Cost Cutting Consultant, Inc. v. Parcel Management Auditing and Consulting Inc. and Rich Michals, Jr.
2:19-cv-03756
E.D.N.YMar 31, 2022Background
- Cost Cutting Consultant (founded by Yisrael Markowitz) entered a white‑label Client Services Agreement with Parcel Management Auditing and Consulting, Inc. (PMAC) under which PMAC would audit and perform services "on behalf of" Cost Cutting and Section 6 barred PMAC from soliciting or servicing Cost Cutting’s customers during the term and for two years after.
- Two disputed accounts — DC Dental and Caroline’s Cakes — are central: Cost Cutting says they were its "Customers" submitted to PMAC under the Agreement; PMAC contends they were PMAC’s own clients and never Cost Cutting’s.
- In March 2015 Cost Cutting sent a "Withdrawal Letter" ending much white‑labeling but stating certain accounts (including DC Dental and Caroline’s Cakes) would "remain with PMAC," a phrase the parties dispute in meaning.
- PMAC’s founder Michals earlier gave Markowitz PMAC website source code for Cost Cutting’s site; PMAC later alleges unauthorized continued use (including on getmyrefundnow.com) after the parties’ split, prompting copyright counterclaims.
- Procedural posture: Cost Cutting sued in state court alleging breach of contract, unfair competition, conversion, and tortious interference; PMAC removed, answered and asserted multiple counterclaims including copyright and trademark claims; motions for summary judgment and cross‑motions follow.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — non‑solicit of customers (DC Dental, Caroline’s Cakes) | These accounts were Cost Cutting’s "Customers" under the Agreement and PMAC serviced them in breach of Section 6 | The accounts always belonged to PMAC (or were PMAC’s accounts temporarily billed for convenience); the Withdrawal Letter shows Cost Cutting conceded they’d "remain with PMAC" | PMAC’s summary judgment denied; triable issue exists whether accounts were Cost Cutting’s or PMAC’s; Cost Cutting’s summary judgment denied for same reason |
| Unfair competition | PMAC misappropriated Cost Cutting’s clients and acted maliciously to destroy Cost Cutting | Conduct is contractual breach only; no independent bad‑faith misappropriation | Denied as to PMAC’s motion: evidence (threatening messages, alleged malicious intent) could support unfair competition beyond contract breach |
| Conversion | PMAC converted customer lists/intellectual property and deprived Cost Cutting of property | Claim duplicates breach of contract; no separate convertible property shown | PMAC’s summary judgment granted: conversion claim dismissed as duplicative of contract claim |
| Tortious interference with contract | PMAC (and Michals) caused breach of the Agreement by soliciting Cost Cutting’s clients | PMAC cannot tortiously interfere with its own contract; Michals was dismissed with prejudice | PMAC’s summary judgment granted: tortious interference claim dismissed as a matter of law |
| Copyright infringement (site source code) | Cost Cutting/Markowitz used PMAC code without authorization (including on getmyrefundnow.com) | Michals expressly allowed Markowitz to use the code (disputed whether use was conditional); fact issues on post‑termination authorization | PMAC’s summary judgment denied: material factual disputes exist about whether authorization ended and whether use was unauthorized |
| Cost Cutting’s motion to dismiss PMAC’s counterclaims (Rule 12(b)(6)) | Counterclaims fail because they rest on an incorrect premise about contractual limits on use of marks/code | PMAC says dismissal is untimely because Cost Cutting already answered; substantive disputes exist | Denied: procedurally untimely (answers already filed); substantive disputes remain; parties may move for summary judgment instead |
Key Cases Cited
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y. 2002) (clear, complete written agreements are enforced according to plain meaning)
- Terwilliger v. Terwilliger, 206 F.3d 240 (2d Cir. 2000) (elements required to prove breach of contract)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden on movant when nonmoving party lacks evidence)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (a scintilla of evidence is insufficient to defeat summary judgment)
- Bayerische Landesbank v. Aladdin Capital Mgmt. LLC, 692 F.3d 42 (2d Cir. 2012) (contract breaches do not give rise to tort claims absent an independent tort duty)
- Carvel Corp. v. Noonan, 350 F.3d 6 (2d Cir. 2003) (tort recovery may be available where defendant intentionally inflicted harm beyond mere contract breach)
- Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020) (copyright infringement requires ownership and unauthorized copying)
- Nifty Foods Corp. v. Great Atlantic & Pac. Tea Co., Inc., 614 F.2d 832 (2d Cir. 1980) (unfair competition available where defendant maliciously interfered with plaintiff’s goodwill)