Chadha v. Chadha
| Decision Date | 02 March 2020 |
| Docket Number | CV 16-3739 (ENV) (AKT) |
| Parties | MUNISH CHADHA and CERNO TECHNOLOGIES PVT. LTD., Plaintiffs, v. SANJAY CHADHA, SANTUSHT BHATIA, TECH MATRIX INFOSOLUTIONS, INC., and CERNO TECHNOLOGIES, INC., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
AMENDED REPORT AND RECOMMENDATION
I. PRELIMINARY STATEMENT
Plaintiffs Munish Chadha ("Munish") and Cerno Technologies Pvt. Ltd. ("CT India") (collectively, "Plaintiffs") commenced this action against Defendants Sanjay Chadha ("Sanjay"), Santusht Bhatai ("Santusht"), Tech Matrix Infosolutions, Inc. ("Tech Matrix"), and Cerno Technologies, Inc. ("CT, Inc.") (collectively, "Defendants") on July 6, 2016 alleging violations of the Defend Trade Secrets Act, 18. U.S.C. § 1836 et seq. ("DTSA"), the Copyright Act of 1976, 17 U.S.C. § 101 et seq. ("Copyright Act"), and state law claims for breach of contract, tortious interference of contracts, fraud, breach of fiduciary duty, breach of duty of loyalty, conversion, unjust enrichment, and account stated. See generally Complaint [DE 1].
Defendants' counsel entered an appearance in this action on July 29, 2016, see DE 15, and subsequently filed an Answer, see DE 18. Defendants actively defended this action until February 5, 2018, when the Court granted the motion of the Certilman Balin law firm to be relieved as counsel of record for the individual Defendants and the corporate Defendants. The Court gave the corporate Defendants 30 days to retain new counsel since a corporation can only proceed by counsel. The individual Defendants were given 30 days to notify the Court whether they were retaining counsel or proceeding pro se. See DE 73.
On February 13, 2018, Plaintiffs filed an Amended Complaint, pursuant to Judge Bianco's February 2, 2018 Order granting Plaintiffs leave to amend to add a claim for copyright infringement. See Amended Complaint ("Am. Compl.") [DE 75]. Notwithstanding their prior participation in the action, Defendants failed to answer or otherwise respond to the Amended Complaint. Likewise, Defendants never responded to Judge Bianco's February 5, 2018 Order regarding retention of new counsel. On April 30, 2019, Plaintiffs filed a Request for a Certificate of Default with the Clerk of the Court. See DE 86. The Clerk of the Court entered defaults against all of the Defendants on May 10, 2018, pursuant to Federal Rule of Civil Procedure ("FED. R. CIV. P." or "Rule") 55(a). See DE 87. On October 1, 2018, Plaintiffs filed a motion for entry of default judgment and permanent injunctive relief against the Defendants. See 95.
Judge Bianco granted in part and denied in part Plaintiffs' motion for default judgment on December 18, 2018, solely as to liability. See DE 100. He then referred the matter to this Court for the calculation of damages and the request for a permanent injunction. Id. Approximately two months later, the law firm of Altman & Company, P.C., by Steven Altman, Esq., filed a Notice of Appearance on behalf of all Defendants. DE 104. Defendants' new counsel filed a letter motion on February 14, 2019, requesting to be heard on Plaintiffs' pending motion as to the issue of damages only. See DE 105, 109. During the March 22, 2019 Status Conference, the Court established a new briefing schedule for all parties, limited to the issue of damages and permanent injunctive relief. See DE 110. As a result, Plaintiffs re-filed their motion for defaultjudgment and permanent injunctive relief, to which Defendants filed opposition. See Plaintiffs' Motion for Default Judgment and Entry of Permanent Injunction, Motion to Damages and Attorneys' Fees ( ) [DE 113]; Defendants' Memorandum of Law in Opposition to Plaintiffs' Claim For Damages ( ) [DE 111]; Plaintiffs' Reply Memorandum of Law in Further Support of Motion for Default Judgment and Request for Damages and Attorney's Fees ( ) [DE 114]; Defendants' Response to the Documents Submitted by Plaintiffs in Reply on Their Claim for Damages and Attorneys' Fees ( ) [DE 117].
On June 3, 2019, Judge Vitaliano1 referred Plaintiffs' motion to this Court for a Report and Recommendation, pursuant to 28 U.S.C. § 636(b). See June 3, 2019 Electronic Order. For the reasons which follow, this Court respectfully recommends to Judge Vitaliano that Plaintiffs' motion be GRANTED in part and DENIED in part.
II. BACKGROUND
In light of the fact that Judge Bianco previously found the Defendants in default and, as a result, liable for damages, this Court is limiting its discussion of the facts to those necessary to a determination of damages.
The following facts are taken from the Amended Complaint and are assumed to be true for purposes of this motion.
In 2012, Munish, a citizen of India, entered into what appears to be a verbal business agreement with his cousin, Sanjay, a citizen of New York, to form a business known as TechMatrix (the "2012 Agreement"). See Am. Compl. ¶¶ 12-13. Tech Matrix, a corporation organized and existing under the laws of the State of New York, markets and sells "proprietary software, including software called Yoda Care and Yoda Shield, to provide paid-for computer services" in the United States, and also markets and sells technical repair services for software related issues. Id. ¶ 16; see also Declaration of Munish Chadha ("Chadha Decl.") [DE 115-1] ¶ 8, annexed to the Declaration of Kalpana Nagampallli in Support of Plaintiff's Motion for Damages and Attorney's Fees ("Nagampalli Decl.") [DE 115-1]. Tech Matrix was allegedly modeled after a business Munish owned and operated in India at the time. Am. Compl. ¶ 12. The proprietary software sold by Tech Matrix was provided by Munish from his business in India. Id. ¶ 13. Under the terms of the 2012 Agreement, Munish provided the business plan, trade secrets, propriety business information, and capital to organize and operate Tech Matrix. Id. In exchange, Sanjay managed the day-to-day operations of Tech Matrix. Id. Munish and Sanjay further agreed that the two were to serve as co-directors of Tech Matrix, sharing equally in the ownership and profits of the business. Id.
Sometime toward the end of 2013, Tech Matrix's bookkeeper advised Munish that Sanjay was transferring the profits earned by Tech Matrix exclusively to himself -- instead of evenly distributing them between Munish and Sanjay in accordance with the Agreement. Id. ¶ 18. As Munish was attempting to recoup his share of Tech Matrix's profits, he discovered that Sanjay had made himself the sole principal and owner of Tech Matrix when he incorporated the business. Id. ¶¶ 18, 19. To date, Sanjay has allegedly failed to share with Munish any profits earned by Tech Matrix. Id. ¶ 20.
In February 2014, Munish, along with non-party Guarav Sharma ("Sharma") and Santusht, all citizens of India, entered into a verbal agreement to form a business known as Cerno Technologies Pvt. Ltd. ("CT India") (the "2014 Agreement"). Id. ¶ 21. CT India, a private limited company organized and existing under the laws of India, is "an information technology company [that] develop[s] mobile applications and legal customer relationship management applications." Id. Under the terms of the 2014 Agreement, Munish, Sharma, and Santusht served as the directors and shareholders of CT India. See id. The three agreed that Munish would own 50% of CT India's shares, Sharma would own 25% of the shares, and Santusht would own the remaining 25%. Id. ¶ 23. Santusht developed CT India's software applications based on ideas conceived from the three directors, id. ¶ 22, while Munish provided the capital for the company's operations, id. ¶¶ 22, 24. Although not a shareholder or director of CT India, Sanjay was hired to market CT India's software applications. Id. ¶ 22.
Sometime in 2014, while serving as a director and shareholder of CT India, Santusht developed two software applications referred to as CT Live and CT Legal. Id. ¶ 25. The source codes for CT Live and CT Legal were in the sole possession of Santusht, who also had access to all of CT India's management, administrative, business, and proprietary information. Id. ¶¶ 31-32. Notwithstanding never having had access to source codes, CT India, as the author and owner of the source codes of CT Legal and CT Live, allegedly possesses a foreign copyright in India for the source codes. Id. ¶¶ 106-107.2
In June 2014, Sanjay and Santusht allegedly colluded to launch CT Live and CT Legal internationally through another company, Cerno Technologies, Inc. ("CT, Inc."). Id. ¶¶ 28, 45. CT, Inc., a corporation organized and existing under the laws of the State of New York, was formed by Sanjay who serves as the sole shareholder and director of the company. Id. ¶ 27. In January 2015, while Munish and Sharma protested the launch of CT Live and CT Legal, Santusht ceased working for CT India and began working for CT, Inc. out of an office which CT, Inc. established in India. Id. ¶ 29. Not only did Santusht take the source codes for CT Live and CT Legal with him to CT, Inc., id. ¶ 32, but he also allegedly "coerced and/or influenced all the Indian employees of [CT India]" to begin working for CT, Inc., id. ¶ 30. CT, Inc. has since launched and marketed CT Live and CT Legal without the consent of CT India under the name Lex Rex. Id. ¶ 45. To date, none of the profits from the sale of Lex Rex (i.e., CT Live and CT Legal) have allegedly been shared with CT India, see id. ¶ 46; nor have the source codes for CT Live and CT Legal been returned to CT India. Id. ¶ 34.
Based on the foregoing conduct, Munish filed a criminal complaint against Defendants in India in September 2015. Id. ¶ 37. In December 2015, Munish and Defendants executed a settlement agreement in which Defendants agreed to remit to Munish $111,000, in six installments...
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