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Svanaco, Inc. v. Brand

United States District Court, N.D. Illinois, Eastern Division

September 30, 2019

SVANACO, INC., Plaintiff,
v.
JONATHAN BRAND and MARTY GILMAN, INC., Defendants. MARTY GILMAN, INC., Counter-Claimant,
v.
SVANACO, INC., Counter-Defendant.

          MEMORANDUM OPINION AND ORDER

          Andrea R. Wood United States District Judge

         This case arises from a soured business relationship between Plaintiff Svanaco, Inc., also known as Americaneagle.com (“Svanaco”), and Defendant Marty Gilman, Inc. (“MGI”). Svanaco creates, hosts, and maintains business websites. In 2012, MGI, a seller of sports equipment, retained Svanaco to design and redevelop its website. The parties disagree about which of them is at fault but do not dispute that by 2015, Svanaco had not delivered a completed website and MGI had not paid the full balance due under the contract. In October 2015, MGI retained Defendant Jonathan Brand as an independent consultant and informed him of its dispute with Svanaco. Over the course of the next few months, Brand launched various attacks against Svanaco on the internet; for example, Brand created more than a dozen websites with “americaneagle” in the URL, posted negative reviews about Svanaco on third-party websites, and launched distributed denial-of-service attacks to disrupt traffic on Svanaco's websites.

         Svanaco has sued both MGI and Brand[1] pursuant to the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d) (Count I), and the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030 (Count II), and has also asserted state law claims of defamation (Count III), tortious interference with prospective economic advantage (Count IV), and civil conspiracy (Count VI).[2] In addition, Svanaco has sued MGI for breach of contract (Count VII), and MGI has likewise asserted a counterclaim against Svanaco for breach of contract. Now before the Court are MGI's motion for summary judgment as to Svanaco's claims (Dkt. No. 195-1) and Svanaco's motion for summary judgment as to MGI's counterclaim (Dkt. No. 191). For the reasons explained below, MGI's motion is granted in part and denied in part, and Svanaco's motion is denied.

         BACKGROUND

         The Parties

         Svanaco is an Illinois corporation that, under the trade name americaneagle.com, creates, hosts, and maintains general and ecommerce websites for businesses and governmental bodies. (MGI's Resp. to Svanaco's Statement of Material Facts (“MGI's RSMF”) ¶ 1, Dkt. No. 207.) Svanaco has created websites for clients such as the National Football League Hall of Fame and the Chicago Bears professional football team. (Pl.'s L.R. 56.1(b)(3)(A) Resp. to Def. MGI's L.R. 56.1(a)(3) Statement of Undisputed Material Facts (“Pl.'s RSMF”) ¶ 79, Dkt. No. 206.) MGI is a Connecticut corporation that, under the trade name Gilman Gear, sells sports equipment and related products. (MGI's RSMF ¶ 2.) In 2012, Svanaco and MGI entered into a contract (“Agreement”) under which Svanaco would design and redevelop MGI's website for $50, 000. (Id. ¶¶ 7-8.) Under the terms of the Agreement, MGI would pay Svanaco in three equal payments: the first payment of $16, 667 was due at the time of signing, the second payment was due upon completion of the Project Plan and Graphics, and the final payment would be due upon launch of the website. (Id. ¶ 8; see also MGI's RSMF Ex. 8.) MGI made the first two payments to Svanaco, but the parties came to a serious disagreement before MGI submitted the third payment. (MGI's RSMF ¶ 9.)

         The Contract Dispute

         To complete the website, Svanaco required certain product information from MGI, such as the pricing, color options, and stock keeping unit (“SKU”) numbers of MGI's products. (Id. ¶¶ 13, 31.) But MGI never provided a completed spreadsheet of this information to Svanaco as requested. (Id. ¶¶ 28-30.) The parties disagree about who is responsible for MGI's failure to provide the information to Svanaco. According to Svanaco, it is standard practice for the customer to provide such information, but MGI repeatedly refused to do so despite multiple requests and reminders, causing a significant delay. (Id. ¶ 15.) However, according to MGI, Svanaco was responsible for devoting 55 hours to importing product information to the website or otherwise helping MGI with this task but only spent 6.5 hours doing so. (Id. ¶¶ 16, 24-25; Pl.'s RSMF ¶ 11.) Svanaco, in turn, claims its staff spent almost 55 hours on related tasks such as creating the product information spreadsheet, training MGI's staff to use the spreadsheet, and building an import tool that allowed MGI to import the data directly into the website. (Pl.'s RSMF ¶ 11.)

         On June 30, 2014, Svanaco presented a “beta website for testing and training” to MGI. (MGI's RSMF ¶ 32.) Svanaco claims it had completed all programming work for MGI's website by then, and MGI could fully test the website's functionality through the beta website. (Id. ¶ 38.) Svanaco also claims the website contained a product import tool that would allow MGI to import its product information without further assistance by Svanaco. (Id. ¶¶ 36-37.) By contrast, MGI claims the beta website was incomplete and had multiple issues; for example, it did not link to MGI's Facebook page or Twitter, was missing the home page with welcome text and audio, and had no company profile page, no banner ads for the various categories of equipment, and no subpages. (Id. ¶ 32.) Thus, according to MGI, the website could not be tested or evaluated in any meaningful way. (Id. ¶ 37.) Svanaco also sent MGI an invoice for the third and final payment around the same time it provided the beta website, which MGI did not pay. (Pl.'s RSMF ¶ 23.) MGI accuses Svanaco of attempting to use the beta website to obtain the third and final payment from MGI, with no intention of completing the website. (Id. ¶ 22.)

         On May 8, 2015, Svanaco sought payment of $8, 666.66 to resume work on the website and told MGI that payment was due within 30 days of the beta website delivery. (Id. ¶ 27.) Then, on May 18, 2015, Svanaco requested payment of $8, 000 to “continue work on this project, ” informing MGI that it had spent over 700 hours working on the website. (Id.) MGI refused to pay, and in June 2015, Neil Gilman, MGI's CEO, stated that he would “post [the beta website] online and invite comment from people who are expert [sic] in web development.” (Id. ¶ 28.)

         MGI Hires Jonathan Brand

         In October 2015, Gilman posted various public advertisements seeking a web designer. (Id. ¶ 30.) On October 11, 2015, Brand contacted Gilman via email. (Id.) Brand and Gilman had never met or had any contact prior to this point. (Id. ¶ 31.) On October 13, 2015, Gilman interviewed Brand and offered him $900. (Id.) According to MGI, Gilman hired Brand as an independent consultant to review the beta website and determine whether it reflected 700 hours of work. (Id.) Gilman did not hire Brand as an employee nor did Gilman provide him with any equipment. (Id. ¶¶ 56-57.) Gilman gave Brand a copy of Svanaco's business proposal and several emails containing passwords and links to access the beta website. (Id. ¶ 32.) After Brand accessed the beta website, he told Gilman that based on what he had seen, it would be difficult for Svanaco to argue that it had worked for more than 5-10 hours on it. (Id. ¶ 33.)

         Gilman asked Brand if Svanaco could be “shamed” into repaying his money. (Id. ¶ 34.) According to MGI, Gilman meant (and Brand understood him to mean) that Svanaco would be presented with “truthful statements” about how little time had been spent on the beta website. (Id. ¶ 34.) Brand replied, “yes, they can be shamed, ” and sent Gilman a link to a website Brand had created, americaneaglereviews.com. (MGI's Resp. to Svanaco's L.R. 56.1(b)(3)(A) Statement of Additional Facts (“MGI's RSAF”) ¶ 9, Dkt. No. 220.) Brand also invited Gilman to make “comments/edits” to his website. (Id. ¶ 11.) MGI claims Gilman did not click the link but does not dispute that he later asked Brand, “has this gone live yet? Why is it that American Eagle hasn't reached out to me if this is on the web?” and “Are they [Svanaco] aware of your review?” (Id. ¶ 12.)

         On October 28, 2015, Brand met with Gilman and MGI's financial administrator, Nadine Parker, to “go over [his] work” and obtain the $900 payment. (Pl.'s RSMF ¶ 35.) Brand did not receive any other payment from MGI after this point. (Id. ¶ 36.) At the meeting, Brand talked about posting an online review about Svanaco. (Id. ¶ 37.) Parker told Brand this would be acceptable “as long as it is truthful.” (Id. ¶ 37.) That evening, Gilman reviewed Brand's post and told him to “make it very clear exactly what [Svanaco] put up which they think is a Beta Site, ” and include a title “something like 700 hours of AE done in 30 minutes using Word Press.” (Id. ¶ 38.) Gilman also stated in his email to Brand, “The big point is that AE didn't do any work for us. Just minimal design concept stuff. I am concerned that AE won't feel intimidated by this review.” (Id.) The parties dispute whether Brand incorporated Gilman's edits. (Id. ¶ 39.)

         The following week, Brand sent Gilman a series of emails urging Gilman to write a demand letter to Svanaco and aggressively seek a refund. (Id. ¶ 40.) Brand also sent Gilman a proposed letter he drafted for Gilman to send to Svanaco, which stated, “My [Gilman's] understanding is that squaring up with Gilman Gear as soon as possible, you may see my consultant's personal warning website taken offline, rather than see it strengthened through aggressive social media and backlink campaigns.” (Id. ¶ 43.) In another email to Gilman, Brand voiced his intent to damage Svanaco financially to the tune of “$100k - 500k in the first 7-9 months.” (Id.) In addition, Brand told Gilman in the emails that “this happened to many other people, ” encouraged Gilman to read negative reviews of Svanaco that Brand had summarized, recommended that Gilman file a Better Business Bureau (“BBB”) complaint against Svanaco, and asked Gilman to pay money to boost Brand's negative review website, americaneaglewebreviews.com, to the top of search-engine listings. (Id. ¶ 40.) Gilman claims he did not take any of the actions that Brand suggested and did not know Brand had filed a BBB complaint purporting to be from MGI. (Id. ¶ 41.) By contrast, Svanaco claims Gilman thanked Brand for filing the BBB complaint in his name and did not withdraw it. (Id.) Gilman also sent an email to Brand on November 1, 2015, asking “Is now the time to contact them and ask them to refund our money?” (Id. ¶ 43.)

         Brand also took other steps to post negative content on the internet about Svanaco. He registered more than a dozen websites with the phrase “americaneagle” (or some variation or misspelling of the phrase) in the URL, such as “Americaneaglereviews.com, ” “Americaneaglewebreviews.com, ” “Americaneaglewebdesign.com, ” “Ameriacaneagle.com, ” and “Ameriecaneagle.com.” (Id. ¶ 47.) On these newly created sites, Brand made negative statements about Svanaco, including “our developer above caught up to American Eagle's two years of work in 30 minutes and had the beta website handling product variations and pricing in 3 hrs., ” “they walked with the $34, 000, no arrests made to date but what is clear is that the design work never started beyond one roughly ½ hour task and that two years of slick Eagle talk, ” and “American Eagle's Manhattan offices appear to have used a combination of radio ads, proprietary jargon and contractual falsehoods to bill $34, 000 for less than 6 hours of actual web services.” (Id. ¶ 44; MGI's RASF ¶ 34.) Brand also called Svanaco an “incurious and overconfident high-end web scam, ” a “web contract fraud ring, ” and a “fraud.” (Id. ¶¶ 34-35.) Posing as actual clients of Svanaco, Brand published these fake negative reviews both on the websites he himself created and on third-party websites such as Glassdoor.com, SiteJabber.com, and Yelp.com, [3] as well as on social media sites such as Twitter. (Pl.'s RSMF ¶¶ 46-47.) Furthermore, Brand posted online content personally attacking Svanaco's lawyers, Robert Reda and Robinson Curley. (Id. ¶ 51.)

         Brand sent links to his posts to Gilman, although the parties dispute whether Brand did so with Gilman's knowledge and approval. At his deposition in this matter, Brand testified that although he sent links, he did not think Gilman understood what was going on. (Id. ¶ 50.) The parties also dispute whether Brand posted the content alone or with the help of an online group called “Anonymous.” (Id. ¶ 45.)

         Svanaco is Attacked

         On November 18, 2015, Svanaco was targeted by a distributed denial-of-service (“DDOS”) attack, which resulted in a 25-minute disruption of service for some websites hosted by Svanaco. (Id. ¶ 70.) The parties dispute whether Brand instigated the attack on November 18, 2015.[4] Svanaco claims it suffered damages from the attack in the form of 85 hours of employee time; specifically time that its employees Ryan McElrath, Tony Svanascini, and Michael Svanascini expended in responding to the attack and repairing the resulting damage.[5] (Id. ¶ 73.) Moreover, on November 27, 2015, the website of one of Svanaco's attorneys, Robert Reda, was targeted by a DDOS attack. (Id. ¶ 71.) The attack was unsuccessful and did not result in a disruption of service. (Id.) According to McElrath, whom Svanaco has designated as an expert witness, [6] Brand was responsible for the DDOS attack on Reda's website. (Id.)

         Svanaco also claims that on November 18, 2015 Brand initiated three separate live-chat sessions with Svanaco referencing Gilman Gear, suggesting that Svanaco “square up” with MGI and threatening to “attack” Svanaco and its “brand in web search, ” as well as its “existing clients.” (Pl.'s RSMF Ex. SS.) MGI disputes that Brand initiated those live-chat sessions. (Def.'s RSMF ¶ 17.)

         NiSource, Calico Cottage, and ID Systems

         According to Svanaco, three potential customers ultimately decided not to do business with Svanaco after discovering Brand's postings and websites: NiSource, Calico Cottage, and ID Systems. (Pl.'s RSMF ¶ 78.) NiSource representative Theodore Markiewicz testified at his deposition that the night before NiSource met with Svanaco, one of Markiewicz's team members sent him a website with negative information about Svanaco and its “success with clients in terms of providing deliverables and completing the project.” (Pl.'s RSMF Ex. Y at 34.) Markiewicz could not recall specifically whether he saw any of Brand's websites or any reviews mentioning MGI. (Id.) Nonetheless, Markiewicz felt “concern[ed]” about the “negative information” he had read, which “made [him] pause to determine if [NiSource] should interview the company.” (Id. at 36.) At the meeting between NiSource and Svanaco, Markiewicz summarized the negative online content and expressed that it made him “very concerned about building a relationship” with Svanaco. (Id. 41.) Despite Markiewicz's concerns, after the meeting, NiSource invited Svanaco to submit a bid for its business. (MGI's RSAF Ex. 59.) NiSource did not reject Svanaco's bid until several months later, after conducting “rankings and ratings” of the bidders based on criteria “across many different categories.” (Id.)

         Judy Levin, Calico Cottage's Director of Marketing, stated that in April 2016, she mentioned in a phone conversation with Gareth Roberts, a regional director for Svanaco, that she had read a negative online customer review of Svanaco. (MGI's R. 56.1(a)(3) St. of Undisputed Mat. Facts (“MGI's SUMF”) Ex. 45, Dkt. No. 196-7.) However, Levin did not recall any details about the review, such as who authored it or any of its content, “other than it appeared to be a generic complaint.” (Id.) Similarly, Richard Garten, President of ID Systems, confirmed that he had viewed negative online comments about Svanaco. (MGI's SUMF Ex. 46.) Garten also stated that he emailed Laura Jackimec, a Svanaco employee, informing her that “one of the primary reasons that ID Systems decided not to go with [Svanaco] was because of various negative reviews that were posted online.” (Id.)

         Yet both Levin and Garten swore affidavits insisting that their respective companies did not base their decisions not to hire Svanaco on the negative online reviews. (Pl.'s RSMF ¶¶ 78.) Instead, Levin stated that her company declined Svanaco's business proposal for three reasons: “(1) we wanted to retain a company that was more conveniently located and more accessible for onsite meetings; and (2) [Svanaco] was not an expert in the content management system (CMS) that we use at Calico Cottage[; and] (3) we wanted to retain [a] company whose scale was more similar to ours.” (MGI's SUMF Ex. 45.) Levin also sent an email to Svanaco explaining that Calico Cottage “just didn't feel it was a good fit based on the size of company we would like to work with and proximity to our offices.” (Id.)

         Garten, for his part, stated that his email to Jackimec was untruthful, and “the reason that I listed the negative reviews as a reason for choosing another website company was to stop the sales pitches from [Svanaco] so I could move on with running my company.” (MGI's SUMF Ex. 46.) According to Garten, he had previously informed a female representative of Svanaco that its business proposal was too expensive, but Svanaco nonetheless made “multiple attempts . . . to close a sale with ID Systems.” (Id.) Garten added, “I can honestly state that even if all of the reviews that I may have read about [Svanaco] were positive, I still would not have entered into an agreement with [Svanaco] to build a website for ID Systems due to their pricing and ID Systems' budget.” (Id.)

         Svanaco's Counsel Contacts MGI and Brand

         On November 24, 2015, Gilman received a letter from Reda identifying numerous allegedly defamatory and unlawful websites and YouTube videos. (Pl.'s RSMF ¶ 62.) Gilman then sent a series of emails to Brand in late November and December 2015, urging Brand to call him, take down previously-posted content and stop posting additional content, and “ask your network in the dark web to take [the content] down now.” (Id. ¶ 64.) Brand replied, “I'll do exactly as you ask.” (Id. ¶ 65.) Brand testified that after Gilman asked him to stop, he refrained from creating any additional posts and “contacted Anonymous” to try and remove other websites and posts. (Id.) But Brand or Anonymous[7] continued to post websites, reviews, and other content about Svanaco, its counsel, and its employees through 2016. (Id. ¶ 66.) And during an in-court appearance on December 23, 2016, Brand provided login and password information that allowed Svanaco to remove additional postings and websites. (Id. ¶ 65; Pl.'s RSMF Ex. X.)

         Brand also advised Gilman, “Please send this basic form of reply to Mr. Reda, the attorney asap. [sic] 1. What does this content have to do with me? I see content relating to my business but I did not publish it. 2. I am not familiar with this content nor do I know exactly how it was obtained. 3. If I can be of further assistance, please let me know.” (MGI's RSAF ¶ 18.) Brand sent another email to Gilman a few minutes later, stating:

For right now, forward all communication to me when you receive it and before you send it. That ensures nothing goes outside of plan . . . . At the beginning part of this process, don't answer a single question about me. This forces disclosure of exactly why [sic] they have and how. All completely routine, I have done this before.

(Id.) Gilman replied, “Yes, I will send you any communication before it is sent to AE [American Eagle]. Of course, I will not answer any question [sic] about you.” (Id.) The following week, on December 1, 2015, Gilman sent an email to Reda stating, “I really don't know what you are referring to. Perhaps you could send me a link to what you are referring to because I have not seen it. I have no knowledge of what it contains.” (Id. ¶ 19.) The first two paragraphs of this email were suggested by Brand; Gilman authored the last sentence. (Id.) Gilman then forwarded to Brand a copy of his email to Reda. (Id.) Gilman later asked Brand to respond to another communication from Reda, and Brand told Gilman that he had done so. (Id. ¶ 20.) Then, on December 19, 2015, Gilman asked Brand to send Reda a statement to the effect that MGI was not involved in the creation and posting of the reviews and websites. (Id. ¶ 21.) Gilman explained, “I need this to protect myself from all the threats being made by Reda and American Eagle.” (Id.)

         In January 2016, Gilman told Brand that he could submit a proposal to build a new e-commerce website for MGI. (Id. ¶ 24.) According to MGI, Brand was “desperate for money, ” even going so far as offering to “sweep floors” for MGI, and Gilman allowed Brand to submit a proposal out of pity. (Id.) MGI eventually declined to retain Brand for that purpose. (Id.) On January 27, 2016, Brand sent an email to Parker, MGI's financial administrator, stating, “I finished the side project months ago as agreed so that we could return to the reason I interviewed, to have a website proposal considered.” (Id. ¶ 28.) However, Gilman eventually told Brand that he did not intend to hire him to build a website for MGI. (Id.; MGI's SUMF Ex. 37.)

         DISCUSSION

         Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment will be denied if “a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255. However, a nonmoving party “may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Id. at 256.

         The arguments raised in the pending cross-motions for summary judgment largely overlap-especially regarding the issue of whether Svanaco and MGI's contract was breached and if so, by whom. Regarding the parties' factual contentions, the Court adopts “a dual, Janus-like perspective” on cross motions aimed at the same claim or defense. Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 603 (7th Cir. 2015) (internal quotation marks omitted). On one motion, the Court views the facts and inferences in the light most favorable to the nonmovant, but if summary judgment is not warranted, the Court gives the unsuccessful movant “all of the favorable factual inferences that it has just given to the movant's opponent.” Id.; see, e.g., Nucap Indus., Inc. v. Robert Bosch LLC, 273 F.Supp.3d 986, 997-98 (N.D. Ill. 2017) (evaluating opposing parties' cross motions for summary judgment).

         As discussed below, the Court grants MGI summary judgment on Count I (the ACPA claim) and Count II (the CFAA claim) because, even if Brand violated those statutes, Svanaco has not introduced evidence suggesting that it would be appropriate to hold MGI vicariously liable for Brand's actions. The Court denies MGI's motion for summary judgment, however, on Count III (defamation), Count IV (tortious interference), Count VI (civil conspiracy), and Count VII (breach of contract) because Svanaco has created genuine ...


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