Saunders Ventures, Inc. v. Salem ( 2019 )


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  • 18-2523-cv
    Saunders Ventures, Inc. v. Salem
    UNITED STATES COURT OF APPEALS
    FOR THE SECOND CIRCUIT
    SUMMARY ORDER
    RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
    SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
    FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
    CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
    EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
    “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
    ANY PARTY NOT REPRESENTED BY COUNSEL.
    At a stated term of the United States Court of Appeals for the Second Circuit, held at
    the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
    on the 12th day of December, two thousand nineteen.
    PRESENT:
    DENNIS JACOBS,
    SUSAN L. CARNEY,
    MICHAEL H. PARK,
    Circuit Judges.
    _________________________________________
    SAUNDERS VENTURES, INC., DBA SAUNDERS & ASSOCIATES,
    Plaintiff-Counter-Defendant-Appellee,
    ANDREW SAUNDERS,
    Plaintiff-Third-Party-Defendant-Appellee,
    v.
    No. 18-2523
    MEG SALEM, AKA MARGARET SALEM,
    Defendant-Counter-Claimant-Third-Party-Plaintiff-
    Appellant,
    COMPASS HAMPTONS, LLC, URBAN COMPASS, INC., DBA
    COMPASS,
    Defendants-Third-Party-Plaintiffs,
    VANESSA BOGAN, JESSICA GRAINGER-ROZZI, JESSE
    SPOONER,
    Defendants-Third-Party-Defendants.
    ______________________________________
    FOR PLAINTIFF-COUNTER-
    DEFENDANT-APPELLEE:                                    Claude G. Szyfer, Michele L. Phamer,
    Stroock & Stroock & Lavan LLP, New
    York, NY.
    FOR DEFENDANTS-APPELLEES:                              Richard J. Montes, Mauro Lilling Naparty
    LLP, Woodbury, NY.
    Appeal from a judgment of the United States District Court for the Eastern District
    of New York (Azrack, J.).
    UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
    ADJUDGED, AND DECREED that the judgment entered on July 27, 2018, is
    VACATED and the cause is REMANDED for further proceedings.
    Appellant Meg Salem (“Salem”) appeals from a modified judgment of the United
    States District Court for the Eastern District of New York (Azrack, J.) denying, in part,
    Salem’s motion for (1) judgment as a matter of law under Federal Rule of Civil Procedure
    50(b), or (2) in the alternative, for a new trial under Federal Rule of Civil Procedure 59. We
    assume the parties’ familiarity with the underlying facts, the procedural history of the case,
    and the issues on appeal, to which we refer only as necessary to explain our decision.
    The following statement of facts is taken from the undisputed portions of the parties’
    filings. In 2010, Salem joined Saunders & Associates (“Saunders”), a real estate brokerage
    firm located in Bridgehampton, New York. Salem and Saunders entered into an Independent
    Contractor Relationship Agreement (the “Agreement”) that set forth the terms of their
    relationship. These included that Saunders “shall be paid a commission.” J.A. at 911.
    2
    Saunders maintained its real estate listings in a private database, “RealNet.” RealNet
    contained all of Saunders’s current and historical listings and other confidential information
    amassed by the company over the years. Andrew Saunders, the company’s owner, testified at
    trial that RealNet “represent[ed] the efforts of all our agents collectively over time.” J.A. at
    197.
    In November 2015, Salem informed Saunders that, effective immediately, she would
    be joining its competitor, Compass, which had recently opened in the Hamptons. At roughly
    the same time, two other agents who worked with Salem, Vanessa Bogan (“Bogan”) and
    Jesse Spooner (“Spooner”), also left with Salem to join Compass. Unbeknownst to Saunders,
    in the period leading up to Salem’s departure, Salem and Bogan emailed listings from
    RealNet to their personal computers, and Salem directed Bogan to delete the sent messages
    from her Saunders email account.
    After joining Compass, Salem enlisted the help of a Saunders employee to obtain the
    RealNet login credentials of Anna Alexopoulos (“Alexopoulos”), a Saunders employee who
    was on vacation at the time. Salem used those credentials to access RealNet. Having
    accessed the database, Salem emailed herself hundreds of Saunders’s listings. In doing so,
    Salem inadvertently sent an email to Alexopoulos, which then led to Saunders discovering
    that Salem had accessed RealNet without authorization.
    Upon its discovery of Salem’s unauthorized use of RealNet, Saunders engaged the
    services of K2 Intelligence, LLC (“K2”), a firm specializing in cybersecurity and cyber
    intrusions. Saunders directed K2 to conduct an investigation into Salem’s unauthorized
    access to its RealNet database and to assess whether (and if so, to what extent) any damage
    was done to the system. Saunders paid K2 $13,299.60 for its investigative services.
    In December 2015, Saunders filed a complaint seeking damages from Salem for
    breach of contract and violation of the Computer Fraud and Abuse Act (“CFAA”), 18
    U.S.C. §§ 1030(a)(2)(C) and (a)(4). Salem then asserted counterclaims against Saunders
    alleging, inter alia, breach of contract with regard to commissions that Saunders retained on
    transactions in which Salem had participated, but that were finalized after she left the firm.
    3
    The case was tried to a jury for five days before the late United States District Judge
    Leonard D. Wexler. On February 20, 2018, the jury returned a verdict in favor of Saunders
    on its CFAA and breach of contract claims and against Salem on her breach of contract
    counterclaim. The jury determined that Saunders was entitled to $13,299.60 in damages on
    its CFAA claims and $1.00 in nominal damages on its breach of contract claim.
    Following the entry of judgment, Salem moved for judgment as a matter of law or,
    alternatively, for a new trial, pursuant to Federal Rules of Civil Procedure 50(b) and 59. In
    her motion, Salem argued that the jury erred in failing to find a breach of contract where “it
    was undisputed that Saunders owed Salem commissions and those commissions had nothing
    to do with the alleged acts of misconduct.” Appellant’s Br. at 12. Salem also argued that
    Saunders failed to prove a loss cognizable under the CFAA; and in the alternative, she
    sought a reduction in the damages award on the grounds that certain costs were not
    recoverable under the CFAA. On July 27, 2018, the District Court granted her motion in
    part, reducing by $1,890 the damages award to Saunders on its CFAA claims. It otherwise
    denied the motion. Salem now challenges these decisions.
    We review de novo a district court’s decision on a post-verdict motion for judgment as
    a matter of law under Federal Rule of Civil Procedure 50(b). See Madeira v. Affordable Hous.
    Found., Inc., 
    469 F.3d 219
    , 226 (2d Cir. 2006). In doing so, we apply the “same standard as
    the district court itself was required to apply.” Diesel v. Town of Lewisboro, 
    232 F.3d 92
    , 103 (2d
    Cir. 2000). We thus consider the evidence in the light most favorable to the non-moving
    party, giving that party the benefit of all reasonable inferences that the jury might have
    drawn in its favor. See 
    id. A motion
    for judgment as a matter of law should be granted “[o]nly
    if there is such a complete absence of evidence supporting the verdict.” 
    Id. (alteration in
    original) (internal quotation marks omitted).
    We review the denial of a Rule 59(b) motion for abuse of discretion. Arnold v. Cty. of
    Nassau, 
    252 F.3d 599
    , 602 (2d Cir. 2001). A district court abuses its discretion if its decision
    to deny the Rule 59(b) motion resulted from an erroneous view of the law or rested on
    clearly erroneous findings of fact, or, if its decision is arbitrary, unsupported by the facts,
    unfair, beyond the range of authority or otherwise manifests a clear error of judgment. 
    Id. 4 I.
         Breach of Contract Claim
    On appeal, Salem argues that no reasonable jury could have determined that Saunders
    did not breach its contract when it failed to pay her $407,000 in commissions from sales that
    Salem originally brought in, but that were finalized after she left the firm. She contends that,
    had the jury found that Saunders breached their contract, it should have reached the
    faithless-agent defense question on the verdict sheet and determined that the payments did
    not arise in connection with the alleged acts of disloyalty. Therefore, Salem maintains she
    was entitled to her commissions.
    “[A] party is not entitled to challenge on appeal the sufficiency of the evidence to
    support the jury’s verdict on a given issue unless it has timely moved in the district court for
    judgment as a matter of law on that issue.” Kirsch v. Fleet St., Ltd., 
    148 F.3d 149
    , 164 (2d Cir.
    1998). As to those issues for which “proper Rule 50 motions were not made, JMOL may not
    properly be granted by the district court, or upheld on appeal, or ordered by the appellate
    court unless that action is required in order to prevent manifest injustice.” Lore v. City of
    Syracuse, 
    670 F.3d 127
    , 153 (2d Cir. 2012); see also ING Glob. v. United Parcel Serv. Oasis Supply
    Corp., 
    757 F.3d 92
    , 97 (2d Cir. 2014) (“The law is pellucid that a party’s failure to move
    under Rule 50(a) has consequences. If that party later moves under Rule 50(b), the standard
    for granting judgment as a matter of law is elevated, and the motion may not properly be
    granted by the district court, or upheld on appeal, except to prevent manifest injustice.”).
    Salem did not move for a directed verdict on her breach of contract claim before the
    jury rendered its verdict. Her failure to preserve the sufficiency issue for appellate review can
    be overlooked only to prevent “manifest injustice,” which exists where a jury’s verdict is
    wholly without legal support. See Rothstein v. Carriere, 
    373 F.3d 275
    , 291 (2d Cir. 2004). Here,
    the jury’s verdict as to Salem’s breach of contract claim is well-supported by the record. See
    ING 
    Glob., 757 F.3d at 97
    . At trial, Salem herself testified that commissions are not payable
    to a brokerage unless and until a deal closes, and confirmed that she was no longer with
    Saunders when the sales at issue closed. Moreover, the Agreement provides that it may be
    terminated at any time. It does not provide that Saunders’s obligation to pay commissions
    survives the Agreement’s termination as to transactions that close post-termination, unlike
    5
    the provision regarding intellectual property rights concerning real-estate listings, which
    continue “[d]uring and after the term of this independent contractor agreement.” J.A. at 911
    ¶ 13. For these reasons, we conclude that there is no manifest injustice in letting the jury
    award stand.
    II.     CFAA
    Salem argues that the costs Saunders incurred in investigating the nature and extent
    of the security breach of RealNet are not recoverable as a “loss” under the CFAA. 18 U.S.C
    § 1030(e)(11). Although Salem concedes that the cost of an investigation aimed at assessing
    damage to a computer system is typically recoverable under the statute, she urges that the K2
    investigation does not qualify.
    The record establishes that Saunders sufficiently proved “loss” to support the jury’s
    verdict on its CFAA claims. The CFAA permits recovery of “any reasonable cost” incurred
    by a victim. 18 U.S.C. § 1030(e)(11). These expressly include the costs of “conducting a
    damage assessment.” 
    Id. The lead
    investigator at K2, Vincent D’Agostino (“D’Agostino”),
    explained at trial the reason for the damage assessment: “There was a concern about a
    potential unauthorized access into an account on November 17th that the company
    [Saunders] wanted investigated.” J.A. at 58. The District Court correctly concluded that
    D’Agostino’s testimony provided ample ground for the jury to have concluded that the
    purposes of the K2 investigation were to identify evidence of a breach, to assess any damage
    it may have caused, and to determine whether any remedial measures were needed. This was
    a sufficient basis to conclude that the cost of that investigation constitutes a compensable
    “loss” under the CFAA because Saunders failed to prove that certain cost entries were
    related to the investigation, and when the District Court reduced the award by $1890, it
    failed to deduct the 5% administrative charge and 8.875% sales tax associated with that
    amount. 18 U.S.C. § 1030(e)(11).
    Salem also argues that the District Court should have further reduced the amount the
    jury awarded to Saunders under the CFAA. Salem fails, however, to demonstrate “such a
    complete absence of evidence” supporting the cost entries as would warrant deducting them
    6
    from the award amount. Kinneary v. City of New York, 
    601 F.3d 151
    , 155 (2d Cir. 2010)
    (internal quotation marks omitted). Salem’s contention that, because counsel was present for
    the phone calls, certain cost entries for calls pertained to litigation charges, as opposed to
    damage assessments, is without merit. In particular, we reject Salem’s contention that,
    because counsel was present on phone calls between the investigators and the client, cost
    entries for the calls pertained to the litigation charges rather than to damage assessments.
    The award, however, should be reduced by $262.23, the amount of the administrative charge
    and sales tax attributable to the $1,890 that was deducted from the original award. We
    conclude that the evidence was sufficient for a reasonable jury to find that the remaining
    costs were recoverable under the CFAA.
    * * *
    We have considered Salem’s remaining arguments and conclude that they are without
    merit. Accordingly, we VACATE the judgment and the cause is REMANDED for further
    proceedings consistent with this order.
    FOR THE COURT:
    Catherine O’Hagan Wolfe, Clerk of Court
    7