Elsevier, Inc. v. Grossman
| Decision Date | 04 August 2016 |
| Docket Number | 12 Civ. 5121 (KPF) |
| Citation | 199 F.Supp.3d 768 |
| Parties | ELSEVIER, INC., et al., Plaintiff, v. Pierre GROSSMAN, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Jason Lee Jurkevich, Sills Cummis & Gross, New York, NY, for Plaintiff.
Pierre Grossman, Garden City, NY, pro se.
Plaintiffs Elsevier Inc., Elsevier B.V., Elsevier Ltd., and Elsevier Masson SAS (collectively, "Plaintiffs" or "Elsevier") publish scientific, technical, and medical journals. On June 29, 2012, Plaintiffs initiated this action against Defendants Publicações Técnicas Internacionais ("PTI"), IBIS Corp. ("IBIS"), and Pierre Grossman ("Grossman" and, together with PTI and IBIS, "Defendants"), alleging that Defendants had obtained multiple journal subscriptions at discounted rates, and then resold the journals to institutions that were ineligible for the discounts. On May 8, 2015, the Court entered default judgment against PTI and IBIS, but Grossman proceeded to trial. On January 14, 2016, a jury determined that Grossman had violated the Racketeer Influenced and Corrupt Organizations Act ("RICO" or the "Act"), 18 U.S.C. §§ 1961 –68, but that he had not engaged in a conspiracy to violate the Act. The jury further determined that Grossman had breached one or more contracts with Plaintiffs and that he had converted Plaintiffs' property. The jury awarded Plaintiffs $11,108 in damages for the RICO violation and $6,201 for the contractual breaches, but found that Plaintiffs had not been damaged by the conversion of their property.
On February 15, 2016, Grossman filed a motion for judgment as a matter of law on the RICO claim (the "RICO Motion"). The following day, Plaintiffs filed: (i) a motion for judgment as a matter of law on the question of RICO damages, or in the alternative, for a new trial solely on the question of RICO damages (the "Damages Motion"); (ii) a motion for an award of damages and an entry of final default judgment against PTI and IBIS (the "Motion for Final Default Judgment"); and (iii) a motion for attorneys' fees and costs under 18 U.S.C. § 1964(c) (the "Fee Motion"). For the reasons set forth herein, the RICO Motion is granted, but Plaintiffs may request a new trial at which they might be able to establish RICO liability against Grossman; the Damages Motion is denied; the Motion for Final Default Judgment is granted in part and denied in part; and the Fee Motion is denied.
The Court assumes familiarity with the facts and procedural history set forth in its prior decision denying Plaintiffs' motion for default judgment and granting Plaintiffs leave to amend the Complaint, Elsevier, Inc. v. Grossman , No. 12 Civ. 5121 (KPF), 2013 WL 6331839 (S.D.N.Y. Dec. 5, 2013) (" Elsevier I "), as well as the Court's opinion granting in part Defendants' motion to dismiss, Elsevier, Inc. v. Grossman , 77 F.Supp.3d 331 (S.D.N.Y. 2015) (" Elsevier II "). For convenience, the facts relevant to this Opinion are set forth below.
Plaintiffs are a group of related publishing companies with offices in Amsterdam, Paris, London, and New York. (See Tr. 149). Together, Plaintiffs produce approximately 2,000 scientific and technological journals, which are geared toward "specialists and professionals" in various fields of medicine, science, and engineering. (See id. at 149–50). Plaintiffs incur substantial costs to create these journals, including the costs of soliciting articles; reviewing the articles; and printing and distributing the journals to customers. (Id. at 150–51).
Plaintiffs sell their journals through annual subscriptions, either directly or through subscription agents. (Tr. 151, 154). Subscription agents help customers complete the paperwork required to obtain subscriptions for various journals. (See id. at 154).
Plaintiffs charge two different prices for their products: Institutions (such as universities and libraries) pay full price, because Plaintiffs expect that institutions will make their journals available to multiple readers. (Tr. 151–52). By contrast, if an individual wishes to purchase a journal for his or her own personal use, he or she can order the journal at a discounted rate. (Id. ). Plaintiffs do not earn a profit on the subscriptions sold to individuals at the discounted price. (Id. at 152–53). As a result, when a subscription agent buys a journal for an individual reader, or when an individual buys a journal directly from Plaintiffs, the agent or the individual must sign a contract stating that the journal has been ordered for "valid personal use." (See, e.g. , Ex. 11; see also Tr. 154–55). In other words, the agent or the individual must promise that the journal will not be given to an institution that should have paid full price. (Id. at 154–55).
Pierre Grossman is a citizen and resident of Brazil. He is also the president and founder of PTI—a Brazilian subscription agency. (Tr. 341, 344, 348–49). Since 2000, Grossman and his wife have been PTI's sole shareholders. (Id. at 341). PTI has a handful of employees, including Grossman's brother-in-law, Roberto Saad. (Id. at 343, 345).
As the president of PTI, Grossman ordered thousands of journal subscriptions for Brazilian institutions and individuals from publishers located "all over the world." (See Tr. 348). However, he found that Brazilian regulations made it very difficult for PTI to pay these publishers. (Id. at 346). As Grossman testified at trial, the Brazilian Central Bank charges a flat fee for any check sent from Brazil to a foreign country. (Id. at 348). Thus, if PTI sent multiple checks to foreign publishers, it would have to pay a fee for each check. (Id. ). In order to reduce PTI's banking fees, Grossman established a New York corporation called IBIS. (Id. at 345, 348–49). Each month, Grossman would send one large check from PTI's account in Brazil to IBIS's account in New York, and the Brazilian Central Bank would charge him only one fee. (See id. at 348–49). Once the money arrived in IBIS's account, Grossman would use it to pay various publishers, including Plaintiffs. (See id. ).
Grossman also testified that around the year 2000, he and his family purchased a small apartment in Garden City, New York. (Tr. 342). This apartment served as an "office" and mailing address for IBIS.
(Id. at 341–42). Occasionally, Grossman asked publishers to ship journals to the apartment because "the Post office didn't work in Brazil for delivery." (Id. at 348, 350).
Between 2007 and 2011, Defendants ordered 51 journal subscriptions from Plaintiffs at the discounted rate applicable to individual readers. (Ex. 10). Nevertheless, over the course of the trial, Plaintiffs proved conclusively that Defendants acquired the 51 subscriptions for Brazilian institutions, which were ineligible for the discount. (Id. ).
Plaintiffs filed the instant action on June 29, 2012. (Dkt. # 1). However, Grossman, PTI, and IBIS missed their deadline to answer the Complaint. Consequently, on June 7, 2013, the Clerk of Court entered certificates of default against these three defendants. (Dkt. # 8–10). The Court issued an Order to Show Cause on July 30, 2013, requiring Grossman, IBIS, and PTI to show cause why a default judgment should not be entered against them. (Dkt. # 12). On August 30, 2013, the Court held a hearing at which Grossman, PTI, and IBIS were jointly represented by counsel; counsel raised several arguments opposing the entry of default judgment. (See generally Aug. 30 Tr.). On December 5, 2013, the Court issued an Opinion and Order vacating the certificate of default against Grossman, PTI, and IBIS, largely because Plaintiffs had not adequately pleaded their RICO claims. See generally Elsevier I , 2013 WL 6331839.
On February 4, 2014, Plaintiffs filed an Amended Complaint, which cured the deficiencies that the Court had identified in the original Complaint. (Dkt. # 33). On May 20, 2014, Defendants moved to dismiss the Amended Complaint for lack of subject matter jurisdiction and failure to state a claim. (Dkt. # 39). On January 5, 2015, the Court issued an Opinion and Order denying Defendants' motion in part and granting it in part. See generally Elsevier II , 77 F.Supp.3d 331. The Court held that it had personal jurisdiction over Defendants, and that Plaintiffs had stated valid RICO claims. Id. at 342–51. The Court further held that Plaintiffs had stated a valid claim for conversion under New York law. Id. at 352. However, the Court concluded that Plaintiffs had not stated a valid state-law claim for fraud. Id.
On January 23, 2015, Defendants' counsel moved to withdraw. (Dkt. # 47). After the Court granted counsel's motion (Dkt. # 49), Grossman decided to proceed pro se (see Dkt. # 52). Similarly, PTI and IBIS declined to retain new counsel. (Dkt. # 55). As corporate entities, however, PTI and IBIS could not take any action in this case without an attorney. See Sec. & Exch. Comm'n v. Research Automation Corp. , 521 F.2d 585, 589 (2d Cir. 1975) (). Thus, PTI and IBIS defaulted. (Dkt. # 65–66).
On April 7, 2015, this Court issued a second Order to Show Cause why default judgment should not be entered against the two corporate Defendants. (Dkt. # 70). Following a hearing on May 8, 2015, the Court "ordered, adjudged[,] and decreed that Plaintiffs ha[d] judgment against [D]efendants IBIS and PTI as to liability on those claims in Plaintiffs' Amended Complaint remaining after the Court's January 5, 2015 Opinion and Order." (Dkt. # 80 (capitalization omitted)). But the Court deferred an inquest on damages until after it had reached "a disposition of the claims against [D]efendant Pierre Grossman." (Id. ).
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