Court Opinion

ID: 4109417
Source: CourtListenerOpinion
Date Created: 2016-12-21 16:00:38.347065+00
Date Added: 2024-06-11T13:55:35.127998
License: Public Domain

15-2084 (L)
Protostorm, LLC v. Antonelli, Terry, Stout & Kraus LLP et al.

                             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 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 Courthouse, 40 Foley Square, in the City of New York, on the 21st day of
December, two thousand sixteen.

Present:
         ROBERT A. KATZMANN,
               Chief Judge,
         RALPH K. WINTER,
               Circuit Judge,
         SIDNEY H. STEIN,
               District Judge.*
________________________________________________

PROTOSTORM, LLC,

           Plaintiff-Appellee-Cross-Appellant,
                                                                Nos. 15-2084, 15-2128,
                                                                     15-2154, 15-3410, 15-2199

PETER FAULISI,

           Plaintiff,

                        v.

*
  Judge Sidney H. Stein of the United States District Court for the Southern District of New York
sitting by designation.
                                                1
ANTONELLI, TERRY, STOUT & KRAUS, LLP,
CARL I. BRUNDIDGE, AND FREDERICK D. BAILEY,

          Defendants-Third-Party-Plaintiffs-Appellants-
          Cross-Appellees,

ALAN E. SCHIAVELLI,

          Defendant-Third-Party Plaintiff-Appellee,

DALE HOGUE,

          Defendant-Third-Party Plaintiff,

KATHY WORTHINGTON,

          Third-Party Defendant-Cross-Claimant,

JOHN J. GINLEY, III, DUVAL & STACHENFELD, LLP,

         Third-Party Defendants-Cross-Defendants.
________________________________________________

For:   Defendants-Appellants-Cross-Appellees
       Antonelli, Terry, Stout & Kraus LLP and
       Alan E. Schiavelli:
                                                          GREGORY M. WILLIAMS (Richard
                                                          W. Smith, on the brief), Wiley
                                                          Rein LLP, Washington, DC.

For:   Defendant-Appellant-Cross-Appellee
       Frederick D. Bailey                                Frederick D. Bailey, Esq., pro se,
                                                          Fairfax, VA.

For: Defendant-Appellant-Cross-Appellee
     Carl I. Brundidge                                    JASON C. SPIRO (Jeffrey A.
                                                          Shooman, on the brief), Spiro
                                                          LLC, Short Hills, NJ.

For:   Plaintiff-Appellee-Cross-Appellant
       Protostorm, LLC                                    JONATHAN E. MOSKIN, Foley &
                                                          Lardner, LLP, New York, NY;
                                                          ROBERT S. GOODMAN, Mound
                                                          Cottan Wollan & Greengrass
                                                          LLP, New York, NY (Arthur M.
                                             2
                                                                 Handler, Arthur M. Handler Law
                                                                 Offices LLC, New York, NY, on
                                                                 the brief).

         Appeal from the United States District Court for the Eastern District of New York

(Chen, J.).

         UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED IN PART AND

REVERSED IN PART.

         Defendants-Appellants-Cross-Appellees Antonelli, Terry, Stout & Kraus LLP

(“ATS&K”), Frederick D. Bailey, and Carl I. Brundidge appeal from a judgment of the United

States District Court for the Eastern District of New York (Chen, J.) entered against them

following a jury trial on a legal malpractice claim. In addition, ATS&K and Defendant-

Appellant-Cross-Appellee Alan E. Schiavelli appeal from the district court judgment holding

them in contempt. Plaintiff-Appellee-Cross-Appellant Protostorm, LLC cross-appeals from the

district court’s order declining to hold Brundidge and Bailey jointly and severally liable with

ATS&K for the compensatory damages awarded by the jury. We assume the parties’ familiarity

with the factual and procedural background to this case, as well as the issues on appeal.

         ATS&K argues1 that the district court’s judgment must be overturned because the

invention for which Protostorm sought patent protection is not patentable under 35 U.S.C. § 101

(“Section 101”), particularly in light of the U.S. Supreme Court’s decision in Alice Corp. Pty. v.

CLS Bank Int’l et al., 134 S. Ct. 2347 (2014). However, ATS&K did not raise the Section 101

issue in its motions for judgment as a matter of law made during trial pursuant to Fed. R. Civ. P.
1
    ATS&K’s brief was submitted on behalf of ATS&K, Schiavelli, and Bailey.
                                               3
50(a). Therefore, ATS&K has not preserved its Section 101 challenge to the patentability of

Protostorm’s invention. See Lore v. City of Syracuse, 670 F.3d 127, 152 (2d Cir. 2012). In

particular, because resolution of the Alice issue in this particular case would require “additional

fact-finding,” Baker v. Dorfman, 239 F.3d 415, 420 (2d Cir. 2000) (quoting Readco, Inc. v.

Marine Midland Bank, 81 F.3d 295, 302 (2d Cir. 1996)), ATS&K’s argument about patentability

under Section 101 is not a “purely legal argument.” Pittman by Pittman v. Grayson, 149 F.3d

111, 120 (2d Cir. 1998). Similarly, we uphold the district court’s ruling that ATS&K failed to

preserve its challenge to the patentability of Protostorm’s invention under 35 U.S.C. § 103

(obviousness).

       ATS&K further argues that Protostorm’s malpractice claim fails as a matter of law

because Protostorm did not adequately prove damages. However, to the extent that ATS&K has

not waived its challenge to the damages award, Protostorm’s damages analysis was sufficient to

support the jury’s verdict. Consequently, we decline to overturn the jury’s damages award.

       In addition, ATS&K and Schiavelli appeal the district court’s order holding them in

contempt for violating the terms of a December 24, 2014 court order barring ATS&K from

making payments except (as relevant here) payments for “operating expenses incurred in the

ordinary course of business.” Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP, No. 08-

CV-931, 2015 WL 5999368, at *1 (E.D.N.Y. Oct. 14, 2015). “We review a district court’s

factual findings for clear error, but a finding of contempt under an abuse of discretion standard.

However, our review of a contempt order is more exacting than under the ordinary abuse-of-

discretion standard because a district court’s contempt power is narrowly circumscribed.” Perez

v. Danbury Hosp., 347 F.3d 419, 423 (2d Cir. 2003) (citation omitted). Here, the district court

                                                 4
did not abuse its discretion in finding that payments made by ATS&K after the firm had ceased

practicing law were not made in the “ordinary course of business.” Therefore, we uphold the

district court’s contempt order against ATS&K. However, we vacate the district court’s order as

against Schiavelli, who was no longer managing partner of ATS&K at the time the relevant

payments were made. The district court had stayed execution of the contempt award pending

resolution of the instant appeal, Protostorm, 2015 WL 5999368 at *2, and we now decline to

effect execution of this award.

         Brundidge, in his appeal,2 argues that Protostorm’s suit against him was time-barred as a

matter of law. However, to the extent that Brundidge has not waived this claim, the jury’s verdict

on the statute of limitations was legally proper and was supported by sufficient evidence. See

Protostorm, LLC v. Antonelli, Terry, Stout & Krauss, LLP, No. 08-CV-931, 2015 WL 3605143,

at *21-*24 (E.D.N.Y. June 5, 2015); Protostorm Br. at 79-87. Brundidge also challenges the

district court’s partial grant of summary judgment against the defendants on the issue of breach.

However, Brundidge’s argument is largely better conceived as a challenge to the jury charge, to

which Brundidge did not, in relevant part, object. A challenge to a jury charge to which a party

does not object at trial is reviewed according to the plain error standard, and Brundidge has made

no showing that any “error affects substantial rights.” Rasanen v. Doe, 723 F.3d 325, 332 (2d

Cir. 2013) (quoting Fed. R. Civ. P. 51(d)(2)). To the extent that Brundidge has not waived any of

his challenge to the district court’s partial grant of summary judgment, and assuming arguendo

that such a challenge is reviewable, the district court properly concluded that summary judgment

on the issue of breach was warranted against the defendants, including Brundidge. Additionally,

we uphold the jury’s award of punitive damages against Brundidge, because, as the district court
2
    ATS&K, Schiavelli, and Bailey join in Brundidge’s brief.
                                                5
explained, the jury could reasonably have arrived at this result on the basis of the evidence

before it. See Protostorm, 2015 WL 3605143, at *24-*26.

       As for Protostorm’s cross-appeal, Protostorm argues that the district court erred by not

holding ATS&K attorneys Brundidge and Bailey jointly and severally liable with ATS&K for

the compensatory damages that the jury awarded on Protostorm’s malpractice claim. However,

we find that Protostorm waived this issue through statements made by Protostorm’s counsel at

trial. See Trial Tr. 2838-39, 3024. Consequently, we decline to find in Protostorm’s favor on its

cross-appeal.

       We have considered all of the parties’ remaining arguments and find in them no basis for

altering our decision. Accordingly, for the foregoing reasons, the judgment of the district court is

AFFIRMED in part and REVERSED in part.

                                          FOR THE COURT:
                                          CATHERINE O’HAGAN WOLFE, CLERK

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