Leventhal v. Schenberg

• Decision Date: 17 January 2013
• Docket Number: No. 11 C 4614.,11 C 4614.
• Citation: 917 F.Supp.2d 837
• Court: U.S. District Court — Northern District of Illinois
• Parties: Howard LEVENTHAL, Plaintiff, v. Gene Byron SCHENBERG, Richard F. Huck, III, Michael J. McKitrick, Danna McKitrick, PC, Patrick G. Somers,NetSecure Technologies, Ltd., and Daniel McCann, Defendants.

917 F.Supp.2d 837

Howard LEVENTHAL, Plaintiff,

v.Gene Byron SCHENBERG, Richard F. Huck, III,¹ Michael J. McKitrick, Danna McKitrick, PC, Patrick G. Somers,²NetSecure Technologies, Ltd., and Daniel McCann, Defendants.

No. 11 C 4614.

United States District Court,

N.D. Illinois,

Eastern Division.

Jan. 17, 2013.

Howard Leventhal, pro se.

Richard Huck, Danna McKitrick, P.C., St. Louis, MO, for Defendants.

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, Chief Judge:

In his Second Amended Complaint, plaintiff Howard Leventhal (“Leventhal”) alleges that defendants Gene Byron Schenberg (“Schenberg”), Richard F. Huck, III (“Huck”); Michael J. McKitrick (“McKitrick”), and Danna McKitrick PC (“Danna McKitrick”) are liable for malicious prosecution (First Cause of Action) and abuse of process (Second Cause of Action); that Schenberg is liable for copyright infringement (Third Cause of Action); that defendants NetSecure Technologies, Inc. (“NetSecure”) and Daniel McCann (“McCann”) are liable for contributory copyright infringement (Fourth Cause of Action) and vicarious copyright infringement (Fifth Cause of Action); and that all Defendants are liable for unfair competition (Sixth Cause of Action). (Dkt. No. 94 (“2d Am. Compl.”).)

Now pending before the court is the “Motion to Dismiss Plaintiff's Second Amended Complaint Pursuant to Rule 12(b)(6) of Defendants Gene Byron Schenberg, Richard F. Huck, III, Michael J. McKitrick, Danna McKitrick, P.C., NetSecure Technologies, Ltd. and Daniel McCann.” (Dkt. No. 97 (“Defs.' Mot”).) For the reasons set forth below, Defendants' motion is granted.

BACKGROUND

When ruling on a motion to dismiss, the court accepts the factual allegations set forth in the complaint as true and draws all reasonable inferences in favor of the plaintiff. Fednav Int'l Ltd. v. Continental Ins. Co., 624 F.3d 834, 837 (7th Cir.2010). The following background facts are therefore set forth as alleged in Leventhal's Second Amended Complaint.

Leventhal is a former officer of two now-dissolved Illinois corporations named BitzMart, Inc. (“BitzMart”) and Primecom Interactive, Inc. (“Primecom”). (2d Am. Compl. ¶ 6.) Schenberg was employed at both companies, first as a contract sales and marketing service provider for Primecom and later as Chief Marketing Officer for BitzMart. ( Id.) Both BitzMart and Primecom “created, developed, and sold software products to businesses and in retail outlets.” ( Id.) Schenberg is currently employed with defendants NetSecure and McCann. ( Id. ¶ 16.)

Schenberg resigned as BitzMart's Chief Marketing Officer in 2002. ( Id. ¶¶ 6, 14.) When he left BitzMart, Schenberg took with him, without permission, certain computer files containing “proprietary lists of customers and detailed customer information and sales information which belonged to Leventhal and were made available to BitzMart on a royalty-free basis.” ( Id. ¶ 14.) From 2002 to the present, Schenberg has “repeatedly used the files [and] displayed the files for the purpose of accessing information about BitzMart's former clients ... up to and including the present day and his current employment with Defendants NetSecure and McCann.” ( Id. ¶ 16.)

Leventhal and Schenberg have been engaged in extensive litigation against each other for approximately ten years, beginning in 2002 when Schenberg sued BitzMart in the Circuit Court of St. Louis County, Missouri, for $60,000 in unpaid wages (Case No. 2102CC–0016362CV (“Wages Case”)) and BitzMart filed counterclaims against Schenberg for conversion, computer tampering, violations of the Computer Fraud and Abuse Act, cyber trespass, and tortious interference. ( Id. ¶ 10; see also Dkt. No. 94–1, Pl.'s Ex. D (“Table of Litigation Cases”),³ Refs. 1–2.) Schenberg prevailed at trial after his attorney, Huck, intentionally scheduled the trial for a date he knew Leventhal could not attend court. ( Id. ¶ 21.) Schenberg was awarded a judgment of $284,171.69 in the Wages Case, along with a finding that BitzMart was Leventhal's “alter ego.” ( Id. ¶ 22; Table of Litigation Cases, Refs. 1–2.)

From December 2003 through July 2011, Leventhal filed at least six cases against Schenberg in various courts, in addition to the case now pending before this court, alleging claims for conspiracy, conversion, copyright infringement, tortious interference, abuse of process, fraud, collusion, unpaid wages, and involuntary servitude. (Table of Litigation Cases, Refs. 3–6, 9, 15–16.)

In April 2004, Schenberg filed a case against Leventhal for abuse of process and malicious prosecution in the Circuit Court of St. Louis County, Missouri (Case No. 04CC–1483 (“Malicious Prosecution Case”)). ( Id., Ref. 7.) Schenberg prevailed in the Malicious Prosecution Case, and was awarded a judgment of $71,895 in actual damages and $200,000 in punitive damages. ( Id.) Schenberg was also awarded $5,000 in attorney's fees for Leventhal's improper attempt to remove the Malicious Prosecution Case to federal court. ( Id., Ref. 10 (Case No. 06–C–0749 (N.D.Ill.) (“Removal Case”) (Kendall, J.)).)

On March 22, 2010, Leventhal and his former wife, Malgorzata J. Kubiak (“Kubiak”), filed a petition for Chapter 7 bankruptcy in the Northern District of Illinois. (2d Am. Compl. ¶ 12; Table of Litigation Cases, Refs. 11–12 (In re Leventhal, Case No. 10–B–12257 (Bankr.N.D.Ill.) (“Bankruptcy Case”)).) Leventhal and Kubiak received their bankruptcy discharge on June 30, 2010. (Bankruptcy Case, Dkt. No. 33.) ⁴ More than a year later, on July 8, 2011, Schenberg filed an adversary proceeding in the Bankruptcy Case. (2d Am. Compl. ¶ 12; Table of Litigation Cases, Ref. 13 ( Schenberg v. Leventhal, Adversary Proceeding No. 11–A–1467 (Bankr.N.D.Ill.) (“Adversary Proceeding”)); see also Pl.'s Ex. E (docket sheet).) On October 28, 2011, as part of the Adversary Proceeding, Bankruptcy Judge Carol A. Doyle dismissed Schenberg's claims for revocation of discharge as untimely, and dismissed Schenberg's remaining claim against Kubiak for failure to state a claim, leaving one claim pending against Leventhal in the Adversary Proceeding. (2d Am. Compl. ¶ 13; see also Adversary Proceeding, Dkt. No. 49.) On April 13, 2012, Bankruptcy Judge A. Benjamin Goldgar entered a judgment in favor of Schenberg on Schenberg's remaining claim against Leventhal that the judgments from the Malicious Prosecution Case and the Removal Case were not dischargeable in bankruptcy. (Adversary Proceeding, Dkt. No. 159.)

Schenberg “has been represented in every single case” by defendant Huck, who also represents all Defendants in the case now pending before this court. (2d Am. Compl. ¶ 11.) Huck's law firm, Danna McKitrick, and Huck's law partner, McKitrick, have also been named as defendants in this case.

LEGAL STANDARD

Rule 8 of the Federal Rules of Civil Procedure requires complaints to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In other words, the complaint must “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). A complaint is sufficient if it gives “enough details about the subject-matter of the case to present a story that holds together.” Swanson v. Citibank, 614 F.3d 400, 404 (7th Cir.2010). On the other hand, a plaintiff “can plead himself out of court by pleading facts that show that he has no legal claim.” Atkins v. City of Chicago, 631 F.3d 823 (7th Cir.2011).

ANALYSIS

1. Malicious Prosecution—First Cause of Action

In response to the pending motion, Leventhal has voluntarily limited his malicious prosecution claim to “Defendants' actions in the Bankruptcy Court for the Northern District of Illinois, Case No. 11 A 01467 adversary proceeding.” (Dkt. No. 116 (“Pl.'s Resp.”) at 4, n. 2.) The court accordingly limits its analysis to the allegations set forth in paragraphs 19–20, 31–33, 37, 41–42 of the Second Amended Complaint.

To prevail on a claim of malicious prosecution, a plaintiff must ultimately demonstrate (1) “that the defendant instituted the underlying suit without probable cause and with malice”; (2) “that the former action was terminated in the plaintiff's favor,” and (3) “that as a result of the underlying action the plaintiff suffered a special injury beyond the usual expense, time or annoyance in defending a lawsuit.” Miller v. Rosenberg, 196 Ill.2d 50, 255 Ill.Dec. 464, 749 N.E.2d 946, 952 (2001).

Defendants argue in their motion to dismiss “Leventhal has not alleged that any lawsuit filed by Schenberg has terminated in Leventhal's favor” and “Leventhal has failed to factually allege ‘special injury’ or ‘special damage’ beyond the usual expense, time or annoyance in defending a lawsuit.” (Def.'s Mot. ¶¶ 13, 15.) The court takes judicial notice of the fact that the Adversary Proceeding initiated by Schenberg in bankruptcy case number 11 A 1467 ultimately terminated in favor of Schenberg on April 13, 2012—approximately two months after the filing of the Second Amended Complaint—when Judge Goldgar held that Leventhal's debts to Schenberg were non-dischargeable in bankruptcy. ( See Adversary Proceeding, Dkt. No. 159.) Schenberg's filing of the Adversary Proceeding, itself, therefore cannot constitute valid grounds for Leventhal's malicious prosecution claim.

Leventhal argues that he nevertheless received a “judicial determination in [his] favor,” because some of the claims filed by Schenberg in the Adversary Proceeding were dismissed by the bankruptcy court. (Pl.'s Resp. at 5.) On its face,...