Opinion
19-CV-4873 (AJN) (BCM)
02-18-2022
SMART TEAM GLOBAL LLC, Plaintiff, v. HUMBLETECH LLC, et al., Defendants.
TO THE HON. ALISON J. NATHAN
REPORT AND RECOMMENDATION
BARBARA MOSES, UNITED STATES MAGISTRATE JUDGE.
Plaintiff Smart Team Global LLC (STG) alleges that defendant Lin Li, a former STG employee, stole the source code for STG's proprietary software, as well as its "ideas, business plans, technology, customer contacts, and other non-public information" for the benefit of his new business, defendant HumbleTech LLC (HumbleTech), and has since used the misappropriated information to compete unfairly against plaintiff, including by "systematically steering STG's business and its clients to his HumbleTech venture[.]" Am. Compl. (Dkt. No. 16) ¶¶ 2-3. Defendant Li never appeared or answered. Defendant HumbleTech appeared through counsel, engaged in motion practice, and answered, but its counsel thereafter sought and obtained leave to withdraw, after which HumbleTech failed to appear through new counsel and made no further effort to defend this action. Consequently, after obtaining a Certificate of Default, plaintiff moved on June 11, 2021 for the entry of a default judgment. (Dkt. No. 60.) On November 8, 2021, the motion was referred to me for report and recommendation. (Dkt. No. 66.)
For the reasons that follow, I recommend, respectfully, that the motion be granted in part. A default judgment in the amount of $266,170.06 should be entered against both defendants, jointly and severally, on plaintiff's claims for violation of the federal Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836, et seq., violation of the Virginia Uniform Trade Secrets Act (VUTSA), Va. Code § 59.1-336, et seq., and breach of the common-law duty of loyalty, and defendants should be permanently enjoined and restrained from using the source code for STG's "Matteroom KM (PBM)" software. Additionally, plaintiff should be directed to submit its application for an award of its reasonable attorney's fees and costs within 30 days of the entry of judgment. be permanently enjoined and restrained from using the source code for STG's "Matteroom KM (PBM)" software. Additionally, plaintiff should be directed to submit its application for an award of its reasonable attorney's fees and costs within 30 days of the entry of judgment.
I. BACKGROUND
A. Factual Allegations
Plaintiff STG, a Virginia limited liability company, is a software consulting firm specializing in "advanced enterprise solutions for clients worldwide," focusing on information governance and a content publishing platform. Am. Compl. ¶ 11. STG also offers a software consulting service that assists clients with system integration across various information governance technologies. Id. ¶ 13. One of its key business partners is iManage, LLC (iManage), which provides legal document management services for corporate law departments and law firms. Id. ¶ 19. STG provides related services to iManage's customers, such as system upgrades, data migration, new implementations, and support services. Id.
Defendant Li, a citizen of the People's Republic of China (PRC), started working for STG in February 2012 as a Professional Services Consultant. Am. Compl. ¶ 17. He worked in STG's New Jersey office (first under a student visa working permit and then under an H1-B visa) until May 2016, and was then assigned to its Shanghai office. Id. While an employee, Li completed an iManage training course, at STG's expense, and was given access to STG's "most confidential information," including pricing sheets and documents setting forth its "long-term, phase-by-phase plans for its customers' investments in particular enterprise software solutions." Id. ¶¶ 21-22, 24. Additionally, as he assumed increasing levels of responsibility, Li obtained "intimate and detailed knowledge" about STG's "current and proposed products and services, business plans, software and other technology, client lists and information, and marketing and sales strategies." Id. ¶ 23.
Li also had access to STG's password-protected computer system, Am. Compl. ¶ 24, including a Domain Administrator level password to access his employer's on-premises Bitbucket, where it stored the source code for its proprietary Matteroom software, including Matteroom KM (PBM). Id. ¶¶ 13, 33-34. The Matteroom KM (PBM) code was written by STG's team of software developers. Id. ¶ 33. While employed at STG, Li worked on updating a portion of the code. Id.
Li resigned on February 25, 2018, effective March 1, 2018. Am. Compl. ¶ 25. Weeks earlier - unbeknownst to STG - he had formed a competing entity in China and HumbleTech (of which he was the sole member) in New York. Id. ¶¶ 10, 25. HumbleTech competes directly with STG as an "information consulting firm specialized in enterprise solutions." Id. ¶ 27. Moreover, Li and HumbleTech have been using STG's proprietary source code (which Li either stole or reverse-engineered), along with other confidential information belonging to STG, "in an effort to secure multiple iManage support and maintenance contracts between HumbleTech and STG's customers." Id. ¶¶ 32, 36.
Those efforts have, to some degree, paid off. Defendants quickly secured contracts with two STG clients, Dahui Lawyers (Dahui) and Junhe LLP (Junhe). Am. Compl. ¶¶ 30-31, 37-38. While still employed at STG, Li convinced another STG employee "to do a substandard job" on a project for Dahui. Id. ¶ 30. Then, after Li resigned, he "immediately began performing information governance services for Dahui through HumbleTech." Id. Similarly, while still working for plaintiff, Li "began to arrange for Junhe to receive iManage support directly from Li rather than through STG's support channels." Id. ¶ 31. After he resigned, Li "was able to immediately begin supporting Junhe through HumbleTech." Id.
Later, in May 2019, another "former STG client," Jingtian & Gongcheng (Jingtian), "signed a contract for iManage support and maintenance with an entity called ITForce," which "has subcontracted the delivery portion of this contract to Li and HumbleTech." Id. ¶ 39. Dahui, Junhe, and Jingtian are all law firms in the PRC. Id. ¶¶ 29, 39.
In its Amended Complaint, plaintiff asserts claims for: (1) unfair competition; (2) breach of the duty of loyalty; (3) tortious interference with prospective economic advantage; (4) violation of the VUTSA; (5) common law misappropriation of confidential information and trade secrets; (6) violation of the DTSA; (7) unjust enrichment; and (7) "forfeiture of salary and benefits." Am. Compl. ¶¶ 1, 44-97.
B. Procedural Background
Plaintiff filed its original Complaint on May 24, 2019. (Dkt. No. 1.) HumbleTech was served through its registered agent for service of process in Albany, New York, on May 29, 2019. (Dkt. No. 6.) Days later, on June 5, 2019, Li filed papers in New York to "dissolve HumbleTech as an entity." Am. Compl. ¶ 42. On June 19, 2019, HumbleTech appeared in this action through counsel. (Dkt. No. 8.)
Plaintiff filed its Amended Complaint on July 24, 2019. On August 7, 2019, HumbleTech moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss all of plaintiff's claims except the VUTSA claim. (Dkt. No. 19.) It argued that plaintiff's common-law claims were preempted by the VUTSA, and that the DTSA claim was not adequately pleaded. HumbleTech did not raise any jurisdictional defenses. In an Opinion and Order dated June 1, 2020 (Op.) (Dkt. No. 36), Alison J. Nathan, United States District Judge, denied the motion to dismiss.
By Order dated November 17, 2020, Judge Nathan granted (i) plaintiff's motion for leave to serve Li by alternate means and (ii) the motion of Butzel Long, P.C. (Butzel Long), HumbleTech's then-counsel, to withdraw, "after effecting service on Mr. Li and filing proof of service on the public docket." (Dkt. No. 50.) On November 20, 2020, Butzel Long served Li with the Amended Complaint, Summons, and other relevant pleadings by mail (to his home address in China) and "to the email address by which Butzel Long and Li previously have communicated." (Dkt. No. 51.) By Order dated December 11, 2020 (12/11/20 Order) (Dkt. No. 52), Judge Nathan relieved Butzel Long, stayed the action for thirty days to allow HumbleTech to obtain new counsel, and authorized plaintiff to move for a default judgment if no new counsel appeared at the end of the thirty-day period. On December 14, 2020, Butzel Long served HumbleTech and Li with a copy of the 12/10/20 Order. (Dkt. No. 53).
No new counsel appeared for HumbleTech. Nor did Li appear, with or without counsel.
On January 19, 2021, the Clerk of Court issued a Certificate of Default as to HumbleTech and Li. (Dkt. No. 56.) On June 11, 2021, plaintiff filed its motion for a default judgment, supported by a memorandum of law (Mem. of Law) (Dkt. No. 61), the declaration of George P. Barbatsuly (Dkt. No. 62), the declaration of Yuancheng Wang (Wang Decl.) (Dkt. No. 63), and a Proposed Default Judgment (Prop. Judgment) (Dkt. No. 64). That same day, plaintiff served its motion papers on HumbleTech (through its registered agent) and Li (at his last known home address in the PRC) via Federal Express. (Dkt. No. 65.)
Defendants did not respond to the motion.
II. DISCUSSION
A. Legal Standards
Fed. R. Civ. P. 55 "provides a 'two-step process' for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment." City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011) (quoting New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005)). The first step, ordinarily performed by a clerk, see Fed.R.Civ.P. 55(a), "formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff." Mickalis Pawn Shop, 645 F.3d at 128. The second step, which in most cases requires a motion made to and granted by the district judge, see Fed. R. Civ. P. 55(b)(2), "converts the defendant's admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the court decides it is entitled[.]" Mickalis Pawn Shop, 645 F.3d at 128. A motion for entry of a default judgment need not be served upon the party against which the judgment is sought unless that party has previously "appeared personally or by a representative" in the action. Fed.R.Civ.P. 55(b)(2).
"[A] default is an admission of all well-pleaded allegations against the defaulting party." Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). In considering a motion for the entry of judgment after default, therefore, "a court is required to accept all of the . . . factual allegations [of the non-defaulting party] as true and draw all reasonable inferences in its favor." Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009). "Nevertheless, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law." Dominguez v. N.Y. Equestrian Ctr., Ltd., 2020 WL 5796275, at *1 (S.D.N.Y. Sept. 28, 2020) (quoting Labarbera v. ASTC Labs. Inc., 752 F.Supp.2d 263, 270 (E.D.N.Y. 2010)).
"The entry of a default, while establishing liability, 'is not an admission of damages.'" Mickalis Pawn Shop, 645 F.3d at 128 (quoting Finkel, 577 F.3d at 83 n.6). The plaintiff must therefore establish its damages through admissible evidence. See Gucci Am., Inc. v. Tyrrell-Miller, 678 F.Supp.2d 117, 119 (S.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). That evidence must be sufficient to permit the court to "ascertain the amount of damages with reasonable certainty." Alcantara, 183 F.3d at 155; see also House v. Kent Worldwide Mach. Works, Inc., 359 Fed.Appx. 206, 207 (2d Cir. 2010) ("[T]here must be a basis upon which the court may establish damages with reasonable certainty.").
B. Jurisdiction
I am satisfied that this Court has subject matter jurisdiction over plaintiff's claims. The Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 because plaintiff sues under the DTSA, which is a federal statute. See Am Compl. ¶ 6. The Court has supplemental jurisdiction over plaintiff's state law claims, both statutory and common law, pursuant to 28 U.S.C. § 1367, because those claims arise out of the same facts and circumstances as the DTSA claim. Additionally, the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(2) because the amount in controversy exceeds $75,000, exclusive of attorneys' fees, costs, and interest; the plaintiff is a citizen of Virginia; both defendants are citizens or subjects of the PRC, which is a foreign state; and neither defendant is domiciled in the State of Virginia. See Am Compl. ¶ 5.
STG is a Virginia limited liability company whose sole members are Yuancheng Wang and Wei Xu, both of whom are natural persons and citizens of the State of Virginia. Am. Compl. ¶ 9. Li is a natural person and a citizen of the PRC. Id. ¶ 10. HumbleTech is a dissolved New York limited liability company (LLC) whose sole member was Li, making the LLC a citizen of the PRC as well. See Catskill Litig. Trust v. Park Place Entm't Corp., 169 Fed.Appx. 658, 659 (2d Cir. 2006) (summary order) (the citizenship of an LLC "is determined by reference to the citizenship of its members"). Although Li dissolved HumbleTech after this action was commenced, see Am. Compl. ¶¶ 1, 42, the members of a New York LLC may continue to sue and be sued "in the name of and for and on behalf of the limited liability company" even after its dissolution. N.Y. Limited Liability Co. Law § 703.
I am also satisfied as to personal jurisdiction over the defendants, which is "a necessary prerequisite to entry of a default judgment." Sheldon v. Plot Commerce, 2016 WL 5107072, at *6 (E.D.N.Y. Aug. 26, 2016), report and recommendation adopted, 2016 WL 5107058 (E.D.N.Y. Sept. 19, 2016). HumbleTech is (or was) an LLC formed under the laws of New York, and consequently is subject to general personal jurisdiction here pursuant to N.Y.C.P.L.R. § 301. See Daimler A.G. v. Bauman, 571 U.S. 117, 126-27 (2014) (corporation is "at home," and thus subject to general personal jurisdiction, in the state where it was formed and where it has its principal place of business); Kerman v. Inter Continental Hotels Grp. Res. LLC, 2021 WL 930253, at *5 n.7 (E.D.N.Y. Mar. 11, 2021) (applying Daimler to LLC defendant and collecting similar cases).
Li is (or was) HumbleTech's sole member. Am. Compl. ¶ 10. Moreover, he committed the conduct at issue in this action - including soliciting STG's customers and signing them to contracts with HumbleTech - on HumbleTech's behalf and for its benefit. He is therefore subject to specific personal jurisdiction in New York, pursuant to N.Y.C.P.L.R. § 302(a)(1), with respect to that conduct. See Axginc Corp. v. Plaza Automall, Ltd., 2021 WL 1030228, at *8 (E.D.N.Y. Mar. 2, 2021) (individual nonresident respondent who was sole or majority shareholder and an officer of various New York corporations was subject to specific personal jurisdiction in New York with respect to business transactions he effected through those corporations), report and recommendation adopted, 2021 WL 1026497 (E.D.N.Y. Mar. 17, 2021); Baizan Guerrero v. 79th St. Gourmet & Deli Inc., 2019 WL 4889591, at *3 (E.D.N.Y. Sept. 10, 2019) (individual defendants were subject to specific personal jurisdiction because they "transacted business within the state of New York as owners, officers and/or agents of [the] [c]orporate [d]efendants," which were incorporated in New York), report and recommendation adopted, 2019 WL 4887914 (E.D.N.Y. Oct. 3, 2019); Hall v. City of Buffalo, 151 A.D.3d 1942, 1943, 59 N.Y.S.3d 224, 226 (4th Dep't 2017) (nonresident individual who was sole shareholder of corporation that operated a tavern in New York was subject to specific personal jurisdiction in New York with respect to alleged torts committed against plaintiff at tavern by its employees or agents).
Before a federal court may exercise personal jurisdiction over a defendant, "the procedural requirement of service of summons" must also be satisfied. Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987). Particularly where a defendant failed entirely to appear, the plaintiff must establish adequate service in order to obtain a default judgment. See Sheldon, 2016 WL 5107072, at *6 ("failure to adequately prove proper service of court documents under [Fed. R. Civ. P.] 4 bars the entry of a default judgment"); Lliviganay v. Cipriani 110 LLC, 2009 WL 1044606, at *1 (S.D.N.Y. Apr. 14, 2009) (lack of proof of proper service "is an independent obstacle to a default judgment."). Here there is no such obstacle. HumbleTech was served in accordance with Fed.R.Civ.P. 4(e)(1) and (h)(1) and N.Y.C.P.L.R. § 311-a(a), and thereafter appeared and defended, for a period, before defaulting. Li, who never appeared, was served in accordance with Fed.R.Civ.P. 4(f)(3), as directed by the Court.
C. Liability
1. Count Six - The DTSA
"Under the DTSA, a complaint must plead that the defendant misappropriated a trade secret (1) by acquiring a trade secret by improper means, or (2) [by] disclosing or using the trade secret without consent." Expert Connect, L.L.C. v. Fowler, 2019 WL 3004161, at *6 (S.D.N.Y. July 10, 2019) (quoting AUA Private Equity Partners, LLC v. Soto, 2018 WL 1684339, at *4 (S.D.N.Y. Apr. 5, 2018)). "Improper means" include "theft, bribery, misrepresentation, [and] breach or inducement of a breach of a duty to maintain secrecy," but exclude "reverse engineering, independent derivation, or any other lawful means of acquisition." 18 U.S.C. § 1839(6). Moreover, while reverse engineering is a defense to misappropriation under the DTSA, "defendants would bear the burden of proving reverse engineering." Uni-Systems, LLC v. United States Tennis Association, Inc., 350 F.Supp.3d 143, 176 (E.D.N.Y. Oct. 4, 2018). Additionally, "the term 'reverse engineering' is not a talisman that may immunize the theft of trade secrets. The relevant inquiry remains whether the means used to obtain the alleged trade secret, including reverse engineering, were proper." Id. (quoting Telerate Sys., Inc. v. Caro, 689 F.Supp. 221, 232-33 (S.D.N.Y. 1988)).
As Judge Nathan has already held, "[t]he Amended Complaint plausibly alleges both that STG possessed a trade secret and that HumbleTech misappropriated that trade secret." Op. at 7. "Specifically, it alleges that Defendants misappropriated STG's proprietary source code for its software, see Am. Compl. ¶ 32; that this source code is stored in a password-protected 'Bitbucket,' id. ¶ 34; that only employees with a need to access the Bitbucket are provided with the Bitbucket password, id.; and that STG derives substantial value from maintaining the confidentiality of its source code because competitors are not able to easily replicate it, id. ¶ 35. It further alleges that Li and HumbleTech wrongfully acquired and used the source code to provide services to their clients and specifies the improper means STG believes they used. Id. ¶¶ 32-36." Op. at 7-8. Since STG has adequately alleged a DTSA claim, defendants' liability under the DTSA is established and plaintiff is entitled to a default judgment on Count Six of the Amended Complaint.
2. Count Four - The VUTSA
In order to state a claim under the VUTSA, a party must show the existence of a trade secret and its misappropriation by the defendants. Collelo v. Geographic Servs., Inc., 283 Va. 56, 60, 727 S.E.2d 55, 68 (2012). The VUTSA defines "trade secret" as: information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: 1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and 2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Id. (citing Va. Code § 59.1-336). Thus, similar to the DTSA, "[t]he VUTSA recognizes misappropriation under two circumstances: (1) improper acquisition of a trade secret or (2) disclosure or use of a trade secret. Misappropriation through acquisition of a trade secret is defined as: acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means. Improper means are defined under the VUTSA as including 'theft, bribery, misrepresentation, use of a computer or computer network without authority, breach of a duty or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.'" Marsteller v. ECS Fed., Inc., 2013 WL 4781786, at *5 (E.D. Va. Sept. 5, 2013) (internal citations omitted); Va. Code § 59.1-336.
Here - for the same reasons discussed above in connection with the DTSA - the Amended Complaint plausibly alleges a VUTSA violation, see Am. Compl., ¶¶ 32-36, 66-67, establishing defendants' statutory liability under Virginia as well as federal law. Plaintiff is therefore entitled to a default judgment on Count Four of the Amended Complaint.
In denying HumbleTech's motion to dismiss the Amended Complaint, the district judge assumed that Virginia law applies to all of plaintiff's state law claims. Op. at 4 n.3. In its default papers, plaintiff continues to rely on Virginia law in connection with its common-law claims. I will do the same.
The Amended Complaint asserts six common-law claims, but plaintiff does not seek a default judgment as to its claim for common law misappropriation of confidential information and trade secrets (Count Five), or as to its unjust enrichment claim (Count Seven). Mem. of Law at 15 n.2. I discuss plaintiff's remaining common-law claims briefly.
a) Count Five - Unfair Competition
Count Five, alleging common-law unfair competition, is premised on plaintiff's allegations that Li and HumbleTech "began to compete directly with STG while Li was still employed in a high-level consultant position with STG," Am. Compl. ¶ 46; that Li "misappropriated STG's time, resources, business opportunities, trade secrets, and confidential and propriety information," id.; that he "actively steered at least two of STG's customers to HumbleTech, while still employed by STG," id.; and that he "has been misleading STG's potential business partners and clients," as well as its former employees, "into believing that HumbleTech is a successor to STG," thus misappropriating "STG's name and goodwill" for HumbleTech's benefit. Id. ¶¶ 40, 48. Plaintiff does not provide any more specific factual allegations as to when, to whom, or how defendants caused business partners or clients to believe that HumbleTech was a successor to STG.
"Virginia continues to adhere to a narrow, sharply defined common law definition of unfair competition, i.e. 'deception, by means of which goods of one dealer are palmed off as those of another.'" Monoflo Int'l, Inc. v. Sahm, 726 F.Supp. 121, 127-28 (E.D. Va. 1989) (citing Benjamin T. Crump Co. v. J.L. Lindsay, Inc., 130 Va. 144, 160, 107 S.E. 679, 684 (1921)). STG has not cited, nor has the Court found, any Virginia authority suggesting that misrepresentations concerning HumbleTech's relationship to STG could give rise to liability for common-law unfair competition. See Sahm, 726 F.Supp. at 123, 127 (dismissing Virginia unfair competition claim premised on allegation that defendant falsely represented itself to be plaintiffs "exclusive European sales agent"). Since plaintiff has not plausibly alleged that defendants are liable to it for common-law unfair competition, it is not entitled to a default judgment on Count One.
b) Count Two - Breach of the Duty of Loyalty
Count Two is premised on allegations that Li - by virtue of his status and employment with STG and his access to its trade secrets - owed, and continues to owe, a duty of loyalty to his former employer. Am. Compl. ¶ 52.
The Virginia Supreme Court has "long recognized that under the common law an employee, including an employee-at-will, owes a fiduciary duty of loyalty to his employer during his employment." Williams v. Dominion Tech. Partners, L.L.C., 265 Va. 280, 289, 576 S.E.2d 752, 757 (2003) (citing Horne v. Holley, 167 Va. 234, 241, 188 S.E. 169, 172 (1936)). "Subsumed within this general duty of loyalty is the more specific duty that the employee not compete with his employer during his employment." Williams 265 Va. at 289 (quoting Hilb, Rogal & Hamilton Co. of Richmond v. DePew, 247 Va. 240, 249, 440 S.E.2d 918, 923 (1994)); accord Combined Ins. Co. of Am. v. Wiest, 578 F.Supp.2d 822, 832 (W.D. Va. 2008).
"[C]ertain conduct by an employee during the term of his employment will clearly constitute a breach of the duty of loyalty he owes to his employer. Principally, an employee must not have "misappropriated trade secrets, misused confidential information, [or] solicited an employer's clients or other employees prior to termination of employment." Williams, 265 Va. at 292 (quoting Feddeman & Co. v. Langhan Assoc., 260 Va. 35, 42, 530 S.E.2d 668, 672 (2000)). "While this list is by no means exhaustive, it is indicative of the types of conduct by an employee that the common law will not condone in an employment relationship." Id. Moreover, this duty continues to apply as to those transactions "completed after termination of the [employment relationship], but which began during the existence of the relationship or that were founded on information gained during the relationship." Today Homes, Inc. v. Williams, 272 Va. 462, 474, 634 S.E.2d 737, 744 (2006).
Here, plaintiff alleges that Li formed two competing entities, including HumbleTech, while still employed at STG; caused STG to perform substandard work for a client "so as to enable HumbleTech to later take over provision of these services for the client"; and "arrang[ed] for another STG client to begin receiving services directly from Li," so that HumbleTech could take over those services upon Li's resignation from STG. Am. Compl. ¶ 54. It also alleges, as noted above, that Li misappropriated STG's trade secrets, including the source code for its proprietary software, and is now using those trade secrets to compete against his former employer. Id. ¶¶ 3336. Consequently, STG has plausibly alleged that Li breached the common law of duty of loyalty, and is entitled to a default judgment (against defendant Li only) on Count Two.
c) Count Three - Tortious Interference with Prospective Economic Advantage
Plaintiff does not allege that defendants interfered with any existing contracts between STG and Dahui, Junhe, or Jingtian. Rather, Count Three is premised on STG's allegation that it had a "reasonable expectancy" of a "continuing business relationship" with them, and with other unnamed "customers, business partners, employees and consultants." Am. Compl. ¶ 57. In its pleading, however, plaintiff does not provide any specific facts as to the basis of its "reasonable expectancy."
Under Virginia law, the elements of a cause of action for tortious interference with prospective economic advantage are: "(1) the existence of a business relationship or expectancy, with a probability of future economic benefit to plaintiff; (2) defendant's knowledge of the relationship or expectancy; (3) a reasonable certainty that absent defendant's intentional misconduct, plaintiff would have continued in the relationship or realized the expectancy; and (4) damage to plaintiff." Williams, 265 Va. at 289 (quoting Glass v. Glass, 228 Va. 39, 51, 321 S.E.2d 69, 76-77 (1984)); accord RitLabs, S.R.L. v. RitLabs, Inc., 2012 WL 6021328, at *10 (E.D. Va. Nov. 30, 2012); Carpenter v. Drechsler, 1991 WL 332766, at *9 (W.D. Va. May 7, 1991), aff'd, 19 F.3d 1428 (4th Cir. 1994).
"The purpose of laws against tortious interference is not to protect consumers or the operation of the marketplace generally. Rather, these causes of action provide a legal remedy where a particular party's specific, existing contract or business expectancy or opportunity has been interfered with in a tortious manner. Thus, the first element that a party claiming under either of these torts must prove is the existence of some specific contract or relationship. Failure to allege any specific, existing economic interest is fatal to the claim." Masco Contractor Servs. E., Inc. v. Beals, 279 F.Supp.2d 699, 709 (E.D. Va. 2003) (emphasis in the original); see also Eurotech, Inc. v. Cosmos European Travels Aktiengesellschaft, 189 F.Supp.2d 385, 391 (E. D. Va. 2002) ("Because plaintiffs do not identify the specific business relationships with which defendant has interfered, plaintiffs' tortious interference claim fails."). Similarly, the plaintiff must plead and prove not a mere possibility, but a "reasonable certainty," that absent the defendant's misconduct "the plaintiff would have continued in the relationship or realized the expectancy." Carpenter, 1991 WL 332766, at *9 (granting summary judgment to defendant where plaintiff could not meet the third element).
Here, STG fails to state a claim for tortious interference with prospective economic advantage because, even as to the three former customers named in the Amended Complaint, plaintiff does not plausibly allege the existence of a "particular business expectancy" that defendant interfered with, nor a "reasonable certainty" that its expectation would have been realized absent defendants' misconduct. As noted above, Plaintiff does not allege that it had a contract with Junhe, Dahui, or Jingtian. Although Junhe and Dahui were receiving services from STG during Li's employment, Am. Compl. ¶¶ 30-31, plaintiff does not allege any facts that would explain why it expected those relationships to continue, much less why it had a "reasonable certainty" that it would have retained the business of those customers absent defendant's misconduct. As to Jingtian, plaintiff alleges only that it was a "former STG client." Id. ¶ 39. It does not state when Jingtian was last its client, what services it performed for Jingtian at that time, or whether Li had anything to do with Jingtian's decision to obtain those services elsewhere. I note as well that, in the case of Jingtian, HumbleTech was allegedly retained by a non-party entity, ITForce, rather than by Jingtian itself.
In STG's inquest submissions, its founder and member, Wang, states that STG "unsuccessfully bid to supply information governance services to Jingtian," but lost out to ITForce, which in turn subcontracted a portion of the work to HumbleTech. Wang Decl. ¶ 9. This issue is addressed in more detail in connection with plaintiff's request for lost-profits damages as to its DTSA, VUTSA, and breach-of-loyalty claims. See Part II(D)(1), infra.
Since plaintiff has not plausibly alleged "a particular expectancy which [it] is reasonably certain will be realized, ” Beals, 279 F.Supp.2d at 709, it has not stated a claim for tortious interference, and is not entitled to a default judgment on Count Three.
d) Count Eight - Forfeiture of Salary and Benefits
In Count Eight, plaintiff asserts that since Li acted disloyally during his employment at STG, he must disgorge the compensation that STG paid to him during the period of disloyalty. Am. Compl. ¶¶ 93-97. However, plaintiff has not provided this Court with any authority suggesting that "forfeiture of salary and benefits" is a separately cognizable cause of action, as opposed to a remedy for one or more of the torts that STG has adequately pleaded in the Amended Complaint. Moreover, a recent decision of the Circuit Court of Virginia held that even where the employer expressly pleaded claims against its faithless employee for fraud and conversion (which STG did not allege), and for unjust enrichment (which STG has dropped), the employer is not entitled to "claw back" the salary previously paid to that employee in the absence of "a contractual right to forfeiture." Geneva Enterprises, LLC v. Bavely, 107 Va. Cir. 249, at *2-3 (Cir. Ct. 2021). The court concluded that unless a contract specifically provides for that remedy, Virginia law does not countenance "a cause of action that permits wholesale forfeiture of wages already paid." Id. at *3. Rather, "a principal must tie specific payments to specific bad acts of the agent. It is not enough for the principal to cite the agent's wrongdoing and reclaim all payments it paid the agent without a tie-in." Id. Since STG does not allege a contractual entitlement to recoup Li's wages and has made no effort to tie the wages it seeks to recoup to any specific "bad acts" of Li, I conclude that it has not stated a claim for forfeiture of salary and benefits, and is not entitled to a default judgment on Count Eight.
D. Remedies
Plaintiff requests actual and exemplary damages, attorney's fees and costs, and equitable relief. Mem. of Law at 18.
1. Actual Damages
Plaintiff primarily seeks the profits that it would have earned from Dahui, Junhe, and Jingtian - had their business not gone to defendants - which it estimates at $228,405.48. Mem. of Law at 20. Although the Amended Complaint fails to plausibly allege that defendants tortiously interfered with STG's relationships with these customers, STG has stated claims under the DTSA and the VUTSA, both of which allow a successful plaintiff to recover its lost profits. 18 U.S.C. § 1836(b)(3)(B)(i)(I); Va. Code § 59.1-338. See also Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Grp., Inc., 2021 WL 1553926, at *7 (S.D.N.Y. Apr. 20, 2021) (noting that the DTSA expressly permits the award of actual loss "in the form of lost profits"); M S Int'l, Inc. v. Patel, 2018 WL 11350041, at *15 (C.D. Cal. Nov. 26, 2018) (entering a default judgment under the DTSA and related state law claims and awarding $667,098.74 in estimated lost profits from 86 clients "serviced by Defendants . . . before they left MSI to work for Century").
Similarly, under Virginia law, once a plaintiff establishes that a former employee breached his fiduciary duty, the plaintiff "is entitled to what it would have received 'but for' the breach of fiduciary duty," RitLabs, 2012 WL 6021328, at *7, including lost profits, if they can be established with "reasonable certainty." Id. at *6 (quoting Shepherd v. Davis, 265 Va. 108, 125, 574 S.E.2d 514, 524 (2003)); see also Saks Fifth Ave., Inc. v. James, Ltd., 272 Va. 177, 188, 630 S.E.2d 304, 311 (2006) (damages for injury to an established business may be measured "by the loss of the usual profits from the business") (internal citation omitted).
According to STG's founder and member Wang, the company provided information governance services to Dahui from June 27, 2014 until June 29, 2018, "when Dahui terminated its relationship with STG and thereafter began obtaining information governance services from Defendants." Wang Decl. ¶ 7. Prior to the termination, STG earned a total of $64,187.19 in profits from Dahui, averaging $1,337.23 per month. Id. Wang attests that in light of STG's longstanding past relationship with Dahui, "had it not been for Defendants' interference, STG reasonably expected to continue providing information governance services to Dahui for at least another 36 months, resulting in lost profits of $48,140.28 flowing from the value of this lost business relationship." Id.
Similarly, plaintiff provided services to Juhne from April 20, 2015, until August 14, 2018, "when Juhne terminated its relationship with STG and thereafter began obtaining information governance services from Defendants." Wang Decl. ¶ 8. Prior to the termination, STG earned an average of $3,278.62 per month from Junhe. Wang again attests that, but for defendants' interference, "STG reasonably expected to continue providing information governance services to Dahui for at least another 36 months, resulting in lost profits of $118,030.32 flowing from the value of this lost business relationship." Id.
Wang does not attest to any past relationship between plaintiff and Jingtian. Instead, he explains that in May of 2019 "STG unsuccessfully bid to supply information governance services to Jingtian." Wang Decl. ¶ 9. Had it won the bid, it "anticipated total profits from this work of $63,234.88." Id. Wang does not state over what period of time those profits were anticipated. As it happened, "the work was instead awarded to ITForce, which subcontracted the delivery portion of the contract to Defendants." Id. On this basis, plaintiff seeks an award of another $63,234.88, representing the "anticipated total profits" from Jingtian.
Although STG's "lost-profit calculations involve a degree of speculation," M S Int'l, 2018 WL 11350041, at *15, Wang's testimony is adequate, in the case of Dahui and Juhne, to support the damages requested. Both were existing customers of STG and both had produced actual profits for plaintiff for longer than the 36-month period it uses to estimate its lost profits. Moreover, both Dahui and Juhne were specifically targeted by Li, on behalf of HumbleTech, while he was still employed at STG. Am. Compl. ¶¶ 30, 31.
As to Jingtian, however, the evidence is almost entirely speculative, and thus insufficient to support an award. Insofar as Wang discloses, STG had no prior relationship with Jingtian at all. Rather, it was bidding - against an unknown number of competitors - for the business of what would have been a new client, and it makes no showing that it reasonably expected to obtain that business - with or without defendants' alleged misconduct. See 3947 Austin Boulevard Assocs., LLC v. M.K.D. Cap. Corp., 2007 WL 1575265, at *2 (S.D.N.Y. May 30, 2007) (declining to award lost profits damages after default, "especially in light of the fact that the . . . project [for which lost profits were sought] would have constituted a new business venture"). Moreover, the winning bidder was a nonparty, IT Force, rather than Li or HumbleTech. Plaintiff has thus failed to show a causal connection between its inability to obtain Jingtian's business and defendants' theft of its trade secrets. See RitLabs, 2012 WL 6021328, at *10 (declining to award damages for lost profits where "plaintiff did not demonstrate that it was 'reasonably certain' that [defendant] Demcenko's conduct," as opposed to other factors, "caused S-Tech Data to stop working with SRL"). Since plaintiff cannot show with "reasonable certainty" that it is entitled to $63,234.88 that it says it anticipated from Jingtian, House, 359 Fed.Appx. at 207, its compensatory damages should be limited to the $166,170.06 in profits that it lost when Dahui and Juhne took their business from plaintiff to defendants.
In addition to lost profits damages, plaintiff seeks to claw back the $4,307.70 that Li received in salary and benefits during the last month of his employment. Mem. of Law at 21-22; Wang Decl. ¶ 5. Under Virginia law, however, an employer may not recoup the wages of a faithless employee As the Fourth Circuit observed in Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690, 726 (4th Cir. 2021), neither willfulness nor malice is defined in the DTSA. Thus, "courts typically look to the state UTSA when interpreting the DTSA inasmuch as the two are substantively identical." Trent P. Fisher Enterprises, LLC v. SAS Automation, LLC, 2021 WL 1209637, at *5-6 (S.D. Ohio Mar. 31, 2021). See also Steves & Sons, 988 F.3d at 726 (collecting cases). Here, the relevant "state UTSA" is the VUTSA, under which "[w]illful and malicious misappropriation" absent a contractual underpinning for the claim or a "tie-in" between the payments made and "specific bad acts" of the agent. Geneva Enterprises, 107 Va. Cir. 249, at *3. Therefore, no additional damages should be awarded with respect to the wages that plaintiff paid to Li.
Prejudgment interest, which is "generally not awarded" in trade secrets cases, Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Grp., Inc., 2021 WL 1553926, at *15 (S.D.N.Y. Apr. 20, 2021), is not sought here.
2. Exemplary Damages and Attorney's Fees
If a trade secret is "willfully and maliciously" misappropriated, the DTSA permits an award of up to twice the amount of actual damages, 18 U.S.C. § 1836(b)(3)(C), as well as the prevailing party's reasonable attorney's fees and costs. 18 U.S.C. § 1836(b)(3)(D). Under the VUTSA, punitive damages (limited to twice the actual damages or $350,000, whichever is less) and reasonable attorney's fees may be awarded "[i]f willful and malicious misappropriation exists." Va. Code §§ 59.1-338(B), 59.1-338.1(ii). Additionally, Virginia common law permits an award of punitive damages for breach of the fiduciary duty of loyalty. RitLabs, 2012 WL 6021328, at *7. While punitive damages are "rare" in Virginia, they "'may be recovered . . . where there is misconduct or actual malice, or such recklessness or negligence as to evince a conscious disregard of the rights of others.'" Id. (quoting Hamilton Dev. Co. v. Broad Rock Club, 248 Va. 40, 45, 445 S.E.2d 140, 143 (1994)).
As the Fourth Circuit observed in Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690, 726 (4th Cir. 2021), neither willfulness nor malice is defined in the DTSA. Thus, "courts typically look to the state UTSA when interpreting the DTSA inasmuch as the two are substantively identical." Trent P. Fisher Enterprises, LLC v. SAS Automation, LLC, 2021 WL 1209637, at *5-6 (S.D. Ohio Mar. 31, 2021). See also Steves & Sons, 988 F.3d at 726 (collecting cases). Here, the relevant "state UTSA" is the VUTSA, under which "[w]illful and malicious misappropriation" means "'acting consciously in disregard of another person's rights or acting with reckless indifference to the consequences, with the defendant aware, from his knowledge of existing circumstances and conditions, that his conduct probably would cause injury to another.'" Hair Club for Men, LLC v. Lailuma Ehson & Illusion Day Spa, LLC, 2017 WL 1250998, *3 (E.D. Va. Apr. 3, 2017) (quoting Owens-Corning Fiberglas Corporation v. Watson, 243 Va. 128, 144, 413 S.E.2d 630, 640 (1992)). See also E.I. Dupont de Nemours & Co. v. Kolon Industries, Inc., 911 F.Supp.2d 340, 343-44 (E.D. Va. 2012) (court instructed jury that for purposes of the VUTSA "[a]n act is done 'maliciously' if prompted or accompanied by such gross indifference to the rights of others as will amount to a willful act without just cause or excuse"), vacated on other grounds, Nos. 131054, 14-1266 (4th Cir. June 12, 2014). Thus, "the VUTSA contains no requirement of an intent to injure" as a precondition to exemplary damages or attorney's fees. Id. at 344.
Here, plaintiff alleges in general terms that defendants' conduct was "intentional, knowing, willful, malicious, fraudulent, and oppressive." Am. Compl. ¶ 86. It also alleges that defendants "knew or had reason to know that by misappropriating STG's confidential, proprietary, and trade secret information, they were acquiring such information through improper means." Id. ¶ 69. This allegation, in turn, is supported by STG's specific factual allegations - which the Court must accept as true after default - that Li procured the source code for plaintiff's proprietary software either by using his Domain Administrator password to take it from STG's Bitbucket or by reverse engineering it based on information gained through his work on that code as an STG employee. Am. Compl. ¶¶ 32-34. Either way, he could not have believed that he was entitled to take the source code, nor to use it, on behalf of a competing business that he secretly formed while still employed at STG, to woo away STG's customers. Id. ¶ 36. I therefore conclude that plaintiff has adequately demonstrated that defendants' conduct qualifies for an award of exemplary damages and attorney's fees. See Hair Club for Men, 2017 WL 1250998, at *3 (awarding attorney's fees under VUTSA where defendant "concealed her competing business from Plaintiff and misappropriated trade secrets in furtherance of that business").
Even where the "willful and malicious" standard is met, the court may decline to award exemplary damages, attorney's fees, or both. See, e.g., Citcon USA, LLC v. RiverPay Inc., No. 2016929, 2022 WL 287563, at *2 (9th Cir. Jan. 31, 2022) (district court did not abuse its discretion in declining to award exemplary damages or attorney's fees under the DTSA and state law, notwithstanding "the jury's finding of malice, oppression, or fraud"); Agrofresh Inc. v. Essentiv LLC, 2020 WL 7024867, at *23 (D. Del. Nov. 30, 2020) ("That Defendants' actions are found to be willful and malicious . . . does not necessarily mean that exemplary damages must follow."), appeal dismissed sub nom. AgroFresh Inc. v. Decco U.S. Post-Harvest, Inc., 2021 WL 2555475 (Fed. Cir. Mar. 29, 2021); E.I. DuPont de Nemours, 911 F.Supp.2d at 344 (fee awards under VUTSA are "discretionary").
In this case, although the Amended Complaint is adequate to establish that the "willful and malicious" standard was met, there is no evidentiary record to assist the Court in determining whether and in what amount to recommend a discretionary award of exemplary damages. Plaintiff's inquest submissions are curiously reticent on this point. The Wang Declaration, for example, says nothing about exemplary damages. Similarly, in its brief, plaintiff simply asks for "up to" twice the amount of the actual damages awarded. Mem. of Law at 21.
Plaintiff does disclose that it paid Li $4,307.70 in salary and benefits during his last month of employment at STG, Wang Decl. ¶ 5, suggesting that his annual compensation, including both salary and benefits, was $51,692.40. To an individual defendant with that earning history, an award of $166,170.06 in actual damages is already fairly substantial, and therefore likely to satisfy, at least in part, the purpose of a punitive damages award: "to punish the defendant and to deter him and others from similar conduct in the future." Lee v. Edwards, 101 F.3d 805, 809 (2d Cir. 1996) (quoting Vasbinder v. Scott, 976 F.2d 118, 121 (2d Cir.1992)); accord Smith v. Litten, 256 Va. 573, 578, 507 S.E.2d 77, 80 (1998) (holding that information concerning defendant's net worth was properly admitted as "material to that twofold purpose and relevant to a determination of the quantum of the award"). On the other hand, it is fairly clear in this case that defendants intentionally defaulted (after HumbleTech appeared and defended for long enough to make and lose a motion to dismiss), thereby preventing plaintiff from developing an evidentiary record that might support a more robust award. On balance, I recommend that the Court assess an additional $100,000 in exemplary damages - less than the maximum award sought by plaintiff, but enough to serve as a warning that a defendant who has willfully and maliciously misappropriated a plaintiff's trade secret cannot escape an exemplary damages award by defaulting. I further recommend that plaintiff be given an opportunity to establish its reasonable attorney's fees and costs through a post-judgment application.
In its brief, plaintiff estimates that its attorney's fees incurred through May 31, 2021 were $141,569. Mem. of Law at 22. Recognizing that this is an insufficient basis on which a fee award could be rendered, STG states if that if the Court determines that such an award is warranted, it will "provide an affidavit of services and the terms of its fee agreement supporting the fees claimed in this case." Id. at 22 n.5.
3. Injunctive Relief
The DTSA and the VUTSA also permit an award of permanent injunctive relief. See 18 U.S.C. § 1836(b)(3)(A); Va. Code § 59.1-337. Under the DTSA, such relief may extend outside of the United States if, among other things, "the offender is . . . an organization under the laws of the United States." 18 U.S.C. § 1837. Under the VUTSA, the injunction may extend for a "reasonable period of time" even after the trade secret ceases to exist, as required "to eliminate commercial advantage that otherwise would be derived from the misappropriation." Va. Code § 59.1-337(A). See Micro Strategy, Inc. v. Bus. Objects, S.A., 369 F.Supp.2d 725, 736-37 (E.D. Va. 2005) ("the objectives of an injunction covering trade secrets will be met when both the trade secrets cease to exist and any residual commercial advantage is eliminated.").
Injunctive relief must, however, "be 'narrowly tailored to fit specific legal violations' and avoid 'unnecessary burdens on lawful commercial activity.'" KCG Holdings, Inc. v. Khandekar, 2020 WL 1189302, at *17 (S.D.N.Y. Mar. 12, 2020) (quoting Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 119 (2d Cir. 2009)), reconsideration denied, KCG Holdings, Inc. v. Khandekar, 2021 WL 517226 (S.D.N.Y. Feb. 11, 2021)). The DTSA itself cautions that any injunction entered thereunder must not "prevent a person from entering into an employment relationship"; that "conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows"; and that the injunction may not "otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade or business." 18 U.S.C. § 1846(b)(3)(A). Plaintiff bears the burden of showing "why the specific relief it requests is appropriately tailored and does not impose an undue hardship." KCG Holdings, 2020 WL 1189302, at *18 (emphasis in the original).
Here, plaintiff seeks a permanent injunction prohibiting both defendants, and all those acting in concert or participation with them, from "accessing, copying, duplicating, downloading, replicating, transmitting, or otherwise using any and all source code(s) for STG's Matteroom KM (BPM) platform." Prop. Judgment at 2. Because this provision is "'narrowly tailored" to fit the "specific legal violations" alleged - namely, misappropriation of the Matteroom KM (PBM) source code, which is an STG trade secret - the requested injunction should be issued in these terms. KCG Holdings, 2020 WL 1189302, at *17.
Plaintiff also requests that defendants be enjoined, for a period of twelve months following entry of the judgment, from "contracting with or providing services for" iManage or any "law firms that use the iManage platform." Prop. Judgment at 2. Plaintiff explains that defendants have been using the misappropriated source code "and other STG confidential information" to obtain iManage support and maintenance contracts, and estimate that twelve months is "the amount of time that STG reasonably anticipates is needed to allow STG to recover the competitive value of STG's source code going forward and eliminate the commercial advantage that Defendants have been allowed to gain from the misappropriation." Mem. of Law at 23, 25; see also Wang Decl. ¶¶ 12-13 (reiterating that iManage is "one of STG's key business partners," and arguing that defendants' "involvement" with iManage should be limited because they have used plaintiff's proprietary information to secure iManage support and maintenance contracts.
I cannot recommend that the Court issue an injunction preventing defendants from contracting with or "providing services for" a third party, iManage. The requested language would prohibit defendants from engaging in this line of work even if their customers had never been STG customers, and even if defendants made no use of STG's source code to secure those customer relationships (or it no longer provided any commercial advantage to defendants). The proposed injunction is therefore overbroad and would place "unnecessary burdens on lawful commercial activity." KCG Holdings, 2020 WL 1189302, at *17. Moreover, if twelve months is sufficient time for STG to "recover the competitive value of STG's source code going forward," Wang Decl. ¶ 14, that value has already been recovered. Li left plaintiff's employment in March 2018. Id. ¶ 4. By the time plaintiff filed its inquest papers, more than three years had elapsed from that event.
III. CONCLUSION
For the reasons set forth above, I recommend, respectfully, that plaintiff's motion (Dkt. No. 60) be GRANTED in part. A default judgment in plaintiff's favor should be entered on Count Six (the DTSA) and Count Four (the VUTSA) against both defendants, and on Count Two (breach of the duty of loyalty) against defendant Li. Plaintiff should be awarded $166,170.06 in actual damages, together with $100,000.00 in exemplary damages, against both defendants, jointly and severally. Additionally, both defendants, together with all those acting in concert with them, should be permanently enjoined and restrained from accessing, copying, duplicating, downloading, replicating, transmitting, or otherwise using the source code for STG's Matteroom KM (PBM) software. Finally, plaintiff should be directed to submit its application for an award of its reasonable attorney's fees and costs within 30 days of the entry of judgment, supported by properly authenticated documents evidencing the fees and cost sought, including its attorneys' contemporaneous timesheets and fee agreement, evidence sufficient to determine the reasonableness of counsel's rates, and invoices or similar documentation reflecting any out-ofpocket costs.
Plaintiff is directed to serve a copy of this Report and Recommendation on defendants and file proof of such service on the docket by no later than February 23, 2022.
NOTICE OF PROCEDURE FOR FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days to file written objections to this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b). See also Fed.R.Civ.P. 6(a) and (d). Any such objections shall be filed with the Clerk of the Court and addressed to the Hon. Alison J. Nathan, United States District Judge. Any request for an extension of time to file objections must be directed to Judge Nathan. Failure to file timely objections will result in a waiver of such objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Frydman v. Experian Info. Sols., Inc., 743 Fed.Appx. 486, 487 (2d Cir. 2018) (summary order); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).