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

254 F. Supp. 3d 625, 2017 U.S. Dist. LEXIS 85958
CourtDistrict Court, S.D. New York
DecidedJune 2, 2017
Docket16 Civ. 3199 (VM)
StatusPublished
Cited by5 cases

This text of 254 F. Supp. 3d 625 (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, 254 F. Supp. 3d 625, 2017 U.S. Dist. LEXIS 85958 (S.D.N.Y. 2017).

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 Zet-ler and CDS, LLC, “Rapid Systems”) alleging in its complaint (“Complaint,” Dkt. No. 1) various violations of state and federal law. Rapid Systems has asserted several direct and derivative claims against C.D.S.; its CEO, Diane Treat (“Treat”); three directors of C.D.S., Jerome Viollon (“Viollon”), Christelle Riot (“Riot”), and Christophe Ráele (“Ráele”); the majority shareholder of C.D.S., Jerome Marechaux (“Mareehaux,” together with Viollion, Riot, and Racle, the “Individual Counterclaim Defendants”); and against CDS Sari, a French company majority-owned by Mare-chaux that employs Viollion, Riot, and Ra-cle (collectively, the “Counterclaim Defendants”).

Before the Court are (1) C.D.S.’s motion to adopt and Rapid Systems’s objections to the Report and Recommendations of special master Daniel Game (the “Special Master”) dated May 17, 2017 (the “Report”); (2) C.D.S.’s motion to hold Rapid Systems in contempt; (3) the Court’s proposal to amend the Order of the Court dated June 15, 2016 to permit ex parte communications between the Special Master and the Court; and (4) the Special Master’s application for an order directing the parties’ to pay any outstanding fees due to the Special Master for services provided in this case.

For the reasons described below, (1) C.D.S.’s motion for adoption of the Special Master’s Report is granted in part and denied in part, and Rapid Systems’s objections to the Report are overruled; (2) C.D.S.’s motion for sanctions is denied; (3) the Court’s order dated June 15, 2016 will be amended to permit ex parte communications between the Special Master and the Court; and (4) the Special Master is ordered to submit to the Court more detailed bills accounting for his services in this case.

I. THE SPECIAL MASTER’S REPORT AND RECOMMENDATIONS

A. BACKGROUND

On June 6, 2016, this Court granted C.D.S.’s motion for a preliminary injunc[628]*628tion and ordered Rapid Systems to give C.D.S. access to a number of accounts and software tools necessary for C.D.S. to continue operating its business of providing software products to talent and booking agencies in the fashion _ industry. See C.D.S., Inc. v. Zetler, 190 F.Supp.3d 375, 376 (S.D.N.Y. 2016) (the “Preliminary Injunction Order”). Rapid Systems appealed the Preliminary Injunction Order, and the Second Circuit affirmed. See C.D.S. Inc. v. Zetler et al., 691 Fed.Appx 33, 35, No. 16-2346, 2017 WL 2347559, at *2 (2d Cir. May 31, 2017).

Pursuant to the Preliminary Injunction Order and Rule 53 of the Federal Rules of Civil Procedure (“Rule 53”), the Court appointed Daniel Garrie to serve as special master “to advise the Court and the parties on the technical questions in dispute in this case, facilitate agreement between the Parties on technical and operational issues, monitor compliance with the preliminary injunctive relief, and mediate disputes within the scope of the Preliminary Injunction Order.” C.D.S., Inc. v. Zetler, No. 16 CIV. 3199, 2016 WL 3522197, at *1 (S.D.N.Y. June 15, 2016) (“June 15 Order”).

By letter dated May 8, 2017, Rapid Systems informed the Court that it had terminated an Exclusive Distributorship Agreement (“EDA”) under which C.D.S. had been selling Rapid Systems’s products.1 (“May 8 Letter,” Dkt. No. 291.) By letter dated May 10, 2017, C.D.S. alleged that Rapid Systems had “terminated [C.D.S.’s] co-equal access to several features required to administer customers’ use of Agencypad that are subject to the [Preliminary Injunction Order].” (“May 10 Letter,” Dkt. No. 293.)

Following receipt of the correspondence, the parties appeared before the Court on May 12, 2017. (“May 12 Hearing,” see Dkt. Minute Entry dated May 12, 2017.) At the May 12 Hearing, the parties agreed that Rapid Systems, in connection with terminating the EDA, had terminated C.D.S.’s access to the Portfoliopad “Rapid Administration” database. That database underlies both Agencypad, the software at issue in this litigation, and the Portfoliopad software, which is owned by Rapid Systems and which was being sold by C.D.S. pursuant to the EDA prior to its termination. As a result, C.D.S. was unable to make the following changes in Agencypad: (1) create user accounts, (2) modify passwords, (3) customize user settings, (4) disable existing users, (4) create agencies, and (5) modify and customize existing agencies. (See May 12, 2017 Transcript at 16:10-14, 19:13-17, 32:11-37:25.) Rapid Systems argued that it had made changes to Portfo-liopad — of which Rapid Systems is the undisputed owner — and not to Agencypad. C.D.S. argued that since Rapid Systems’s modifications had altered the functionality of Agencypad, including C.D.S.’s ability to add new clients, Rapid Systems had violated the Preliminary Injunction Order by failing to maintain the status quo during the pendency of the litigation.

At the conclusion of the May 12 hearing, the Court ordered the parties to consult with the Special Master regarding an appropriate procedure to return the parties to the status quo that existed prior to May 8, 2017. (See Dkt. Minute Entry dated May 12, 2017.) The Court directed the [629]*629Special Master to submit a report to the Court “concerning what is necessary to restore the status quo and to what extent it can be done without in any way harming the rights that Rapid Systems has in this matter up to this point.” (May 12, 2017 Transcript at 64:9-12.)

On May 17, 2017, the Special Master submitted his report and recommendations to the Court and the parties. (“Report,” on file with chambers.) The Special Master recommends that (1) the Court order Rapid Systems to restore interim access to the Portfoliopad database that existed prior to its actions on May 8, 2017, and (2) the Court order the parties to develop a permanent solution devised by the Special Master by which C.D.S. would again have “the ability to add and edit agencies and users of Agencypad” without “restoring Portfoliopad functionality that was restricted by [Rapid Systems’] actions on May 8, 2017.” (Report at 2.)

By letter dated May 17, 2017, Rapid Systems requested an opportunity to be heard regarding the Report pursuant to Rule 53(f) (1) and stated its intention to object to the Report pursuant to Rule 53(f)(2). (“May 17 Letter,” Dkt. No. 295.) By letter dated May 18, 2017, C.D.S. requested that the Court adopt the Report and impose sanctions on Rapid Systems for violating the Preliminary Injunction Order. (“May 18 Letter,” Dkt. No. 296.) On May 19, 2017, the Court ordered the parties to submit any objections to the Report by not later than May 25, 2017. (See “May 19 Order,” Dkt. No. 297.)

Pursuant to the May 19 Order, C.D.S. moved, on May 25, 2017, for adoption of the Report. (See Dkt. No. 300.) Specifically, C.D.S. requests that the Court order (1) restored access as it existed prior to May 8, 2017; (2) implementation of the Special Master’s proposals for adding licensed users to existing customers’ accounts, for renewals of existing customers and for continued sales of Agencypad only; and, alternatively, (3) implementation of the Special Master’s recommended “workaround” to achieve restoration of functionality.

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Related

C.D.S., Inc. v. Zetler
288 F. Supp. 3d 551 (S.D. Illinois, 2017)
C.D.S., Inc. v. Zetler
268 F. Supp. 3d 488 (S.D. New York, 2017)

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Bluebook (online)
254 F. Supp. 3d 625, 2017 U.S. Dist. LEXIS 85958, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cds-inc-v-zetler-nysd-2017.