Broadspring, Inc. v. Congoo, LLC

BROADSPRING, INC., Plaintiff, v. CONGOO, LLC, d/b/a Adiant, et al., Defendants.

13-CV-1866 (JMF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 20, 2014

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

This is a lawsuit between bitter rivals in the online advertising industry. Plaintiff Broadspring, Inc. ("Broadspring") brought the action against its competitor, Congoo, LLC ("Congoo"), and two Congoo executives, Chief Executive Officer, Ashraf Nashed, and Senior Vice President of Business Development, Rafael Cosentino (collectively, "Defendants"). Broadspring alleges principally that Defendants engaged in a campaign to spread false and defamatory information about it through Internet posts and other communications. Congoo, in turn, has brought counterclaims alleging that Broadspring made false and misleading statements about Congoo to two of its clients. (Am. Compl. (Docket No. 27); Answer & Am. Countercls. (Docket No. 45)). Before the Court are seven different motions, including cross-motions for summary judgment, dueling motions to exclude the testimony of expert witnesses at trial, two motions by Plaintiff for discovery-related sanctions, and a motion by Plaintiff for leave to file a Second Amended Complaint. (Docket Nos. 75, 94, 97, 98, 102, 108).

For the reasons stated below, Defendants' motion for summary judgment is denied except with respect to the tortious interference claim against Defendant Nashed. In addition, Plaintiff's motion for summary judgment is granted. Further, Plaintiff's motion to exclude is granted inpart and denied in part, and Defendants' motion to exclude is denied. Finally, Plaintiff's motion for sanctions based on improper designations of material as highly confidential is granted, Plaintiff's motion for sanctions based on spoliation of evidence is granted in part and denied in part, and Plaintiff's motion seeking leave to file a Second Amended Complaint is granted. The end result is that, but for the tortious interference claim against Defendant Nashed, all of Plaintiff's affirmative claims remain, and all of Congoo's counterclaims are dismissed.

BACKGROUND

A. The Parties

As noted, Broadspring and Congoo are competitors in the online advertising business. (Markiles Decl. (Docket No. 141) ¶ 3; Nashed Decl. (Docket No. 104) ¶ 10). They each operate online advertising networks, which connect advertisers with websites, or "publishers." (Markiles Decl. ¶ 3). Online advertising networks place their advertisers' advertisements on publishers' websites, generating revenue from the advertisers and, in turn, paying publishers for the space. (Id.). The online advertising networks pay publishers either on a "CPM" basis — that is, a fixed sum per every thousand impressions (or viewers) that an advertisement receives — or on a "revenue share" basis, whereby the publisher receives a percentage of the revenue the advertising network derives from its advertisers. (Id.).

Broadspring is a Delaware corporation whose sole office is in Irvine, California. (Id. ¶ 1). It was incorporated in 2002, but had no revenue prior to June 2004, at which point it acquired the assets of another company, Mindset Interactive, Inc. (Alexander Decl. Supp. Defs.' Mot. Summ. J. (Docket No. 111), Ex. 4 ("Markiles Dep.") 38:16-40:2; Alexander Decl. Supp. Defs.' Mot. Summ. J., Ex. 8 ("Jatwani Dep.") 27:5-11; Alexander Decl. Supp. Defs.' Mot. Summ. J., Ex. 21). Congoo, which launched its online advertising business in 2008 and alsooperates under the names Adiant and Adblade, is a Delaware limited liability company whose principal place of business is in Somerville, New Jersey. (Nashed Decl. ¶¶ 2-3). As noted, Nashed is Congoo's Chief Executive Officer and Cosentino is its Senior Vice President of Business Development. (Id. ¶¶ 1, 9).

B. The Squidoo Lens and Its Dissemination

The dispute between the parties centers on a web page that Defendant Cosentino created in mid-February 2013 on the website www.squidoo.com, which is a platform that allows users to create pages, or "lenses," on subjects of their choice. (Cosentino Decl. (Docket No. 105) ¶ 2; Godin Decl. (Docket No. 106) ¶ 2). Under the moniker "Recruiterman" — whose profile page states that the account holder "live[s] in Brooklyn with [his] wife Susan and [their] 4 year[] old boy Liam," none of which applies to Cosentino — Cosentino created a page (the "Lens") on the topic of online advertising and marketing businesses. (Cosentino Decl. ¶ 2; Katz Decl. Opp'n Defs.' Mot. Summ. J. (Docket No. 143), Ex. 3; Alexander Decl. Supp. Defs.' Mot. Summ. J., Ex. 3 ("Cosentino Dep.") 252:24-253:22).¹ The Lens provided Cosentino's commentary — without disclosing his identity or his relationship to Congoo — on thirteen different advertising networks, including Broadspring and Congoo. (Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 4). In its first iteration, the Lens stated that "many of [Broadspring's] advertisers appear to be continuity programs (re-bill offers) where the advertiser gets the customer to enter their credit card for a free trial and the[n] makes it tough to cancel. I'd be careful here." (Id. at 3).On February 23, 2013, Cosentino e-mailed Nashed a link to the Lens, to which Nashed replied: "Ingenious!" (Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 5). On March 2, 2013, Nashed sent Cosentino another e-mail, which contained additional statements about Broadspring. (Cosentino Decl. ¶ 13). Among other things, Nashed wrote that "it looks like Broadspring was formerly Mindset Interactive, a notorious spyware company. Mindset was eventually shut down by the [Federal Trade Commission ("FTC")] and Sanford Wallace, their founder, known as 'Spamford Wallace' was banned from online activity for 5 years." (Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 6). Toward the end of the e-mail, Nashed wrote "[o]ur publishers should know about [Broadspring's] background." (Id.). Cosentino reviewed the e-mail, performed some "Google searches of [his] own," and then revised the Lens that same day. (Cosentino Decl., ¶ 14-15). The updated version of the Lens contained text that was nearly identical to the text of Nashed's e-mail. Under the "Broadspring" header, the revised Lens read:

A simple Google search shows that Broadspring was formerly Mindset Interactive, a notorious spyware company. Mindset was eventually shut down by the FTC in 2005 and Sanford Wallace, their founder, known as "Spamford Wallace" was banned from online activity for 5 years. In Nov 2006, Broadspring's shareholders then launched the notorious ringtones company, New Motion, dba Atrinsic. Atrinsic had $17mm in financing (from various unknown investors), became public through a shady reverse-merger. They settled 3 years ago with 6 million users scammed: http://www.ftc.gov/os/caselist/0423142/ WallaceFinalJudgment.pdf

(Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 7). On March 4, 2013, Cosentino sent Nashed a link to the Lens using his Yahoo! Instant Messenger account. (Id., Ex. 8; Cosentino Decl. ¶ 24). Cosentino disseminated the Lens, as well as statements similar to those made in the Lens, in several ways. First, he posted links to the Lens in discussion threads on other websites under false names. (See, e.g., Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 9, at 2; Id., Ex. 10, at 5; Cosentino Dep. 289:6-20, 293:6-294-22). Second, he e-mailed links to the Lens directly to publishers, including Intermarkets.net, the New Hampshire Union Leader, the New York DailyNews, and Geology.com. (Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 11, at 8; Id., Ex. 12, at 5; Id., Ex. 13, at 2; Id., Ex. 14, at 2; Cosentino Decl. ¶ 26). Third, although Squidoo "locked" the Lens on March 11, 2013 (making it inaccessible to the public) (Godin Decl. ¶ 7; Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 15), Cosentino pseudonymously re-posted many of the statements that were on the Lens in a discussion thread on another website, Contextly.com. Under the name "Richard J," for example, Cosentino posted the following:

[Broadspring] used to distribute spyware under the company name Mindset Interactive. When they were named in a lawsuit by the FTC they dropped that name. They then formed a new company called Atrinsic dba New Motion which distributed Ring tone scams to 13 year olds. They were again sued and this time had to settle a class action lawsuit with 6 Million people. Now Broadspring is using content.ad to drive consumer[] to howlifeworks and those fake editorials which are not even marked as such so they can get their credit cards and re-bill them. Publishers who work with these guys simply have zero critical thinking or care[] about their audience.

(Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 16, at 10-11; Cosentino Dep. 300:12-19). Even after posting on Contextly.com, Cosentino continued to e-mail similar statements to publishers directly. (See, e.g., Katz Decl. Opp'n Defs.' Mot. Summ. J., Ex. 18, at 149 ("So you know, the folks at Broadspring shut down their company (mindset interactive) soon after they were named by the FTC in a lawsuit for distributing spyware.")).

C. Geology.com

One publisher that is particularly relevant to the parties' claims is Geology.com. In June 2012, Congoo and Geology.com had entered into an agreement that provided Congoo with the exclusive right to serve advertisements "with a thumbnail image and/or a title and/or a description and/or a call to action" on Geology.com. (Alexander Decl. Supp. Defs.' Mot. Summ. J., Ex. 40). The agreement provided that it could be terminated with ninety days of notice. (Id.). In February 2013, without either party terminating the agreement, Geology.com began to run Broadspring advertisements as well as the Congoo advertisements. (Pl.'s Response to Defs.'Rule 56.1 Statement (Docket No. 144) ("Pl.'s Rule 56.1 Statement Response") ¶ 75; Alexander Decl. Supp. Defs.' Mot. Summ. J., Ex. 41, at 5). Apparently, Cosentino saw the Broadspring advertisements; he then called Hobart King, the...