Software Pricing Partners, LLC v. Geisman

• Docket Number: 3:19-cv-00195-RJC-DCK
• Decision Date: 31 August 2022
• Parties: SOFTWARE PRICING PARTNERS, LLC Plaintiff, v. JAMES H. GEISMAN, Defendant.
• Court: U.S. District Court — Western District of North Carolina

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SOFTWARE PRICING PARTNERS, LLC Plaintiff, v. JAMES H. GEISMAN, Defendant.

No. 3:19-cv-00195-RJC-DCK

United States District Court, W.D. North Carolina, Charlotte Division

August 31, 2022

ORDER

Robert J. Conrad, Jr. United States District Judge

THIS MATTER comes before the Court on Plaintiff's Motion for Default Judgement (Doc. No. 85).

I. BACKGROUND

A. Factual Background

Plaintiff Software Pricing Partners, LLC (“Plaintiff” or “SPP”) provides software companies with pricing tactics, program and project management solutions, and project deployment services used to help increase a company's overall profitability and improve its growth. (Doc. No. 57 ¶ 11). To that end, SPP developed its own confidential information and trade secrets in the form of unique algorithms, formulae, approaches, frameworks, and insights for software companies to deploy complex tailored licensing, packaging, pricing, and discounting models into their operations. (Id. ¶¶ 12, 21).

In June 2015, Chris Mele and Defendant Geisman formed SPP. (Id. ¶ 14). When formed, SPP acquired all intellectual property from Geisman and the now-dissolved Software Pricing Partners, Inc., an entity Geisman owned. (Id. ¶¶ 15-16). In their roles at SPP, Geisman, and Mele spent considerable time developing innovative tools, formulae, and techniques for building pricing and licensing models and packaging software features. (Id. ¶ 22). A handwritten formula developed by Mele and Geisman is at the heart of SPP's business. (Doc. No. 22 at 44-48). During this time, Geisman had access to SPP's confidential information and trade secrets, and regularly relied on this information to perform work for SPP. (Doc. No. 57 ¶ 23).

In March 2018, SPP and Geisman began discussing Geisman's exit from SPP. (Id. ¶ 33). The discussions ultimately culminated in a Member Exit Agreement (“MEA”) between SPP, Mele, and Geisman, executed on July 15, 2018. (Id. ¶ 36; Doc. No. 57-2). Pursuant to the MEA, Geisman gave up his membership interest in the SPP and resigned. (Doc. No. 57-2 at 2). The Court previously concluded the following MEA provisions are unenforceable as a matter of law: non-competition provision (paragraph 17(b)), non-solicitation provision (paragraph 17(d)), company intellectual property provision (paragraph 18), and related provision restricting Geisman's ability to teach, write papers, and engage in other similar activities (paragraph 17(e)). (Doc. No. 40). In addition to the unenforceable provisions, the MEA contains confidentiality provisions and protection of SPP's name and logo.

While negotiations regarding Geisman's exit were ongoing, on numerous occasions Geisman copied SPP's confidential information and trade secrets to Geisman's personal laptop, despite denying it to SPP and Mele. (Doc. No. 57 ¶ 44). SPP provided a list of 134 files that Geisman took from SPP, containing specific trade secrets. (Id. ¶ 50; Doc. No. 57-3). Also during negotiations, Geisman stated in an email to his brother-in-law on July 10, 2018: “[w]ith my knowledge I could re-create the substance of any SPP IP. I certainly won't broadcast that but for use with clients (suitably restricted), what do you think?” (Id. ¶ 57). In October 2018, after Geisman executed the MEA, Geisman attempted to access SPP's files again. (Id. ¶ 58).

After exiting SPP, Geisman used and disclosed SPP's trade secrets and confidential information for his own gain and in competition with SPP. (Id. ¶¶ 66-67). Geisman solicited SPP's customers and intercepted leads from SPP. (Id. ¶¶ 84-86). For example, on July 23, 2018, Geisman sent a presentation containing SPP's confidential information to a third party. (Id. ¶ 70). On October 4, 2018, Geisman provided PowerPoint slides to a third party for a presentation that included SPP's information and logo. (Id. ¶ 89). On October 29, 2018, Geisman sent an email to four people which included a confidential SPP spreadsheet. (Id. ¶ 91). Geisman also sent SPP's trade secret algorithms and non-sanitized confidential spreadsheets to VideoMyJob, an Australian software company. (Id. ¶¶ 92-93; Doc. No. 22 at 59-68). On March 4, 2019, on a podcast, Geisman held himself out to be the “founder and president of SPP” and disclosed SPP's confidential information. (Doc. No. 57 ¶¶ 72-73). Geisman also copied, distributed, and altered SPP's copyright materials without SPP's consent. (Id. ¶¶ 97-104).

During the course of this litigation, in 2020, SPP discovered at least 11,150 known SPP documents on Geisman's laptop, at least 11,200 known SPP documents on Geisman's external hard drive, and at least 730 known SPP documents on Geisman's backup drive. (Id. ¶ 51). These files include: (1) SPP's files from over 210 completed projects with SPP's clients;^[1] (2) over 340 files from dozens of failed client proposals; (3) at least 250 critical files to SPP's business contained in a single directory; and (4) at least 1,600 files from SPP's workshop presentations. (Id.). Geisman has all of SPP's information that gives SPP a competitive edge in the market. (Doc. No. 5-1 ¶ 30).

B. Procedural Background

On April 19, 2019, SPP filed its Complaint in this Court against Geisman alleging he misappropriated confidential information and trade secrets. In May 2019, SPP also filed a Motion for Preliminary Injunction. (Doc. Nos. 4 & 5). The Court entered a limited preliminary injunction that required Geisman to delete from his computer and not to use or disclose the contents of certain 224 files Geisman allegedly copied. (Doc. No. 32). Thereafter, on a motion to dismiss, the Court dismissed SPP's claims as follows: (1) claim for breach of the MEA to the extent it is based on the non-competition provision, non-solicitation provision, company intellectual property provision, and related provisions restricting Geisman's ability to teach, write papers, and engage in other similar activities because they are unenforceable as a matter of law; (2) trade secret misappropriation under North Carolina Trade Secrets Protection Act and common law because the alleged misappropriation occurred outside of North Carolina; and (3) trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”) without prejudice to file an amended complaint because the Complaint did not identify with any specificity the trade secrets that Geisman allegedly used or disclosed. (Doc. No. 40). The Court also noted that SPP released all claims it had against Geisman as of July 15, 2018-whether known or unknown-such that alleged misappropriation, use, or disclosure of confidential information and trade secrets prior to July 15, 2018, cannot support SPP's claims. (Doc. No. 40 at 24).

On May 12, 2021, SPP filed the operative Second Amended Complaint asserting claims for: (1) breach of the MEA; (2) misappropriation of trade secrets under the Massachusetts Trade Secrets Act (“MTSA”); (3) misappropriation of trade secrets under the DTSA; (4) copyright infringement in violation of 17 U.S.C. § 501; (5) copyright infringement in violation of the Digital Millennium Copyright Act (“DMCA”) under 17 U.S.C. § 1202; and (6) Unfair and Deceptive Trade Practices under N.C. Gen. Stat. § 75-1.1. During discovery, in July 2021, Geisman filed a Chapter 13 bankruptcy case in the United States Bankruptcy Court for the District of Massachusetts. (Doc. No. 57). The bankruptcy case stayed this action until SPP received relief from the automatic stay to continue litigating this case. Thereafter, the Court held a status conference at which Geisman indicated he is “unable to continue to defend against the allegations in this lawsuit” and would agree to an entry of default “to be proactive . . . in lieu of becoming an unresponsive party.” (Doc. No. 81). The Clerk of Court entered a default on April 18, 2022, after which SPP filed its Motion for Default Judgment requesting a permanent injunction, damages including treble damages, and attorneys' fees. (Doc. Nos. 83, 85). Geisman contests the scope of the permanent injunction and amount of damages requested. (Doc. No. 88).

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 55, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). Upon the entry of default, the defaulted party is deemed to have admitted all well pleaded allegations of fact contained in the complaint. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001); Weft, Inc. v. GC Inv Assocs., 630 F.Supp. 1138, 1141 (E.D. N.C. 1986). However, the defendant is not deemed to have admitted conclusions of law and the entry of “default is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover.” Ryan, 253 F.3d at 780 (citations omitted); see also E.E.O.C. v. Carter Behavior Health Servs., Inc., No. 4:09-cv-122-F, 2011 WL 5325485, at *3 (E.D. N.C. Oct. 7, 2011). Rather, in determining whether to enter judgment on the default, the court must determine whether the well pleaded allegations in the complaint support the relief sought. Ryan, 253 F.3d at 780 (citing Weft, 630 F.Supp. at 1141); DIRECTV, Inc. v. Pernites, 200 Fed.Appx. 257, 258 (4th Cir. 2006) (“[A] defendant is not held to admit facts that are not well pleaded or to admit conclusions of law.”). “If the court finds that liability is established, it must then determine damages.” Carter Behavior Health, 2011 WL 5325485, at *4 (citing Ryan, 253 F.3d at 780-81). “The court must make an independent determination regarding damages, and cannot accept as true factual allegations of damages.” Id. (citations omitted). While the court may conduct an evidentiary hearing to determine...