Entertainment Data Oracle, Inc. v. iSpot.tv, Inc. ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ENTERTAINMENT DATA )
ORACLE, INC., )
)
Plaintiff, )
)
v. ) C.A. No. N22C-06-133
) PRW CCLD
ISPOT.TV, INC., )
)
Defendant. )
Submitted: November 22, 2022
Decided: December 7, 2022
Upon Defendant iSpot.tv, Inc.’s Motion to Dismiss or Stay,
DENIED in part, GRANTED in part.
MEMORANDUM OPINION AND ORDER
Garrett B. Moritz, Esquire, Elizabeth M. Taylor, Esquire, ROSS ARONSTAM &
MORITZ LLP, Wilmington, Delaware, Demian A. Ordway, Esquire, Timothy W.
Grinsell, Esquire, Victoria Roeck, Esquire, HOLWELL SHUSTER & GOLDBERG LLP,
New York, New York, Attorneys for Plaintiff Entertainment Data Oracle, Inc.
Seth A. Niederman, Esquire, FOX ROTHSCHILD LLP, Wilmington, Delaware, Gavin
W. Skok, Esquire, FOX ROTHSCHILD LLP, Seattle, Washington, Attorneys for
Defendant iSpot.tv, Inc.
WALLACE, J.
iSpot.tv, Inc. (“iSpot”) and Entertainment Data Oracle, Inc. (“EDO”) are both
in the entertainment advertising analytics business. iSpot, the senior player with a
focus on television; and EDO, the start-up with a focus on movies. EDO became a
customer and subscriber to iSpot’s august television analytics database and related
services on the understanding it was purportedly to be used for EDO’s movie
business. After the expiration of three successive customer and licensing
agreements, EDO launched a new television analytics platform in direct competition
with iSpot. While EDO was in the middle of negotiating new investments in its new
venture, iSpot filed suit in California alleging misappropriation of trade secrets,
copyright violation, and breach of contract. In turn, EDO filed suit here, alleging
tortious interference in a prospective business relationship by “fil[ing] baseless
claims against EDO” in California “with the intent to disrupt EDO’s expected equity
infusion from [an investor].”1
iSpot has moved now to stay or dismiss this action incanting McWane,2 or
alternatively, to dismiss the action under the judicial privilege doctrine. Because the
viability of EDO’s claim here is all but dependent on the California Action, the Court
will STAY this action in favor of the ongoing California suit.
1
Compl. ¶ 83, June 17, 2022 (D.I. 1); see D.I. 13, Ex. A, First Amended Complaint, iSpot.tv,
Inc. v. Nadezhda Teyfukova and Entertainment Data Oracle, Inc., 2:21-CV-06815-MEMF-MAR
(C.D. Cal. Mar. 7, 2022) (hereinafter the “California Action”).
2
See McWane Cast Iron Pipe Corp. v. McDowell–Wellman Engineering Co., 263 A.2d 281(Del. 1970)).
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I. FACTUAL AND PROCEDURAL BACKGROUND
A. THE PARTIES
iSpot is a Delaware corporation with its principal place of business in
Bellevue, Washington.3 EDO is a Delaware corporation with its principal place of
business in New York, New York.4
B. FACTUAL BACKGROUND
This dispute arises from Defendant iSpot’s alleged tortious interference with
EDO’s business relations with Shamrock Capital Advisors, LLC (“Shamrock”).
According to EDO, it was preparing to consummate an $80 million investment deal
with Shamrock in March 2022 when iSpot hit EDO with a sham suit in California.5
iSpot’s California complaint alleges EDO used iSpot’s data and intellectual property
impermissibly.6
In 2014, EDO and iSpot entered into a licensing agreement where EDO
licensed access to iSpot’s database of TV ads to develop EDO’s own predictive
3
Id. ¶ 13.
4
Id. ¶ 12.
5
Id. ¶¶ 2-3. iSpot filed suit against EDO and Nadya Teyfukova on March 7, 2022, in the United
States District Court for the Central District of California seeking damages and injunctive relief
for (1) federal trade secrets misappropriation; (2) state trade secrets misappropriation; (3) federal
copyright violation; and (4) state breach of contract (against EDO only). California Action ¶¶ 58-
88.
6
Compl. ¶¶ 6-7.
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product.7 EDO and iSpot entered into three separate contracts from 2014 through
2018 granting EDO a license to use iSpot’s database.8 iSpot says it allowed EDO to
become a customer based on the representation that EDO’s business was movie box
office sales analysis and promises by EDO that it would not misuse iSpot’s data to
create its own predictive analytics service.9 The California complaint alleges EDO
breached that agreement when EDO used iSpot’s data to develop its own competing
products.10
In response, EDO acknowledges the contracts it entered with iSpot prohibited
EDO from using iSpot’s data to build a TV monitoring service. 11 EDO says its last
contract with iSpot terminated in March 2018.12 And months later, EDO announced
the launch of its own advertising analytics product, EnGage.13 EDO insists it did
not use iSpot’s data to contribute to any of its products and the EnGage product
offers inherently different information than what is available in iSpot’s database. 14
7
California Action ¶ 3.
8
Id. ¶ 23.
9
Id. ¶ 3.
10
Id. ¶ 7.
11
D.I. 13, Ex. B Motion to Dismiss, iSpot.tv, Inc. v. Nadezhda Teyfukova and Entertainment
Data Oracle, Inc., 2:21-CV-06815-MEMF-MAR (C.D. Cal. Apr. 15, 2022) (hereinafter the
“California Motion to Dismiss”) at 3.
12
Id.
13
Id.
14
Id. at 3-4.
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EDO filed suit against iSpot in Delaware alleging iSpot wrongfully filed the
California complaint so as to disrupt EDO’s funding from Shamrock.15 iSpot has
now moved to stay or dismiss this Delaware Action in favor of the California
Action.16
II. APPLICABLE LEGAL STANDARDS
A. MOTION TO STAY OR DISMISS FOR IMPROPER VENUE
Superior Court Civil Rule 12(b)(3) allows for the dismissal or stay of an action
due to improper venue. “Courts may dismiss or stay a matter under Rule 12(b)(3)
‘in deference to a first-filed case in a different jurisdiction’ under the well-settled
McWane doctrine.”17 “Generally, under the McWane doctrine, ‘litigation should be
confined to the forum in which it is first commenced,’ a concept impelled by
‘considerations of comity and the necessities of an orderly and efficient
administration of justice.’”18
McWane requires the Court to ask: “(1) is there a prior action pending
elsewhere; (2) in a court capable of doing prompt and complete justice; (3) involving
15
Compl. ¶¶ 80-84.
16
D.I. 12.
17
EnVen Energy Corp. v. Dunwoody, 2020 WL 2770609, at *3 (Del. Ch. May 28, 2020) (quoting
PPL Corp. v. Riverstone Hldgs. LLC, 2019 WL 5423306, at *6 (Del. Ch. Oct. 23, 2019)).
18
Nat’l Fire Ins. Co. of Pittsburgh, PA v. Trustwave Ltd., 2017 WL 7803921, at *2 (Del. Super.
Ct. Dec. 21, 2017) (quoting McWane, 263 A.2d at 283).
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the same parties and the same issues?” 19 “If all three criteria are met, McWane and
its progeny establish a strong preference for the litigation of a dispute in the forum
in which the first action was filed.”20
“While ‘[a] party may move for either a stay or dismissal under McWane, . . .
dismissals are rarely granted when the first-filed doctrine is invoked.’”21 “Under
McWane, ‘it is preferable to merely stay the later-filed action because it is impossible
to predict with certainty the course of earlier-filed litigation in another
jurisdiction.’”22
B. MOTION TO DISMISS
“Under Superior Court Civil Rule 12(b)(6), the legal issue to be decided is,
whether a plaintiff may recover under any reasonably conceivable set of
circumstances susceptible of proof under the complaint.”23 Under that Rule, the
Court will
(1) accept all well pleaded factual allegations as true, (2) accept even
vague allegations as “well pleaded” if they give the opposing party
notice of the claim, (3) draw all reasonable inferences in favor of the
19
LG Elecs., Inc. v. InterDigital Commc’ns, Inc., 114 A.3d 1246, 1252 (Del. 2015) (internal
citation omitted).
20
Id. (citation and quotation marks omitted).
21
Riordan Ltd. v. IVN Consulting, LLC, 2021 WL 2879786, at *4 (Del. Ch. July 9, 2021)
(alteration in original) (citing 1 DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER, CORPORATE
AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 5.01[a], at 5-3 (2nd ed.
2020)).
22
Id. (citing Schnell v. Porta Sys. Corp., 1994 WL 148276, at *6 (Del. Ch. Apr. 12, 1994)).
23
Vinton v. Grayson, 189 A.3d 695, 700 (Del. Super. Ct. 2018) (cleaned up) (quoting Super. Ct.
Civ. R. 12(b)(6)).
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non-moving party, and (4) not dismiss the claims unless the plaintiff
would not be entitled to recover under any reasonably conceivable set
of circumstances.24
“If any reasonable conception can be formulated to allow Plaintiffs’ recovery, the
motion must be denied.”25 If the claimant may recover under that standard, then the
Court must deny the motion to dismiss.26 This is because “[d]ismissal is warranted
[only] where the plaintiff has failed to plead facts supporting an element of the claim,
or that under no reasonable interpretation of the facts alleged could the complaint
state a claim for which relief might be granted.”27
III. DISCUSSION
A. ISPOT CANNOT GAIN 12(B)(6) DISMISSAL UNDER EITHER A GENERAL
LITIGATION PRIVILEGE OR THE JUDICIAL PROCEEDINGS PRIVILEGE.
iSpot argues EDO’s tortious interference of prospective business relationships
claim (Count I) is barred by both a general litigation privilege and by the judicial
proceedings privilege.28 Concerning the general litigation privilege, iSpot argues
“the filing of a lawsuit is a privileged action and cannot form the basis of liability
24
Id. (quoting Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535
(Del. 2011)).
25
Id. (citing Cent. Mortg. Co., 27 A.3d at 535).
26
Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
27
Hedenberg v. Raber, 2004 WL 2191164, at *1 (Del. Super. Ct. Aug. 20, 2004) (citation
omitted).
28
Def.’s Mot. to Dismiss at 17-20, Aug. 15, 2022 (D.I. 13).
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for tortious interference, so long as the filing is in good faith.”29 Concerning the
judicial proceedings privilege, iSpot argues the statements made in the California
complaint cannot be used as a basis for the Delaware Action, and devoid of those
statements the Complaint is void of reasonable conceivability and thus fails under
Rule 12(b)(6).30
First, Delaware allows tortious interference in a prospective business
relationship claim based on a malicious lawsuit.31 While the filing of a lawsuit is
generally a “privileged action and cannot form the basis of liability for tortious
interference,” that privilege does not extend to lawsuits filed in bad faith.32 iSpot
argues EDO hasn’t shown it acted maliciously or in bad faith; for support it points
out merely that those instances where courts have found malice or bad faith seemed
far more severe than the facts here.33 At this pleading stage, the Court finds the
allegations of malice or bad faith survive 12(b)(6) review. The eventual merit of the
allegation is both fact intensive and likely dependent on discovery in California.
Second, the judicial proceedings privilege is not applicable here. The judicial
29
Id. at 17-18 (citation omitted).
30
See id. at 17-20.
31
See OptimisCorp v. Waite, 2015 WL 5147038, at *78 (Del. Ch. Aug. 26, 2015) (citation
omitted)).
32
Id.33
Reply Br. at 16, Oct. 25, 2022 (D.I. 20).
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proceedings privilege derives from:
a common law rule, long recognized in Delaware, that protects from
actions for defamation statements of judges, parties, witnesses and
attorneys offered in the course of judicial proceedings so long as the
party claiming the privilege shows that the statements [were] issued as
part of a judicial proceeding and were relevant to a matter at issue in
the case.34
But the Delaware Complaint is not based on defamatory statements. It is based on
the filing of the California Action itself.
iSpot contends the privilege is not restricted to just defamatory statements.35
For this proposition, iSpot depends on the Delaware Supreme Court’s decision in
Barker v. Huang,36 the United States District Court for the District of Delaware’s
decision in Hoover v. Van Stone,37 and this Court’s decision in BRP Hold Ox, LLC
v. Chilian.38 But a careful reading of these cases reveals they do not stand for that
which iSpot posits.
In Hoover v. Van Stone, the federal district court granted summary judgment
on claims including tortious interference with a contractual relationship, when the
tortious interference claim was indeed based on defamatory statements.39 In Barker
34
Barker v. Huang, 610 A.2d 1341, 1345 (Del. 1992) (emphasis added) (citations omitted).
35
Reply Br. at 17; see Def.’s Mot. to Dismiss at 18.
36
610 A.2d 1341 (Del. 1992).
37
540 F.Supp. 1118 (D. Del. 1982).
38
2018 WL 5734648 (Del. Super. Ct. Oct. 31, 2018).
39
Hoover, 540 F.Supp. at 1122 (“At the outset, the Court must address the first prerequisite for
claiming the absolute privilege-whether the allegedly defamatory statements in this case were
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v. Huang, our Supreme Court found the privilege applied “regardless of the tort
theory by which the plaintiff seeks to impose liability.” 40 But the Court limited that
application “[t]o the extent that such [alleged defamatory] statements were made in
the course of judicial proceedings.”41 And while BRP Hold Ox held “[d]efamation
need not accompany other claims for the absolute privilege to apply,” it was not the
filing of the complaint but rather statements from an allegedly defamatory demand
that formed the basis for the tortious interference in a business relationship claim.42
So, these cases might stand for the proposition that the privilege can apply to more
than just a defamation claim. But, no doubt, there also must be some allegation of
some specific defamatory statement for that specific privilege to apply.
Here, EDO’s tortious interference with prospective business relationships
claim is not grounded on some allegation of defamatory statements. It’s the filing
of the California complaint itself on which EDO’s Delaware tortious interference
claim is based.43
made during the course of a judicial proceeding, and thus arose in a privileged context. If the
occasion on which the statements were made is privileged, the Court must then determine whether
the contents of the statements were pertinent to this action.” (citation omitted)).
40
Barker, 610 A.2d at 1349.
41
Id. (emphasis added).
42
BRP Hold Ox, LLC, 2018 WL 5734648, at *5
43
Compl. ¶ 83 (“On information and belief, iSpot acted on that knowledge and filed baseless
claims against EDO in its March 7, 2022 amended complaint with the intent to disrupt EDO’s
expected equity infusion from Shamrock.”).
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The Delaware Complaint is based on the fact the California complaint was
filed, not on any supposed defamatory allegations made therein. So, in these
circumstances, the judicial proceedings privilege doesn’t doom EDO’s tortious
interference claim. Accordingly, iSpot’s Motion to Dismiss that claim under Rule
12(b)(6) is DENIED.
B. THE DELAWARE ACTION WILL BE STAYED PENDING THE OUTCOME OF THE
CALIFORNIA ACTION.
“Granting a stay is a discretionary enterprise and derives from a court’s
inherent power to control its docket.”44 “A court may grant a stay ‘on the basis of
comity, efficiency, or common sense.’”45 “A stay of any aspect of litigation
shouldn’t be granted automatically; it should be granted only if the opponent
wouldn’t be prejudiced by the delay and considerations of expense and litigation
economy predominate.”46 “And when resolving whether to stay or not, the Court
‘must make a particularized judgment evaluating the weight that [purported]
efficiency should be afforded . . . and the significance of any risk of injury to [a
party] . . . that might eventuate from a stay.’”47
44
Lima USA, Inc. v. Mahfouz, 2021 WL 5774394, at *7 (Del. Super. Ct. Aug. 31, 2021) (citing
Solow v. Aspect Res., LLC, 46 A.3d 1074, 1075 (Del. 2012)).
45
LightLab Imaging, Inc. v. Axsun Techs., Inc., 2012 WL 1764225, at *1 (Del. Ch. May 10,
2012) (quoting Julian v. Julian, 2009 WL 2937121, at *8 (Del. Ch. Sept. 9, 2009)).
46
Lima USA, Inc., 2021 WL 5774394, at *7 (citing Schick, Inc. v. Amalgamated Clothing &
Textile Workers Union, 1987 WL 12450, at *2 (Del. Ch. June 18, 1987)).
47
Id. (alterations in original) (quoting In re McCrory Parent Corp., 1991 WL 137145, at *1 (Del.
Ch. July 3, 1991)).
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Here, there are two actions—a first-filed action in California, and a second-
filed action in Delaware.48 The parties in both actions are effectively the same.49
iSpot’s California Action seeks to determine whether EDO breached: (1) its
contracts with iSpot; and (2) state and federal laws.50 EDO’s suit here seeks to
determine whether iSpot’s California Action was brought to disrupt EDO’s business
relationship with Shamrock.51 While they have different claims they are indeed
closely related; the Delaware Action is a direct response to the California Action.52
The McWane doctrine might well apply even where the competing suits aren’t
identical.53 This is particularly so where a natural question arises as to efficiency
and duplication. Without doubt, that question looms large here—first in relation to
discovery; second, in relation to outcome.
iSpot professes that discovery in these two suits wouldn’t or shouldn’t
overlap:
48
See Compl.; California Action.
49
California Action ¶¶ 58-88. The difference in parties is Nadya Teyfukova, EDO’s employee
who is only named in the state and federal misappropriation of trade secret claims, and federal
copyright act claim, but not the breach-of-contract claim. Id.50
Id.51
Compl. ¶¶ 80-84.
52
Id. ¶ 84 (“iSpot’s baseless claims disrupted EDO’s equity infusion deal with Shamrock,
causing substantial economic harm to EDO.”).
53
Tulum Mgmt. USA LLC v. Casten, 2015 WL 7456003, at *2 (Del. Ch. Nov. 20, 2015) (“The
McWane doctrine favors granting a stay not only where the parties and issues are identical, but
also where there exists substantial or functional identity between the two such that they arise out
of a common nucleus of operative fact.” (citations and quotation marks omitted).
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In iSpot’s [California] claim, the people with relevant knowledge of the
facts are mostly EDO employees—who allegedly “stole” iSpot data
from 2016 through 2018. In EDO’s claim, the people with relevant
knowledge are mostly iSpot employees—who gathered information for
and approved filing the Breach Complaint in 2021 and 2022. And not
only don’t the witnesses and time periods for the claims overlap, the
facts they support don’t either. While a subset of documents may be
relevant to both actions, discovery on iSpot’s breach claim concerns
what EDO employees were doing with iSpot data in 2017, whereas
discovery on EDO’s tortious interference claim concerns what iSpot
employees were thinking about allegations in the Breach Complaint
years later.54
But in this very explanation iSpot must concede that at least some “subset of
documents may be relevant to both actions.”55 Ostensibly, what will be gleaned in
the California discovery (pending the inevitable dispositive motions) will be used in
the Delaware Action. While iSpot vainly insists otherwise, there is little doubt the
information developed during the California Action will be key in the litigation of
the Delaware Action. So allowing the Delaware Action to proceed will lead to
overlapping discovery and engender disordered and inefficient administration of
justice.56
Second, the outcome of the California Action will not only inform various
facets of the Delaware Action, that outcome has an even chance of rendering the
54
Pl.’s Answering Br. at 16, Oct. 3, 2022 (D.I. 19) (emphasis in original).
55
Id.56
Nat’l Fire Ins. Co. of Pittsburgh, PA, 2017 WL 7803921, at *2 (“Generally, under the McWane
doctrine, ‘litigation should be confined to the forum in which it is first commenced,’ a concept
impelled by ‘considerations of comity and the necessities of an orderly and efficient administration
of justice.’” (quoting McWane, 263 A.2d at 283)).
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Delaware suit unnecessary or unviable.
“EDO alleges that, because the evidence iSpot had at the time was inconsistent
with breach, iSpot pled its claim in bad faith.”57 But if discovery from California
reveals that iSpot had evidence at the time that was consistent with breach, then the
underpinnings of this aspect, if not the whole, of EDO’s Delaware Action would
likely erode.58 That outcome is suggested by EDO itself.59 And EDO itself admits
that at this point: “‘[I]t is impossible to predict with certainty the course of’ the
California Action.”60 Given EDO’s own recognition that the California Action’s
result will likely affect the necessity and viability of the suit here, the suit here will
be stayed pending resolution of that California Action.
57
Pl.’s Answering Br. at 1(emphasis in original).
58
At argument, EDO insisted that its claim was detached enough to move forward. It says even
if iSpot’s California lawsuit is a winner, it can still be the basis for EDO’s tortious interference
claim here. Arg. Tr. at 26-27, Dec. 6, 2022 (D.I. 22) (EDO’s counsel invoking the Restatement of
Torts). But the Restatement provides that:
The use of these weapons of inducement is ordinarily wrongful if the actor has no
belief in the merit of the litigation or if, though having some belief in its merit, he
nevertheless institutes or threatens to institute the litigation in bad faith, intending
only to harass the third parties and not to bring his claim to definitive adjudication.
RESTATEMENT (SECOND) OF TORTS § 767 (1979) (emphasis added) (citation
omitted).
And though it incants the theoretical potential of a good-lawsuit/malicious-intent tortious
interference charge, EDO has brought no such claim here. Again, both here and in California,
EDO claims iSpot’s malice and bad faith are evidenced, in large part, by its suit’s lack of merit.
59
Compl. ¶ 5 (“Perhaps if iSpot had a meritorious breach-of-contract claim against EDO, none
of that would have mattered. But it didn’t.”).
60
Pl.’s Answering Br. at 21 (alteration in original) (quoting Schnell, 1994 WL 148276, at *6).
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IV. CONCLUSION
A stay here is warranted. Without question, allowing this suit to proceed
alongside the California Action will require overlapping discovery, will waste both
party and judicial efforts, and could well lead to inconsistent outcomes.61
Accordingly, iSpot’s prayer for a Stay under Rule 12(b)(3) is GRANTED;
its application for dismissal under both Rules 12(b)(3) and 12(b)(6) is DENIED.
The parties shall file a joint status report within 14 days of any dispositive
ruling in the California Action.
IT IS SO ORDERED.
_________________________
Paul R. Wallace, Judge
61
See FWM Corp. v. VKK Corp., 1992 WL 87327, *2 (Del. Ch. Apr. 27, 1992) (“[I]f I do not
stay this action, judicial resources will be wasted in having both courts expending their efforts in
attempting to address this issue until one of the courts actually decides the issue. Likewise,
defendants also will be wasting resources because they will be fighting the same battle on two
fronts when, ultimately, the decision of only one of the courts will matter.”).
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