CREDIT BUREAU CONNECTION INC. v. PARDINI

• Decision Date: 02 August 2010
• Docket Number: Case No. CV F 10-1202 LJO GSA.
• Citation: 726 F.Supp.2d 1107
• Parties: CREDIT BUREAU CONNECTION, INC., Plaintiffs, v. William PARDINI, and B.T.B. Inc., d.b.a. Data Consultants, Defendants.
• Court: U.S. District Court — Eastern District of California

726 F.Supp.2d 1107

CREDIT BUREAU CONNECTION, INC., Plaintiffs,

v.William PARDINI, and B.T.B. Inc., d.b.a. Data Consultants, Defendants.

Case No. CV F 10-1202 LJO GSA.

United States District Court,E.D. California.

July 12, 2010.

Order on Reconsideration and Motion for Preliminary Injunction Aug. 2, 2010.

COPYRIGHT MATERIAL OMITTED.

Kristi Weiler Dean, Stone Rosenblatt Cha, Woodland Hills, CA, Darryl J. Horowitt, Rema Marianna Koligian, Coleman & Horowitt, LLP, Fresno, CA, for Plaintiffs.

David Alan Makman, Kirin Law Group P.C., San Francisco, CA, for Defendants.

ORDER ON PLAINTIFF'S TEMPORARY RESTRAINING ORDER MOTION (Doc. 6)

O'NEILL, District Judge.

Introduction

Plaintiff Credit Bureau Connection, Inc. (“CBC”) moves for a temporary restraining order against defendants William Pardini (“Mr. Pardini”), a CBC shareholder, director, and officer, and B.T.B., Inc., d.b.a. Data Consultants (“Data Consultants”), a company wholly-owned and operated by Mr. Pardini (collectively “defendants”). CBC contends that defendants have blocked CBC from accessing its copyrighted software program and database. CBC seeks an order, inter alia, to prohibit defendants from restricting CBC's access to the software program, known as eF & I Complete, changing passwords to the internet-based software program, changing the source code, and otherwise interfering with CBC's customer contracts. In addition, CBC seeks an order to mandate defendants to restore access rights and functionalities of the software to CBC. Although defendants successfully dispute ownership of the copyright, CBC establishes a likelihood of success on its claim that defendants are violating its unlimited implied license to the software and are interfering with CBC's existing and prospective economic relations. Having balanced the equitable factors, this Court GRANTS CBC's temporary restraining order motion, and ORDERS defendants to show cause why a preliminary injunction should not issue.

Background

CBC's Motion and Allegations

CBC seeks mandatory and prohibitory injunctive relief against defendants based on allegations that defendants are misappropriating and infringing on its proprietary software, eF & I Complete. CBC's action and motion are based on the following allegations:

Plaintiff CBC is a California corporation originally formed by Michael Green (“Mr. Green”) in 2004. CBC provides car dealerships with access to credit reports for individual car purchasers. CBC is able to order credit reports from each of the three credit bureaus through a license held by Mr. Green (“bureau license”). Since 1988, Mr. Green has also been in the business of providing car dealerships with finance and insurance software through his sole proprietorship known as Automotive Marketing Profit Systems (“AMPS”). Defendant Data Consultants is wholly owned and operated by defendant Mr. Pardini. Data Consultants is also in the business of providing finance and insurance software to automobile dealerships.

Shortly after the formation of CBC, Mr. Green and Mr. Pardini agreed to pool their assets, and CBC became a joint venture between the two. According to their agreement, CBC would have access to Data Consultants' business infrastructure, including its employees and office space, while Data Consultants would have access to CBC's bureau license and contacts in the automobile industry. Mr. Pardini became a 50% shareholder, officer, and director of CBC.

CBC began to work with Darin Larsen (“Mr. Larsen”), a computer consultant working for Data Consultants. CBC paid Mr. Larsen directly for the time he spent working on CBC business, and Data Consultants paid Mr. Larsen separately for his Data Consultants work. In March 2006, Mr. Larsen, on behalf of CBC, began to develop a web-based software system that would integrate both the credit reporting as well as financial and insurance systems services. The project was authorized by Mr. Green and Mr. Pardini as officers and directors of CBC. In consideration of his efforts, Mr. Larsen became a twenty percent (20%) shareholder of CBC, with Mr. Pardini and Mr. Green each contributing ten percent (10%) of their respective interests in the company. Mr. Larsen was paid hourly for his work by CBC.

By July 2007, the integrated software known as eF & I Complete was ready to be sold. The development of the software was paid for entirely by CBC. Mr. Larsen provided the initial concept and overall design. The source code and other technical aspects of the system were created by Data Consultants employees working under the direction and supervision of Mr. Larsen. CBC paid for the Data Consultants employees for the expense of the development of the project. Both CBC and Data Consultants marketed eF & I Complete under its individual name and for its own account.

In January 2008, CBC and Data Consultants came to the following agreement: the companies would split Mr. Larsen's salary equally; Data Consultants would pay CBC a 50% commission from all revenues generated from its use of the bureau license; CBC would pay Data Consultants 20% of all the revenues received from CBC customers as compensation for the use Data Consultants' administrative and technical support of eF & I Complete; and Data Consultants would pay CBC a total of $86,000 as reimbursement for a portion of CBC's costs with the development of eF & I Complete. The parties operated under this agreement for two years. As of the date this action was initiated, Data Consultants has paid $30,000 of the total $86,000 it promised to pay to CBC under the agreement.

From mid-2007 through early 2010, CBC contracted with individual automotive dealerships, automotive dealership groups, and national resellers who marketed the software. In addition, CBC and Data Consultants entered into multiple integrated agreements through which CBC and Data Consultants became jointly obligated to provide and support the software.

Beginning in early 2010, Mr. Pardini began to express his dissatisfaction with the compensation that he and Data Consultants received in connection with the support of eF & I Complete. The parties were unable to resolve the issue, and Mr. Pardini, Mr. Green, and Mr. Larsen agreed that the operations of CBC and Data Consultants should be separated completely. In April 2010, CBC acquired its own office space and personnel. At the same time, the CBC principals continued to discuss the details of the separation, including which company would have title to eF & I Complete and what compensation would be paid to the other for a perpetual license.

Although separation discussions were ongoing, all parties agreed that both companies would continue to have access to eF & I Complete. Unbeknownst to CBC, however, Mr. Pardini and Data Consultants converted the eF & I Complete software by blocking CBC's access to the features of the software that are necessary to demonstrate the software and to install information regarding new customers. In addition, Data Consultants employees have modified the software's administrative rights, making it impossible for CBC's representatives to support existing customers in connection with their operation of the system. Moreover, Mr. Pardini has made statements to CBC's existing and prospective customers that only he and Data Consultants could provide and support the eF & I Complete software. CBC requested defendants to restore its access to all feature of eF & I Complete. Defendants have refused these multiple requests.

Based on these allegations, CBC contends that its ability to service its customers, integration partners and resellers have been jeopardized and that its entire business. CBC asserts that defendants' actions are interfering with CBC's ability to honor existing contracts and are causing the loss of current and prospective customers, goodwill, and prospective market share. CBC contends that its shareholder, director and officer, Mr. Pardini, breached his fiduciary duty of loyalty to CBC, and has intentionally interfered with valuable CBC contracts in a calculated effort to deprive the remaining CBC shareholders of their livelihood. CBC asserts the following eleven causes of action against defendants:

1. Breach of Fiduciary Duty;

2. Unfair Business Practices; 3. Intentional Interference with Existing and Prospective Economic Advantage;

4. Negligent Interference with Existing and Prospective Economic Advantage;

5. Conversion;

6. Unjust Enrichment;

7. Accounting;

8. Injunctive Relief;

9. Copyright Infringement;

10. Breach of Contract; and

11. Declaratory Relief.

In this motion, CBC seeks an order to enjoin defendants from engaging in, committing or performing the following acts:

1. Restricting CBC's access to, or interfering in CBC's ability to use any portion of the eF & I Complete software;

2. Changing the User ID or Password for the Master User Account Access on the hosting account used to access the administrative account;

3. Changing the User IDs or Passwords used to access either the eF & I Complete live application server or the live database server;

4. Changing the User IDs or Passwords used to access the administrative account functions at Rackspace;

5. Changing the User IDs or Passwords used to access the eF & I Complete backup servers;

6. Changing the Internet Protocol (“IP”) Address where the domain name serve is currently pointing;

7. Changing any of the eF & I Complete source code, except that they may make minor changes to the source code as necessary to fix an error that causes material harm to customers;

8. Deleting anything from the live database or application server;

9. Further unlawful interference with any existing contracts between CBC and its customers; and

10. Making representations to CBC's existing or potential customers that CBC does not have ownership or use rights to eF & I Complete.

In addition to this prohibitions, CBC seeks a mandatory injunction to require defendants to:

1. Provide CBC...