ESPOT, Inc. v. MyVue Media, LLC

• Decision Date: 02 October 2020
• Docket Number: CIVIL NO. 4:19-CV-954-SDJ
• Citation: 492 F.Supp.3d 672
• Parties: ESPOT, INC. v. MYVUE MEDIA, LLC, et al.
• Court: U.S. District Court — Eastern District of Texas

492 F.Supp.3d 672

ESPOT, INC.

v.MYVUE MEDIA, LLC, et al.

CIVIL NO. 4:19-CV-954-SDJ

United States District Court, E.D. Texas, Sherman Division.

Signed October 2, 2020

Benton Williams, II, Benton Williams PLLC, William Benjamin Jones, Austin Smith Champion, Harper Bates & Champion LLP, Dallas, TX, for ESPOT, Inc.

Christopher John Schwegmann, Patrick Brett Disbennett, Lynn Pinker Cox & Hurst LLP, Dallas, TX, Michael E. Jones, Potter Minton, Tyler, TX, for MyVue Media, LLC, NexxGen News, LLC, David Drucker, Andrew Moskowitz, Kevin Carpentier, Joe Clemente, Thomas Weddell.

MEMORANDUM OPINION & ORDER

SEAN D. JORDAN, UNITED STATES DISTRICT JUDGE

Parents managing a child's extracurricular schedule know that it can be tedious and fraught. Parents of children that play youth sports—with all the attendant practices, paperwork, tournaments, and fundraising—know this all too well. Plaintiff ESPOT, Inc. ("ESPOT") aimed to alleviate this problem by creating a free digital-media product that its principals, Mike Valley and Brad Cohen, hoped would streamline communication between the coaches and the families of student athletes. The product they created, a tablet called "TeamTab," would contain timely, team-specific information about schedules and other team obligations. ESPOT could then leverage the platform to generate advertising revenue by selling targeted digital advertising space to display on the tablets.

As ESPOT attempted to launch its product, it sought the contacts and expertise of those outside the business, including Defendants Joe Clemente, Kevin Carpentier, and Andrew Moskowitz. All appeared enthusiastic about the company's prospects when ESPOT sent Clemente 150 tablets to place with families, anticipating that these would be the first of thousands of tablets to go into homes across the country. Then the lights went out on the venture. ESPOT alleges that, having conspired together to do so, Defendants David Drucker, Thomas Weddell, Joe Clemente, Andrew Moskowitz, and Kevin Carpentier (collectively, the "Individual Defendants") extracted the trade-secret source code from tablets Clemente enticed ESPOT to send. ESPOT also alleges that the Individual Defendants misappropriated ESPOT's client lists and financial projections, which they used in creating and marketing their own tablet product as part of a business plan with Defendants MyVue Media, LLC ("MyVue") and NexxGen News, LLC ("NexxGen") (collectively, with the Individual Defendants, the "MyVue Defendants").

ESPOT filed this lawsuit against the MyVue Defendants, asserting a civil violation of the Racketeering Influenced and Corrupt Organizations Act ("RICO") and RICO conspiracy under 18 U.S.C. § 1962, et seq. , misappropriation of trade secrets under 18 U.S.C. § 1836, et seq. , and violation of the Computer Fraud and Abuse Act ("CFAA") under 18 U.S.C. § 1030, et seq. ESPOT also alleges aiding and abetting and conspiracy against all the Individual Defendants, breach of fiduciary duty against Defendants Moskowitz, Carpentier, and Clemente, and conversion against Defendant Clemente.

ESPOT moved for a temporary restraining order and preliminary injunction on the misappropriation-of-trade-secrets and breach-of-fiduciary-duty claims. (Dkt. #22). The MyVue Defendants responded in opposition, (Dkt. #27), to which ESPOT replied, (Dkt. #29). Contemporaneous with briefing on the preliminary injunction, the MyVue Defendants filed a motion to dismiss for lack of personal jurisdiction as to all defendants under Federal Rule of Civil Procedure 12(b)(2) and for failure to state a civil RICO claim under Rule 12(b)(6). (Dkt. #25). ESPOT responded in opposition, (Dkt. #35), to which the MyVue Defendants replied, (Dkt. #43). ESPOT filed an additional sur-reply. (Dkt. #44). In this order, the Court addresses the motions to dismiss. The preliminary injunction will be considered in a separate order.

After a telephonic conference with the parties, the Court determined that ESPOT's motion would be considered a preliminary-injunction motion and not a motion for temporary restraining order. (Dkt. #23). The Court also held two additional hearings regarding both the preliminary-injunction motion and the motions to dismiss, at which Mike Valley and Robert Hirano testified. (Dkt. #37, #45).

The nature of the motions to dismiss and the claims alleged requires that the Court address the motions in an unusual order. The Court cannot rule on the 12(b)(6) motion to dismiss the RICO claims unless it first determines that it has personal jurisdiction over the defendants as to those claims. See Moran v. Kingdom of Saudi Arabia , 27 F.3d 169, 172 (5th Cir. 1994) (A ... motion for lack of subject matter [or] personal jurisdiction must be considered by the district court before other challenges ...."). But because ESPOT urges the Court to exercise pendent personal jurisdiction over the defendants with respect to the remaining non-RICO claims, personal jurisdiction as to these claims depends on whether the RICO claims survive the 12(b)(6) motion.

The Court concludes that it has personal jurisdiction over every defendant with respect to the RICO claims. However, the Court further concludes that ESPOT has failed to plead a valid civil RICO claim or conspiracy. Unable to exercise pendent personal jurisdiction based on the RICO claims, the Court concludes that it has personal jurisdiction only over Defendant Clemente with respect to the remaining claims. The Court therefore GRANTS in part and DENIES in part the Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. The Court further GRANTS the Rule 12(b)(6) motion to dismiss the civil RICO claims.

I. BACKGROUND

A. The ESPOT Business

Mike Valley and Brad Cohen, co-founders of ESPOT, began their business selling a digital advertising and communication product to sports facilities. That product is a dedicated screen that communicates relevant information to sports-facility patrons while intermittently rolling through short video advertisements—an idea that combined a helpful locker room feature from Valley's days as a professional hockey player and coach with advertising revenue. That idea led to another—to take the attributes of ESPOT's sports-facility product and put it in tablet form. Rather than providing information about a sports facility, the "TeamTab" tablet, which ESPOT began developing in early 2019, would be available for free to allow teams to communicate information and responsibilities with players and their families. Then, like the facility product, the tablet would also facilitate programmatic advertising.

Despite the simplicity of the concept, execution was more difficult. The tablet ESPOT uses, a retail item, does not function properly for ESPOT's purposes right out of the box. It must be programmed using server-side software to input content, kiosk software to strategically limit functionality, and programmatic advertising—small video clips—to provide the seamless user interface that is intended. Valley claims that figuring out the "TeamTab" configuration recipe—how to get each of these components to work together and run smoothly—took him and Cohen hundreds of hours. Once the settings were established, however, Valley was able to create a "JSON" file that saved the kiosk software settings, making them easily portable from device to device. (Dkt. #37, Hr'g Tr. vol. 1 79:6–16). ESPOT contends that the contents of the JSON file, along with the server-side software customizations, are a trade secret because of the value derived from the time and effort taken to create the setting configuration.

Around the time that Valley was creating the TeamTab, ESPOT brought on Defendant Andrew Moskowitz, a New Jersey resident, to help with advertising sales. In his role, Moskowitz had access to sales presentations, contracts, and pricing information. (Dkt. #37, Hr'g Tr. vol. 1 65:2–24). Kevin Carpentier, a New York resident, followed shortly after, at the suggestion of Moskowitz, to help with sales of ESPOT's original product to sports facilities. In this role, Carpentier had access to "Streak" which is software that helps businesses manage their customers, leads, and sales presentations. (Dkt. #37, Hr'g Tr. vol. 1 66:14–25). Carpentier then recommended another New York resident, Joe Clemente, who owned a customer sports facility, as a person who could sell ESPOT's sports-facility product through his extensive professional network. Moskowitz also connected ESPOT with Roger Hirano, based in Brazil, who was hired to develop a new "ad-stack," which is software that allows companies to determine when and how digital advertisements are displayed. Though consulting agreements were drafted for Carpentier, Clemente, and Moskowitz, only Moskowitz signed one. None of the consultants knew about the TeamTab product initially, instead learning about it several weeks after coming on board. Once ESPOT had the TeamTab product ready, the next step was to get it into the hands of users.

Clemente, in particular, appeared excited about the idea and eager to help. He and Carpentier connected Cohen with Defendant Thomas Weddell, a New York resident and potential investor, in an unsuccessful attempt to raise capital. According to Weddell, Cohen sought a $400,000 investment and presented limited financial information and a spreadsheet that did not contain detailed financials or projections. (Dkt. #25-7, Ex. C ¶¶ 7–9). Weddell claims that Cohen did not follow up after the phone call and that he did not invest in ESPOT.

Clemente also reached out to Valley directly, initiating text-message conversations on May 4, 2019, and May 6, 2019. (Dkt. #35-1, Ex. A-1 at 1–2). In the May 6 conversation, Valley mentioned that he was busy trying to get tablets "out the door," and asked Clemente to "[s]tart thinking about what teams" might be good candidates for tablets. (Dkt. #35-1, Ex. A-1 at 3). Clemente responded that he needed to know how many teams because he "ha[s] unlimited resources...