Small Business Bodyguard Inc. v. House of Moxie, Inc.

Citations: 230 F. Supp. 3d 290; 2017 U.S. Dist. LEXIS 14898; 2017 WL 455561Docket: No. 14-cv-7170 (CM)

Court: District Court, S.D. New York; January 30, 2017; Federal District Court

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The decision addresses the motions for summary judgment filed by House of Moxie, Inc. (HOM) and Small Business Bodyguard Inc. (SBBI) along with its CEO Rachel Rodgers and her law firm, Rachel Rodgers Law Office, PC (RRLO). Both motions are granted in part and denied in part.

The case originates from a brief joint venture between HOM and Rachel Rodgers Consulting LLC (RRC), now SBBI, aimed at selling an e-book titled “Small Business Bodyguard” and related products. HOM, owned by Ashley Ambirge, provided brand development services and had a substantial online presence. In February 2013, HOM engaged RRLO for general business counsel, which included various legal services. However, the attorney-client relationship ended in February 2014 after the one-year agreement expired.

In May 2013, HOM and RRC entered a joint venture agreement (JVA) for the SBB Product, stipulating equal profit sharing. Tensions arose within a year, leading to the dissolution of the JVA. HOM accused Rodgers of improperly managing joint venture assets, such as withholding payments and failing to reimburse HOM for expenses. However, the JVA lacked explicit deadlines for payment distribution, and HOM presented no proof of denied reimbursements.

Additionally, HOM claimed Rodgers made false representations regarding the joint venture's intellectual property. Specifically, she stated the trademark “Small Business Bodyguard” was used in commerce since June 21, 2013, despite the product not being sold until July 24, 2013. HOM also contended that RRC misinformed the U.S. Patent and Trademark Office that a trademark assignment was pending before the formal dissolution of the joint venture occurred.

Rodgers initially registered the copyright for the Small Business Bodyguard (SBB) text and radio episodes listing both himself and Ambirge as co-authors. However, the copyright registration issued on October 17, 2014, identified Rodgers as the sole author. To rectify this, SBBI filed a supplemental registration in December 2014. HOM submitted a separate copyright application for the same SBB text, listing both authors, and subsequently assigned this registration and related ones to SBBI.

On June 7, 2014, the parties signed a joint-venture dissolution agreement (JVDA), wherein SBBI agreed to buy HOM’s interest in the joint venture. In exchange, HOM received an irrevocable license to sell the SBB Product for three years and $15,000, payable in three installments. The JVDA specified that sales would be tracked via a special hyperlink created by SBBI, with HOM entitled to a 100% commission on gross sales for the first two years, decreasing to 75% in the third year.

The JVDA prohibited HOM from distributing or reproducing the SBB Product, preparing derivative works, or making statements that could tarnish the brand. HOM could request sales tracking information and commission reports from SBBI. Although an earlier draft of the JVDA included a clause preventing SBBI from ceasing sales of the SBB Product, this was removed from the final agreement. After the three-year term, HOM had the option to become an SBB affiliate.

Following the JVDA's execution, both parties accused each other of breaches. HOM claimed SBBI failed to provide a functioning affiliate hyperlink, but this issue was resolved quickly, with Ambirge testifying that the link was operational within three days. HOM successfully sold over $10,000 worth of the SBB Product in June 2014, the first month of the license.

Rodgers altered the licensee link for tracking HOM's sales from a 90-day to a 30-day expiration shortly after the Joint Venture Development Agreement (JVDA) was signed, while other SBBI affiliates maintained a 60-day tracking period. The rationale for this change is unclear, but it seemingly did not hinder HOM's sales or SBBI's commission calculations. SBBI failed to provide HOM with the required verification of sales tracking settings but did grant access to the "Affiliate Center" for real-time sales monitoring. HOM's first commission payment for June 2014 was delayed by a month due to SBBI's cash-flow issues, which HOM ultimately accepted.

SBBI initiated a "last chance" promotion for the SBB Product, raising its price from $295 to $495, without notifying Ambirge or HOM beforehand. Upon learning of the promotion, Ambirge informed potential customers via email and indicated that Rodgers would assume control of the SBB Product business. Additionally, HOM claimed that SBBI improperly deducted $470 in "finance fees" from commissions related to an installment payment plan. SBBI contested that the additional $59 from this plan was part of the "Gross Sales Price" for commission calculations.

In late September 2014, SBBI introduced a new marketing strategy featuring limited-time availability for the SBB Product, accompanied by promotional emails about imminent sales closures. Customers visiting the website after these periods were informed they had missed the opportunity to purchase. In November 2014, SBBI launched an updated version of the SBB Product without listing Ambirge as a co-author, despite her earlier request to remove her name from promotional emails. Ambirge's legal counsel did not specify a request to be removed as a co-author.

HOM, citing "material breaches" of the JVDA, attempted to rescind the agreement and launched its own website to sell the SBB Product on August 19, 2014, which was a replica of the existing SBB website, including its promotional content.

Rodgers issued a DMCA take-down notice to BlueHost, resulting in the deactivation of all HOM websites due to a claimed copyright violation. HOM contended that many deactivated sites were unrelated to SBB and incurred costs of $5,936 to migrate them to a new host. Additionally, SBBI accused HOM of defamation based on articles published by HOM and communications regarding a negative portrayal of Rodgers. In March 2015, HOM launched a new website for a business writing course, which SBBI sought to block, arguing it violated the JVDA by providing legal services. The court allowed HOM to modify the course to remove legal advice, leading to refunds for customers who opted out.

HOM also filed counterclaims against Rodgers and her law office for legal malpractice and breach of fiduciary duty. HOM alleged that Rodgers failed to file an S-corporation election with the IRS, resulting in $40,000 in potential taxes, which Rodgers disputed by providing evidence of the submission. Additionally, HOM claimed malpractice related to a failed trademark application for "The Middle Finger Project," which was initially denied but eventually registered after a timely response was submitted. HOM further alleged that Rodgers made misrepresentations affecting the joint venture's intellectual property rights and acted improperly by serving as counsel during the formation of their joint venture agreement, although it is unclear whether she advised HOM to seek separate counsel. HOM did eventually retain separate counsel during the drafting of the JVDA.

HOM has not specified any JVA provisions it deems improper or sought rescission of the JVA, despite a potential conflict of interest. A similar agreement by Rodgers for another joint venture was accepted by HOM. The litigation history is complex, with various claims and counterclaims, but only certain claims remain. SBBI’s amended complaint includes nine counts against HOM, such as breach of contract related to the JVDA, unjust enrichment, infringement of registrations, common-law defamation, and unfair competition regarding the HOM SBB Website. In response, HOM filed eight counterclaims against SBBI, Rodgers, and RRLO, including breaches of contract and fiduciary duty, as well as legal malpractice claims.

HOM has moved for summary judgment to dismiss SBBI’s claims and to seek judgment on its own counterclaims, while SBBI and co-defendants have cross-moved for summary judgment in their favor. SBBI previously sought a temporary restraining order and a preliminary injunction against HOM's course offerings, which the Court granted initially but later denied due to lack of evidence for irreparable harm and because HOM had revised the course to comply with the JVDA. The applicable legal standard for summary judgment requires the absence of genuine issues of material fact, with the moving party bearing the initial burden to demonstrate that no such disputes exist.

A genuine issue for trial exists if a reasonable jury could find in favor of the non-moving party based on the entire record. The Court must resolve ambiguities and draw reasonable inferences in favor of the non-movant. To defeat summary judgment, the non-moving party cannot rely on conclusory or speculative evidence; it must present specific facts showing a genuine issue for trial. Summary judgment aims to eliminate cases unlikely to proceed to a directed verdict.

In the case involving SBBI’s claims against HOM concerning the HOM SBB Website, the Court granted HOM’s motion for summary judgment on SBBI’s breach-of-contract claim and denied SBBI’s cross-motion. Count 1 alleges HOM breached the Joint Venture Distribution Agreement (JVDA) by creating a website that mimicked SBBI’s and executing one sale of SBB Product. While the validity of the JVDA is undisputed, the Court found no evidence of actual damages caused by HOM's brief website operation. SBBI's claim that it suffered damages from lost web traffic or reputational harm was deemed untimely and unsupported by evidence, as SBBI failed to demonstrate any actual damages. The Court noted that arguments raised for the first time in a reply brief are not considered, and speculation is insufficient to meet the evidentiary burden required to defeat summary judgment.

A motion for summary judgment serves as a decisive point for litigants, with HOM entitled to summary judgment dismissing Count 1. In Count 5, HOM's motion for summary judgment against SBBI's copyright infringement claim based on the SR Registration is denied, while SBBI's cross-motion for summary judgment is granted. SBBI seeks statutory damages for alleged infringement of a registered copyright related to the HOM SBB Website. For a copyright infringement claim, two elements must be established: ownership of a valid copyright and copying of original work components. A registered copyright is considered valid until proven otherwise, and minor omissions do not invalidate it.

SBBI holds a valid copyright for the Small Business Bodyguard text, with registration applied for on July 25, 2013, and granted on October 17, 2014. Under the Joint Venture Development Agreement (JVDA), HOM transferred any copyright interest to SBBI. HOM challenges the validity of the SR Registration, arguing that material misrepresentations were made regarding authorship. The initial registration application incorrectly listed both Ambirge and Rodgers as co-authors, with Ambirge noted as a work-for-hire contributor. The Copyright Office interpreted this as co-authorship, leading to Rodgers being listed as the sole author in the registration. Subsequently, Rodgers submitted a supplementary registration to correct the authorship error by adding Ambirge as a co-author. HOM's claims of misrepresentation lack supporting evidence.

Rodgers submitted the copyright application, listing Ambirge as a co-author with an unintentional work-made-for-hire designation, which was incorrectly omitted on the registration certificate by the Copyright Office. Rodgers subsequently filed a supplementary registration to rectify this error, and no evidence contradicts his account, indicating no intent to mislead the Copyright Office. Consequently, the SR Registration is deemed valid, establishing SBBI as the copyright owner. 

On August 19, 2014, HOM launched a website that replicated the SBB Website, which included excerpts from the copyrighted Small Business Bodyguard e-book. Although HOM contends that its license to sell the SBB Product allowed the reproduction of SBB Website materials, the existence of a valid license does not exempt a licensee from infringement claims if the license terms are exceeded. According to the Joint Venture Development Agreement (JVDA), HOM is prohibited from distributing or reproducing the SBB Work or creating derivative works without express permission from SBBI. The JVDA defines "Promotional Materials" narrowly, excluding portions of the copyrighted SBB Product, which SBBI did not provide for affiliate use. Therefore, HOM's limited license does not permit it to reproduce copyrighted text on its website.

The JVDA does not grant HOM the right to reproduce the SBB Product's copyrighted text, as multiple provisions explicitly prohibit reproduction without SBBI's prior written consent. Although HOM has a valid license to sell the SBB Product, it exceeded authorized usage, likening its actions to those of an infringer without a contractual relationship with the copyright holder. Consequently, the claim is classified as copyright infringement under copyright statutes rather than a breach of contract, entitling SBBI to statutory damages per the Copyright Act, with the amount to be determined at trial.

In Count 6, HOM’s motion for summary judgment dismissing SBBI’s infringement claim related to the TX Registration is granted, while SBBI’s cross-motion is denied. The TX Registration, filed by HOM on August 28, 2014, only covers the SBB Product, not the audio recordings, and was assigned to SBBI via the JVDA. However, since the TX Registration was not filed within three months of the SBB Product's first publication (July 24, 2013), statutory damages for infringement occurring between that date and the registration date are not available. The HOM SBB Website was operational only briefly from August 19 to 21, 2014, and thus, SBBI cannot claim statutory damages for this infringement.

In Count 9, HOM’s motion for summary judgment dismissing SBBI’s claim for unfair competition is granted, and SBBI’s cross-motion is denied. This claim mirrors liability under the Lanham Act, which had been dismissed previously due to a lack of allegations regarding consumer confusion, as HOM's product was genuine and not marketed under another trademark.

Under New York law, unfair competition is a flexible doctrine that heavily relies on factual circumstances. In the case referenced, the unfair competition claim survived the motion to dismiss but not the motion for summary judgment. New York recognizes two types of common-law unfair competition: "palming off" (selling goods of one manufacturer as those of another) and misappropriation (misusing a competitor's resources or ideas). The essence of a misappropriation claim involves the defendant taking advantage of the plaintiff's efforts through deceit or a breach of trust. SBBI failed to provide evidence supporting either theory, as HOM did not engage in palming off or reverse palming off, and SBBI did not articulate a misappropriation claim in its filings. Consequently, HOM is entitled to summary judgment dismissing the unfair competition count.

Regarding SBBI's claims from HOM's statements, HOM's motion for summary judgment on the breach-of-contract claim under the Joint Venture Development Agreement (JVDA) is granted, while SBBI's cross-motion is denied. The JVDA prohibits defamatory statements, assessed under the same criteria as common-law defamation, which requires a false statement that damages the plaintiff's reputation. The elements of defamation include a defamatory false statement, publication to a third party, relevance to the plaintiff, the requisite fault level of the speaker, harm or slander per se, and lack of privilege. The details surrounding these claims emphasize the need for SBBI to substantiate its allegations to succeed.

The plaintiff in this breach-of-contract claim includes SBBI's officers, directors, employees, and agents regarding the "of and concerning" element. The JVDA's prohibition on "inflammatory" statements lacks a common-law counterpart, and the court must interpret contract terms to avoid surplusage, assigning a "fair and reasonable meaning" to each term. The term "inflammatory" is distinct from defamation, as argued by SBBI, which defines it as tending to provoke strong emotions, according to Black’s Law Dictionary. HOM's assertion that SBBI is employing a lower standard for "inflammatory" statements is countered by the absence of an alternative definition.

SBBI claims three communications violated the JVDA: a Facebook post by HOM, two blog posts by Ambirge, and an email exchange involving Ambirge and Scott Greenfield. The court finds that HOM's Facebook post, which stated that all claims against it had been dismissed, did not breach the JVDA. SBBI's argument that the post degraded SBBI and Rachel Rodgers is flawed; the latter part of the statement is true and not defamatory. Even if the post's reference to HOM’s counterclaims could be seen as directing attention to them, it does not constitute an assertion of fact and is privileged under New York law. Furthermore, the statement that all claims were dismissed, though factually incorrect, does not expose SBBI to public contempt or disgrace, nor would it likely inflame reasonable readers. Ultimately, SBBI failed to provide evidence of any damages resulting from the post, leading the court to conclude that the Facebook post did not breach the JVDA.

Damages are a necessary element in a breach-of-contract claim, and a non-movant must provide evidence to raise a genuine issue of fact regarding damages to survive a motion for summary judgment. SBBI claims it suffered damage to its goodwill and reputation and loss of subscribers due to HOM's Facebook post, asserting damages of at least $75,000. However, to substantiate this claim, SBBI must link the revenue decline to HOM's post. SBBI submitted annual profit and loss statements indicating a revenue decrease in 2015 compared to previous years, but these statements alone do not establish causation.

SBBI produced four emails from dissatisfied customers as evidence. The first three emails were sent prior to the Facebook post and thus do not support SBBI's claim. The remaining email, sent seven weeks after the post, expresses dissatisfaction but does not reference HOM's Facebook post as the cause of the author's discontent. The sender's frustrations stem from issues unrelated to the post and indicate awareness of publicly available court records rather than HOM's statements. Consequently, this email fails to provide the required link to HOM's post to substantiate SBBI's damage claims.

The excerpt addresses the claims made by SBBI regarding alleged damages from a Facebook post by HOM and two blog posts by Ambirge on The Middle Finger Project. SBBI's dissatisfaction is linked to the SBB Product itself rather than HOM's post, which is deemed not to have caused any damages. The court finds no evidence supporting SBBI's claim of damages resulting from HOM's post, rejecting SBBI's reliance on precedents (Lexington Prod. Ltd. v. B.D. Commc’ns, Inc. and Randall-Smith, Inc. v. 43rd St. Estates Corp.) that allow for uncertain damage amounts when some damages are proven. It clarifies that SBBI has not demonstrated any damages connected to the Facebook post, nor that it was defamatory or inflammatory, leading to the conclusion that no breach of the Joint Venture Development Agreement (JVDA) occurred.

Similarly, the blog posts from Ambirge are also found not to breach the JVDA. SBBI identifies three statements it claims are defamatory, but the court rules that the first statement is hyperbolic and does not reference SBBI or Rodgers, while the second statement does not pertain specifically to SBBI or Rodgers either. Thus, both blog posts are deemed non-defamatory, reinforcing that SBBI has not substantiated its claims.

The excerpt addresses issues related to defamation claims concerning a statement made by Ambirge. It emphasizes that generalized statements about "people with larger than life egos" are not actionable for defamation, as established in Brady v. Ottaway Newspapers. Ambirge's claim regarding experiences of extortion and manipulation lacks specificity, as it does not identify Rodgers or SBBI directly. The legal standard requires that a statement be "of and concerning" a plaintiff, a determination usually made by the court. Although Ambirge acknowledged knowing Rodgers, neither he nor SBBI is named in her blog post. The statement includes a mention of ongoing legal issues but does not provide sufficient context to identify Rodgers clearly. To prove defamation, a plaintiff must show that an average reader could reasonably infer a reference to them from the statement and that relevant extrinsic facts were known to the audience. SBBI fails to present evidence that supports the notion that readers would connect Ambirge's statement to Rodgers, noting that public commentary did not explicitly link her blog to any specific legal proceedings involving Rodgers.

An average reader would not identify SBBI as the opposing party in the legal matter with HOM or recognize Rodgers as the "someone I know" referenced by Ambirge, as the statement does not name the plaintiff and lacks context linking it to her. Following the precedent set in *Three Amigos SJL Rest. Inc. v. CBS News Inc.*, the statement is not considered “of and concerning” the plaintiff. Furthermore, even if a reader could infer a connection to Rodgers, the statement remains non-defamatory as it asserts subjective opinions about unspecified actions being viewed as “extortion, manipulation, fraud, and deceit,” which cannot be verified for truth. The vague nature of Ambirge’s statement is characterized as "loose, figurative, or hyperbolic," thus not actionable for defamation, supported by cases such as *Polish Am. Immigration Relief Comm. Inc. v. Relax* and *Old Dominion Branch No. 496 v. Austin*. Terms like "traitor" and descriptions of money as "dirty" are deemed protected hyperbole under the First Amendment. Statements labeled as hyperbole or opinion, such as “sucker” or “crooks,” are not actionable. Courts assess whether a statement is defamatory by considering the whole communication's content, tone, and purpose. The *Greenbelt Co-op. Pub. Ass’n v. Bresler* case illustrates that accusations like "blackmail" in a specific context were not viewed as provable assertions of fact, emphasizing that such statements may be perceived as rhetorical hyperbole rather than serious charges.

Ambirge's blog post employs exaggerated and hyperbolic language to express her frustration rather than to make criminal accusations. The use of phrases such as “my fingers are constantly in motion” and “varying degrees of what many people might view as extortion” indicates emotional hyperbole, which is not actionable for defamation, as established in Mann v. Abel and Gross v. N.Y. Times Co. The use of qualifying language like “many people might view” suggests generalized opinions lacking factual basis. The New York Court of Appeals precedent in 600 W. 115th St. Corp. v. Von Gutfeld reinforces this, noting that ambiguous phrases indicate hyperbole rather than definitive claims. Ultimately, Ambirge’s statements do not constitute defamation as they are not factual assertions nor directed at specific individuals, and they do not evoke strong emotional reactions. SBBI's claims of inflammatory language are unsupported, with evidence showing that only one email from dissatisfied customers post-dates the blog and does not reference it. Furthermore, even if Ambirge’s posts violated the JVDA, SBBI has not demonstrated any resultant damages. The email exchange with Scott Greenfield, which SBBI claims breached the JVDA, was disclosed during discovery and does not alter the overall assessment of the blog posts.

On October 24, 2014, Greenfield shared a link to his article criticizing attorney Rodgers, which had been published on October 15, 2014. The article labels Rodgers as an "innovative twinkie lawyer" unbound by ethics and describes her SBB Product as "simplistic nonsense surrounded by edgy copywriting." Ambirge responded positively to Greenfield's email, acknowledging the article's usefulness for understanding legal matters while clarifying that her current situation was a better learning experience. She expressed her low opinion of Rodgers by stating, “Much less one of Rachel’s caliber, as it seems,” which is characterized as an opinion rather than a defamatory statement, as opinions cannot be proven true or false. Ambirge's comment about Rodgers being a "raging, irresponsible asshole" is also deemed non-defamatory, lacking factual assertion and unlikely to inflame passions. The email exchange between Greenfield and Ambirge was private until discovery, reducing its potential inflammatory impact. Greenfield later clarified that his negative view of Rodgers was long-standing and independent of Ambirge's input.

Ambirge expressed gratitude to Greenfield and others for bringing unethical behavior to light, stating he would prefer to speak the truth rather than remain silent amid an impending disparagement claim from RR. He praised Greenfield and his colleagues for their ethical standards and expressed hope that discussing these issues publicly would serve as a warning against unethical professionals. The allegedly defamatory statement in Ambirge's email, labeling certain individuals as "unethical, unscrupulous unprofessionals," is deemed non-defamatory as it constitutes a constitutionally protected opinion rather than a factual assertion. This statement does not imply undisclosed facts that could render it defamatory and is characterized as rhetorical hyperbole. Additionally, SBBI failed to provide evidence of damages resulting from this private email exchange, undermining its claim. Consequently, HOM is granted summary judgment dismissing Count 2 of SBBI's defamation claim. SBBI's assertion of defamation based on various statements, including a Facebook post, blog posts, and the email exchange, fails to meet the common-law defamation standards, which require a defamatory statement of fact that is false, published to a third party, concerning the plaintiff, made with fault, causing harm, and not protected by privilege. None of the statements in question fulfills these criteria, as they do not expose SBBI to public disdain and are largely rhetorical, leading to the dismissal of SBBI’s claims.

The private email exchange between HOM and Greenfield did not contain any defamatory statements regarding Rodgers or SBBI, leading to the conclusion that not every negative comment constitutes grounds for a lawsuit. Consequently, HOM is entitled to summary judgment dismissing Count 7. 

In Count 3, HOM's motion for summary judgment to dismiss SBBI's breach-of-contract claim, which alleged that HOM violated the JVDA by offering a course containing legal advice, is granted. The court noted that overwhelming evidence indicated the course initially included illegal elements, but after modifications by HOM, SBBI acknowledged that the revised course did not violate the JVDA. Thus, HOM did not breach the contract.

Count 8, which sought a declaratory judgment asserting SBBI's ownership of certain copyright registrations assigned by HOM, also fails. The court emphasized that SBBI must demonstrate an actual controversy to establish jurisdiction, which it could not do. HOM had validly assigned the copyrights to SBBI as per the JVDA, and the assignment was recorded, negating any controversy that would justify a declaratory judgment.

SBBI has not provided any evidence indicating that HOM is likely to initiate an infringement lawsuit concerning the TXu Registrations. HOM acknowledged the validity of its assignment in court, leading to the dismissal of Count 8 due to a lack of subject matter jurisdiction regarding the assignment's validity.

Regarding HOM’s Counterclaims, SBBI's cross-motion for summary judgment to dismiss HOM’s first counterclaim for breach of contract is granted partially and denied partially, while HOM's motion for summary judgment is denied. HOM's first counterclaim alleges five breaches of the Joint Venture Development Agreement (JVDA). To succeed, HOM must demonstrate four elements of breach of contract: a valid contract, substantial performance by the non-breaching party, a breach, and damages.

1. HOM claims SBBI failed to provide a sales link for the SBB Product. However, the JVDA does not specify a deadline for this link, which SBBI provided within a reasonable timeframe, as HOM had a functioning link within three days of signing the JVDA and made sales of at least $10,000 in the first month.
   
2. HOM asserts that SBBI breached the JVDA by increasing the SBB Product price from $295 to $495. The JVDA does not prohibit such a price increase, thus not constituting a breach.

3. HOM contends SBBI breached the JVDA by temporarily halting sales of the SBB Product. However, the JVDA does not restrict SBBI from doing so, especially after a clause preventing such action was removed by mutual agreement.

4. HOM claims SBBI breached the JVDA by releasing an updated product without crediting Ambirge as a co-author. The JVDA does not impose an obligation to continue crediting Ambirge in future updates, and SBBI was permitted to modify the product. Therefore, there is no contractual requirement for SBBI to maintain such attribution after the joint venture's termination. 

Overall, HOM has not substantiated its claims with evidence of damages or breaches as outlined in the JVDA.

SBBI is accused of breaching the Joint Venture Development Agreement (JVDA) by interfering with HOM's license through the misuse of the DMCA takedown procedure, specifically by requesting the deactivation of several HOM websites, including the HOM SBB Website. SBBI's initial takedown request on August 19, 2014, was justified as the HOM SBB Website infringed SBBI's SR Registration, permitting SBBI to act under the DMCA. However, on August 21, 2014, BlueHost deactivated HOM’s entire account due to alleged violations of its terms of service. Following this, SBBI sent an additional notice on September 9, 2014, requesting the deactivation of fourteen pages from The Middle Finger Project website, claiming they referenced the SBB Product and linked to the HOM SBB Website. BlueHost complied with this request, citing its policy against reactivating websites involved in ongoing litigation. Four of these pages were provided to the Court, but none contained infringing content, leaving unresolved factual issues regarding whether SBBI's actions interfered with HOM's license, thereby breaching the JVDA. Consequently, neither party is entitled to summary judgment on this aspect of HOM's first counterclaim, while the remainder of the claim is dismissed.

Regarding HOM's second counterclaim, which alleges three additional breaches of the JVDA by SBBI, the Court partially granted SBBI's motion for summary judgment while denying HOM's motion in part. One allegation involves SBBI's late commission payments for June and July 2014, which were due on specific dates per the JVDA. The June payment was 30 days late, resulting in HOM claiming damages limited to lost interest, calculated under New York law at a legal rate of 9% per annum, amounting to $74.91. HOM also alleges an improper calculation of commission base values for installment sales.

Under the Joint Venture Development Agreement (JVDA), HOM is entitled to a commission of 100% of the Gross Sales Price from HOM sales for the first two years. The Gross Sales Price is defined as the full retail price charged to consumers, which was set at $495 for the SBB Product. Consumers had the option to either pay the full amount or select an installment plan, resulting in an additional $59 finance fee for installment payments. SBBI justified excluding this finance fee from the commission calculations, asserting it was not part of the full retail price. The $59 charge is classified as a finance charge, representing the cost of credit for installment purchases, thus supporting SBBI's position that it did not breach the JVDA by omitting this fee from commission calculations.

Additionally, HOM alleged that SBBI failed to provide required reports and information regarding sales and commission calculations. The JVDA entitles HOM to request such reports from RRC, which agrees to comply. Correspondence between HOM’s attorney and RRC indicated a request for referral partner settings, but the clarity of this request was questioned. While it was noted that HOM had access to the Affiliate Center for tracking sales metrics, SBBI ultimately did not provide the specific report requested. Whether SBBI fulfilled its obligations under the JVDA regarding the provision of reports is a disputed issue that will be resolved at trial. HOM is entitled to partial summary judgment related to a 30-day delay in the June 2014 commission payment, while SBBI is granted summary judgment regarding the retail price commissions. The matter concerning referral partner settings will proceed to trial.

Counterclaim 5 has been dismissed following the granting of SBBI, Rodgers, and RRLO's cross-motion for summary judgment against HOM’s claim for breach of fiduciary duty. HOM alleges that Rodgers and RRLO breached their fiduciary duties by forming a joint venture agreement (JVA) with a client. Legal precedents indicate that attorneys may engage in business transactions with clients, provided they do not exploit their superior position. HOM failed to demonstrate any fraudulent or unfair conduct in the JVA, nor did it show that it lacked essential knowledge regarding the contract. The terms of the JVA did not indicate that Rodgers received an undue advantage, as she and SBBI bore more responsibilities while receiving only half of the profits. Consequently, the claim was found to lack evidentiary support.

Counterclaim 6 was also dismissed, with the court granting the defendants' cross-motion for summary judgment. HOM's second counterclaim contends that the defendants breached their fiduciary duties by reimbursing SBBI for specific expenses while withholding reimbursements from HOM and delaying profit distributions for April and May 2014. The JVA explicitly allowed SBBI to reimburse expenses before profit distributions, and HOM provided no evidence that it sought reimbursement and was denied. Regarding the profit payments, SBBI paid HOM its share for April and May 2014 on June 7, 2014, the same day the parties signed the joint venture distribution agreement (JVDA). The timing of these payments was deemed reasonable, as they were made shortly after the respective months ended, allowing for the deduction of fees and expenses. The JVDA superseded the original JVA, rendering any potential breach of the JVA irrelevant. Therefore, SBBI is entitled to summary judgment on this counterclaim as well.

The court granted in part and denied in part the cross-motion for summary judgment by SBBI, Rodgers, and RRLO, dismissing HOM's first counterclaim for malpractice, while denying HOM's motion for summary judgment in its favor. HOM's seventh counterclaim alleges that Rodgers and RRLO committed legal malpractice by failing to file the appropriate tax election form and mishandling a trademark application. Under New York law, a legal malpractice claim requires proving (1) attorney negligence, (2) proximate cause of the loss, and (3) actual damages. 

HOM claims that Rodgers advised it to register as an S-corporation, but failed to file the election form with the IRS, leading to an unintentional registration as a C-corporation and a potential $40,000 tax liability. HOM mitigated this by incurring $1,320 in attorney’s fees and a late fee. In contrast, Rodgers and RRLO assert that the form was filed correctly and provided documents indicating submission. However, while Rodgers stated she was willing to correct any issue at no cost, she admitted to not following up with the IRS regarding the form’s status.

The court noted that the key issue is whether Rodgers failed to submit the form or if the IRS misplaced it. If the former is true, it could indicate professional negligence. Evidence suggests that if the form had been filed correctly, HOM would have avoided additional tax liabilities. It is established that HOM incurred costs due to the alleged negligence, including a late fee and legal fees for rectifying the issue.

Damages are recoverable under New York law as established in relevant case law. A $1,345 malpractice claim is set to proceed to trial due to a material fact issue. HOM alleges malpractice by Rodgers regarding a trademark application for "The Middle Finger Project," which was initially filed on June 24, 2013. The PTO issued an office action on December 30, 2013, refusing registration based on "immoral or scandalous matter." Although Rodgers and RRLO failed to inform HOM of this office action before ceasing representation on February 20, 2014, HOM eventually hired new counsel who successfully defended the application by the June 30, 2014 deadline. The court found no malpractice, determining that Rodgers did not negligently or willfully withhold information critical to HOM's decision-making, nor did her actions fall below the professional standard of care. Consequently, summary judgment was granted in favor of Rodgers and RRLO on this counterclaim.

In a separate counterclaim involving another trademark application for "Small Business Bodyguard," HOM contended that Rodgers misrepresented the date of first use in commerce and falsely informed the PTO about a pending trademark assignment. However, there was no evidence of injury to HOM from these alleged misrepresentations, as the trademark was successfully registered and no challenges to its validity were made. HOM's failure to demonstrate any monetary loss from Rodgers' actions—an essential element of a malpractice claim—led to the granting of summary judgment for SBBI, Rodgers, and RRLO. 

In conclusion, HOM's motion for summary judgment was granted in part, dismissing several counts of SBBI’s complaint and addressing HOM’s counterclaims.

Count 5 is denied, as are HOM's fifth, sixth, seventh, and eighth counterclaims. SBBI, Rodgers, and RRLO’s cross-motion for summary judgment is granted for Count 5 and dismisses HOM's fifth, sixth, and eighth counterclaims. However, the motion is denied concerning Counts 1 through 4, 6 through 9 of SBBI’s amended complaint, and HOM’s first counterclaim. The court grants in part and denies in part HOM’s second and seventh counterclaims, awarding HOM $74.91 for the second counterclaim. HOM's third and fourth counterclaims will proceed to trial, along with parts of the first, second, and seventh counterclaims related to DMCA takedown issues and S-corporation malpractice. The amount of statutory damages for Count 5 will be determined at trial. Count 4, related to SBBI's unjust enrichment claim, is dismissed.

A communication from the Copyright Office raised questions about the authorship of the work, and no clarification was provided by Rodgers. HOM's assertion that SBBI's copyright infringement claim is invalid due to the SR Registration issuance after the initial complaint is incorrect, as SBBI amended its complaint accordingly. Previous communications between Ambirge and Greenfield over Twitter were referenced but not produced as evidence. HOM is seeking damages of just over $5,000, which the court suggests may not warrant federal jurisdiction and could be more suitable for small claims court, particularly given the disputed amount is only $470. Additionally, "ifax" documents, although not submitted during discovery, will be admissible at the bench trial with appropriate cross-examination.