi ients. Plaintiffs did not have any access to SmartOffice or any other data on their cl 2010. Without access to Sma files, from May fice, According clients' WCM's of to Defendants, contact in ce to pick up Meanwhile, leave rmation Schatzki On 1 and May 18, r Schatz from to May retain 19, 2010, SmartOffice. access to received a WCM when she list of came into to PIa WCM as iffs, Defendants were clients and u their financial them a sor. by Defendants. ted to viewing ed to r boxes. according This assertion is access 2010 the "F" drive and her using the database to contact Plaintif to 3, Plaintiffs had no way to contact or provide services to clients. her s EBIX Plaintiffs granted contend Plaintif that S limited zki was r clients' contact information only and was ot r client rmation 19 that s needed to adequate Schatzki did not have r clients. sufficient fendants deny that information to contact r s. cl Acco off 1 ces to provide se on May ng to 29, igation, and P 2010 S intiffs, when tzki s limited access Defendants did not threatened regain SmartOffice until mid-July of 2010. was EBIX full cut with to access is assertion is denied by Defendants. Plaintiffs contend that immediately a er Weiser terminated the agreement between WCM and BPP/Schatzki on May 3, 2010, pr Plaintiffs took s laws. Specif lly, to s comply with is assertion al ed by and state Defendants. Plaintiffs contend that after WCM's termination of lman Plaintiffs, instructed EBIX to te the data relating to WCM-only clients from the remainder of the database to prevent inadvertent information on those cl On Comprehensive dealer, May instructed by Plaintiffs Timothy Management Se ces, ing that WCM to the ivate s. 2010, 10, Asset access in wr 20 (" th L. Inc., WCM th ") of bro r- required to WCM's was comply with Regulation S-P personal and accessing the only bro by preventing Michel stated WCM granted personal clients. t its to the information aintiffs, during employees information of access everyone to all of clients. Schatz her instead of complying with that the sition, instruction, financial Schatzki's and and BPP's s assertion is denied by Defendants. WCM had no independent relationship clients, of from r-dealer clients. According financial oyees WCM rt from 38 Defendants Registe deny s Investment assertion and th Schatzki-only Adviser claim ("RIA") that the clients executed agreements with WCM. After abase, moved for refused WCM Plaintiffs to commenced an injunction t the SmartOffice database. t an it ion action in the state SmartOffice court and would restore to them control of Defendants removed the action to this Court and moved for similar injunctive relief. In the course of two meeti 2010, following a mediation session 21 on June 25 and June 30, be Magistrate Judge Debra Freeman of this Court, re ive Order as A. motions r parties agreed to resolve their injunctive relief in a Draft Consent llows: Defendants conceded that BPP and Schatz were the sole owners of the EBIX SmartOffice license; B. Following a review clients were 547 clients (iii) be of the signated as were dat se "Schatz ki only"; signated as "Weiser 107 individuals and entities were "Joint" ients of both 1,609 (i) WCM and ( i i) Only"; emed to Plaintiffs; (iv) and there were 38 RIA clients; C. Data on the "Weiser 547 clients that were Only" would identified as removed from the SmartOffice database; D. Data on the 38 RIA clients would be retained by Defendants until such time as they each provided a written authorization to WCM to transfer their les and access to their data to Plaintiffs; 22 E. For the 107 "Joint," clients aintiffs who and were designat Defendants would have access to their information until as they made bus ss a with in the as to each such t who and future, they would do information on se WCM would also be deleted from ients who the choice as SmartOffice database if and ent to when full they made such a choice; F. Plaintiffs were access all to 10,000+ appeared of the contacts on led and information and on the other whose prospects SmartOffice, exclusive data apart from the information on attorneys and vendors; G. Plaintif After the data was separa restored their 1 to SmartOf ce access database to and (which were to control did not of take place until mid-July 2010); H. The paper files on Schatzki I s returned to her; 23 ients would be given a copy of Schatzki would 1. data on r clients that was electronic stored on the "F" would meet with re ctive drive of WCM's server; and J. BPP Brian officer De I Mi clients' Edelman to nate el ir data from the other party's copy of the SmartOffice database. On scs 's Schatz 7, lman to July that clients 2010, WCM del contai that was red one copies stored on or more computer the the information "F" drive of on WCM' s server. On July 9, data on 2010, SmartOff agreement. Two databases Plaintiffs and a was separat in Michel and Edelman met to accordance were small one for with created, Defendants, a above-described large and the one cl for data This resolution was reported to the Court. According to the Plaintiffs, or this Court, be the of resolution the de the rties' the and the unbeknownst to Plaintiffs cross-motions 24 for inj uncti ve iations relief, for while Defendants were representing to this Court that they were suffering data on great harm because SmartOffice, they Defendants did have access to the surreptitiously copied all of the data in the SmartOffice database, on "Schatzki-only" alternate clients, database known and as not including the information uploaded ACT!. This that assertion data onto an is denied by Defendants. At her July 16, 2011 deposition, Michel testified that she knew who Schatzki's clients were and that SmartOffice data was not ACT! with transferred to divide the data on July 9, before 2011. she However, began corresponding with Dave Worral technology consultant, about met Edelman in June 2010, ("Worral"), transferring the to Michel an information SmartOffice data to ACT!. On June 16, 2010, Worral sent Michel an email outlining the "next steps" for installation of steps" follows: is as an "Phase ACT! I" database. "Carijn will data import file to Dave of a project "Step No.4" send a involving of the copy of the the "next contact . to evaluate. This is scheduled to occur on June 17, 2010." Plaintiffs contend that on June 17, 2010, emailed Worral as per "step No.4" of the schedule, 25 Michel attaching a file named contact, every "SmartOffice family client and and I.csv" containing, personally prospect in inter identifiable the alia, information SmartOffice for database. The Defendants deny the contents of the file. This action occurred on the same day Defendants moved for injunctive relief, SmartOff claiming that they had no access to the data. According to the Plaintiffs, emailed Michel his notes from acknowledged receipt of the that the file contained on June 17, their phone "SmartOffice data Worral conversation I. csv" pertaining 2010, and and noted 13,811 to file contacts. Defendants deny that the email indicated that notes were emailed or Worral acknowledged receipt of the file. On June 21, 2010, board member James Blake, $20,000 check available Michel CPA, on emailed ("Blake") June 23, as king 2010 in invoice from Customer Information Technology. Worral emailed a third party consultant, asking him to import information from "Sma ACT! database, to be named "WCM Main". 26 Weisermazars, ake to make a response On June 21, Dan LLP Boehm to an 2010, ("Boehm") fice I. csv" to an On June 22, 2010, Michel emailed Worral install ACT! Michel instructing him to work with onto WCM's server. On June 22, regarding logistics proposed schedule. pertaining to Egan to 2010, Worral emailed ACT!, The schedule provided that "SmartOffice I.csv" would be imported to ACT! be presented for approval. Richards and attached a wi thin two days, and a sample would In that same email, Worral specified the "Phase II" of the project would involve another import from SmartOffice at an unspecified date. According to the Plaintiffs, asked Richards contained emailed ACT! on the the the to help data group on Michel computers download "SmartOffice announcing of her on June 24, I. csv" intent several to other 2010, Worral "WCM_Main", which onto ACT!. Michel personally install WCM employees. The Defendants deny this assertion. On July 9, 2010, Edelman and Michel met mediated agreement to divide the SmartOffice data. as per the EBIX provided the parties with two identical copies of Smart Office, one for Plaintiffs and one for WCM. According to approximately 660 the contacts Plainti ff s, from WCM' s 27 Edelman leted all but copy of SmartOffice, and Michel deleted those same 660 contacts from Plaintiff's copy of SmartOf ceo The Defendants deny this assertion. According to the did not disclose the "SmartOffice I. csv" Plaintiffs, at the that WCM was reta file, which at that meeting, Michel ing a copy of the time was on ACT!. The Defendants deny this assertion. On electronic July files, insurance policy pertaining to 13, 2010, which Michel contained information clients who in-depth and were emailed Worral data, correspondence designated by the five including histories, parties as "Schatzki Only" clients. The Defendants deny the contents of the files. July On instructed him story Office to 19, 2010, download in it." Michel "the ACT! On July 2 0, emailed database Richards Richards with the and Smart confirmed that he had done so. The Defendants deny this assertion. On that great as July 21, 2010, Worral of July 16, 2010, ACT! emailed contained Michel 12,972 confirming contacts, exceeding the 660 contacts that WCM was entitled to keep 28 pursuant to the mediated agreement. The fendants deny that the number was in excess of the mediated Defendants information have pertaining ement. stipulated to that Schatzki-Only the electronic clients remains in Defendants' possession. Defendants have stipulat that clients and related records contai "[t]he contacts, in Smart Office on May 3, 2010 were transferred to a database known as ACT! pr to the July 7, 2010 Mediation meeting." Defendants have also stipulated and agreed pertaining "Schatz as to rt mediation of non-WCM, to delete data clients Schatzki-only non-jo all (the retained the Schatzki Data a Da ta " ) , the July 2010 mediation. David Katz other registered pursuant when it for the advisor at WCM on May 3, 2010, SmartOffice. agreed mediated to confirmations investment never us testified that WCM, ("Katz"), who besides Schatzki was the only to agreement, overwhelming 29 release did Plaintiffs' not majority obta of a written Plaintiffs' clients. Such thirty-eight ("RIA") written (38) clients of (the confirmations Schatzki I s "Schatzki were only registered RIA obtained investment Clients"). for advisory Defendants deny the paraphrasing of the Draft Consent Order. M&K SmartOffice reimbursed licensing According to P Schatzki fees BPP for she while or was an during the the M&K monthly employee. intiffs, BPP was reimburs Schatzki managed employees course of r M&K employment. During the course of Scha t zki' s employment w h WCM, she and other WCM employees continued populating the SmartOffice database with ient information. October 2007 to May 3, 2010, According to Plaintiffs, SmartOffice access was from limited to people who were under Schatzki's direct supervision and control and employees and partners of Weiser were not given access to SmartOffice. BPP including had numerous advertising, subscriptions, auto, business gifts, ordinary bank operating service fees, office supply expenses, 30 expenses, dues and seminars and legal expenses. According to Plaintiffs, t incurred and in 2010 after termination. WCM reimbu and BPP for the expenses. Schatz Accordi to the Defendants, all given access to SmartOff other M&K se expenses were than those Pia SmartOffice. loyees of WCM were The Plaintiffs deny that employees working iffs with note Schatzki t had SmartOffice access was password protected. Schatz A: I testifi at her deposition as llows: any of our license always share information - of anything we were us Q: Okay. When you say A: Whether it was SmartOffice or anythi A: [WCM] was us Q: And you, as that we used. SmartOffice, wasn't it? Q: And [WCM] was us SmartOffice, the manager of [M&K] used SmartOff [WCM], instructed employee to send this to all of the empl the s in the group, right? A: Yes. why I I would normally do it directly. d it. 31 I don I t to know not the point. Q: But the it because you stion is, the wanted s empl is use to SmartOffice? A: Everybody was using SmartOffice, yes. Q: You wanted them to? A: Yes, we all were. We had to manage our clients that way. Transcript of the 14, June Deposition 2011 of Schatzki ("Schatzki Oep. I") at 296:12 to 279:9. There were Schatzki no and tten any of confidentiality the people who agreements were using SmartO Maerkle while was Schatzki' s administrat Schatzki's s. cl Rivers Joan had her to own Antoneillo Plaintiffs clients ("Antoneillo") was when had recruited she joined 32 was by WCM. hired Schatzki. to access to use SmartOf SmartOffice, and Schatzki inst according assistant employed by both M&K and WCM and had access and SmartOff served as by to ceo WCM and Antoneil Antoneillo put her ients' information on SmartOffice after she joined WCM. Plaintiffs deny this assertion. Vicky Sherman (" Sherman") supervised by Schatzki at WCM. was a WCM employee and was Schatzki told Sherman to enter data into SmartOffice. izabeth Cowley used allege Cowley SmartOf that ce Cowley a ("Cowley") er was Schatzki a employee joined WCM. SmartOffice used WCM and Plaintiffs under Schatzki's supervision. According to the Defendants, Officer for WCM prior in was terminated. Compliance position after Be to Berlin Michel was the taking Chief over deny Plaintiffs this this the time assertion. David Katz ("Katz") was WCM at working when Schatzki first was employed by WCM and had According SmartOffice to Defendants, the after Schatzki became deny this assertion. 33 Katz a was WCM S own clients. given employee. access to Plaintiffs Margaret Salacan ("Salacan") was a WCM employee who served as Schatzki's administrative assistant and was supervised by Schatzki. Salacan had access to SmartOffice during the course of her enter employment contacts database. SmartOf with WCM, and other Plaintiffs and Shatzki information allege that instructed Salacan to onto Salacan the SmartOffice added data into ce only when directed by Schatzki and for data related to Schatzki's or BPP's clients. Ellen Shafran her own when, clients. (" Shafran") Shafran according had was access Plaintiffs, to a WCM employee who had to SmartOffice, under but Schatzki's only direct supervision. Schatzki compete oral never confidentiality agreements on had any WCM agreements. confidentiality employee According and sign to regulatory any non Plaintiffs, compliance were reached. Defendants assert that Schatzki actions to keep the processes confidential. assertion. 34 did not take any Plaintiffs deny this Schatzki clients when she never was prohibited employed anyone by WCM. from contacting Plaintiffs deny her this assertion. BPP did not have any WCM employees sign confidentiality agreements. Plaintiffs deny this assertion. zki S provided the lowing testimony at deposition: Q: Let's go to "Plaintiffs proprietary and BPP Paragraph files contain information assembled 66 which over many of your Complaint. confidential Plaintiffs rs and and Schatzki at great wi th [WCMj, expense." Do you see that? A: Yes. Q: You shared that confidential informat right? A: I am not sure. Q: Well, you put it on a database, ght? A: Some of it. Some of it was old. Q: Some of it was old? A: Some of my clients were with me for 30 years. 35 her Q: Right. A: I still original clients. that Q: But so-called confidential, information was sha A: If the Q: And if with [WCM] , right? r was in the of 1 proprietary ce, yes. was on SmartOffice, was sha A: Yes. Q: You did nothing to keep t se people from stealing your clients? A: No. I would never even think that way. I would leave my poc anybody tbook out in this room. lS going to steal I don't what I k that have in my pocketbook. Schatzki Dep. I at 308:5 to 309:11. Shortly EBIX, login l after te nat ed, to the SmartOffice unauthorized rmation changed the 1 same dat se access to by protect that cl who was Defendants contend that WCM 36 followed called the Schatz to the SmartOffice database, "procedure" Michel changed WCM's the licensor of the SmartOffice system, longer an employee of WCM. the was Schatz no Michel she was follow "for every single deny Plaintiffs employee." Plaintif changed the name According assertion. BPP's changed Michel impermissibly this login of the to information, account to and "WCM" . Plaintiffs allege that in order to effectuate the co-opting of BPP's database, represented to EBIX that Michel she was acting for EPP, and that Michel r admitted that she was acting as a WCM the agent when she changed SmartOffice password and took this action to cut off Schatzki and EPP from their clients. According to the Defendants, although some of the clients on SmartOf ce did not require the protection of federal and laws, state immediate privacy way termination, could be to as a practical separate the matter data following work database and no Schatzki's separated. According to Plaintif the with which EBIX and WCM contained to over effectuate 10,000 a SmartOffice Edelman of partition clients, pursuant to the mediated agreement and eventually segregated the data in a number of hours. 37 red of the contacts and prospects who Schatzki had added to the database be WCM was and all of the data had to be protected before it data could have been segregated in a few hours; to there joining t parties After the cl unautho WCM data changed that the client inst unauthoriz Michel t was zed disclosure, separating WCM information subject data information to privacy to protect laws aga that was not subject to any a copy to belong to of the ne dete belonged Plaintiffs deny t which Schatzki Schatzki client clients so could in that be tion belonged to client t returned to received a list her. of her clients with contact information from WCM when she came into WCM's office to boxes. on s assertion. Schatzki her laws disclosure. Plaintiffs deny this assertion. system to whi log- WCM began the process of reviewing and obtained SmartOffice t According to Plaintiffs, the list was ck up outdated, incomplete and inaccurate. WCM sent which client the RIA of WCM twenty client or (20) was release RIA clients given ir Schatzki. According to Plaintiffs, initiation of s action and injunctive relief. 38 a choice a to confidential release ei r form, remain information a to forms were sent after after Plaintiff's moved for Defendants state that on May 18, 2010, EBIX terminated SmartOffice WCM's access to se. Plaintiffs deny this assertion. Defendants assert 15 days, terminated from May 3, WCM' s to Pla that 2010 access. assert aintiffs that WCM had access iffs WCM's May 18, 2010, is deny access to to SmartOffice when EBIX assertion. database was terminated on May 28, 2010. On Ma y 19, formation on on May 19, zki 2010, had access to her SmartOffice system. According to Pla 2013, SmartOffice; EBIX access information, gave Schatzki allowed nothing about result, Schatz very Schatzki policies, limited only to stories, iffs, access see to contact etc. As a was therefore unable to provide any services to clients. zki also had access to 1 S within 24 downloaded Plaintif to 48 hours r outlook after her calendar deny this assertion. 39 te client in nation from her ion because WCM Edelman computer. On May information system. 19, had she 2010, gained According to Schatz from Plaintiffs, called access she some to only cl the nts whose SmartOffice had the contact information and could not provide services. clients that S Of all on May 19, 2010, none of tzki called and spoke with cided them to stay w WCM; all cided to leave with Schatzki. Shortly after Schatzki or about SmartOf May 19, 2010, ined access to SmartOffice on EBIX half access r to ceo Plaintiffs deny this assertion. Defendants allege clients' terminated Schatzki had 11 access to her information by July 1, 2010. After July 2010, more than of tzki's clients transferred Plaintiffs deny this assertion; did not have Plaintiffs all 11 access to her clients' SmartOffice data was partiti her paper files from 40 to Schatzki. that Schatzki information until the on July 9, August. WCM 2010 and rece of Schatzki could not name any of her clients that stayed with WCM and refused to go with her. of the clients Schatzki; she testified Plaintiffs deny this assertion as incomplete. Not belonged to "didn't [sic] all belong to me." on the that SmartOffice some of the system clients Plaintiffs deny this assertion as incomplete. Defendants confidentiality note information that was maintaining important to the WCM. clients' Plaintiffs deny this assertion as incomplete. Shatzki provided the following testimony at deposition: Q. Did you ask for any compensation to place "Building, Protecting and Preserving Wealth for Generations" on this business plan? A. Yes. We were always going to have to be compensated 10 percent of the gross revenue over and above. Q. Is that in writing? 41 her A. No. or It was never in writing with Marcum with Resnick or any other firm I & Kliegman wor with either. Q. What was the was to ta length of time that alleged contract place? A. Forever. Q. Forever? A. Forever. As long as they used it. Schatzki Dep. I at 138:23 to 139:12. Plaintiffs deny this assertion as incomplete. WCM paid Schatzki a discretionary bonus of $152,173.00, which was more than $133,965.09, the amount the amount that she would have received had she been entitled to a fee for the revenue generated in the Plaintif ten rcent ar of employment. first deny this assertion. WCM was Plaintiffs deny operating at a loss 2007, 2008 and 2009. is assertion as incomplete. BPP did not file partnership tax deny this assertion as incomplete. 42 returns. Plaintiffs - - - - , - - - -.... --~~- ... --- --- BPP is still in existence, and is currently operati income. and generat th WCM. The RIA clients had agreements the Plaintif RIA Schatz Clients had According to agreements with WCM while she was at WCM. The Summary Judgment Standard Summary no genuine party is Civ. P. judgment is appropriate ct and issue as to any material entitled to 56(c). a judgment as only where a matter "there is the moving of law." Fed. R. A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Libert Inc., 477 u.S. 242, 248 (1986). The relevant inquiry on application for summary judgment is "whether evidence presents a s require submiss to a one party must prevail court is not rged with weighing the its truth, jury or whether as a matter of cient sagreement to is so one sided that law." Id. at 251-52. A dence and determining but with determining whether there is a genuine issue for tri 43 735 F. U.S. Supp. 1205, at 249. 1212 Moreover, (S.D.N.Y. 1990) if the evidence for the nonmoving party may grant summary judgment. Anderson, will "material" only if under applicable law, and 477 U.S. at 249-50. A fact affect such the facts will not preclude summary "isolate and dispose of factually the moving party Id. in cases where persuasion at the trial, "the scharged by 'showing' court that there nonmoving party's ordinarily suffi evidence is - that is, an case." ent burden r bears t party on preclude The goal the is ini t to burden Celotex, of 433 (2d Cir. 2005), the moving evidence 477 movant U.S. to of ct exists, Atl. Mut. bears the 1 burden party may pointing out to the absence the suit (1986). 432 F.3d 428, non-moving the unsupported claims." Celotex showing that no genuine issue of material Ins. Co. v. CSX Lines, L.L.C., of sputes over irrelevant judgment. 477 U.S. 317, 323-24 While outcome "properly entry of summary judgment." Id. at 248. facts 477 ilIa or "not significantly probative," the court is a mere sc is (quoting Anderson, to at point strict support 325. to a be the "It is lack of on an essential element of the non-movant's claim [T]he nonmoving party must [then] come forward with admissible evidence sufficient to raise a genuine issue of fact 44 for t 145 (2d Goe (2d ." Jaramillo v. We al Cir. v. Cir. March of Dime ("Once 1995) supported (internal 2008) showing suf rhaeuser Co., tations moving cient rward corne with evidence see also 51 F.3d 14, has suggest to party the genuine issue as to a material fact, must omitted); Birth Defects Found. the 536 F.3d 140, made a prope absence of 18 y any the nonmoving party . that would be suf cient to support a jury verdict in his favor"). I. The Motions With Respect To Plaintiffs' Conversion Claims Are Denied The conversion Defendants claim on have moved to dismiss the basis that keep the database because certa and (2) retention summary their of obligations the judgment on t they were aintiffs' entitled to entries related to WCM clients under database. (1) the The Regulation Plaintiffs conversion S-P required cross moved claim. Both the seeking motions are denied. a. The P intiffs' Database To establish a claim for conversion, establish (1) title to the a plaintiff must converted property; 45 or a right to possession of and fendant; Weaver, v. that (3) 327 F. 1m Am. property; dama s 258, Supp. Inc., Tech. see also Jaffe forth Schatzki Courts that had BPP v. was C adjudicating act of conversion by conversion. (S.D.N.Y. Supp. F. ital One Bank, Simon v. ing Brass 2004) 1001, the 1003 No. 09 (S.D.N.Y. 4106 C (S.D.N.Y. March 1, 2010). The facts the sole licensee majority the compi 262 780 (PGG), 2010 WL 691639, at *7 set an caused by t --------------------~------ 1991)); (2) of conversion of of the SmartOffice fice Smar electronic files and data. have held that the compiler of the data has a possessory right or interest these materials unless an emp yment states otherwise. See F.3d 400, 404 05 or other agreement ide Mutual Ins. Co., (2d Cir. 2006); Shmueli v. Corcoran G 460 802 N.Y.S.2d 871, 87475 (N.Y. Sup. Ct. 2005). In addition to showing a possessory right or interest, the plaintiff must establish that the defendant's dominion over or interference rights. th Colavito v. the property N.Y. olated Donor Network aintiff's Inc., 860 N. E. 2d 713, 717 vi tion occurs when someone acts to block the interest holder from Nati (N.Y. 2006). With respect to electronic records, accessing his or her electronic 864 N.E.2d 46 data. 1272, such a See 1278 (N.Y. 2007) (noting that conversion can occur through the deletion of data or the trans r of electronic Shmueli, 802 N.Y.S.2d at 873, from WCM, locked data from a computer); 874-77. Michel, under instructions out Plaintif away of SmartOffice by instructing EBIX to change the database's password. Where a defendant's original possession was lawful, a conversion does not occur unless the defendant refuses to return the property rts v. (S.D.N.Y. after United the plaintiff rna Arab s 137 2001). Here, the a Supp. F. drive. information ients, partition the Recognizing pertaining the the to Plaintiffs data. SmartOffice amount of time. that Thus, offered to clients work aintiffs 445, drive "F" and contained and with were 451 Schatz RIA Defendants unable paper some files to to access for some Defendants dominion over the SmartOffice database constituted conversion. b. 2d Seanto paper files and the SmartOffice WCM-only However, database, See aintiffs made the requisite demands for SmartOffice access and the return of t " F" demand. S-P Does Not 47 Regulation S-P requires certain institutions to obtain consent from certain rsonally before Ie 248.10. This requirement applied to only the 38 § RIA Clients out of Plaintiffs' Schatz identifi transferred to an unaffiliated third party. information can See 17 C.F.R. clients 1,754 clients. When the rti tioned SmartOffice in July 2010, parties finally WCM only remainder of required written releases for these 38 clients; t intiffs' data was released to them without any such releases. Regulation investment compa registe C. F. R. with § S-P only ties It public personal "brokers, dealers, obliges and these Exchange] groups to Commission." protect the § in products regu 248.10. ion of for 17 non information of individual consumers who have a customer or client relationship with those institutions. C.F.R. and es, as well as to investment advisers that are t 248.1. governs See 17 Regulation S P does not protect the non-public companies bus ss, or individuals commercial or who obtain other financial purposes. The ion also does not apply to data relating to individuals or entities that were merely prospects or business contacts as opposed to customers. Regulation S P does not apply to clients who used an organization's s estate planning or wealth ces solely to obtain insurance, management 48 planning that did not involve the of or sale of nancial Information Consumer 40335 purchase (June 29, insurance 2000) by a securities. See (Regulation S P), Privacy 65 F. R. of 40334, final rule excludes the provision (" [T] broker-dea r, fund, or registered advisor from the scope of Regulation S-P."). 11 under Regulation S-P Plaintiffs' only clients who were the cl s 38 Schatzki ("Schatzki RIA Clients Broker-Dealer and Schatzki' s Clients"). Schatzki RIA which was an RIA. Clients had service agreements with WCM, The The RIA Clients were the only Schatz 38 Schatz to give WCM written consent before broker-dealer their clients who had information could be released to Plaintiffs. On May 10, structed Michel Smith, 2010, WCM's writing that Regu broker-dealer, ion S-P required WCM to prevent its employees from accessing the personal and financial information of 2010 Schatzki -only broker-dealer clients. and May 16, concerns about in an effort to quell WCM's regulatory 2010, restoring shareholder Edelman, solut Defendants' permit to EBIX to On May 14, Plaintiffs' through duplicate SmartOffice counsel, counsel. Edelman SmartOffice. 49 emailed access, a suggested Pursuant to BPP proposed that WCM Edelman's "script", propos departure, contacts added since Plaintiffs' May 3, RIA who Weiser re1ationsh clients Furthermore, WCM clients had no deleted from Schatz's copy would with Schatz of SmartOff ice. and 2010 all contacts and insurance! annui t y policies created ior to Schatzki' s date of hire at WCM, with the Weinstock's from exception WCM's copy expressed of of SmartOffice. resistance to clients, After this would be Defendants' removed representatives Plaintiffs' solution, counsel offered to quarantine data pertaining to Schatz's RIA Defendants had the capacity to ients. identify RIA Clients. When the Court suggested a partitioning of the data during the injunct phase of this identify their clients litigation, t parties a matter of hours. were able to Even if Defendants required consent from the 38 Schatzki RIA Clients, Regulation S P did not compel Defendants' ial of Plaintif access for & and the remaining clients. Defendants' reliance v. See In re S.W. on Continental Bach & Co., 435 B.R. al 825 (N.Y. Supp. 2007). Both In re 50 In re S.W. Fundi 866 is (Bankr. Fundi S.W. Bach misplaced. S.D.N.Y. 2010); 848 N.Y.S. Ba 2d and Alpha involved the transfer of customer information from one broker-dealer to another. In the case at bar, WCM was not a broker dealer; neither was BPP. Defendants' reliance on 11 NYCRR § 420.17 and N.J.S.A. 17:23A-13 is also misplaced. Schatzki and BPP are also insurance licensees, contrary, and under New Di v. (" [I 1t field that, contract insurance In agent administrator York was claim to the rmation court unlikely relating (N.Y. in the App. insurance contract to the contrary, owns the expirations the at . 233, 238-39 (2d Dept. 1904). Brownstone New 99-100 is the custom and practice Hartford v. Sullard, 97 App. conversion a 108 A.D.2d 96, in the absence of a independent a absent not the organization for which he or she See Estate of 1985) Group, law, an independent insurance agent's customer in belongs to that agent, worked. York Inc. held to to v. that succeed insurance 0600751/2008, 2008 NY Slip Op 32131(U) Dist an on insurance the merits customer program of its rmation. (Sup. Ct. July 29, 2008). The court noted that "even if a proprietary right in an entity's 51 customer's expirations exists, to the retail brokers, not ghts would likely belong those the program insurance company." Id. As retail brokers, the in tion perta Accordingly, block Plaintif administrator or Schatzki and BPP own ing to their insurance customers. no insurance regulation autho from their ient data, zed WCM to since Plaintiffs were insurance licensees themselves who had individual relationships with their clients. c. The Plaintiffs dispute requires Defendants rely is not the A Factual Dispute Exists With Re To Conversion to a have establish mere denial denied the damages. "scintilla," of The and Plaintiffs' facts evi this cross s. on which the Defendants factual motion r spute summary judgment. II. The Motion To Dismiss The Civil Conspiracy Claim Is Denied The Defendants Conspiracy claim on t tort claim and aga have grounds that (a) moved to dismiss the there is no underlying (b) Michel was a WCM employee when she committed 52 underlying the acts establishing the conspiracy as well as t tort of conversion. New York law recognizes a cause of action for c 1 conspiracy where that cause of action is linked to other alleged tion Entm't v. Bozell, torts. 2d 514, 532 (S.D.N.Y. conspiracy, as an 2001). initial To prevail on threshold, a 142 F. Supp. civil plaintiff a claim of must demonstrate a primary underlying tort from which the conspiracy claim derives. 2000 WL 1808977, independent See Kirch tort, v. k v. Marshall, See S at *6 there Libert (S.D.N.Y. ., Media Alexander & Alexander N.E.2d 102, (1986). p Dec. 98 Civ. 8, In 449 of F.3d N.Y., addition 388, the v. (RCC), Without civil Inc. to 1569 2000). can be no claim for 2006); 102 No. con 401 an iracy. (2d Cir. Fritzen, primary 503 tort, a intiff must prove the four essential elements of a conspiracy claim: overt (1) act an in intentional purpose; and agreement furtherance between of participation (4) resulting two the the damage Federation, 142 F. Supp. 2d at 532. 53 or more agreement; furtherance or injury. parties; (3) of the a World (2) an parties' plan Wrestli or previously Court This judgment motion Opinion. See Schatzki v. Civ. 4685 on (RWS), the con racy. First, Defendants conversion argued claim that a fails at *8 January a corporation matter of regarding civil scope of im and Plaintiff's Second, law. conspire 10 2012). Plaintiff's conversion, cannot employees acting wi thin that No. 19, had two arguments 2012 ssed because the only tort was as (S.D.N.Y. Jan. argued di alleged Plaintiffs t LLC, Defendants conspiracy claim had to that in Weiser 2012 WL 169779, In the previous motion, aim conspiracy summary Defendants' denied Defendants with its its employment, agents or and since Michel is an employee of WCM and Weiser is WCM's parent company, a civil conspiracy claim cannot occur. because Defendants' been ied, re the was a alleged during a summary This Court held: judgment motion for convers the conspiracy claim survived the motion; genuine con t issue ra to of material commit when Michel was not employee of WCM. Here, Pla fact (1) had and (2) concerning whether iff's property occurred employed at or acting as an Id. the conversion claim remains to be li tigat held above. Further, and the within Id. scope whether Michel of her was employment 54 acting at as the a as WCM agent time of the alleged conspiracy to genuine issue of mate at the summary convert Plaintiffs' property remains a al fact that is not appropriate to settle judgment stage. remains and the Defendants' The civil conspiracy claim summary judgment motion on the claim is denied. III. The Motions With Respect To The Unjust Enrichment Claim Are Denied Under New York law, the measure of unjust enrichment claim "is restricted to the of the benefit con damages 534 (S.D.N.Y. 'unjust gain, Farace, an 'reasonable value' rred upon the defendants," Pure Power Boot 813 489, for 2011), rather than 413 F.3d 330, and is "measured [by a plaintiff'sl 340 (2d Cir. 2005). by Supp. F. a 2d defendant's loss,'" Pereira v. Plaintiffs' assertions regarding whether Defendants kept a complete copy of Plaintiffs' SmartOffice testimony data of have been Plaintiffs' challenged by Defendants' also urged damage theor are also uefendants. challenged disputed damages as set expert, in limine motion. forth above. The Donnelly, has been The Plaintiffs have s based on joint venture concepts that factually as well These conflicts bar summary granting the unjust enrichment claim. 55 as legally by the judgment dismissing or IV. The Plaintiffs' Contract Claim For Commissions Is Dismissed Schatzki for 2009 written e and 2010 contract seeks commissions under has an been oral that contract; adduced. The s she all no was evidence Defendants deny owed of a the stence of any such agreement and contend no written contract existed. Under the New York Statute of Frauds, an oral contract is void where See N. Y. Gen. 11 performance is not possible wi thin a Obl . Law § 5-701 (a) (1) (McKinney 2002) year. (stati that an oral agreement is void if "[b]y its terms is not to be performed within one year from the making thereof"). at-will employment courts have requirement. 2007). held that Guilbert In order requirement, re tionsh at-will v. can terminated at any time, contracts Gardner, Because an 480 survive F.3d 140, the one-year 151 (2d Cir. an at-will contract to survive the one year the measure of compensation must become "fixed and earned" within the one ar. 694 N.E.2d 56,60 (N.Y. 1998). 56 Schatz Ins itutional that case, 968 Servs., the relied has alleged performed wi thin one on N.E.2d 947 promise year, Ryan Kellogg 2012). (N.Y. could because v. Partners ~----~--------~~----------- it have was very a However, clearly promise to in been pay a amount of compensation plus a discretionary bonus for a certa year sing of employment. The alleged oral contract survived the statute of frauds because it was capable of becoming fixed and earned within one year. Id. at 15. alleged oral contract between the parties was If t allegedly made at the commencement of Schatzki's employment with WCM in 2007, then the only compensation capable of becoming fixed and earned within one year would be the monies allegedly due to her in 2008, which she s received. In addition, Schatzki stated in her deposition that the alleged oral contract was to take place "forever." Schatzki Dep. An oral contract that calls for I at 138:23-139:12. performance of indefinite duration, even if terminable within one year only by its breach, is not enforceable under the statute of frauds. See DIE v. (N.Y. Gusrae 2007) Frauds 844 N.Y.S.2d 214 {alleged oral contract was unen because partnership was the to plaintiff have claimed continued 57 0 Sup. Ct. rceable under Statute of that his indefinitely right even to after a he inception N.E.2d 388 only by a Schatzki (2008). The 673 N.Y.S.2d 470 Plan Adm'rs, CNY Fire (N.Y. App. 649 N.Y.S.2d 482 Erne Servs., (N. Y. the In White App. case Di v. in relied v. Div. (N.Y. 639 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _~_ __ L_ _ _ _ _ _ _ __ 1996). has on involved oral be performed within one year. See Caruso v. contracts that cou Malang, 888 breach), cases s within one year of left the firm and that it was terminab 1998); Gold v. App. N.Y.S.2d Div. 1996); 628 (N.Y. Purchas 1998), its 671 the court nion and did not affirmed Benefit Div. N.Y.S.2d discuss on App. the the facts tri 384 of court's opinion below. Because Schatzki's contract claim is bas agreement that call on an oral for performance of an indefinite duration, it is barred by the Statute of Frauds. V. The Defendants' Motion to Dismiss Indispensible Party Is Denied Defendants assert that EBIX For Failure To was the terminated WCM's access to SmartOffice on May 18, on or about May 19, 2010, terminated 58 Join An party who 2010 and then, Plaintiffs' access to SmartOffice. Defendants argue have sustained after May 18, but the conduct of EBIX, that whose is subject person's in states: to service joinder will not deprive that join rty. matter jurisdiction must be j In aintiffs that and Plaintiffs failed to Fed. R. Civ. P. 19(a) (1) who damages 2010 do not flow from WCM's conduct this action, an indispensible A person the absence, of process court of and subj ect ned as a party if: the court cannot (A) accord complete relief among existing parties . If Rule 9 (a) lS satisfied, the court will consider dismissal under Rule 19(b) is warranted. Fed. R. While EBIX' s aims, EBIX partition actions expressed data. a EBIX cut off PIa after WCM threat legal also did not the remained not control in WCM's complicit in action to iffs' against "F" drive files possession until August and transfer the copying . P. relate to Plaintiffs' willingness 59 whether help 19(b). conversion the parties limited access EBIX. Moreover, and paper 2010. of a y EBIX les that EBIX was also the "SmartOffice I.csv" file. being able could be It was WCM's actions that prevented Plaintiffs from to access the characterized SmartOffice a as database. joint Even (explaining that 498 U.S. 5, " it s the long EB tortfeasor, characterization would not transform EBIX into a necessa under Rule 19. See if rule that it such party 8 (1990) is not necessary for all joint tortfeasors to be named as defendants in a lawsui t") . sing Given such, EBIX is not an indispensible for summary party under Rule 9. Conclusion As set wi th respect to den to forth above, an judgment conversion and unjust enrichment claims are motions to jo the motions indispensible summary judgment and di smiss for civil con party is deni ira and the ssal of the contract cla 60 and failure mot ion is granted. It is so red. New York, NY/ November ],..) , 2013 61
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