Advanced Analytics, Inc. v. Citigroup Glob. Mkts., 04-CV-3531-LTS-SLC

MEMORANDUM ORDER ADOPTING REPORT AND RECOMMENDATION

LAURA TAYLOR SWAIN Chief United States District Judge

Plaintiff Advanced Analytics, Inc. (“Plaintiff” or “AAI”) has filed objections to the Report and Recommendation of Magistrate Judge Pitman, dated September 4, 2019 (docket entry no. 340 (the “Report”)), which recommends that the motion for summary judgment filed by Defendants Citigroup Global Markets, Inc. and The Yield Book, Inc. (“Defendants”) be granted; to the Opinion and Order of Judge Pitman, also dated September 4, 2019 (docket entry no. 339 (the “Rule 56(h) Ord.”)), which denied Plaintiff's related motion pursuant to Federal Rule of Civil Procedure 56(h); and to the Opinion and Order of Magistrate Judge Cave, dated June 9, 2020 (docket entry no. 438 (the “Reconsideration Ord.”)), which denied Plaintiff's motion for reconsideration of two of Judge Cave's non-dispositive orders in the above-captioned action. The Court has jurisdiction of this case pursuant to 28 U.S.C. section 1332.

The Court has reviewed thoroughly the parties' submissions on the objections as well as the papers filed in connection with the underlying motions and, for the following reasons, overrules each of Plaintiff's objections and adopts the Report in its entirety.

Background

The factual background of this case has been discussed in prior orders of the Court; the parties' familiarity with them is assumed. Plaintiff alleges that Defendants misappropriated number sequences developed by Plaintiff's principal, Dr. Xiaolu Wang (the “ACE Sequences”), during Defendants' testing of those sequences, which were then incorporated into a software product (“the Yield Book”) or used to create new sequences of numbers for use in the Yield Book. On May 7, 2004, Plaintiff filed its Complaint (docket entry no. 1) asserting claims for breach of contract, misappropriation of trade secrets, breach of the duty of good faith and fair dealing, quantum meruit, unjust enrichment, and constructive trust. On July 1, 2004, Defendants filed an Answer and counterclaim (docket entry no. 11) asserting their entitlement to an award of attorneys' fees and costs, in the event they prevailed in this action, under the terms of the parties' January 7, 1997, non-disclosure agreement (“NDA”).

On February 15, 2008, the parties filed cross-motions for summary judgment. On August 5, 2009, Judge Pitman issued a report and recommendation (docket entry no. 112 (the “2009 Report”)) recommending that judgment be entered in favor of Plaintiff on Plaintiff's claim that Defendants breached the NDA, to the extent that claim arose from Defendants' admission that their sequence developer, Teytel, had used outputs from Defendants' testing of the ACE Sequences (but not the sequences themselves) to compare the accuracy of outputs from sequences allegedly developed by Teytel, but only to the extent of a nominal damages award of one dollar, based on a conclusion that Plaintiff had failed to proffer evidence of damages flowing from Teytel's “research (i.e. non-investment)” misuse of the ACE outputs. The 2009 Report recommended that judgment be entered in favor of Defendants in all other respects, including to the extent that Plaintiff's breach of contract claim asserted that Teytel used or targeted the ACE

Sequences themselves (rather than merely the outputs of Defendants' testing of those sequences) in developing his own sequences on behalf of Defendants. See Advanced Analytics, Inc. v. Citigroup Glob. Markets, Inc., No. 04-CV-3531-LTS-HBP, 2009 WL 7133660, at *7-25 (S.D.N.Y. Aug. 5, 2009), report and recommendation adopted in part, rejected in part, 04-CV-3531-LTS-HBP, 2010 WL 4780772 (S.D.N.Y. Nov. 22, 2010). The 2009 Report also recommended that the Court enter judgment in favor of Defendants on their counterclaim for an award of fees and costs, given that Defendants had “prevailed with regard to the central relief sought” for purposes of the NDA. Id. at *24.

In a Memorandum Order dated November 22, 2010 (docket entry no. 124 (the “2010 Order”)), the Court adopted the 2009 Report in several respects and entered judgment in favor of Defendants on Plaintiff's claims for breach of the duty of good faith and fair dealing, quantum meruit, and unjust enrichment. Advanced Analytics, 2010 WL 4780772, at *3.^[1]However, the Court declined to adopt the 2009 Report's recommendations “regarding the character of Teytel's use of the output and the significance of that use as to the appropriate measure of damages, ” id. at *2, and therefore granted Plaintiff's motion for summary judgment, to the extent it claimed that Teytel's use of the ACE test results was in violation of the parties' NDA, as to liability only, leaving open the question of the appropriate measure of damages. As to the remainder of Plaintiff's breach of contract claim-regarding Plaintiff's allegations that Teytel used or targeted the ACE Sequences in developing his own-the Court denied both

parties' motions for summary judgment, explaining that, on the then-existing record, evidence of references to ACE in a notebook maintained by Teytel (the “Teytel Notebook”) and the expert evidence proffered by Plaintiff “would be sufficient to support a reasonable jury's determination in Plaintiff's favor on this aspect of the breach of contract claim.” Id. The Court also noted, however, that “apparently relevant discovery (in the form of Defendants' development and testing records) requested by Plaintiff and ordered produced by the Magistrate Judge has not yet been produced, ” rendering summary judgment inappropriate. Id. Similarly, the Court concluded as to Plaintiffs' timely^[2] misappropriation claims that summary judgment in favor of Defendants was “premature as well as unwarranted on the current record because there [was] a genuine issue of material fact as to whether Defendants' sequences were derived from the ACE sequence, ” and because “the outstanding testing and development discovery may be relevant to whether Plaintiff can frame a genuine issue of material fact as to whether Defendants' disclosed practices were a front for actual use of the ACE sequence in generating Yield Book outputs.” Id. at *3. Having so concluded, the Court also declined to adopt, as “premature, ” the 2009 Report's recommendation that the Court grant Defendants' motion for summary judgment on their counterclaim for attorneys' fees under the parties' NDA because “genuine issues of material fact preclude[d] the resolution at this stage of most of the parties' dispute concerning breach of the NDA.” Id. at *4.

On or about March 7, 2011, Defendants produced the testing and development files discussed in the 2010 Order. (Report at 18; Defendants' Statement of Undisputed Facts Pursuant to Local Civil Rule 56.1, dated April 5, 2013 (“Def't 56.1 Stmt.”) ¶ 67.) Defendants

subsequently produced evidence from their retained expert, Dr. Nathaniel Polish, who analyzed the testing and development files and opined that they reflect, consistent with Teytel's Notebook and testimony, Teytel's independent development of Defendants' sequences, and that there was not “any data or code in the Sequence Development and Testing Files to suggest that Dr. Teytel relied upon, targeted or had access to the ACE Numbers or any product of the ACE Numbers, ” while he was developing Defendants' sequences. (Second Expert Report of Dr. Nathaniel Polish, dated June 18, 2012 (Exhibit 35 to the Declaration of Nathaniel E. Jedrey dated April 5, 2013) (“Second Polish Report”) at 15; Report at 29-30.) Plaintiff did not timely produce any contrary expert opinion evidence analyzing the testing and development files produced by Defendants on March 7, 2011. (Report at 29-30; Def't 56.1 Stmt. ¶ 79.)

Against that backdrop, Defendants renewed their motion for summary judgment as to Plaintiff's remaining claims^[3]; Plaintiff separately moved for sanctions pursuant to Federal Rule of Civil Procedure 56(h), based on Plaintiff's claim that Defendants submitted affidavits in support of summary judgment in bad faith. On September 4, 2019, Judge Pitman issued an Opinion and Order denying Plaintiff's Rule 56(h) motion, as well as the Report, recommending that the Court grant Defendants' motion for summary judgment in its entirety. On June 9, 2020, Judge Cave-who was assigned the pretrial management of this action after Judge Pitman's retirement in 2019-issued an Opinion and Order resolving Plaintiff's motion for reconsideration as to Judge Cave's resolution of two ancillary disputes between the parties. Plaintiff has filed objections to all three decisions.

Discussion

When reviewing a report and recommendation, the Court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C) (Westlaw through P.L. 117-41). The Court must make a de novo determination to the extent that a party makes specific objections to a magistrate judge's findings. Soley v. Wasserman, 823 F.Supp.2d 221, 228 (S.D.N.Y. 2011) (citing United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997)). “However, when a party makes only conclusory or general objections, or simply reiterates his original arguments, the court reviews the report and recommendation strictly for clear error.” Piligian v. Icahn Sch. of Med. at Mount Sinai, 490 F.Supp.3d 707, 715 (S.D.N.Y. 2020) (citation and internal quotation marks omitted).

When a party objects to a magistrate judge's non-dispositive order, the Court must review the objections and “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed.R.Civ.P. 72(a); 28 U.S.C. § 636(b)(1)(A). A decision is clearly erroneous where “the...