New London Assocs., LLC v. Kinetic Soc. LLC

384 F. Supp. 3d 392
CourtDistrict Court, S.D. Illinois
DecidedApril 11, 2019
Docket18cv7963(DLC)
StatusPublished
Cited by20 cases

This text of 384 F. Supp. 3d 392 (New London Assocs., LLC v. Kinetic Soc. LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New London Assocs., LLC v. Kinetic Soc. LLC, 384 F. Supp. 3d 392 (S.D. Ill. 2019).

Opinion

DENISE COTE, United States District Judge

Defendants Costella Kirsch, Internap Corporation ("INAP"), Blue Chip Venture Company Ltd.1 and Blue Chip VI Extension Fund II LLC (the "Blue Chip Defendants"), have moved pursuant to Rule 12(b)(6), Fed. R. Civ. P., to dismiss the claims against them in the Second Amended Complaint ("SAC"). INAP and the Blue Chip Defendants have additionally moved to dismiss the SAC for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed. R. Civ. P. Defendants Spectrum Media *400Services LLC ("Spectrum") and Multiplier Capital LLC ("Multiplier") have moved for judgment on the pleadings pursuant to Rule 12(c), Fed. R. Civ. P., joining in arguments made by the other moving defendants. For the reasons that follow, the Blue Chip Defendants', INAP's, and Costella Kirsch's motions to dismiss are granted. Multiplier's motion for judgment on the pleadings is granted. Spectrum's motion for judgment on the pleadings is granted in part.

Background

The following facts are alleged in the SAC and are assumed to be true for the purpose of addressing this motion. Plaintiff New London Associates, LLC ("NLA") is a software developer. NLA owns a federal copyright registration for a software program known as "RTR."2

In 2011, NLA entered into an agreement with nonparty Twelvefold Media Inc. ("Twelvefold"), in which NLA agreed to provide the RTR software to Twelvefold in return for a promised payment, which was never received. NLA alleges that it installed the RTR software on an NLA server that was located at a server hosting space in New York City that it rented from INAP. INAP provided internet access to the servers so that the servers could be accessed via the internet by Twelvefold. The servers were subsequently moved to an INAP facility in Secaucus, New Jersey. NLA also provided Twelvefold with access to the source code to RTR via Github, an online source code hosting service that allows programmers to remotely access and modify the source code. As NLA alleges, this is generally accomplished by downloading a local copy of the source code, modifying that local copy, and then uploading the modified copy onto Github.

At an unspecified date, Twelvefold defaulted on its obligations to NLA. NLA alleges that, notwithstanding its failure to make the required payments to NLA, Twelvefold continued to use and modify the RTR software through Github. At an unspecified date, Twelvefold agreed to settle its debt to NLA in exchange for a discount and a guarantee of payment, but it defaulted on that obligation as well. Accordingly, NLA alleges that Twelvefold did not own and was not licensed to use RTR.

In 2016, Twelvefold's assets were acquired by defendant Kinetic Social LLC ("Kinetic") in an asset sale completed under the "supervision" of Multiplier, the Blue Chip Defendants, and Costella Kirsch (collectively, the "Financing Entities"), as well as non-party Bridge Bank.3 The Financing Entities allegedly conditioned their funding of Kinetic upon the distribution of the RTR software to Kinetic and to an escrow service. The SAC references an email from Chris McCleary, Kinetic's CFO, to Twelvefold and Costella Kirsch, stating "Guys, we will need the entire code base in escrow before closing. Let us know what we can do to make this happen." NLA asserts that McCleary was also the "agent" of the Blue Chip Defendants. The SAC also references an email discussion regarding McCleary's request, in which Rich Ginn, a partner of Costella Kirsch, wrote "Costella Kirsch is ok with this request." NLA also asserts that Multiplier was aware of McCleary's request and NLA's objections to it, but does not offer further details.

*401NLA alleges that, prior to the asset sale to Kinetic, Twelvefold's Chairman, Peter Horan, personally ordered employees of Twelvefold to transfer a copy of the RTR source code to Twelvefold's creditors, believed to include the Financing Entities.4 The SAC alleges that "Horan and other Twelvefold personnel were ordered to carry out copying the RTR source repository and distribute it to Kinetic in New York and to an escrow service." At Twelvefold's instruction, a new source code repository was established with Atlassian, which is a competitor of Github.

NLA repeatedly objected to the transfer of the RTR software. NLA's CEO personally informed Twelvefold and Costella Kirsch that NLA owned the rights to RTR and had not been paid for it. NLA alleges that it is aware of emails exchanged during the period between May and June of 2016 between Twelvefold, Kinetic, Costella Kirsch, and a Blue Chip Defendant regarding the RTR software and NLA's claim to ownership thereof.

The SAC alleges that the Financing Entities "gained control" over Twelvefold and Kinetic through "lending, equity, or other financial transactions," but the details of those transactions and the Financing Entities' role in them are not described in the SAC. The Financing Entities "partially or completely owned and/or controlled both Twelvefold and Kinetic." Various personnel from the lending entities participated actively in the asset sale as well as in the management and operations of Kinetic.

Following the asset sale, Kinetic issued a one million dollar note (the "Note") to NLA for a "setup fee, as well as a separate equipment rental agreement for NLA's servers," which were located at INAP's facility in New Jersey. Kinetic defaulted on the Note and the rental agreement in 2016. To date it has not paid for its use of RTR, despite continuing to use the software.

NLA filed suit against Kinetic for nonpayment of its obligations under the Note in New York Supreme Court in November 2017 and obtained an $ 893,570.09 judgment against Kinetic on May 18, 2018. Also in 2017, NLA filed an action in New Jersey Superior Court against INAP and Kinetic. In March 2018, NLA obtained an order of replevin from that court to repossesses its servers from INAP and Kinetic, as well as a judgment against Kinetic related to Kinetic's unpaid lease agreement with NLA. NLA alleges that INAP has refused to provide access to the servers in accordance with the order of replevin.

During the pendency of the New Jersey action, Kinetic sold its assets, including the RTR software, in a private asset sale to Spectrum Media Services LLC ("Spectrum"). NLA alleges that the sale was conducted with the knowledge and consent of the Financing Entities because their personnel were copied on "notices and correspondence" concerning the sale on November 14, 2017. Multiplier and the Blue Chip Defendants are alleged to have had control over Spectrum through their investments in that company, and to have caused the RTR software to be copied and transferred from Kinetic to Spectrum. NLA again contacted the Blue Chip Defendants to object to the sale of the RTR software. Spectrum has continued to access and modify the RTR software through *402NLA's Github repository as recently as April 13, 2018.

In March 2018, an INAP employee in New York informed NLA that, at Spectrum's request, it had set up a high-speed network connection between NLA's servers located in INAP's facility in Secaucus, New Jersey, and Spectrum's servers in that same facility. Such a connection is known as a "cross connect" and involves physically connecting the two servers using network cables.

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Bluebook (online)
384 F. Supp. 3d 392, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-london-assocs-llc-v-kinetic-soc-llc-ilsd-2019.