C.D.S., Inc. v. Zetler

198 F. Supp. 3d 323, 2016 U.S. Dist. LEXIS 104318, 2016 WL 4257745
CourtDistrict Court, S.D. New York
DecidedAugust 3, 2016
Docket16 Civ. 3199 (VM)
StatusPublished
Cited by7 cases

This text of 198 F. Supp. 3d 323 (C.D.S., Inc. v. Zetler) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
C.D.S., Inc. v. Zetler, 198 F. Supp. 3d 323, 2016 U.S. Dist. LEXIS 104318, 2016 WL 4257745 (S.D.N.Y. 2016).

Opinion

DECISION AND ORDER

VICTOR MARRERO, United States District Judge.

Plaintiff C.D.S., Inc. (“C.D.S.”) commenced this action against defendants Bradley Zetler (“Zetler”), CDS, LLC, and Rapid Systems CC (collectively with Zetler and CDS, LLC, “Rapid Systems”) alleging in its complaint various violations of state and federal law. (“Complaint,” Dkt. No. 1.) C.D.S. simultaneously moved for preliminary injunctive relief, and after a hearing (“Preliminary Injunction Hearing”) the [329]*329Court granted a preliminary injunction to C.D.S. by Order dated June 6, 2016.1 (“Preliminary Injunction Order”, Dkt. No. 39.) C.D.S. and Rapid Systems subsequently exchanged letters concerning contemplated pre-answer motions. (“Pre-Motion Letters,” Dkt. Nos. 68-69, 72-75.)

The Court construes Rapid Systems’ Pre-Motion Letters as a motion to (1) stay this action pending resolution of Rapid Systems’ related breach of contract claim being adjudicated in France; or, in the alternative, (2) dismiss the action pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure (“Rule 12(b)(7)”) for failure to join necessary parties under Rule 19 of the Federal Rules of Civil Procedure (“Rule 19”); (3) dismiss the action for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (“Rule 12(b)(6)”); and (4) require a more definite statement pursuant to Rule 12(e) of the Federal Rules of Civil Procedure (“Rule 12(e)”) (collectively, “Rapid Systems’ Motion,” Dkt. No. 75.)

The Court additionally construes the correspondence in C.D.S.’s Pre-Motion Letters as a motion by C.D.S. for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (“Rule 56”) on the first cause of action in its Complaint, seeking a declaratory judgment pursuant to 28 U.S.C. Section 2201 that C.D.S. is the sole owner of the copyright in the Agencypad software application (“Agencypad”). (“C.D.S.’s Motion,” Dkt. No. 73.)

For the reasons set forth below, Rapid Systems’ Motion is DENIED in its entirety, and C.D.S.’s Motion is also DENIED.

I. BACKGROUND

C.D.S. filed its Complaint against (1) Zetler, the former president of C.D.S., (2) CDS, LLC, a limited liability company owned by Zetler, and (3) Rapid Systems CC, a South African company owned by Zetler, as well as nominal defendants Amazon Web Services, Inc. (“Amazon”) and Rackspace US, Inc. (“Rackspace”).2 The Complaint alleges breach of fiduciary duty, unjust enrichment, misappropriation of trade secrets, violations of the Computer Fraud and Abuse Act, 18 U.S.C. Section 1030 (“CFAA”), the Copyright Act, 17 U.S.C. Section 101, and the Lanham Act, 15 U.S.C. Section 1501. (Dkt. No. 1.) C.D.S. seeks declaratory judgments determining that Rapid Systems’ copyright and trademark registrations for C.D.S.’s software are void, and that C.D.S. is the owner of certain accounts hosted on Amazon and Rackspace. (Id.)

In short, the Complaint alleges that Rapid Systems wrongfully registered a copyright and trademark for the Agency-pad software and mark, despite C.D.S.’s status as the legal owner of the copyright and trademark in Agencypad. The Complaint further alleges that during Zetler’s tenure as president of C.D.S. he used C.D.S.’s funds, corporate records, and accounts to benefit himself and his own company, Rapid Systems. Zetler’s actions allegedly included entering into a contract with Amazon for web hosting and with Rackspace for email hosting under the name of CDS, LLC, a company that he wholly owned, rather than on behalf of C.D.S. These actions prevented C.D.S. from accessing its email and electronic information or servicing clients after Zetler [330]*330was terminated as president. Finally, C.D.S. alleges that Zetler wrongfully retained control over employee passwords and confidential business communications stored in the Amazon and Rackspace accounts, in violation of the CFAA and state law.

A. RAPID SYSTEMS’ MOTION

By letter dated June 21, 2016 (“June 21 Letter,” Dkt. No. 75), Rapid Systems requests: (1) a stay of the instant action— either on forum non conveniens grounds or as an exercise of the Court’s inherent power to abstain from exercising jurisdiction— pending disposition of an action in France (“French Action”) for breach of contract brought by Rapid Systems against C.D.S. and its French counterpart, CDS SARL; (2) in the alternative, dismissal of the action pursuant to Rule 12(b)(7) for failure to join CDS SARL and Jerome Marechaux (“Marechaux”) as necessary parties under Rule 19; or (3) dismissal of the action for failure to state claims under the CFAA and misappropriation of trade secrets pursuant to Rule 12(b)(6). Rapid Systems also moves for a more definite statement pursuant to Rule 12(e) on the grounds that C.D.S.’s requests for a declaratory judgment of ownership of the Amazon and Rackspace accounts are ambiguous. As a threshold matter, Rapid Systems requests that the Court address its request for a stay pursuant to a forum selection clause in the 2001 Exclusive Distributorship Agreement (“2001 Agreement”) prior to addressing any other issues raised in the Pre-Motion Letters.

C.D.S. opposed Rapid Systems’ Motion by letter dated July 6, 2016. (“July 6 Letter,” Dkt. No. 68.) C.D.S. argues that: (1) no stay is warranted because the intellectual property claims before this Court exist outside of the 2001 Agreement that Rapid Systems seeks to enforce in the French Action, and therefore the outcome of the French Action is irrelevant to the proceedings in this case; (2) CDS SARL and Marechaux are not subject to service of process in this action and cannot be added on the basis of hypothetical future claims; and (3) C.D.S.’s CFAA claim and misappropriation of trade secrets claim are properly pled.

Rapid Systems replied by letter dated July 11, 2016. (“July 11 Letter,” Dkt. No. 69.) Rapid Systems maintains that: (1) by challenging Rapid Systems’ ownership of the Portfoliopad system (“Portfoliopad”) in this Court, C.D.S. breached the 2001 Agreement governed by French law, and accordingly the Court should stay the instant action pending resolution of the French Action; (2) CDS SARL and Mare-chaux are subject to service of process and Zetler will be exposed to inconsistencies if CDS SARL and Marechaux are not joined; and (3) the allegations pursuant to the CFAA are still not properly pled and further specificity is required with respect to C.D.S.’s requested declaratory judgment over the Amazon and Rackspace accounts.

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Bluebook (online)
198 F. Supp. 3d 323, 2016 U.S. Dist. LEXIS 104318, 2016 WL 4257745, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cds-inc-v-zetler-nysd-2016.