Mobile Real Estate, LLC v. Newpoint Media Grp., LLC

• Decision Date: 18 May 2020
• Docket Number: No. 19-CV-11475 (KMK),19-CV-11475 (KMK)
• Citation: 460 F.Supp.3d 457
• Parties: MOBILE REAL ESTATE, LLC, et al., Plaintiffs, v. NEWPOINT MEDIA GROUP, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

460 F.Supp.3d 457

MOBILE REAL ESTATE, LLC, et al., Plaintiffs,

v.NEWPOINT MEDIA GROUP, LLC, et al., Defendants.

No. 19-CV-11475 (KMK)

United States District Court, S.D. New York.

Signed May 18, 2020

Gregory Saracino, Esq., Saracino Morris Law Group PLLC, Harrison, NY, Counsel for Plaintiffs.

Frederick L. Whitmer, Esq., Kilpatrick Townsend & Stockton LLP, New York, NY, Counsel for Defendants.

OPINION & ORDER

KENNETH M. KARAS, United States District Judge:

Plaintiffs Mobile Real Estate, LLC ("MRE") and John Lim, a founding partner of MRE ("Lim"; with MRE, "Plaintiffs"), bring this Action against Defendants NewPoint Media Group, LLC ("NewPoint"); NewPoint Media Group Holdings, LLC ("NewPoint Holdings"); The Real Estate Book d/b/a TREBMobileAgent ("TREB"); Lion Equity Partners, LLC ("Lion"); and Pez Gallo Holdings, LLC ("Pez Gallo"; collectively, "Defendants"), claiming breach of contract, violation of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 et seq. , civil conspiracy, negligence, and unjust enrichment in connection with Defendants’ alleged misappropriation of Plaintiffs’ proprietary software application. (See generally Am. Compl. (Dkt. No. 11).) Before the Court are the Parties’ competing Motions regarding arbitration. Plaintiffs seek to stay and/or vacate arbitration, ("Plaintiffs’ Motion"), while Defendants move to compel arbitration, stay this Action, or both, ("Defendants’ Motion"; with Plaintiffs’ Motion, the "Motions"). (See Pls.’ Not. of Mot. (Dkt. No. 13); Defs.’ Not. of Mot. (Dkt. No. 20).)

For the reasons explained herein, Defendants’ Motion is granted in part and denied in part, and Plaintiffs’ Motion is denied.

I. Background

A. Factual Background

The following facts are taken from the Amended Complaint, and the declarations and exhibits submitted in connection with the Motions. (Am. Compl.; Decl. of Gregory Saracino, Esq. in Supp. of Pls.’ Mot. ("Saracino Decl.") (Dkt. No. 14); Aff. of John Lim in Supp. of Pls.’ Mot. ("Lim Aff.") (Dkt. No. 15); Decl. of Frederick L. Whitmer, Esq. in Supp. of Defs.’ Mot. ("Whitmer Decl.") (Dkt. No. 21); Decl. of Eric Loeffel in Supp. of Defs.’ Mot. ("Loeffel Decl.") (Dkt. No. 22); Reply Decl. of Gregory Saracino, Esq. in Further Supp. of Pls.’ Mot. ("Saracino Reply Decl.") (Dkt. No. 29)).¹ The Court recounts only the facts that are relevant to the instant Motions.

1. The Parties

During the relevant period, MRE maintained a principal place of business in Stamford, Connecticut. (Am. Compl. ¶ 11.) Lim, owner and officer of MRE, resides in Westchester County, New York. (Id. ¶¶ 12–13.) NewPoint Holdings, Lion, and Pez Gallo are beneficial owners of NewPoint, and TREB is a "trade name used by NewPoint in connection with its operation of its TREB real estate sales promotion magazine." (Loeffel Decl. ¶ 13.) Plaintiffs aver that Lion was the owner of NewPoint until April 2018, when it sold NewPoint to Pez Gallo. (Am. Compl. ¶¶ 25–26.) Also according to Plaintiffs, NewPoint Holdings is a Delaware limited liability company which maintains principal places of business in Delaware; Bee Cave, Texas; and Lawrenceville, Georgia. (Id. ¶¶ 16–18.) Plaintiffs label TREB as a "subsidiary and/or d/b/a of NewPoint" that, along with NewPoint, has principal places of business in Bee Cave, Texas and Lawrenceville, Georgia. (Id. ¶¶ 14–15, 19–21.) Pez Gallo is a Delaware limited liability company with principal places of business in Delaware and Carlsbad, California, and Lion maintains a principal place of business in Denver, Colorado. (Id. ¶¶ 22–24.)

Plaintiffs "own, innovate, operate, and develop technology platforms that drive sales through shortcodes and text messaging," (id. ¶ 34), and "provide[ ] an array of consulting and ... internet data exchange [ ] aggregation and search technology to large scale real estate portals that drive real estate sales nationwide," (Lim Aff. ¶ 3). According to Lim, the "WinLocal^TM platform" developed by MRE is MRE's "absolute bread and butter." (Id. ¶¶ 8, 10.) This platform "enable[s] the delivery of real estate listing and related information to mobile phones ... and provides for the management and tracking of lead information." (Am. Compl. ¶ 34.) Specifically, the technology "assigns a text message to a property, delivers a lead to an advertiser or agent through text messaging, delivers a mobile-originated lead via email to agent or advertiser, and configures, creates, and maintains an enterprise level technology system automatically integrating large volumes of properties, advertisers, and text codes." (Id. ¶ 31.) These "text codes" prompt individuals looking for homes to view detailed information about home listings, and give listing agents or advertisers "real-time leads." (Id. ¶ 32 (italics omitted).) Plaintiffs state that prior to executing agreements with them, NewPoint "did not have any solutions which their clients could use outside of magazines and Real Estate Book URLs," and "relied solely on print media." (Id. ¶¶ 28, 33.) Conversely, today, NewPoint "relies almost entirely on mobile lead generation." (Id. ¶ 28.)

2. The Service Agreements and Amendments

In June 2013, NewPoint and MRE entered into a Master License and Services Agreement (the "First Services Agreement"). (See Saracino Decl. Ex. E ("First MSA") (Dkt. No. 14-5).)² According to Plaintiffs, the First Services Agreement "provided a license for [MRE's] MREID platform as well as a host of consulting services," which included "maintenance of mobile website, upgraded reporting, advertising guidelines, continuing education and training, advertiser webinars, and introducing mobile advertising." (Lim Aff. ¶ 7.)³ The First Services Agreement included a section on "[d]ispute [r]esolution," that set forth:

In the event of any dispute, claim, question, or disagreement arising from or relating to this [First Services] Agreement or the breach thereof, the Parties shall use commercially reasonable efforts to settle the dispute, claim, question, or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both Parties. If they do not reach such a solution within a period of sixty (60) days, then, upon notice by either Party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration conducted in Lawrenceville, Georgia and administered by the [American Arbitration Association] in accordance with the provisions of its Commercial Arbitration Rules.

(First MSA ¶ 12.4.)

According to Lim, NewPoint subsequently decided to "expand the services and more deeply integrate MRE's tech[nology] with the more expansive WinLocal^TM platform." (Lim Aff. ¶ 8.) Thus, on March 10, 2014, NewPoint and MRE executed a Second Master License and Services Agreement (the "Second Services Agreement"). (See Saracino Decl. Ex. F ("Second MSA") (Dkt. No. 14-6).) The Second Services Agreement took "several weeks" to negotiate in a process that involved the companies; their lawyers; Susan Deese ("Deese"), NewPoint's in-house counsel; and Scott Dixon ("Dixon"), NewPoint's chief executive officer ("CEO"). (Lim Aff. ¶ 10.) An earlier e-mail from Dixon to Lim attaching a draft of the Second Services Agreement stated, "[A]ttached is the agreement for our new relationship called[ ] Second Master[,] and an amendment [t]o our existing relationship .... I look forward to our next step together." (Saracino Decl. Ex. J ("Feb. 19, 2014 Lim E-Mail") (Dkt. No. 14-10).)

The Second Services Agreement "provided use and access to MRE's proprietary software platforms, including WinLocal^TM Agent Platform that enables the delivery of real estate listing and related information to mobile phones ... and provides for the management and tracking of lead information." (Am. Compl. ¶ 44 (emphases omitted).) This Agreement also included, inter alia, "creation of mobile, desktop[,] and tablet websites, providing data feeds containing real estate listings in the United States and Canada, custom single property websites, digital ad creation automated for use in e[-]mail and postlets, PDF property flyers, customizable Gateway Apps^TM, ... GPS enabled vanity text codes for sign riders, and ... access to the source code." (Id. ¶ 45 (emphasis omitted).)⁴

The Second Services Agreement did not include a provision mandating arbitration. (See generally Second MSA.) Instead, it included a clause stating

The [P]arties agree that any actions arising under th[e] [Second Services] Agreement shall be brought exclusively in the applicable state or federal courts located in Westchester County, New York. Each Party agrees to submit itself to the jurisdiction and venue of such courts for the purposes of any such action.

(Id. ¶ 13.6.) According to Lim, MRE did not want to arbitrate in the event of a dispute, and did not want to litigate in Lawrenceville, Georgia, which is the location Deese originally included when the arbitration clause was deleted from the Second Services Agreement. (Lim Aff. ¶ 10; see also Saracino Decl. Ex. K ("Draft Second MSA") (showing that an earlier draft of the Second Services Agreement provided that the Parties would be governed by the laws of the state of Georgia, and any actions arising under the Agreement would be brought in state or federal courts in Lawrenceville, Georgia) (Dkt. No. 14-11).) Thus, Plaintiffs "insisted that New York law would govern, and that any dispute would be heard in a New York court." (Lim Aff. ¶ 5.) The Second Services Agreement also included a non-compete clause, which was not included in the First Services Agreement, and upon which NewPoint "insisted." (Id. ¶ 13; Am. Compl. ¶ 49.) Finally, the Second Services Agreement set forth that

Th[e] [Second Services] Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes any and all agreements or understandings, whether written or oral,

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