Court Opinion

ID: 9940674
Source: CourtListenerOpinion
Date Created: 2024-02-14 21:09:42.58421+00
Date Added: 2024-06-11T13:45:23.969994
License: Public Domain

HOV Servs., Inc. v ASG Techs. Group, Inc.
               2024 NY Slip Op 30456(U)
                     February 9, 2024
           Supreme Court, New York County
        Docket Number: Index No. 657346/2020
                  Judge: Andrew Borrok
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
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                       publication.
 [FILED: NEW YORK COUNTY CLERK 02/09/2024 04:42 P~                                                                       INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                                              RECEIVED NYSCEF: 02/09/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53
            ----------------------------------------------------------------------------------- X

             HOV SERVICES, INC.,                                                                     INDEX NO.         657346/2020

                                                          Plaintiff,                                                    01/17/2024,
                                                                                                                        01/17/2024,
                                                - V -                                                                   01/17/2024,
                                                                                                     MOTION DATE        01/17/2024
             ASG TECHNOLOGIES GROUP, INC.,
                                                                                                                        017 019 020
                                                          Defendant.
                                                                                                     MOTION SEQ. NO.        021

                                                                                                      DECISION+ ORDER ON
                                                                                                            MOTION
            ----------------------------------------------------------------------------------- X

            HON. ANDREW BORROK:

            The following e-filed documents, listed by NYSCEF document number (Motion 017) 444,445,484,491,
            492
            were read on this motion to/for                                                         PRECLUDE

            The following e-filed documents, listed by NYSCEF document number (Motion 019) 450,451,452,453,
            454,455,456,457,458,507,508,509,510,511,512
            were read on this motion to/for                                                         PRECLUDE

            The following e-filed documents, listed by NYSCEF document number (Motion 020) 459, 460
            were read on this motion to/for                                                           SEAL

            The following e-filed documents, listed by NYSCEF document number (Motion 021) 461,462,463,464,
            465,466,467,468,469,470,471,472,473,474,475,476,477,478,479,480,481,482,483,496,
            497,498,499,500,501,502,503,504,505,506,513
            were read on this motion to/for                                                         PRECLUDE

            Upon the foregoing documents, the motions in limine are decided as set forth on the record

            (2.7.24 and 2.8.24) and as set forth below.

            By way of background, reference is made to (i) a prior Decision and Order of this Court (the

            Prior Decision; NYSCEF Doc. No. 371), dated January 27, 2022, which (x) dismissed HOV's

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                                             Page 1 of 9
             Motion No. 017 019 020 021

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  NYSCEF DOC. NO. 523                                                                    RECEIVED NYSCEF: 02/09/2024

            causes of action for fraudulent inducement and violation of GBL § 349, (y) dismissed HOV's

            affirmative defenses of fraud and waiver, and (z) limited ASG' s claims under the Overlapping

            Customer Restriction to claims arising on or after November 30, 2016, and (ii) a Decision and

            Order of the Appellate Division (the Appellate Decision; HOV Services, Inc. v ASG Tech.

            Group, Inc., 212 AD3d 503 [1st Dept 2023]), which (w) dismissed HOV's economic duress

            claim and defense to enforcement of Exhibit E, (x) dismissed HOV' s fraudulent inducement

            claim, fraud, waiver, and estoppel defenses, (y) declared that Exhibit Eis an enforceable

            agreement, and (z) finding that the Overlapping Customer Provision was a continuing duty.

            Many of the issues that are the subject of these motions in limine were squarely addressed by the

            Appellate Decision such that relitigating them here would be to argue against the law of the case.

               I.       HOV's motion (Mtn. Seq. No. 017) to exclude evidence regarding Overlapping
                        Customers without new agreements executed during the limitations period is
                        denied.

            The Appellate Decision is instructive on this point:

                    The motion court appropriately limited defendant's counterclaim for breach of the
                    overlapping customer restriction to conduct arising within the two years preceding
                    defendant's assertion of the same counterclaim in a prior federal action. Although this
                    claim was subject to a two-year contractual limitation provision, the overlapping
                    customer restriction constituted a continuing duty, which was breached anew at least each
                    time a new contract was entered into, even if with the same overlapping customer

            (HOV Services, Inc. v ASG Tech. Group, Inc., 212 AD3d 503, 506 [1st Dept 2023]). As such,

            the continuing wrong doctrine does apply to this case ( CWCapital Cobalt VR Ltd. v CWCapital

            Investments LLC, 195 AD3d 12, 19 [1st Dept 2021] [applying the continuing wrong doctrine

            where there was a continuing duty to manage an investment]). Each time HOV provided

            services during the relevant period to one of its customers in violation of the Agreement, an
             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                     Page 2 of 9
             Motion No. 017 019 020 021

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 [FILED: NEW YORK COUNTY CLERK 02/09/2024 04:42 P~                                                 INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                      RECEIVED NYSCEF: 02/09/2024

            independently actionable claim with its own limitations period arose, but that does not extend the

            period for claims outside of the limitations period (i.e., before November 30, 2016) (see id. at 19-

            20; id. at 23 [Scarpulla, J. (dissenting)]; Moses v Dunlop, 155 AD3d 466,468 [1st Dept 2017]).

            Ganzi v Ganzi (183 AD3d 433,434 [1st Dept 2020]) does not change this result- that case does

            not stand for the proposition that an additional contract or re-execution is necessary for the

            continuing wrong doctrine to apply. Thus, the motion is denied.

               II.      HOV's motion (Mtn. Seq. No. 019) to preclude evidence regarding ASG's list
                        prices is denied.

            Exhibit E, which the Appellate Decision already held is an enforceable agreement, addresses this

            issue by its express terms. Firstly, Exhibit E authorized HOV to use the Mobius software solely

            to provide services to HOV's ASP customers, but HOV was specifically not authorized to

            service ASG's clients with the Mobius software (Exhibit E; NYSCEF Doc. No. 3, at 1; id. at 4).

            Further, HOV was not allowed to do processing for the benefit of anyone but themselves or

            otherwise except in accordance with the Agreement:

                     Except as otherwise expressly provided in this Exhibit, Licensee shall not transfer,
                     sublease, assign or deliver Software to other equipment, another location, or another
                     company-including but not limited to as a consequence of merger, acquisition,
                     divestiture, change of ownership, or change of control-or provide or otherwise make
                     Software available to anyone other than Licensee's employees or do processing for the
                     benefit of any entity other than as stated above unless Licensee shall have obtained
                     ASG' s prior written consent and paid the applicable fees which shall not exceed fifty
                     percent (50%) of ASG's then-current list price (with no discounts applied) for the
                     Software.

            (id., at 5 [emphasis added].) As discussed at length on the record (2.7.24), the "do processing for

            the benefit of any entity other than as stated above" applies to the Overlapping Customer

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                       Page 3 of 9
             Motion No. 017 019 020 021

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 [FILED: NEW YORK COUNTY CLERK 02/09/2024 04:42 P~                                                  INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                       RECEIVED NYSCEF: 02/09/2024

            scenario because any servicing of those Overlapping Customers is (i) specifically disallowed by

            the agreement and (ii) such servicing would require using the Mobius software to process the

            Overlapping Customers' document retrieval and storage requests. As such, servicing these

            customers required, under Exhibit E, ASG's written consent and the payment of applicable fees,

            which were capped at fifty percent of ASG' s then-current list price. The fact that HOV

            negotiated a price ceiling and otherwise protected themselves from any future increases in

            ASG' s list prices suggests that this provision was specifically negotiated by HOV for their own

            protection. The motion is denied.

               III.     HOV's motion (Mtn. Seq. No. 020) to seal documents is granted solely to the
                        extent set forth below.

            As set forth on the record (2.7.24), good cause exists for sealing (i) NYSCEF Doc. No. 454, as

            the same source document was already sealed by this Court and (ii) NYSCEF Doc. No. 455, but

            the Defendant shall upload a redacted version ofNYSCEF Doc. No. 455, redacting that

            document as discussed on the record (2.7.24), and (iii) NYSCEF Doc. No. 458. NYSCEF Doc.

            No. 453 is not sealed, as no good cause has been shown therefor.

               IV.      ASG's motion (Mtn. Seq. No. 021) to preclude is granted solely to the extent set
                        forth below.

            The branch of the motion seeking an adverse inference is denied at this time. A party seeking

            sanctions based on the spoliation of evidence must demonstrate (i) that the party with control

            over the evidence had an obligation to preserve it at the time it was destroyed, (ii) that the

            records were destroyed with a culpable state of mind, and (iii) that the destroyed evidence was

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                        Page 4 of 9
             Motion No. 017 019 020 021

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 [FILED: NEW YORK COUNTY CLERK 02/09/2024 04:42 P~                                                  INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                       RECEIVED NYSCEF: 02/09/2024

            relevant to the party's claim or defense such that the trier of fact could find that the evidence

            would support that claim or defense (VOOM HD Holdings LLC v EchoStar Satellite LLC, 93

            AD3d 33, 45 [1st Dept 2012]).

            As discussed on the record (2.7.24 and 2.8.24), the record before the Court is simply not clear as

            to whether spoliation sanctions are warranted at this time. In the 2018 federal litigation, HOV

            sued seeking to have the federal court declare that Exhibit E was not enforceable and otherwise

            alleged that their "servers" were damaged by virtue of ASG sending a code through the Mobius

            software. The servers are available to ASG in this litigation. However, certain logs from the

            servers are not. Two types of logs apparently existed - Audit Logs and Activity Logs. Audit

            Logs seem to record Mobius software activities. Activity Logs seem to record when and what

            type of software was installed on that specific server. Audit Logs are not generated

            automatically. They must be manually "turned on." The record before the Court is simply

            unclear as to whether this ever in fact occurred (NYSCEF Doc. No. 500, pages 176-177, lines

            20-16). These logs would be relevant to the issue of processing activity and may be relevant to

            the issue of whether processing activity occurred for "overlapping customers." The record

            however is also unclear as to whether the log would have captured which customer the

            processing activity was completed for. Finally, it is unclear from the record if the Audit Log

            would have captured any information relevant to any "secret code" allegedly sent by ASG such

            that it would have been relevant to any claims in the federal action. In other words, the record is

            unclear as to whether the Audit Logs had information relevant to the federal action such that

            there was a litigation hold in place as to the Audit Logs. The Activity Log on the other hand

            would have been relevant to how many servers had the Mobius software. This presumably

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                        Page 5 of 9
             Motion No. 017 019 020 021

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            would have been relevant to the claims about the "secret code" being sent to servers with the

            Mobius software such that there would have been a duty to preserve these logs as of that time.

            But it is not clear from the record whether the information regarding the damage to the servers

            was otherwise available or the information as to which servers had the Mobius software is

            otherwise available from the email evidence adduced. As such, the argument made at oral

            argument (2.7.24 and 2.8.24) for a litigation hold violation based on the federal action fails at

            this time.

            The record does however suggest an earlier date for a litigation hold than that set forth in the

            papers (i.e., the two dates proffered by ASG were July 3, 2019 [Interrogatory and Requests

            asking for the location and date range of CPUs deploying the Mobius software] and December 9,

            2020- [ASG amending Counterclaims in the prior federal proceeding Case No. 1:18-cv-09780

            to allege that HOV exceeded the number of servers allowed under Exhibit E; NYSCEF Doc. No.

            462, at 7-9]). In February 2019 in the federal action, ASG made certain document demands

            including:

                    All Documents and Communications Concerning HOV' s use of ASG Software from
                    September 30, 2018 to the present.

            (NYSCEF Doc. No. 479, at 3.)

            On March 8, 2019, HOV responded (id., at 4). As of this time, HOV was certainly on notice as

            to the relevance of the logs such that there was a duty to preserve the logs. The information in

            the logs that ASG seeks however would have been destroyed at that time because the servers re-

            write every approximately 30 days (NYSCEF Doc. No. 470, pages 186-187, lines 1-12) and

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                       Page 6 of 9
             Motion No. 017 019 020 021

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            because in 2018 HOV had already begun transitioning off the server. Exhibit D's contract period

            ended on September 29, 2018. Exhibit E began on September 30, 2018. The parties do not

            dispute that HOV moved away from ASG's software. In fact, ASG claims that HOV reverse

            engineered their software such that this other "reverse engineered" software would have

            presumably been in the Activity Log as of February 2019 - the date of the litigation hold. If at

            trial, the above issues are resolved in a manner suggesting that spoliation did in fact occur, as

            discussed, the Court shall give an appropriate instruction to the jury.

            The branch of the motion seeking to preclude HOV from arguing it did not provide services

            using the Mobius software to the customers listed in HOV's Responses to Interrogatory Nos. 2 &

            3 (NYSCEF Doc. No. 473) is denied. Interrogatory Nos. 2 & 3 are perfectly permissible to use

            at trial and may be introduced as admissions, but their later response creates an issue to be

            explored in front of the jury as to what was meant by certain language in that response.

            The branch of the motion seeking to (i) preclude HOV from challenging the validity of Exhibit

            E, (ii) preclude HOV from attempting to vary the terms of Exhibit E, and (iii) preclude HOV

            from asserting that ASG should have granted a license renewal on different terms is granted, as

            the Agreement is enforceable, contains a merger clause, and these issues were otherwise squarely

            addressed by the Appellate Decision.

            The branch of the motion seeking to preclude HOV from seeking consequential damages or lost

            profits relating to the service outage is granted, as the limitation of liability provisions of the

            Agreement are applicable and limit ASG' s liability for the software outage in question:

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                          Page 7 of 9
             Motion No. 017 019 020 021

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 [FILED: NEW YORK COUNTY CLERK 02/09/2024 04:42 P~                                                     INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                       RECEIVED NYSCEF: 02/09/2024

                      [ASG] SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE THAT MAY ARISE
                      IN CONNECTION WITH THE FURNISHING, PERFORMANCE OR USE BY
                      LICENSEE OF SYSTEM INCLUDING WITHOUT LIMITATION, ANY SPECIAL,
                      INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT
                      NOT LIMITED TO, LOSS OF REVENUES AND LOSS OF PROFITS.

            (NYSCEF Doc. No. 3 § 8 ["Liability"] [emphasis added].) As discussed on the record (2.7.24-

            2.8.24), HOV has not articulated any sufficient basis upon which to disregard the contractual

            limitations on liability under the circumstances of this case.

            Accordingly, it is hereby

            ORDERED that HOV' s motion (Mtn. Seq. No. 017) to preclude evidence is denied; and it is

            further

            ORDERED that HOV's motion (Mtn. Seq. No. 019) to preclude evidence is denied; and it is

            further

            ORDERED that ASG's motion to preclude evidence (Mtn. Seq. No. 021) is granted solely to the

            extent set forth in this Decision and Order; and it is further

            ORDERED that the Clerk of the Court is directed, upon service on him of a copy of this order

            with notice of entry, to seal NYSCEF Doc. Nos. 454,455 & 458 and to separate these documents

            and to keep them separate from the balance of the file in this action; and it is further

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                           Page 8 of 9
             Motion No. 017 019 020 021

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 !FILED: NEW YORK COUNTY CLERK 02/09/2024 04 :42 PM!                                                INDEX NO. 657346/2020
  NYSCEF DOC. NO. 523                                                                         RECEIVED NYSCEF: 02/09/2024

            ORDERED that the Defendants shall upload redacted versions of NYSCEF Doc. No. 455 to the

            public docket in accordance with this Decision and Order; and it is further

            ORDERED that thereafter, or until further order of the court, the Clerk of the Court shall deny

            access to the said sealed documents to anyone (other than the staff of the Clerk or the court)

            except for counsel of record for any party to this case and any party; and it is further

            ORDERED that service upon the Clerk of the Court shall be made in accordance with the

            procedures set forth in the Protocol on Courthouse and County Clerk Procedures for

            Electronically Filed Cases (accessible at the "E-Filing" page on the court's website).

                     2/9/2024
                      DATE                                                       ANDREW BORROK, J.S.C.

                                     ~
             CHECK ONE:                  CASE DISPOSED                    NON-FINAL DISPOSITION

                                         GRANTED         □ DENIED         GRANTED IN PART          □ OTHER
             APPLICATION:                SETTLE ORDER                     SUBMIT ORDER

             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN       FIDUCIARY APPOINTMENT    □ REFERENCE

             657346/2020 HOV SERVICES, INC. vs. ASG TECHNOLOGIES GROUP, INC.                           Page 9 of 9
             Motion No. 017 019 020 021

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