Unicorn Crowdfunding, Inc. v. New Street Enterprise, Inc.

Background

Unicorn Crowdfunding, Inc. developed a television program called The Unicorn. New Street Enterprise, Inc., doing business as Socialfix, worked with Unicorn for about a year on branding, marketing, advertising, graphic design, investor materials, event staffing, and related work. Socialfix, along with Ossian Ventures, Inc. and Teresa Tateossian, later claimed that Unicorn had not fully compensated Socialfix.

The parties agreed that Socialfix would receive compensation, but disputed the form and amount. Unicorn maintained that compensation was primarily supposed to be equity in Unicorn, with limited cash payments for specified early services. Socialfix claimed it expected more substantial cash compensation and equity. Socialfix received roughly $17,000 in cash and no equity.

After the relationship deteriorated, Socialfix sent Unicorn demands for payment and claimed ownership of the UNICORN mark and related materials. Tateossian applied to register the mark with the United States Patent and Trademark Office and later withdrew the application. Socialfix then sent Bloomberg Television a cease-and-desist letter shortly before a Bloomberg event that was supposed to promote The Unicorn. Bloomberg removed Unicorn branding from the event. Unicorn alleged that the letter damaged its relationship with Bloomberg and contributed to Bloomberg’s later decision not to work with Unicorn or air the show.

Motions and legal standards

The parties filed cross-motions for summary judgment. Summary judgment is a decision before trial that is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court must view disputed facts in favor of the party opposing the motion.

Socialfix sought partial summary judgment on liability for unjust enrichment and quantum meruit, which are related claims seeking payment for benefits or services provided without adequate compensation. Socialfix also sought summary judgment against Unicorn’s state-law claims. Unicorn sought summary judgment on its claim under the Lanham Act, a federal trademark statute, and partial summary judgment on liability for tortious interference with business relations.

Rulings on Unicorn’s claims

Lanham Act claim

The court denied Unicorn’s motion for summary judgment on its false-designation-of-origin claim under Section 43(a) of the Lanham Act. Unicorn argued that it owned the UNICORN mark and that Socialfix’s trademark application and cease-and-desist letter were likely to cause confusion.

The court held that there was at least a genuine factual dispute about whether Socialfix had used the mark “in commerce,” a required part of Unicorn’s claim. The court reasoned that filing a trademark application generally seeks to reserve a right in a mark and is not itself a commercial use. It also held that sending the cease-and-desist letter did not, on this record, constitute use of the mark in commerce. Tateossian’s statement that she used the mark as part of her work with Unicorn did not resolve the statutory question. Because Unicorn was the only party seeking summary judgment on this claim, the court did not decide whether Socialfix would ultimately prevail on the claim.

Tortious-interference claim

The court denied both parties’ motions concerning Unicorn’s claim that Socialfix tortiously interfered with Unicorn’s business relationship with Bloomberg. Under New York law, the claim required evidence of a business relationship, interference, wrongful or improper conduct, and injury to the relationship.

The court found factual disputes about Socialfix’s purpose in sending the cease-and-desist letter. Krysinski testified that the letter was intended to pressure Unicorn to resume discussions about payment and that Socialfix did not intend to sue Bloomberg. Tateossian, however, testified that she believed Socialfix owned the mark and sent the letter to protect its intellectual property. The court held that a factfinder, rather than the judge on summary judgment, had to resolve these competing accounts and decide whether Socialfix acted in bad faith or used wrongful means.

The court also rejected Socialfix’s argument that Unicorn had no evidence of harm. Witness testimony about the deterioration of the Bloomberg relationship and Bloomberg’s removal of Unicorn branding from the event could support a finding of injury and causation. The court did not rely on the claim that Bloomberg’s ultimate decision not to air The Unicorn was caused by Socialfix, because the record contained little direct evidence connecting that outcome to the letter.

The court made several evidentiary rulings in reaching this result. It would not rely on testimony to prove the contents of Unicorn’s unproduced sponsorship agreement with Bloomberg. It disregarded hearsay statements about Bloomberg’s reasons for distancing itself from Unicorn. It also disregarded Bloomberg invoices that Unicorn had not produced during discovery. The court did consider later events described in Bodik’s declaration because they occurred after his deposition and did not contradict his earlier testimony.

Consumer-protection claim

The court granted Socialfix’s motion solely as to Unicorn’s claim under New York General Business Law § 349. Unicorn did not respond to Socialfix’s argument seeking judgment on that claim, and the court deemed the claim abandoned. The court also held that the record lacked evidence that Socialfix engaged in deceptive conduct directed at consumers or the public at large.

Rulings on Socialfix’s counterclaims

Socialfix had originally asserted claims for breach of contract, quantum meruit, unjust enrichment, and promissory estoppel. Socialfix dropped the breach-of-contract claim. The pending motions addressed only quantum meruit and unjust enrichment; the promissory-estoppel claim was not at issue.

The court denied Socialfix’s motion for summary judgment on liability for unjust enrichment and quantum meruit. The court found that the evidence established several points: Socialfix provided services, Unicorn accepted them, the parties expected Socialfix to be compensated, and Unicorn provided neither the expected equity nor full cash compensation. The court also held that Unicorn’s unclean-hands defense was waived because Unicorn did not plead it in its answer. In the alternative, the court held that the alleged conduct did not approach the seriously improper conduct generally required for that defense.

Even so, the court found that summary judgment was inappropriate because the parties disputed the specific nature and amount of Socialfix’s work and the reliability of Socialfix’s later-created invoices. Those factual issues had to be resolved before the reasonable value of the services could be determined. The court therefore left the unjust-enrichment and quantum-meruit claims unresolved.

Disposition

The court denied Unicorn’s motion for summary judgment in full. It granted Socialfix’s motion for summary judgment solely as to Unicorn’s claim under New York General Business Law § 349. It denied Socialfix’s motion as to Unicorn’s tortious-interference claim and denied Socialfix’s motion concerning its unjust-enrichment and quantum-meruit counterclaims. The court directed the Clerk to terminate the pending motions and stated that an order concerning the next steps would issue.