Jorgensen & Company v. Sutherland et al

BRIEF in Opposition

D.N.J.September 6, 2016

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY JORGENSEN & COMPANY, Plaintiff, v. GARY SUTHERLAND, STEPHEN VONO, DOGAN TUNCEL, NORTH AMERICAN PROFESSIONAL LIABILITY INSURANCE AGENCY, LLC, PLAZA INSURANCE COMPANY, Defendants. ) ) ) ) ) ) ) ) ) ) ) Case No.: 2:15−CV−07373−CCC−MF BRIEF IN OPPOSITION TO MOTION TO DISMISS FILED BY DEFENDANTS SUTHERLAND, VONO, AND TUNCEL On October 8, 2015, Plaintiff Jorgensen & Company (“Jorgensen”) filed this action for copyright infringement, trade secret theft, tortious interference, and unfair competition in violation of the laws of the United States and the State of New Jersey. An Application for Injunctive Relief and two Motions to Dismiss were soon filed thereafter. Defendant Gary Sutherland’s Motion to Dismiss did not seek relief based on the supposed lack of individual liability. ECF No. 22-2. On July 18, 2016, Plaintiff Jorgensen & Company (“Jorgensen”) filed a Motion to Amend seeking leave to name two additional individuals as defendants - Stephen Vono and Dogan Tuncel. ECF No. 61. The Motion was unopposed and granted by Order of the Court. See Order, dated August 10, 2016 (ECF No. 71). Defendants Stephen Vono and Dogan Tuncel - as well as defendant Gary Sutherland, filed a Motion to Dismiss on August 26, 2016. ECF No. 76. In support of their motion, Defendants filed a four-page brief. ECF No. 76-2. The sole basis for the Motion to Dismiss is that Defendant North American Professional Liability Agency, LLC (“NAPLIA) is a limited liability company so its principals are protected from individual liability. Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 1 of 12 PageID: 1296 -2- Brief at 3 - 4. In other words, Defendants Sutherland, Vono, and Tuncel move solely on the basis that they are all protected under NAPLIA’s corporate veil. This argument was not raised by Sutherland in the first Motion to Dismiss or in opposition to the more recent Motion to Amend. Instead, Defendants filed a new Motion to Dismiss apparently hoping that this second motion to dismiss would take months to decide. A review of the record demonstrates Defendants’ Motion to Dismiss is an unfortunate attempt to delay the proceedings and harass Plaintiff. Their four-page submission makes no reference whatsoever to the actual allegations found in the twenty-two page Amended Complaint and completely ignores applicable legal authority that bars the motion. Again, the Counts brought against the individual defendants are for copyright infringement (Count I), violations of the New Jersey Trade Secrets Act (Count II), and Tortious Interference with Contractual Relations and Prospective Economic Relations (Count III). All of these claims are intentional in nature and unprotected by the sort of corporate immunity relied upon by Defendants given Defendants’ active participation. In fact, the one claim that does not describe individual conduct was not brought against the individual defendants, namely the Lanham Act claim. Count IV was only brought against NAPLIA given that Plaintiff did not have information regarding the active participation of Sutherland, Vono and Tuncel. Curiously, the pending motion also seeks dismissal of the Lanham Act claim even though the claim does not even seek relief against the individual defendants. Brief at 2. It is not often the case that one faces a motion so wholly bereft of legal merit as the pending motion to dismiss - deficient both on procedural as well as substantive grounds. It is respectfully requested that the Court deny the pending motion and entertain a future motion for fees given the waste of judicial resources engendered by Defendants’ filing. Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 2 of 12 PageID: 1297 -3- LEGAL ARGUMENT DEFENDANTS’ FOUR-PAGE MOTION WAS IMPROPERLY FILED, INTENDED TO DELAY AND HARASS, AND IS WHOLLY WITHOUT MERIT A cursory review of Defendants’ four-page motion demonstrates it was intended to delay Plaintiff’s action and cause Plaintiff to incur unnecessary expense in the process. It is as if Defendants do not care about flouting the Rules given they fully expect there will never be any adverse repercussions to their actions. First, the Order entered by the Court granting the Motion to Amend expressly requires “all Defendants shall file an Answer to the Amended Complaint within 3 days of the date of this Order.” See ECF No. 71. Given that this Order was entered on August 10, 2016, Defendants’ Answer was due by August 15, 2016. Instead, NAPLIA filed its Answer a week later on August 22, 2016. ECF No. 74. And, four days after that date, the individual defendants filed the pending motion - something not even expressly permitted in the Order. Not only is this motion inappropriate given the Court’s Order, it raises issues that should have been put before the Court in November 2015 or at the very latest during the recent Motion to Amend. 1. Defendant Sutherland’s motion is in violation of Fed. R. Civ. P. 12(g)(2) Defendants’ motion seeks “an Order dismissing Plaintiff’s Complaint for Failure to State a Claim Upon Which Relief May Be Granted pursuant to Federal Rule of Civil Procedure 12(b)(6).” Notice of Motion, dated August 26, 2016 (ECF No. 76) (emphasis added). As well, Fed. R. Civ. P. 12(b)(6) was the Rule relied upon by Sutherland when he filed his first motion to dismiss. Notice of Motion, dated November 12, 2015 (ECF No. 22). Given that both the prior and present motion are based on Fed. R. Civ. P. 12(b)(6), Sutherland’s present motion is procedurally barred. See Fed. R. Civ. P. 12(g)(2) (“(2) Limitation on Further Motions. Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 3 of 12 PageID: 1298 -4- rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.”). Neither Fed R. Civ. P. 12(h)(2) nor Fed R. Civ. P. 12(h) (3) are applicable here given such rules only allow for serial dismissal grounds to be raised under very limited circumstance not applicable here. See Fed R. Civ. P. 12(h)(2)(A), (B), (C); Fed R. Civ. P. 7(a); Fed R. Civ. P. 12(c); Fed R. Civ. P. 12(h)(3). Accordingly, under clear mandate from Fed. R. Civ. P. 12(g)(2), it was improper for Defendant Sutherland to file the present motion to dismiss. See Leyse v. Bank Of America Nat. Ass’n, 804 F. 3d 316, 320 - 321 (3d Cir. 2015) (“The second motion to dismiss does not qualify for the Rule 12(h)(3) exception, which exempts only motions to dismiss for lack of subject-matter jurisdiction. . . .The motion does not fall within the Rule 12(h)(2) exception either. Under this provision, a successive motion to dismiss for “[f]ailure to state a claim . . . may be raised (A) in any pleading allowed or ordered under Rule 7(a); (B) by a motion under Rule 12(c); or (C) at trial.” Fed. R.Civ.P. 12(h)(2). Bank of America’s second motion to dismiss was plainly neither a Rule 7(a) pleading nor a motion raised at trial. Nor was it a Rule 12(c) motion for judgment on the pleadings, which may be filed only “[a]fter the pleadings are closed.” Fed.R.Civ.P. 12(c). Thus, because no exception to Rule 12(g)(2) covers Bank of America’s successive motion, it was improper to consider that motion.”). In reversing the trial court’s decision to hear the second motion given the second motion to dismiss covered new grounds, the Third Circuit found: “[t]he procedural bar of Rule 12(g)(2), however, covers all motions to dismiss for failure to state a claim, regardless of the grounds asserted.” Id. at 321 (emphasis added). Likewise, the fact that Sutherland now suggests a new purported ground to dismiss is similarly of no import and the present motion to dismiss is barred pursuant to Fed. R. Civ. P. 12(g)(2). Defendants’ tactics should seen as a transparent attempt to delay and harass. See e.g., Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 4 of 12 PageID: 1299 -5- Ukawabutu v. Morton, 997 F. Supp. 605, 609 - 610 (D. N.J. 1998) (reasoning that “by filing two successive motions to dismiss, asserting different grounds . . . Respondents have delayed the ultimate resolution of the petition on the merits, a result which disserves the interests of all concerned.”) (emphasis added). 2. Defendants Vono and Tuncel should have raised their “individual liability” concerns in opposition to the recent Motion to Amend Defendants Vono and Tuncel did not take part in the first motion to dismiss but certainly were able to raise their purported concerns in opposition to the recent Motion to Amend given that such a motion should be denied when the new claim is futile. See Cowell v. Palmer Twp., 263 F.3d 286, 296 (3d Cir. 2001) (“Although Fed. R. Civ. P. 15(a) states that leave to amend “shall be freely given when justice so requires,” we have held that leave to amend need not be granted when amending the complaint would clearly be futile.”). And, “‘Futility’ means that the complaint, as amended, would fail to state a claim upon which relief could be granted.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) (emphasis added). Again, rather than resolve this issue in a judicious manner and in compliance with the Rules, Defendants slapped together a four-page Motion to Dismiss immediately after the Motion to Amend was granted. To obtain cover, Defendants’ counsel might seek refuge in something said by Magistrate Judge Falk. During the July 27, 2016 Case Management Conference, Magistrate Judge Falk mentioned that he would likely grant the pending Motion to Amend but that Defendants were free to file any motion they wanted - including a motion to dismiss, when the issue was raised by NAPLIA’s counsel. That casual statement, however, was obviously not any sort of green light to actually file such a motion - the Court is not on the bench to provide legal counsel to litigants. Defendants’ counsel should have reviewed the Amended Complaint and case law beforehand and determined that their motion was not tenable. In other words, it should never have been filed. Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 5 of 12 PageID: 1300 -6- 3. Copyright infringement claim based on direct, vicarious and contributory infringement The Court has previously denied the motion to dismiss the copyright claim brought against Defendant Sutherland. There is absolutely no reason why such dismissal would not also apply to Defendants Vono and Tuncel. In addition, under well-understood principles of vicarious liability, Vono and Tuncel are also liable for copyright infringement on grounds not previously addressed. To state a claim of vicarious copyright infringement, a plaintiff must allege (1) direct copyright infringement by a third party, i.e., NAPLIA, Plaza and Sutherland; (2) an obvious and direct financial interest in the exploitation of these copyrighted materials, namely the profits derived from the CPA Prosecure program that finds its way back to these individual defendants; and (3) the right and ability to supervise this infringing activity. See Ellison v. Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004). With regard to the first element, the Court has already ruled on this issue when it previously denied each Defendants’ motion to dismiss the copyright claim - including the individual, Gary Sutherland. To erase any lingering doubt, it is worth showing the Court that a side-by-side comparison demonstrates that the NAPLIA/Plaza’s CPA Prosecure insurance program infringes on Jorgensen’s copyright by copying numerous verbatim sections from Jorgensen’s copyright registered CPAGold™ insurance program - including the below sections from Jorgensen’s Rating Guidelines. The copyright deposit for Jorgensen’s “Rating Guidelines” used by its CPAGold™ insurance program is found on the left side of this comparison (ECF No. 21-1) while located on the right side of this side-by-side comparison is Plaza’s filed “Rating Guidelines” for the CPA Prosecure program: Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 6 of 12 PageID: 1301 -7- ECF No. 21-1 at 5 ECF No. 6 at 58 ***** ***** ECF No. 21-1 at 6 ECF No. 6 at 59 ***** ***** Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 7 of 12 PageID: 1302 -8- ECF No. 21-1 at 7 ECF No. 6 at 59 ECF No. 21-1 at 7 - 8 ECF No. 6 at 60 ***** ***** ***** ***** Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 8 of 12 PageID: 1303 -9- ECF No. 21-1 at 9 ECF No. 6 at 61 ***** ***** ***** ***** ECF No. 21-1 at 9 ECF No. 6 at 54 ECF No. 21-1 at 10 ECF No. 6 at 62 The above sections copied by Plaza and NAPLIA - as well as other sections that show verbatim copying or trivial changes made by NAPLIA and Plaza, demonstrate that the material found in the CPA Prosecure insurance program is substantially similar to the registered CPAGold™ insurance program. It is important to note the affirmative defenses interjected by Defendants to successfully prevent injunctive relief from being granted will be addressed at the appropriate time. What is relevant for purposes of this motion, however, is that as managers of NAPLIA and the former general partners of the “NAPLIA Partnership”, the individual defendants certainly had the right and ability to supervise the infringing activity of NAPLIA and NAPLIA’s insurance partner, Plaza. Accordingly, the factual predicate for a vicarious infringement claim has been properly asserted against Defendants Vono and Tuncel - both of whom are active participants in the infringing conduct of Defendants NAPLIA and Plaza. In addition, the Court of Appeals for the Third Circuit recognizes that contributory copyright infringement extends joint and several liability to Defendants Vono and Tuncel given they materially contributed to the infringement. See e.g., Columbia Pictures Indus., Inc. v. Redd Horne, Inc., 749 Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 9 of 12 PageID: 1304 -10- F.2d 154, 160 (3d Cir.1984) (“An officer or director of a corporation who knowingly participates in the infringement can be held personally liable, jointly and severally, with the corporate defendant.”). Under this theory of liability, an individual is liable as a contributory infringer where she, “with knowledge of the infringing activity, induces, causes, or materially contributes to the infringing activity of another.” Id. It cannot be credibly argued that the facts alleged do not fit within this standard. The Amended Complaint describes the activities of the individual defendants leading to the infringing conduct - from their over decade long access to the CPAGold™ program to the creation of the infringing CPA Prosecure program of NAPLIA and Plaza. See e.g., Amended Complaint ¶¶ 41 - 45 (ECF No. 61 at 16 - 17). See c.f., Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 291 (3d Cir. 1991) (“In short, copying is demonstrated when someone who has access to a copyrighted work uses material substantially similar to the copyrighted work in a manner which interferes with a right protected by 17 U.S.C. § 106.17”). Indeed, Tuncel freely admits he actively solicits to this day CPAGold™ members for the NAPLIA/Plaza CPA Prosecure insurance program - a program based on Jorgensen’s copyright-protected material. Amended Complaint ¶ 51 (ECF No. 61 at 18) (“And after this action was first commenced, in an email dated November 18, 2015, Defendant Tuncel went so far as to admit to Mr. Jorgensen: “I have been “enticing” many clients to NAPLIA over the last couple months and we are going full force with a pipeline full of new business to go after as well in the coming months. We plan on being very successful with getting those clients to work with us as well.”). 4. Trade Secret and Tortious Interference Claims As for the trade secret and tortious interference claims, such intentional claims also turn on the active participation of the individual defendants. See Donsco, Inc. v. Casper Corp., 587 F.2d Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 10 of 12 PageID: 1305 -11- 602, 605-07 (3d Cir. 1978) (“We hold that Casper Pinsker is liable as a participant in a wrongful act. This liability is distinct from the liability resulting from the “piercing of the corporate veil” as that term is commonly used. The effect of piercing a corporate veil is to hold the owner liable. The rationale for piercing the corporate veil is that the corporation is something less than a bona fide independent entity. Pinsker is liable here as an actor rather than as an owner.”) (reversing dismissal of corporate officer in unfair competition action). Such active participation is set forth in the Amended Complaint. See e.g., Amended Complaint ¶¶ 51 - 61 (ECF No. 61 at 18 - 20). See also Amended Complaint ¶ 38 (ECF No. 61 at 14 - 15) (“On two separate occasions, Defendants Tuncel and Sutherland also requested details of CPAGold™ confidential panel counsel list. This request was directed to XL’s claims staff to avoid Jorgensen being aware of the request. Upon information and belief, this information was provided to the claims staff of Plaza, NAPLIA’s new partner insurer.”). Indeed, the Trade Secret Act claim is based in part on sensitive material first obtained when the individual defendants were conducting business in Massachusetts as the NAPLIA Partnership or as another entity. See e.g., Amended Complaint ¶ 15 (ECF No. 61 at 8) (“In May 1999, Defendant Vono joined Jorgensen as an independent contractor producer based in Massachusetts. Soon thereafter, Sutherland and Vono decided to form their own agency - a partnership called North American Professional Liability Insurance Agency (“NAPLIA Partnership”).”); Amended Complaint ¶ 17 (ECF No. 61 at 8) (“After Defendant Tuncel left Landy in June 2003, he started a web hosting company called Spiderweb hosting. Given their preexisting relationship via Landy, Tuncel solicited Jorgensen and in November 2003 Jorgensen became one of Tuncel’s web hosting clients. Upon information and belief, Tuncel sold the web-hosting company in 2004 and joined NAPLIA as an insurance producer.”). Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 11 of 12 PageID: 1306 -12- 5. Actions done by the NAPLIA Partnership provide for individual liability Notwithstanding what is suggested by Defendants in their brief regarding the corporate veil that supposedly protects them, the Amended Complaint also pleads the fact of their partnership that allows for joint and several liability. See e.g., Amended Complaint ¶¶ 14 - 19, 21, 31 - 40 (ECF No. 61 at 7 - 10, 12 - 15). Under both Massachusetts and New Jersey law, general partners charged with a tort claim are necessary parties given their joint and several liability. See Largo Realty, Inc. v. Purcell, 77 Mass. App. Ct. 162, 164 (2010); La Mar-Gate, Inc. v. Spitz, 252 N.J. Super. 303, 310 (1991). Accordingly, all of the individuals should have been named in this action from the very beginning and there are certainly no grounds now for not keeping them in this action. Indeed, if movants had carefully reviewed the Amended Complaint and relevant case law instead of firing off their four-page motion they would have come to understand the pending motion had no merit from every possible vantage point. CONCLUSION For the foregoing reasons, it is respectfully requested that the Court deny the pending Motion to Dismiss. Defendant’s Sutherland’s motion is procedurally defective and should be rejected pursuant to Fed. R. Civ. P. 12(g)(2); Defendant Vono and Defendant Tuncel’s motion should be denied given direct, vicarious and contributory copyright infringement claims are adequately set forth in the Amended Complaint and the two business tort claims are also adequately pled as against these defendants given the direct actions of these individuals. By: /s/ Paul E. Paray Paul E. Paray Zimmerman Weiser & Paray LLP One Carol Place Moonachie, New Jersey 07074 Attorneys for Plaintiff Jorgensen & Company Dated: September 6, 2016 Case 2:15-cv-07373-CCC-MF Document 77 Filed 09/06/16 Page 12 of 12 PageID: 1307 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY JORGENSEN & COMPANY, Plaintiff, v. GARY SUTHERLAND, STEPHEN VONO, DOGAN TUNCEL, NORTH AMERICAN PROFESSIONAL LIABILITY INSURANCE AGENCY, LLC, PLAZA INSURANCE COMPANY, ROCKHILL INSURANCE COMPANY, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 2:15−CV−07373−CCC−MF CERTIFICATE OF SERVICE I HEREBY CERTIFY that the Brief in Opposition to the pending motion to dismiss was served upon all counsel, by sending same via ECF: Eric B. Levine Lindabury, McCormick, Estabrook & Cooper, P.C. 53 Cardinal Drive Westfield, NJ 07091 (908) 233-6800 elevine@lindabury.com (Counsel to Defendants Gary Sutherland and North American Professional Liability Insurance Agency, LLC) Gabriella R. Garofalo-Johnson Marshall, Dennehey, Warner, Coleman & Goggin, P.C. 425 Eagle Rock Avenue, Suite 302 Roseland, New Jersey 07068 Tel: (973) 618-4179 grjohnson@mdwcg.com (Counsel to Defendant Plaza Insurance Co.) By: /s Paul E. Paray___ Paul E. Paray Zimmerman Weiser & Paray LLP Attorneys for Plaintiff Jorgensen & Company DATED: September 6, 2016 Case 2:15-cv-07373-CCC-MF Document 77-1 Filed 09/06/16 Page 1 of 1 PageID: 1308