Shah v. Rodino

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

SOUTH BEND DIVISION

DURO INC, DURO RECYCLING INC,

DURO REALTY INC,

Plaintiffs,

v. Case No. 3:13-CV-103 JD

E SPENCER WALTON JR,

GEORGIANNE M WALKER, MAY

OBERFELL LORBER,

Defendants.

OPINION AND ORDER

This case arises from Defendants E. Spencer Walton, Jr., Georgianne M. Walker and

May Oberfell Lorber’s (collectively “MOL”) representation of Terry Rodino and Plaintiffs Duro,

Inc., Duro Recycling and Duro Realty, Inc. (collectively “Duro”) in state and federal court

litigation filed by minority shareholders, Amit Shah and Tim Dugle. Duro’s remaining claims

against MOL include legal malpractice and conspiracy to violate the Computer Fraud and Abuse

Act (“CFAA”). [DE 408; 443]. MOL moves for summary judgment in its favor as to both

claims. [DE 473]. This motion is ripe for decision. [DE 487; 494]. The parties have also filed

motions relating to the designated evidence submitted in support of their briefs. [DE 484; 497;

498; 499]. These motions are also ripe and addressed below.

I. FACTUAL BACKGROUND

This case began as a business dispute between the majority and minority shareholders of

Duro and its related entities over the management of those companies by Mr. Rodino.1 Duro was

1 The facts of this case stem, in part, from events as early as 2004, involving many individuals who are no longer

parties to the action. The factual background here only includes relevant facts as they relate to the remaining claims

of the Third Amended Complaint between Duro and MOL.

in the business of selling pallets, which are commonly used for transporting goods. [DE 408 at

3–4]. Mr. Rodino was the president and majority shareholder of Duro until September 2017,

which is the time period Duro alleges Mr. Rodino misappropriated assets. [DE 474-9 at 2–3].

Mr. Shah and Mr. Dugle were minority shareholders during the relevant time. Mr. Rodino

decided how expenses would be coded, whether to make distributions to shareholders, how he

was compensated, whether to use company assets for his own benefit, how money was allocated

among the various Duro Entities, how labor and materials were apportioned among the Duro

Entities, and what documents would be provided in litigation. [DE 476-1 at 35–37]. Duro asserts

that when Mr. Rodino engaged in such actions, he committed unlawful conduct including fraud,

embezzlement, conversion, breach of fiduciary duty, and misappropriation of funds. [DE 408 at

17–19].

In September 2008, Mr. Rodino created another business called Apex Pallet, Inc.

(“Apex”), which was a brokering company for pallets. Apex would purchase pallets from a pallet

company and sell them to a customer. [DE 485-4 at 7]. Mr. Rodino testified that Apex did not

receive a commission on the sales, but it would receive the profits of the sale. Id. Mr. Rodino

was the sole owner and shareholder of Apex. Mr. Rodino testified that Apex was created to

service KIK, a customer that needed pallets. Prior to Apex’s formation, KIK was a customer of

Duro. Mr. Rodino testified that he created Apex to serve as a go-between for Duro and KIK

because KIK indicated it would not do business with a company owned by any of the Shahs,

including Mr. Shah, who had just become a minority shareholder in Duro. Id. at 8–9. When he

learned this, Mr. Rodino went to the offices of Warrick & Boyn and told them to incorporate

Apex. Id. at 10. Mr. Rodino formed Apex to keep KIK’s busines and ultimately Apex was

“extremely profitable for the Duro companies.” Id. at 9. Duro asserts that Apex was created and

used to steal customers, supplies, pallets, money, and resources from Duro. [DE 408 at 9]. Mr.

Walton testified that he was told by Bill Haut at Warrick & Boyn that Apex was formed because

KIK would no longer do business with Duro once it learned Mr. Shah owned shares. [DE 486-2

at 29]. Mr. Walton further testified that when Mr. Rodino spoke with him about his conversation

with KIK regarding Mr. Shah, Mr. Walton asked Mr. Rodino if “there [was] anything in writing

to substantiate” the conversation. Id. at 30. Mr. Walton asked Mr. Rodino if he was able to get it

in writing and the result of that was an email from KIK that stated, “[m]anagement’s direction at

the time was to avoid doing business with anyone associated with the Shahs.” Id.

Mr. Shah and Mr. Dugle, as minority shareholders, filed their original complaint in this

action on February 14, 2013. As minority shareholders in the Duro Entities they raised eleven

claims against Mr. Rodino, Duro, and others, alleging violations of the Racketeer Influenced and

Corrupt Organizations (“RICO”) Act, and the federal money laundering criminal statute, as well

as state law claims for fraud, conversion, deception, breach of fiduciary duty, and unjust

enrichment. On March 24, 2014, this Court dismissed all eleven claims without prejudice in

response to Defendants’ motion to dismiss. As to the RICO claims, the Court “decline[d] to

allow Plaintiffs to bring their derivative claims in a direct action” while “expressly stat[ing] no

opinion as to whether such claims are appropriate in this case.” [DE 68 at 12]. Having dismissed

all of the federal claims, the Court declined to exercise supplemental jurisdiction over the state

law claims. Id. The Court, however, granted them leave to file an amended complaint. Id. at 15.

Having limited the scope of an amended complaint, the Court prohibited Mr. Shah and Mr.

Dugle from adding new claims or new defendants without leave of court. Id. On April 23, 2014,

Mr. Shah and Mr. Dugle filed a Motion for Leave to Amend the Complaint. In that proposed

Amended Complaint, they clarified the claims raised in their original complaint and included

new defendants and claims based on conduct during the pendency of the motion to dismiss. The

minority shareholders also alleged new claims related to Mr. Rodino’s alleged destruction of

computer documents and computer trespass, federal RICO claims, Indiana RICO claims, and

legal malpractice claims against the attorneys representing Duro.

Before the Court could rule on the first motion to amend, Mr. Shah and Mr. Dugle filed

another Motion for Leave to File a Second Amended Complaint. In their proposed Second

Amended Complaint, Mr. Shah and Mr. Dugle repeated the claims included in their proposed

First Amended Complaint and added new claims against Elkhart County and Scott Mills (an IT

professional at Duro) as defendants for their part in Mr. Rodino’s alleged destruction of

computer files in violation of the federal CFAA and Indiana’s computer tampering statute. In

addition, Plaintiffs proposed an additional derivative claim against Defendant MOL for allegedly

conspiring with and assisting Mr. Rodino and Mr. Mills in violating the CFAA and the state

computer tampering statute. The Court granted the motion for leave to file the Second Amended

Complaint, which was then filed on June 29, 2015. [DE 89; 90].

During the underlying litigation, Mr. Shah and Mr. Dugle moved to disqualify MOL as

counsel for Mr. Rodino and Duro on two occasions. [DE 15; 144]. The first was on March 26,

2013, and the motion asserted that MOL’s concurrent representation of Mr. Rodino and Duro

created a conflict under Indiana Rules of Professional Conduct 1.7 and that Duro’s interest in

determining the party responsible for the alleged mismanagement of Duro put MOL at odds with

the interests of Mr. Rodino who Mr. Shah and Mr. Dugle alleged engaged in the

mismanagement. [DE 54 at 7]. They also asserted that MOL knew of Mr. Rodino’s alleged

misconduct and intent to continue and thus should have withdrawn under Rule 1.13(b) and the

concurrent representation was improper under Rule 1.13(g) for failing to obtain consent from the

minority shareholders. Id. After a hearing, Magistrate Judge Nuechterlein denied the motion,

finding that Defendants demonstrated that the interests of Mr. Rodino and Duro were aligned. Id.

at 9–10. On July 30, 2015, Mr. Shah and Mr. Dugle filed a new motion to disqualify MOL. [DE

144]. The minority shareholders again asserted the past and present concurrent representation

constituted a conflict of interest and the representation has caused harm to Duro. Id. at 3. They

also argued that MOL should be disqualified because they allegedly conspired with Mr. Rodino

to violate the CFAA and MOL was added as defendants to the recently filed Second Amended

Complaint. Magistrate Judge Martin denied the motion, holding that the issue had already been

decided, MOL’s inclusion as defendants could not be a basis for disqualifying counsel, and the

motion was premature because there was a pending motion to dismiss the Second Amended

Complaint nor had discovery begun. It was uncertain if MOL would remain as defendants. [DE

226 at 3–5].

On June 14, 2016, MOL moved to withdraw as Mr. Rodino’s counsel, which the Court

granted. [DE 255–58]. After two status conferences regarding Duro’s representation, the Court

granted MOL’s second set of motions to withdraw from representing Duro on May 17, 2017.

[DE 340]. On September 21, 2017 the claims against Duro, Mr. Rodino, his family members and

others were settled and subsequently dismissed, including the derivative claims made by Mr.

Shah and Mr. Dugle on behalf of Duro. [DE 381; 391; 396]. All shares previously owned by Mr.

Rodino were redeemed by Duro. [DE 408 at 3]. The same day all of Mr. Dugle’s shares were

also redeemed, thereby making Mr. Shah the sole shareholder of Duro. [DE 476-1 at 26]. Duro

paid Mr. Rodino $1.4 million for his shares and Duro did not receive money from Mr. Rodino.

Id. at 31–32, 34. The settlement and dismissal of claims against Mr. Rodino and others preserved

whatever claims Duro might have against MOL and Warrick & Byon. [DE 408 at 3; 471 at 9].

As consideration, the settlement required Mr. Rodino to execute a separately signed affidavit that

waived all attorney-client and attorney work product privilege regarding all communications,

disclosures, advice, and documents between him and MOL. [DE 471 at 5]. That waiver did not

include the attorney-client privilege held with his new attorneys. [DE 474-7 at 28].

Part of the express consideration for the settlement was that Mr. Shah would receive “all

stock, title, and interest in [Duro].”2 [DE 471 at 4]. Shortly after the September 2017 settlement

was effectuated, Mr. Shah transferred all of Duro’s assets, worth millions of dollars, to his pallet

company, Green Stream. [DE 476-1 at 15–16, 27]. After Mr. Shah took over, Duro no longer had

any hard assets, operations, revenue, income, employees, or customers. Id. at 15–18, 27. The

only “asset” that Duro has now is this lawsuit. Id. at 15–16. After this case is resolved, Mr. Shah

does not know what he will do with Duro. Id. at 28. Since Mr. Shah took over, he has distributed

all of the cash left over in Duro to himself. Id. at 16.

The Third Amended Complaint was filed on June 8, 2018 and asserted claims by Duro,

Mr. Shah, and Mr. Dugle against MOL as well as Warrick & Boyn and its attorneys. [DE 408].

Pursuant to MOL’s motion, the Court dismissed Count 1 for legal malpractice as to Mr. Shah and

Mr. Dugle and dismissed Count 2 for a claim entitled conflict of interest, in its entirety. [DE 437;

443]. On May 6, 2020, the Court granted a stipulation to dismiss between Plaintiffs and

Defendants Warrick & Boyn, William Haut, and Timothy Shelly. [DE 460]. On January 22,

2021, MOL moved for summary judgment as to both remaining claims of the Third Amended

Complaint. [DE 473]. For the following reasons, the Court grants MOL’s motion.

II. STANDARD OF REVIEW

2 The Settlement Agreement indicated plaintiffs, Mr. Shah and Mr. Dugle, would receive “all stock, title, and

interest” however, Mr. Dugle’s previous 1% of Duro was redeemed the same day of the Redemption Agreement, so

Mr. Shah owns 100% of Duro. [DE 476-1 at 26].

On summary judgment, the burden is on the moving party to demonstrate 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). That means that the Court must construe all facts in the light most

favorable to the nonmoving party, making every legitimate inference and resolving every doubt

in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment is

not a tool to decide legitimately contested issues, and it may not be granted unless no reasonable

jury could decide in favor of the nonmoving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986). The party seeking summary judgment “bears the initial responsibility of informing the

district court of the basis for its motion, and identifying” the evidence which “demonstrate[s] the

absence of [a] genuine issue of material fact.” Id. at 323. Once the moving party meets this

burden, the nonmoving party may not rest on allegations or denials in its own pleading but must

set out specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(c)(1); Beard v. Whitley

Cty. REMC, 840 F.2d 405, 410 (7th Cir. 1988). The disputed facts must be material, which

means that they “might affect the outcome of the suit under the governing law.” Brown v. City of

Lafayette, 2010 WL 1570805, at *2 (N.D. Ind. Apr. 16, 2010). “If the nonmoving party fails to

establish the existence of an element essential to his case, one on which he would bear the

burden of proof at trial, summary judgment must be granted to the moving party.” Ortiz v. John

O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996).

III. ANCILARY MOTIONS

The parties have filed a number of ancillary motions relating to the designated evidence

submitted in support of their briefs. Duro moves to strike two of MOL’s exhibits. [DE 484].

MOL moves to strike or exclude Duro’s expert opinion of Lucian Pera [DE 497] and Ronald

Braver [DE 498], as well as portions of John Henning’s declaration [DE 499]. Before reaching

the merits of the motion for summary judgment, the Court will address these motions in turn.

A. Duro’s Motion to Strike Exhibits 16 and 9 of MOL’s Designated Evidence

Duro moves to strike two of MOL’s designated exhibits—16 and 9. [DE 484]. MOL

responded in opposition [DE 496], to which Duro did not reply. For the following reasons, the

Court denies Duro’s motion to strike Exhibits 16 and 9.

1. Exhibit 16

By way of background, on March 18, 2014, Mr. Shah and Mr. Dugle filed a grievance

with the Indiana Supreme Court Disciplinary Commission (“the Commission”), which is an

administrative agency of the Indiana Supreme Court responsible for investigating and

prosecuting claims of misconduct against lawyers licensed to practice law in Indiana and

protecting lawyers against unwarranted claims of misconduct. See Indiana Rules for Admission

to the Bar and Discipline of Attorneys, Rule 23. The grievance was about MOL’s representation

in this action. On April 15, 2014, a member of the Commission sent Mr. Walton a letter stating

the grievance was “dismissed as not raising a substantial question of misconduct that would

warrant disciplinary action.” [DE 474-17 at 1]. In support of its motion for summary judgment,

MOL designated Exhibit 16, which includes the April 15 letter from the Commission, the March

18 grievance, and the letter from attorney John Henning to the Commission enclosing the

grievance. Id. at 1–3. Duro argues Exhibit 16 should be stricken and not considered by the Court

for several reasons: 1) the documents are unauthenticated; 2) the letter is improper and

inadmissible hearsay evidence under Rule 802 and no exception applies; 3) the opinions

contained in the letter constitute undisclosed opinion testimony; and 4) the substance of the letter

is irrelevant.

“To be considered on summary judgment, evidence must be admissible at trial, though

‘the form produced at summary judgment need not be admissible.’” Cairel v. Alderden, 821 F.3d

823, 830 (7th Cir. 2016) (quoting Wragg v. Vill. of Thornton, 604 F.3d 464, 466 (7th Cir. 2010)).

“A party may object that the material cited to support or dispute a fact cannot be presented in a

form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2) (emphasis added). “In other

words, the Court must determine whether the material can be presented in a form that would be

admissible at trial, not whether the material is admissible in its present form.” Stevens v.

Interactive Fin. Advisors, Inc., 2015 WL 791384, at *2 (N.D. Ill. Feb. 24, 2015) aff’d in part,

830 F.3d 735 (7th Cir. 2016). As the Seventh Circuit has specifically noted, “the Federal Rules

of Civil Procedure allow parties to oppose summary judgment with materials that would be

inadmissible at trial so long as facts therein could later be presented in an admissible

form.” Olson v. Morgan, 750 F.3d 708, 714 (7th Cir. 2014).

First, Duro argues that Exhibit 16 should be stricken because the documents are

unauthenticated and therefore inadmissible under Federal Rule of Evidence 901, which states

“[t]o satisfy the requirement of authenticating or identifying an item of evidence, the proponent

must produce evidence sufficient to support a finding that the item is what the proponent claims

it is.” Duro notes in its motion that Mr. Henning laid a foundation for the grievance and the letter

he wrote enclosed with the grievance but argues no foundation has been laid for the letter from

the Commission. [DE 484 at 3]. In its response to Duro’s motion, MOL filed a supplemental

designation of evidence that contains an affidavit from Mr. Walton authenticating Exhibit 16,

particularly the letter from the Commission. [DE 495-3]. Cehovic-Dixneuf v. Wong, 895 F.3d

927, 932 (7th Cir. 2018) (noting that parties can submit supplemental affidavits to cure

evidentiary defects). In his affidavit, Mr. Walton attests to the Exhibit 16 documents being true

and accurate copies of the letter he received from the Commission and its enclosures. Further, at

trial, Mr. Walton could testify that it is a true and accurate copy of what he received from the

Commission and a records custodian of the Commission could testify or submit an affidavit that

it is a true and accurate copy. Duro has not subsequently challenged this affidavit or the

foundation and authentication it provides. Therefore, the Court finds Exhibit 16 has been

authenticated.

Second, Duro argues that Exhibit 16 contains inadmissible hearsay. The Commission’s

letter states that the grievance was “dismissed as not raising a substantial question of misconduct

that would warrant disciplinary action.” [DE 474-17 at 1]. Duro argues that MOL is attempting

to use Exhibit 16 to prove that Duro’s claims are prohibited by Indiana law and that Mr. Shah is

improperly bringing the pending claims. However, the Court disagrees with this characterization

and does not find it is being offered for the truth of the matter asserted—that is, no misconduct

existed. In its motion for summary judgment, MOL cites to Exhibit 16 on two occasions. First, it

cites to the filing of the grievance at the direction of Mr. Shah as evidence that Mr. Shah wanted

to “strike back” at the attorneys who represented Mr. Rodino and Duro during the litigation. [DE

476 at 34]. Next, MOL cites to Exhibit 16 in support of its arguments on why attorney fees

should not be disgorged. Id. at 58. MOL argues that an important factor in this analysis is the

willfulness of the alleged violation. MOL argues in part that the alleged violation was not willful

because, among other evidence, it had been made aware the grievance was dismissed as there

was no substantial question of misconduct. Thus, the Court finds that MOL is not offering the

Commission’s letter for the truth of the matter asserted and therefore is not hearsay.

Third, Duro argues the Commission’s letter constitutes undisclosed opinion evidence and

must be stricken. Duro asserts that MOL is attempting to use the letter to show that MOL

committed no misconduct, however MOL never identified members of the Commission as

witnesses in discovery disclosures and did not identify the opinion or provide opinion disclosures

as required by the Federal Rules. MOL argues that for the same reason the Commission’s letter

is not hearsay—it is not offered for the truth of the matter asserted—the letter does not constitute

undisclosed expert opinion. MOL has not offered the letter as an expert opinion that no

misconduct occurred, but rather for the reasons stated above, relating to evidence of Mr. Shah’s

motivation in pursuing MOL and the disgorgement of attorney fees analysis. The Court agrees

and does not find that the Commission’s letters is being offered as undisclosed opinion evidence.

Fourth, Duro argues Exhibit 16 is irrelevant to the underlying issues in the present case

because its experts’ opinion contradicts the letter. Federal Rule of Evidence 401 defines relevant

evidence as evidence which “has any tendency to make a fact more or less probable than it

would be without the evidence” and “the fact is of consequence in determining the action.”

However, again, MOL is not offering the letter to establish no misconduct occurred, but rather

argues its relevancy is the impact the letter had on MOL, which is a fact of consequence to some

of Duro’s allegations. The Court agrees and therefore finds Exhibit 16 relevant.

Lastly, to the extent Duro argues the grievance filed by Mr. Henning at the request of Mr.

Shah and the letter enclosed with it is hearsay, the Court disagrees. A statement offered against

an opposing party that was made by a person whom the party authorized to make a statement on

the subject or by the party’s agent on a matter within the scope of that relationship while it

existed is not hearsay. Fed. R. Evid. 801(d)(2)(C), (D). Here, there is evidence that Mr. Henning

filed this grievance at the request of Mr. Shah and Mr. Dugle. [DE 474-15 at 9]. At the time of

the grievance, they were minority shareholders of Duro and requested their attorney, Mr.

Henning to pursue the alleged violations with the Commission. Mr. Shah is now the sole owner

of Duro pursuing claims related to the underlying litigation. Further, at trial, Mr. Henning, the

declarant, could testify to the letter and grievance he authored. Thus, the Court finds the

grievance and letter from Mr. Henning are not hearsay under Rule 801(d)(2)(C)-(D).

Accordingly, for the above reasons, Duro’s motion to strike MOL’s Exhibit 16 is denied.

2. Exhibit 9

In support of its motion for summary judgment MOL designated an Affidavit of Terry

Rodino dated January 16, 2020 as Exhibit 9. Duro argues Mr. Rodino’s affidavit should be

stricken and not considered by the Court because it is inconsistent with his previous affidavit

from September 2017 and his later deposition testimony taken in July 2020. [DE 484 at 9]. Duro

asserts that Mr. Rodino’s story has changed about whether or not MOL provided him with advice

regarding various business practices and decisions related to Duro, and therefore the

inconsistences and contradictions in his story make the January 2020 affidavit implausible and

not credible and should be disregarded by the Court.

Any affidavit submitted for the court’s consideration in ruling on a motion for summary

judgment must “be made on personal knowledge, set out facts that would be admissible in

evidence, and show that the affiant is competent to testify on the matters stated.” Fed. R. Civ. P.

56(c)(4). “[A]lthough personal knowledge may include reasonable inferences, those inferences

must be ‘grounded in observation or other first-hand personal experience. They must not be

flights of fancy, speculations, hunches, intuitions, or rumors about matters remote from that

experience.’” Payne v. Pauley, 337 F.3d 767, 772 (7th Cir. 2003) (quoting Visser v. Packer

Eng’g Assoc., 924 F.2d 655, 659 (7th Cir. 1991) (en banc)). The Seventh Circuit has held the

term “self-serving” “must not be used to denigrate perfectly admissible evidence through which

a party tries to present its side of the story at summary judgment.” Hill v. Tangherlini, 724 F.3d

965, 967 (7th Cir. 2013). The mere fact that an affidavit is self-serving does not preclude the

court from considering it on summary judgment, as long as the affidavit meets the requirements

of Rule 56(c). See Payne, 337 F.3d at 773 (“lay[ing] to rest the misconception that evidence

presented in a ‘self-serving’ affidavit is never sufficient to thwart a summary judgment

motion.”).

A party generally may not “create an issue of fact by submitting an affidavit whose

conclusions contradict [that party’s own] prior deposition or other sworn testimony.” Buckner v.

Sam’s Club, Inc., 75 F.3d 290, 292 (7th Cir. 1996). “The concern in litigation, of course, is that a

party will first admit no knowledge of a fact but will later come up with a specific recollection

that would override the earlier admission.” Id. Rule 56 thus requires a judge to scrutinize the

substance of an affidavit offered in response to a summary-judgment motion to determine

whether a reasonable jury could rely on the factual statements it contains. James v. Hale, 959

F.3d 307, 315 (7th Cir. 2020). In this Circuit the sham-affidavit rule prohibits a party from

submitting an affidavit that contradicts the party’s prior deposition or other sworn testimony. Id.

at 316.

The Seventh Circuit has recognized exceptions to the sham-affidavit rule. Id. at 317. The

rule provides that an affidavit is inadmissible only when it directly contradicts the affiant’s

previous sworn testimony unless the earlier testimony was ambiguous, confusing, or the result of

a memory lapse. Cook v. O'Neill, 803 F.3d 296, 298 (7th Cir. 2015). The submission of a

supplemental affidavit that clarifies ambiguous or confusing deposition testimony is allowed.

James, 959 F.3d at 317. The sham affidavit doctrine, therefore, reflects the judgment that

affidavits cut from whole cloth and offered solely to create issues of fact “are so lacking in

credibility as to be entitled to zero weight in summary judgment proceedings unless the affiant

gives a plausible explanation for the discrepancy.” Beckel v. Wal-Mart Assos., Inc., 301 F.3d

621, 623 (7th Cir. 2002). “Changes in testimony normally affect the witness’s credibility rather

than the admissibility of the testimony, and thus the sham-affidavit rule applies only when a

change in testimony ‘is incredible and unexplained.’” United States v. Funds in the Amount of

$271,080, 816 F.3d 903, 907 (7th Cir. 2016) (quoting Cook, 803 F.3d at 298). “Without the

doctrine, even an affidavit involving contradictions so clear that the only reasonable inference

was that the affidavit was a sham designed to thwart the purposes of summary judgment would

in fact preclude summary judgment, because the court otherwise could not grant summary

judgment without intruding upon the jury’s role in resolving questions of credibility.” United

States ex rel. Robinson v. Indiana Univ. Health, Inc., 204 F.Supp.3d 1040, 1044 (S.D. Ind. 2016)

(citing Bank of Illinois v. Allied Signal Safety Restraint Sys., 75 F.3d 1162, 1168-69 (7th Cir.

1996) (internal quotations and citations omitted)). The Seventh Circuit has emphasized that the

rule is to be used with “great caution.” Id.

In September 2017, following mediation in the underlying litigation, Mr. Rodino entered

into the Redemption Agreement with Mr. Shah, Mr. Dugle, and Duro. [DE 474-7]. As an exhibit

to the Redemption Agreement, Mr. Rodino submitted a sworn affidavit (“September 2017

Affidavit”). Id. at 26–28; [DE 484-5 at 2–4].3 In the September 2017 Affidavit, Mr. Rodino

provided sworn statements that he consulted with MOL and Warrick & Boyn and relied on their

advice regarding various business practices and decisions related to Duro. Specifically, Mr.

Rodino provided the following sworn statements:

6. On various occasions I consulted with attorneys at Warrick & Boyn and/or

May Oberfell Lorber regarding various business practices and decisions related to

3 The Redemption Agreement was filed by MOL in support of its motion for summary judgment at DE 474-7,

including its “Exhibit E,” which is an affidavit signed by Mr. Rodino in September 2017. However, this affidavit is

not the same September 2017 Affidavit that Duro attaches to its motion to strike. Neither party addresses this

discrepancy.

the Duro Entities, including, but not limited to: the incorporation of the Duro

Entities; firing my then minority shareholder Tim Dugle; electing on behalf of the

various Duro Entities to not pay shareholder dividends; opposing Dugle’s attempts

to sell his shares in our businesses to Amit Shah; the formation of Apex Pallet to

handle K.I.K. Custom Products business; various lawsuits which erupted between

Shah, Dugle, the Duro Entities, my other businesses, my family and Aaron Zou;

and amending Duro’s By-Laws to allow for indemnification of an officer or director

for actions or omissions related to their management of the Duro Entities.

7. On all occasions mentioned above I fully apprised these lawyers, to the best of

my ability, regarding the facts and circumstances surrounding each issue.

9. On all occasions mentioned above I relied on the advice of the lawyers at May

Oberfell Lorber and Warrick & Boyn and carried out that advice to the best of my

ability.

[DE 484-5 at 3–4] (emphasis added). In January 2020, Mr. Rodino submitted another sworn

affidavit in this matter (“January 2020 Affidavit”), which is MOL’s Exhibit 9 and the subject of

Duro’s instant motion to strike. In the January 2020 Affidavit, Mr. Rodino provided sworn

statements, among others, that he did not consult with or rely on MOL’s advice:

6. I did not seek or receive advice from MOL regarding changing the Duro Entities

by-laws to provide indemnity to officers of Duro Entities.

8. I did not seek, receive or need advice from MOL, that I could pay MOL’s fees

for their representation of me from the Duro Entities accounts.

9. I did not seek, receive or need advice from MOL regarding the formation of Apex

Pallet, Inc.

16. I did not seek, receive or need advice from MOL regarding the incorporation of

the Duro Entities.

17. I did not seek, receive or need advice from MOL regarding firing minority

shareholder Tim Dugle.

18. I did not seek, receive or need advice from MOL regarding the payment of

shareholder dividends. At all times relevant to the allegations made against me in

state and federal court, I understood that if I, as the majority shareholder, decided

to pay dividends that dividends would paid to all shareholders proportionally.

20. MOL did not advise me that I had no obligation to pay dividends or

distributions.

[DE 474-10 at 2, 4]. Lastly, in July 2020, Mr. Rodino gave deposition testimony in this case. He

testified that he could not remember one way or another whether he consulted with or relied on

MOL’s advice regarding Duro. [DE 484-4 at 9–10, 13]. He also testified that he had no

recollection of the circumstances in the drafting or execution of the January 2020 Affidavit, and

no recollection of communications with MOL on various relevant topics. Id. at 4–5.

Duro argues these inconsistencies and contradictions throughout Mr. Rodino’s two

affidavits and deposition testimony make the January 2020 Affidavit implausible and no

reasonable factfinder could credit it. MOL argues that the primary purpose of the “sham

affidavit” rule is to preclude a party from preventing the entry of summary judgment through the

use of an affidavit created during the summary judgment process that directly contradicts earlier

deposition testimony. While it is important to note that the affidavit in question was obtained

months before Mr. Rodino was deposed and before any motion for summary judgment was filed,

it is not dispositive because the sham-affidavit rule can apply to contradictions or inconsistencies

with “other sworn testimony,” not just previous deposition testimony. James, 959 F.3d at 316.

First, the Court compares the September 2017 Affidavit and the January 2020 Affidavit.

MOL argues that these affidavits are not inherently inconsistent with one another. As MOL

notes, the September 2017 Affidavit uses “and/or” when describing what law firm he consulted.

For example, the affidavit states, “I consulted with attorneys at Warrick & Boyn and/or May

Oberfell Lorber regarding various business practices and decisions related to the Duro Entities,

including but not limited to . . . .” [DE 484-5 at 3] (emphasis added). Applying the ordinary

meaning of “and/or” results in a reading as “I consulted with attorneys at Warrick & Boyn [or]

May Oberfell Lorber [or both] regarding various business practices and decisions related to the

Duro Entities.” This language does not affirmatively establish only one outcome, such as, that

MOL definitively provided the advice discussed. Rather, it established the possibility that one or

both of the law firms provided the advice. Therefore, the September 2017 Affidavit is ambiguous

and subject to further explanation because it failed to define what each law firm did or did not

provide Mr. Rodino. The affidavit left open the possibility that either or both law firms could

have provided the advice on each topic. Mr. Rodino’s January 2020 Affidavit is more specific

than his September 2017 Affidavit, not inconsistent.

Further, the January 2020 Affidavit in Exhibit 9 is consistent with other established facts

of the case. In its Answer to the Third Amended Complaint, Warrick & Boyn admitted that Mr.

Haut, one of its attorneys, incorporated Duro and prepared its Articles of Incorporation. [DE 418

at 5]. Warrick & Boyn admitted that it prepared the corporate formation documents for Duro

Realty. Id. at 6. Warrick & Boyn admitted that it incorporated Duro Recycling. Id. at 7. Thus, the

fact that MOL did not provide advice on the incorporation of Duro is consistent with the

established fact that Warrick & Boyn provided that advice. Additionally, Warrick & Boyn

admitted that Mr. Rodino consulted with Warrick & Boyn about the formation of Apex, the

corporate formation documents for Apex reveal that Warrick & Boyn prepared them, and Mr.

Rodino testified to going to Warrick & Boyn’s office to get Apex incorporated. Id. at 16–17; [DE

485-4 at 28; 485-4 at 10]. Thus, the fact that Exhibit 9 attests that Mr. Rodino did not consult

with MOL about the formation of Apex, is consistent with the established facts of the case that

he consulted with Warrick & Boyn.

In July 2020, five months after the January 2020 Affidavit and six months before the

motion for summary judgment was filed, Mr. Rodino was deposed. Mr. Rodino testified that he

had no recollection of the circumstances in the drafting or execution of the Affidavit. [DE 484-4

at 4–5]. Mr. Rodino also testified that he did not draft the January 2020 Affidavit, did not know

who drafted it, did not know how he received it, and had no recollection of receiving any

instructions from anyone about reviewing or signing it. Id. at 5. He also testified he had no

recollection of who asked him to sign it and whether he reviewed anything before signing it. Id.

When asked if he spoke with any attorneys from MOL prior to signing it or preparing it, he

responded, “I don’t think so” and “not that I’m aware of.” Id. Later in his testimony, he stated he

did recall signing it under the penalty of perjury that it was true and accurate. [DE 496-1 at 6–7].

After reviewing the affidavit, he testified that it “appear[s] to be accurate.” Id. at 7. As to the

advice he received from MOL, Mr. Rodino testified he could not remember the advice given or

not given to him by MOL. He testified to having no recollection of consulting with or relying on

advice from MOL about the firing of Mr. Dugle [DE 484-4 at 13], payment of shareholder

dividends (id. at 7, 11), the formation of Apex (id. at 9–10), various lawsuits (id. at 6), and

amending Duro’s by-laws (id. at 13). He confirmed that he did not seek or receive advice from

MOL concerning payment of distributions. Id. at 7.

The Court is persuaded by MOL’s arguments and reiterates the lack of rebuttal by Duro

before the Court. See Wojtas v. Capital Guardian Tr. Co., 477 F.3d 924, 926 (7th Cir. 2007)

(stating that failure to oppose an argument constitutes waiver). While some responses in his

deposition were “arguably evasive answers,” Knauf Realty, LLC v. Prudential Real Est.

Affiliates, Inc., 486 F. Supp. 2d 855, 857 (W.D. Wis. 2007), Mr. Rodino’s failure to recall

information after he previously provided specific facts does not make his deposition inherently

inconsistent or contradictory to his previous affidavits. See Russell v. Acme–Evans Co., 51 F.3d

64, 67–68 (7th Cir. 1995) (When a “deposition and affidavit are in conflict, the affidavit is to be

disregarded unless it is demonstrable that the statement in the deposition was mistaken, perhaps

because the question was phrased in a confusing manner or because a lapse of memory is in the

circumstances a plausible explanation for the discrepancy.”). In fact, during the deposition Mr.

Rodino explained why he believed he could not recall the events discussed: “[This lawsuit has]

been extremely stressful for me and my family, and I have tried to forget everything that has

happened with it. So my memory is a little unclear because I have worked as hard as I can since

this thing’s been done with to forget about it.” [DE 484-4 at 5]. He further testified that he did

not believe there was anything that could refresh his recollection regarding his conversations

with MOL because he was trying to forget them, and he was having trouble remembering

because speaking with Plaintiff’s counsel was upsetting him. Id. at 6; [DE 496-1 at 3–5]. Exhibit

9 was created a year before any motion for summary judgment was filed and does not inherently

contradict Mr. Rodino’s previous sworn statement. Rather, it is more specific than the prior

ambiguous language used in the September 2017 Affidavit. Additionally, other established facts

of the case are consistent with Exhibit 9. Further, Mr. Rodino’s failure to recall what he

previously remembered months prior does not inherently contradict the facts contained in Exhibit

9 either and does not render the affidavit so implausible that no reasonable factfinder could credit

it. Accordingly, the Court finds that Mr. Rodino’s January 2020 Affidavit is not a “sham

affidavit” and Duro’s motion to strike Exhibit 9 is denied.

B. MOL’s Motion to Strike Portions of the Declaration of John Henning

MOL moves to strike over half of the 62 paragraphs included in the Declaration of John

Henning because they contain statements not based on personal knowledge, conclusions without

proper supporting evidence, legal arguments, speculation, and conclusions regarding alleged data

destruction that can only be offered by a properly disclosed expert, which MOL argues Mr.

Henning is not. [DE 499]. Duro responded in opposition to the motion [DE 502], to which MOL

replied [DE 509]. For the following reasons, the Court grants in part and denies in part MOL’s

motion to strike.

Federal Rule of Civil Procedure 56 states that affidavits filed in support of summary

judgment “must be made on personal knowledge, set out facts that would be admissible in

evidence, and show that the affiant or declarant is competent to testify on the matters stated.”

Fed. R. Civ. P. 56(c)(4). “An affidavit not in compliance with Rule 56 can neither lend support

to, nor defeat, a summary judgment motion.” Paniaguas v. Aldon Companies, Inc., 2006 WL

2568210, at *4 (N.D. Ind. Sept. 5, 2006) (citing Zayre Corp. v. S.M. & R. Co., 882 F.2d 1145,

1148–49 (7th Cir. 1989); Palucki v. Sears, Roebuck & Co., 879 F.2d 1568, 1572 (7th Cir. 1989)).

“[W]hen considering a motion to strike portions of an affidavit in support of a motion for

summary judgment, courts will only strike and disregard the improper portions of the affidavit

and allow all appropriate recitations of fact to stand.” Id. (citations omitted). Specifically, the

following statements are not properly included in an affidavit and should be disregarded: (1)

conclusory allegations lacking supporting evidence, see Young v. Monahan, 420 F. App’x 578,

583 (7th Cir. 2011); (2) legal argument, see Pfeil v. Rogers, 757 F.2d 850, 862 (7th Cir. 1985);

(3) inferences or opinions not “grounded in observation or other first-hand experience,” Visser,

924 F.2d at 659; (4) mere speculation or conjecture, see Stagman v. Ryan, 176 F.3d 986, 995 (7th

Cir. 1999); and (5) statements in affidavits which blatantly contradict prior sworn testimony in

an attempt to create sham issues of genuine dispute, see Beckel, 301 F.3d at 624; Allied Signal,

75 F.3d at 1168–69. As discussed above in Section III.A. in more detail, “the Federal Rules of

Civil Procedure allow parties to oppose summary judgment with materials that would be

inadmissible at trial so long as facts therein could later be presented in an admissible

form.” Olson, 750 F.3d at 714.

Mr. Henning is an attorney and previously represented Mr. Shah and Mr. Dugle from

approximately 2010-2017 when he was at the law firm Ogletree Deakins. [DE 485-10 ¶ 3].

Though Mr. Henning does not personally represent Plaintiffs any longer, Ogletree Deakins

continues to represent them. The declaration states that the “evidence and information set forth in

this Declaration supports the claims alleging [MOL], [Mr. Rodino], and Scott Mills. . .conspired

to conceal and destroy evidence as early as December 2010 in violation of 18 U.S.C. §

1030(a)(4).” Id. at ¶ 4.4 He also states that he has not been offered or received any compensation

for his declaration. Id.

First, MOL moves to strike several paragraphs for being legal arguments, conclusions,

and opinions. For example, in paragraphs 4 and 5, Mr. Henning states that MOL “conspired to

conceal and destroy evidence as early as December 2010 in violation of 18 U.S.C. § 1030(a)(4)”

and “tried to prevent Plaintiffs from gaining meaningful access to relevant documents and

evidence at every turn.” Id. at ¶¶ 4, 5. MOL argues that similar legal conclusions are made

throughout Mr. Henning’s declaration. The Court agrees that Mr. Henning makes legal

arguments and conclusions throughout his declaration and strikes paragraphs 4 and 5, as well as

the following paragraphs on that basis: ¶ 6 (stating MOL made false representations), ¶ 7

(stating MOL “engaged in obstructionist discovery practices designed to prevent [Duro] from

completing a financial accounting”), ¶ 20 (stating MOL refused to allow Duro’s expert to access

records and that MOL took action to prevent the audit), ¶¶ 39-40 (stating MOL made

misrepresentations to the Court), ¶ 41 (stating MOL maintained a position “despite [Duro’s]

evidence to the contrary”), ¶ 57 (stating Defendants knowingly refused to produce relevant

material), and ¶ 59 (stating the minority shareholders had evidence Mr. Rodino was

4 Mr. Mills was an IT professional at Duro and is no longer a party to this case.

misappropriating assets and MOL knew this). See Greene v. Westfield Ins. Co., 963 F.3d 619,

627 (7th Cir. 2020) (“affidavits are for stating facts, not legal conclusions.”); Pfeil, 757 F.2d at

862 (“Because legal argumentation is an expression of legal opinion and is not a recitation of a

‘fact’ to which an affiant is competent to testify, legal argument in an affidavit may be

disregarded.”).

However, the Court does not strike the following paragraphs because they are Mr.

Henning’s characterization of the facts based on his own personal knowledge gained through the

years spent litigating this case with MOL as opposing counsel: ¶ 38 (stating that MOL did not

permit access to missing financial records), ¶ 60 (stating MOL refused to provide relevant

documents that were necessary to complete an audit), and ¶¶ 61-62 (stating MOL refused to

produce “basic financial records” necessary to complete an audit). “It is true that “personal

knowledge” includes inferences—all knowledge is inferential—and therefore opinions.” Visser,

924 F.2d at 659. But all that is required for inferences to be admissible is that they are “grounded

in observation or other first-hand personal experience” rather than “flights of fancy, speculations,

hunches, intuitions, or rumors about matters remote from that experience.” Id. Further, some of

these paragraphs cite to corroborating documents. To the extent MOL disagrees with the

characterization of the documents Mr. Henning cites, MOL is free to challenge the facts Mr.

Henning recounts and the inferences he draws from them. But those concerns relate to the

credibility and the weight of the evidence, which the Court does not determine or weigh at this

stage. For that reason, the Court does not strike the following paragraphs: ¶ 11 (Mr. Rodino

replaced the Duro server in December 2010), ¶¶ 17, 34, 37 (stating the hours Mr. Mills worked),

¶ 36 (stating MOL refused to provide records needed for the forensic accounting and allow a

financial manager to access records), and ¶ 55 (stating MOL objected to computer experts’ steps

to determine whether data was destroyed).

Next, MOL moves to strike paragraphs that include conclusory statements beyond Mr.

Henning’s personal knowledge. It argues Mr. Henning has not established that he observed or

has some other form of personal knowledge as to whether Mr. Rodino replaced computers,

altered the books, and purchased different versions of QuickBooks, and therefore paragraph 24

should be stricken. However, the only portion of paragraph 24 that is conclusory without factual

support is “[w]hile MOL prevented the disclosure of any paper records, Rodino replaced the

computers and altered the books for the Duro Entities” and therefore must be stricken. [DE 485-

10 ¶ 24]. The same reason applies to the statement “[w]hile Rodino shredded documents, MOL

worked to cut off Plaintiffs’ access to Duro’s financial records” and therefore is stricken. Id. at ¶

12. MOL asserts that Mr. Henning has not established that he has personal knowledge of other

paragraphs throughout the declaration and therefore should be stricken. The Court agrees and

accordingly strikes the following paragraphs: ¶ 13 (stating when MOL began drafting motions),

¶ 50 (stating Mr. Mills accessed a Duro computer remotely and worked on QuickBooks files on

June 12, 2013), and ¶ 51 (stating the Duro computers were taken offline for a week).

Lastly, and most dispositive to the underlying issues of the case, MOL argues that

paragraphs 16, 26, 33, 35, 48, 49, 52-54, and 56, should be stricken because they are “analyzing

whether files have been altered and deleted from a server and reaching a conclusion on the issue

is not within the realm of a layperson” and instead requires an expert opinion that complies with

the Federal Rules. [DE 499; 509]. During the underlying litigation, Mr. Henning and MOL

agreed to hire Protek International to image and forensically review Duro’s computers. Protek

handles computer forensics, investigative and advisory services, as well as eDiscovery. [DE 145-

17]. Protek imaged the computers and ran a “deleted file sweep” to identify metadata for any

deleted files. Protek then sent work product to Mr. Henning and his colleagues, as well as MOL,

listing what Protek categorized as “previously existing” files. In his declaration, Mr. Henning

attests to the conclusions reached in these emails and work product.5

It is undisputed that Mr. Henning has not demonstrated an expertise in computers and has

not been designated as an expert in this matter. [DE 499-1; 502]. However, Duro argues that an

expert is not required to admit this evidence and if one were, its failure to designate a witness as

an expert is harmless. First, Duro argues that there is no authority for the proposition that an

expert is required to admit an electronic record into evidence. It supports this assertion by citing

U.S. E.E.O.C. v. Olsten Staffing Servs. Corp., 657 F.Supp.2d 1029 (W.D. Wis. 2009). In Olsten,

the court found it was sufficient to admit an email based on testimony of “someone who

personally retrieved the email from the computer” or other “circumstantial evidence.”). Duro

attempts to analogize this to Mr. Henning’s direction and management of Protek’s collection of

Duro’s electronic records and states this “ought to be sufficient circumstantial evidence of the

authenticity of the data retrieved.” [DE 502 at 10]. However, unlike Olsten, Mr. Henning did not

personally retrieve, identify, or analyze the metadata used to support his statements in his

declaration. Mr. Henning specifically avers that the identification of metadata shows that over

9,000 emails and hundreds of PDFs, zip files, excel spreadsheets, and word documents were

deleted and attests to the dates of the alleged deletion or alteration. [DE 485-10 ¶¶ 16, 33, 35, 48-

50, 52-54, 56]. Duro argues that it can produce the person at Protek who retrieved the data to

5 The Court notes that the vast majority of the cited documents in Mr. Henning’s declaration, particularly those in

the disputed paragraphs 16, 26, 33, 35, 48, 49, 52-54, and 56 are found on the docket in the appendix of exhibits the

Plaintiffs’ filed in July 2015 in support of their renewed motion to disqualify MOL as counsel for Mr. Rodino and

Duro. [DE 145]. The original motion to disqualify MOL was filed in March 2013 and was denied by the Magistrate

Judge [DE 54], as previously discussed in more detail in Section I.

establish the “non-technical fact” that he retrieved the data to authenticate the deleted files’

report. [DE 502 at 11] (emphasis in original). However, this argument fails. Even the mere

retrieval of the information purported to be in the deleted files report is technical, and such

testimony would be inextricably intertwined with scientific, technical, and specialized

knowledge regarding the retrieval, identification, and analysis of metadata.

Contrary to Duro’s argument there is authority in this Circuit that requires expert

testimony regarding the retrieving, identifying, and analyzing of metadata as it requires a

technical, scientific, or specialized knowledge. See United States v. Wehrle, 985 F.3d 549, 554

(7th Cir. 2021). In Wehrle, the Seventh Circuit held the trial court abused its discretion by failing

to qualify an individual who testified regarding the forensic-examination process as an expert.6

Id. “A forensic-examination process falls within Rule 702’s ambit if it involves ‘specialized

knowledge [that] will assist the trier of fact to understand the evidence or to determine a fact in

issue.’” Id. (quoting Fed. R. Evid. 702; Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579,

589–91 (1993). The “technical concepts beyond ordinary knowledge” included testimony

relating to a forensic examination of a device, data-extraction software, the reliability of data

retrieval and safeguards, and “other technical concepts such as . . . metadata (data which gives

information about other data).” Id. Further, Judge St. Eve states in her concurring opinion that

certain cases require expert testimony regarding the collection of digital data such as one with a

“sophisticated nature of the particular forensic analysis or the equipment deployed, or the

technical nature of the testimony” or the alleged deletion of data. Id. at 596 (St. Eve., J.,

concurring). MOL points out that Mr. Henning refers to Protek as “forensic computer experts” in

his declaration and Walt Sigmund’s, a Protek representative, email signature includes, among

6 Ultimately, the Seventh Circuit concluded the trial court’s abuse of discretion was harmless error because the guilt

of defendant “was overwhelming.” Id. at 554.

other titles, “Forensic Computer Examiner.” [DE 145-32 at 7]. Additionally, MOL attached an

email to its reply from August 15, 2013, from Mr. Henning to Ms. Walker indicating that “[w]e

need the experts to review the metadata and opine on the spoliation. You need one too. Protek

cannot do that.” [DE 499-3]. Counsel for Duro (who was previously counsel for minority

shareholders), knew an expert’s opinion was necessary when it came to reviewing the metadata.

Although that discussion was premised on an allegation of spoilation of evidence, the technical

skill required does not change under the CFAA. Mr. Henning is not a computer forensic expert,

nor did he retrieve, identify, or analyze the metadata cited by Duro to help support the CFAA

claim.

MOL argues that Mr. Henning, though not an expert himself, cannot not be used as a

mouthpiece for an expert in another field. The Seventh Circuit has previously discussed

situations where one expert cannot be used as “the mouthpiece” of another:

A scientist, however well credentialed he may be, is not permitted to be the

mouthpiece of a scientist in a different specialty. That would not be responsible

science. A theoretical economist, however able, would not be allowed to testify to

the findings of an econometric study conducted by another economist if he lacked

expertise in econometrics and the study raised questions that only an

econometrician could answer. If it were apparent that the study was not cut and

dried, the author would have to testify; he could not hide behind the theoretician.

Dura Auto. Sys. of Indiana, Inc. v. CTS Corp., 285 F.3d 609, 614 (7th Cir. 2002). The same logic

applies here, perhaps even more so since Mr. Henning is not an expert. Where the Seventh

Circuit has found one expert cannot speak for another, it is even more necessary to conclude that

a non-expert cannot speak on behalf of an expert, which is what Duro is seeking to do. Mr.

Henning did not author or create the documents nor did he retrieve, identify, or analyze the

metadata that Duro uses to establish documents were deleted from its computers. He has no

firsthand or technical knowledge as to what exactly Protek did to extract the data in its reports,

how Protek performed the deleted files sweep, or explain the reasoning behind its ultimate

conclusions about what documents were deleted and when. Nor does he have expertise in these

topics. Therefore, his declaration cannot be used to relay the alleged findings of an undisclosed

expert, Protek7 and the Court strikes paragraphs 16, 26, 33, 35, 48, 49, 52-54, and 56.

Alternatively, Duro argues that if expert testimony is needed for the evidence to be

admissible at trial (which the Court has now found that it is), its failure to designate an expert

witness was harmless. Under Federal Rules of Civil Procedure, an expert must provide “a

complete statement of all opinions the witness will express and the basis and reasons for them”

and “the facts or data considered by the witness in forming them.” Fed. R. Civ. P. 26(a)(2)(B)(i)-

(ii). “Expert reports must include ‘how’ and ‘why’ the expert reached a particular result, not

merely the expert’s conclusory opinions.” Salgado by Salgado v. Gen. Motors Corp., 150 F.3d

735, 741 n.6 (7th Cir. 1998). The reason for that disclosure requirement is so that “opposing

counsel is not forced to depose an expert in order to avoid ambush at trial[.]” Id.; Ciomber v.

Coop. Plus, Inc., 527 F.3d 635, 642 (7th Cir. 2008) (“The purpose of Rule 26(a)(2) is to provide

notice to opposing counsel—before the deposition—as to what the expert witness will

testify[.]”). As the Seventh Circuit noted in Ciomber, “this purpose would be completely

undermined if parties were allowed to cure deficient reports with later deposition testimony.”

527 F.3d at 642.

If a party fails to provide information as required by Rule 26(a), “the party is not allowed

to use that information or witness to supply evidence on a motion, at a hearing, or at a trial,

unless the failure was substantially justified or is harmless.” Fed R. Civ. P. 37(c)(1). The party

who violated Federal Rule 26 has the burden to prove the violation was justified or harmless. See

7 The Court expressly makes no opinion as to whether Protek or its representatives qualify as an expert under the

Federal Rules of Evidence as that issue has not been presented to the Court for decision.

generally Brown v. Chicago Transit Auth., 2020 WL 777296 at *1 (N.D. Ill. Feb. 14, 2020)

(quoting Keach v. U.S. Tr. Co., 419 F.3d 626, 639 (7th Cir. 2005)). “The exclusion of non-

disclosed evidence is automatic and mandatory under Rule 37(c)(1) unless non-disclosure was

justified or harmless.” Musser v. Gentiva Health Servs., 356 F.3d 751, 758 (7th Cir. 2004). The

determination of whether a failure is harmless or justified is left to the broad discretion of the

district court. David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003). The trial court need

not make explicit findings regarding a justification or the harmlessness of the Rule 26 violation,

however, the court should consider the following factors to determine whether the failure was

substantially justified or harmless: “(1) the prejudice or surprise to the party against whom the

evidence is offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of

disruption to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence

at an earlier date.” Id.

Duro does not argue its failure to disclose an expert witness is substantially justified,

however it does argue it is harmless because there is no prejudice or surprise. See Wojtas, 477

F.3d at 926 (stating that failure to oppose an argument constitutes waiver). Duro argues that

MOL has known about these deleted files reports for more than five years and has had ample

opportunity to try to dispute them. However, this same argument cuts against Duro as to whether

its failure to disclose an expert witness was willful as it knew it needed an expert to review the

metadata as early as 2013. Duro also argues that MOL and their clients “admitted” that the files

Protek’s report identified as deleted were in fact deleted, citing to an interrogatory response. The

interrogatory asks Mr. Rodino and Duro to identify documents that have been deleted since a

certain date. The response does not admit that the reports were accurate but rather asserts that

none of the data contained in the “deleted items lists” were “intentionally destroyed or

overwritten,” asserting that they were “deleted in the normal course of business” and “much” of

them continue to exist elsewhere in an “inaccessible” form, “which does not constitute a

violation of the duty to preserve electronically stored information.” [DE 145-34 at 5]. Duro

argues its failure does not cause prejudice because the trial date will not be delayed by any need

to authenticate the report by additional declaration or deposition. However, while a trial date has

not been set in this case, further delay is prejudicial to MOL. This action has been pending since

2013, with the operative Third Amended Complaint pending since 2018. All discovery in this

case was closed on November 30, 2020. The reopening of expert discovery would not simply

require the declaration or deposition of a Protek representative. But rather require time for the

preparation of an expert report, both by Duro and potentially MOL’s rebuttal expert, followed by

the depositions of both these experts and any attempt to disqualify either expert through Daubert

motions. As MOL argues in its reply, it had no reason to retain its own forensic computer expert

because Duro never disclosed any expert who would testify as to the technical process used to

determine what files were deleted, whether those files were recoverable, when the files were

accessed/deleted, and who accessed/deleted them. The deadline for discovery, just as they

pertain to the Third Amended Complaint, was extended three times. Counsel for Duro has been

aware that the review of metadata and the conclusions derived from that review would require

expert opinion since 2013. The underlying CFAA claim Duro seeks to prove stems from the

unauthorized access or alteration of information on a computer. Although MOL has had these

reports since 2013, it is only now that Duro attempts to use them as proof that it conspired with

Mr. Rodino to violate the CFAA. Duro has not met its burden that this failure to disclose an

expert witness is harmless. See Musser, 356 F.3d at 757–58 (7th Cir. 2004) (finding Gentiva was

prejudiced by Musser’s failure to disclose experts because “there are countermeasures that could

have been taken that are not applicable to fact witnesses, such as attempting to disqualify the

expert testimony on grounds set forth in [Daubert], retaining rebuttal experts, and holding

additional depositions to retrieve the information not available because of the absence of a

report.”); Knox v. Butler, 2021 WL 86605, at *1 (S.D. Ill. Jan. 11, 2021) (finding summary

judgment warranted, in part, because plaintiff failed to offer an expert witness who would be

competent to testify on the underlying facts that forms the basis of the information in pamphlets

on the dangers of smoking).

Without an expert testifying to the identification, retrieval, and analysis of the deleted

files found in the reports created by Protek cited in paragraphs 16, 26, 33, 35, 48, 49, 52-54, and

56, Duro has not presented evidence where the underlying facts are admissible at trial. Olson,

750 F.3d at 714. Not only would expert testimony be required, but Mr. Henning could not testify

to the report’s contents for the truth of the matter they assert—again, that someone deleted files

at Duro—as it would be impermissible hearsay. And therefore, this evidence cannot be

considered at summary judgment.8 Accordingly, consistent with the foregoing, the Court grants

in part and denies in part MOL’s motion to strike Mr. Henning’s declaration. 9

C. MOL’s Motion to Strike and/or Exclude Expert Opinion of Lucian Pera

MOL moves to strike or exclude a portion of Lucian Pera’s expert opinion testimony.

[DE 497]. Specifically, MOL seeks to strike Mr. Pera’s testimony that MOL’s reliance on the

Court’s two previous orders denying the minority shareholders’ motion to disqualify MOL as

8 As discussed further below in Section IV.D., Duro attempts to use the Protek reports to show that Mr. Rodino

deleted the files. Neither the reports nor Mr. Henning seem to reach this conclusion, at least not directly. And any

inference falls short. Moreover, the evidence that MOL was involved in the deletions is even thinner. Even if, there

can be no conspiracy without an agreement to commit an illegal act. And as will be discussed later, the Court finds

no illegal act occurred.

9 In its reply to the motion to strike, MOL addresses a Supreme Court decision, Van Buren v. United States, 141 S.

Ct. 1648 (2021), which was decided after the parties completed their briefing on the merits of the motion for

summary judgment. Because it is applicable to the merits of the CFAA claim, the Court addresses the case below in

Section IV.D.

counsel is “not prudent.” [DE 485-1 at 15]. MOL’s motion is denied for two reasons. First, to the

extent Mr. Pera’s opinion is meant to be in support of the issue of disgorgement of attorney fees,

the Court does not reach the issue, as discussed below, and thus, the motion is denied as moot.

Second, MOL’s motion is premised on a mischaracterization of Mr. Pera’s testimony,

perhaps in part, due to Duro’s use of the testimony in its opposition to the motion for summary

judgment. MOL’s motion sets forth that Mr. Pera attests to whether the Court should consider its

past rulings on the motion to disqualify counsel. However, this is a better description of Duro’s

argument in light of Mr. Pera’s testimony. Mr. Pera’s testimony is squarely regarding whether he

believes it is prudent for attorneys to rely on decisions denying a motion to disqualify or a

dismissal of a disciplinary action when evaluating whether a conflict of interest exists in their

representation. In fact, he testifies that those decisions may be “persuasive to a later decider.” Id.

To the extent MOL asserts what Mr. Pera actually opined is improper, the Court does not

agree. Mr. Pera’s testimony is not improper as it relates to his opinions on the standard of care of

an attorney and what he believes or does not believe is prudent for an attorney to consider when

evaluating the existence of a conflict of interest. Though these opinions may not have been in

Mr. Pera’s previously disclosed expert report, MOL is not prejudiced by his later testimony. Mr.

Pera’s opinion is not a surprise to MOL given the testimony was elicited by hypothetical

questions posed by MOL’s counsel during his deposition and Mr. Pera is not expected to

anticipate every question at his deposition. See Lott v. ITW Food Equip. Grp. LLC, 2013 WL

3728581, at *23 (N.D. Ill. July 15, 2013) (recognizing that “Rule 26 does not automatically

exclude evidence that an expert could have included in his original report as ‘[s]uch a rule would

lead to the inclusion of vast amounts of arguably irrelevant material in an expert's report on the

off chance that failing to include any information in anticipation of a particular criticism would

forever bar the expert from later introducing relevant material.’”) (quoting City of Gary v.

Shafer, 2009 WL 1370997, at *5 (N.D. Ind. May 13, 2009)). Also, Duro asserts that the opinion

stated in his testimony was not included in his previously disclosed declaration because the

opinion is irrelevant to his expert opinion regarding MOL’s compliance with the Indiana Rules

of Professional Conduct. Therefore, MOL’s motion to strike is denied.

D. MOL’s Motion to Strike and/or Exclude Expert Opinion of Ronald

Braver

MOL moves to strike or exclude the expert opinion of Ronald Braver that was not

included in his expert report. [DE 498]. MOL argues that Mr. Braver’s expert opinion regarding

the $1.1 million in damages caused by Mr. Rodino should be stricken or excluded from Duro’s

response to MOL’s motion for summary judgment because the opinion was not included in Mr.

Braver’s expert report. However, because the Court does not reach the issue of legal malpractice

damages, as discussed below, it denies MOL’s motion to strike as moot.

IV. DISCUSSION

In the Third Amended Complaint, Duro alleges two claims against MOL—legal

malpractice and conspiracy to violate the CFAA. [DE 408]. Particularly, it alleges that Mr.

Rodino breached his fiduciary duties to minority shareholders as the sole director and officer of

Duro and did so with the express consent of or based on the legal advice of MOL. [DE 408 at

16]. It alleges that based on the legal advice of MOL, Mr. Rodino engaged in a laundry list of

unlawful conduct, to which MOL did not take adequate steps to protect Duro or conspired to

commit with Mr. Rodino. MOL moves for summary judgment on both of the remaining claims

of the Third Amended Complaint. [DE 473]. MOL offers several arguments in support of

summary judgment asserting Duro: 1) is barred by Indiana’s prohibition against assignment of

claims; 2) is barred by the doctrine of in pari delicto; 3) cannot establish the elements of legal

malpractice; 4) cannot establish it is entitled to the disgorgement of attorney fees; and 5) cannot

establish a claim under the CFAA. The motion is ripe for decision and the Court addresses each

issue in turn.

A. Indiana’s Prohibition against Assignment of Claims

MOL asserts summary judgment must be granted in its favor on both the legal

malpractice claim and the conspiracy to violate the CFAA claim because Indiana law prohibits

the assignment of claims. First, the Court addresses the assignment of a legal malpractice claim.

The law in Indiana is clear—assignments of a legal malpractice claim, to a former litigation

adversary or otherwise, is prohibited. In Picadilly, the Supreme Court of Indiana held that a party

may not assign a legal malpractice claim to someone who was his adversary in underlying

litigation. Picadilly, Inc. v. Raikos, 582 N.E.2d 338 (Ind. 1991), abrogated on other grounds by

Liggett v. Young, 877 N.E.2d 178 (Ind. 2007). In Picadilly, a bar (Picadilly) overserved a patron

who later caused an accident resulting in injuries to Charles Colvin. Mr. Colvin sued Picadilly

and a jury awarded him compensatory and punitive damages. Picadilly then filed a legal

malpractice claim against its attorneys, alleging they were negligent when they allowed an

improper punitive damages jury instruction. The attorneys moved for and were granted summary

judgment. Picadilly then sought protection from its creditors by filing bankruptcy. As part of the

plan for reorganization, the punitive damages award to Mr. Colvin was discharged, however, in

return, he was assigned Picadilly’s malpractice claim against the attorneys. Mr. Colvin

immediately filed a motion challenging summary judgment. The case reached Indiana’s highest

court which held “legal malpractice claims are not assignable” to a former litigation adversary.

Id. at 339.

The Picadilly court supports its finding with public policy. “Assignment should be

permitted or prohibited based on the effect it will likely have on modern society, and the legal

system in particular.” Id. at 341. The court asserted that the free assignment of legal malpractice

claims would weaken at least two standards that define the lawyer’s duty to the client—the duty

to act loyally and the duty to maintain client confidentiality. First, the court reasoned that:

An attorney’s loyalty is likely to be weakened by the knowledge that a client can

sell off a malpractice claim, particularly if an adversary can buy it. If an attorney is

providing zealous representation to a client, the client’s adversary will likely be

motivated to strike back at the attorney in any permissible fashion. If an adversary

can retaliate by buying up a client’s malpractice action, attorneys will begin to

rethink the wisdom of zealous advocacy. A legal system that discourages loyalty to

the client, disserves that client.

Id. at 342. If assignments were permitted, the court speculated that they would “become an

important bargaining chip in the negotiation of settlements—particularly for clients without a

deep pocket. An adversary might well make a favorable settlement offer to a judgment-proof or

financially strapped client in exchange for the assignment of that client’s right to bring a

malpractice claim against his attorney.” Id. Attorneys in such negotiations would quickly learn

that their interests and those of their clients were incompatible and they would need to “sacrifice

their own hides (and the deep pockets of their malpractice insurance carriers) in order to secure a

favorable settlement for their client.” Id. at 342.

Next, the Picadilly court analyzes the duty to maintain confidentiality and the threat it

faces by the assignment of legal malpractice claims. When a client sues an attorney, the attorney

is permitted to reveal confidential client information reasonably necessary to establish a defense.

Id. at 343 (citing Ind. Professional Conduct Rule 1.6(b)(2)). This allows for the client to control

the scope of the disclosure. However, once the claim is assigned, the client’s control over the

litigation is lost, but the attorney’s right to defend himself or herself by revealing client

information survives. Id. This could lead to an attorney reasonably responding to the assignee’s

claim by revealing information the client would have preferred to remain confidential, but the

client can no longer prevent the attorney’s disclosures. This would encourage clients to withhold

damaging information from their attorney “in order to preserve their ability to sell off a

malpractice claim without the fear of losing control over that information,” which “erodes the

principles fostered by the duty of confidentiality.” Id. In 2007, the Indiana Supreme Court again

confirmed that the public policy of Indiana expressed in Picadilly holds true and again held that

“[a]ssignment should be permitted or prohibited based on the effect it will likely have on modern

society, and the legal system in particular.” State Farm Mut. Auto. Ins. Co. v. Estep, 873 N.E.2d

1021, 1025 (Ind. 2007).

MOL argues that while the claims against it are brought in the name of Duro, there can be

no question that Mr. Shah is the one bringing these claims, given his sole ownership of Duro, and

as a former litigation adversary of Duro, the settlement between Mr. Shah, Mr. Dugle, Mr.

Rodino, and Duro served as a de facto assignment to Mr. Shah of the legal malpractice claims

belonging to Duro. MOL argues it is undisputed that Mr. Shah was Duro’s litigation adversary

because he advanced claims against Duro for years and sought damages from it or the dissolution

of the corporation. In response, Duro argues that Mr. Shah is not and never was a litigation

adversary of Duro because Duro was only included as a nominal defendant in the derivative

shareholder action. However, as MOL addresses in their reply, whether or not Mr. Shah is a

litigation adversary is not dispositive under Indiana law. In Rosby, the Indiana Court of Appeals

held that “Picadilly represents a bright-line rule drawn by the supreme court holding that no

malpractice claims may be assigned, regardless whether they are assigned to an adversary”

and “find void as a matter of law all such assignments.” Rosby Corp. v. Townsend, Yosha, Cline

& Price, 800 N.E.2d 661, 665, 666 (Ind. Ct. App. 2003) (emphasis added). The court reasoned

that although the Picadilly court “discussed the implications of a role reversal where an

assignment to an adversary was involved, it made no indication that its holding was limited to

such facts” and thus, held that “Picadilly bars the assignment of all legal malpractice claims.”

Id. at 666. Accordingly, Duro’s argument that Mr. Shah was not a litigation adversary, and

therefore any assignment cannot be invalid, is not relevant to the Court’s analysis of whether the

de facto assignment occurred and is prohibited.

Both Duro and MOL argue Summit to support their positions. In Summit, the Indiana

Court of Appeals found that Picadilly did not bar a legal malpractice claim that was assigned to a

successor corporation, which was a direct continuation of its predecessor. Summit Acct. &

Computer Serv., Inc. v. RJH of Florida, Inc., 690 N.E.2d 723 (Ind. Ct. App. 1998). There, the

defendant law firm and attorney appealed the judgment against them on the basis that the claims

for punitive damages and legal malpractice had been improperly assigned. The claims originally

belonged to Kimco Leasing, which sold all of its assets, including the claims against the

defendants, to Hoffman, which then subsequently sold the same assets to RJH of Florida, which

operated under the name of Kimco Leasing. The trial court distinguished the case from Picadilly

as it did not involve a suit on behalf of a former adversary and thus the public policy concerns

expressed in Picadilly were not applicable. Id. at 728. Duro cites to Summit for the proposition

that the court affirmed the decision to distinguish Picadilly based on the lack of involvement of a

former litigation adversary. However, Summit was decided before Rosby, which held that

Picadilly’s holding is not limited to only assignments to former litigation adversaries. The Rosby

court held that because there was no evidence before it to support that the plaintiff was a

successor corporation, the rule of Summit did not apply. Rosby, 800 N.E.2d at 667.

Although the outcome of Summit indicates Indiana carved out an exception to its

prohibition of assignment of legal malpractice claims when it is assigned to a successor

corporation that is a direct continuation of its predecessor, the factors considered in that case,

when applied to the undisputed facts here, are ultimately not favorable to Duro because they

indicate that Indiana law looks past the name of the corporate entity when considering whether

an impermissible assignment has occurred. These factors include 1) whether the corporation’s

ownership was the same, 2) if it engaged in the same business, 3) if its operations continued, and

4) if it did so in the same place. In Summit, Kimco Leasing sold all of its assets, including its

claims against the Defendants, to Hoffman, Inc., who subsequently sold all the same assets to

RJH of Florida, Inc., which operated under the name of Kimco Leasing. 690 N.E.2d at 728.

Richard Hoffman was the sole shareholder, director, and officer of all three corporations and the

corporations conducted business of the same nature from the same place. Id. Given these facts,

the court concluded the successor corporation was a “a direct continuation of” its predecessors

and “should have the same rights and liabilities.” Id. See also Mishawaka Brass Mfg. Inc. v.

Milwaukee Valve Co., 444 N.E.2d 855, 858 (Ind. Ct. App. 1983) (finding the record supported

the conclusion that one corporation was “a direct continuation” of another corporation with

which the plaintiff conducted the underlying transaction because both were wholly owned by the

same individual, had virtually the same officers and directors, operated on the same business

premises and conducted the same business).

Here, the evidence does not support that the current Duro is a direct continuation of the

Duro prior to Mr. Shah’s ownership, despite the lack of name change. First, the ownership is

different. Mr. Rodino was previously the majority shareholder and now Mr. Shah is the sole

owner, with no other officers, directors, or shareholders. Second, Duro no longer conducts the

same business as it previously did before the change in ownership. In fact, Mr. Shah testified that

Duro is not operating at all, nor does it have any hard assets, revenue, income, employees, or

customers, and its future business plans are unknown. [DE 476-1 at 15–18, 27]. Shortly after the

settlement was effectuated, Mr. Shah transferred all of Duro’s assets to his pallet company,

Green Stream. Id. at 15–16, 27. Mr. Shah testified that the only “asset” Duro has now is this

lawsuit. Id. at 15–16. Since Mr. Shah became sole owner of Duro, he has distributed all of the

cash left over to himself. Id. at 16. The only thing that did not change after the settlement and

Redemption Agreement were effectuated was the name of the company. Further, unlike here,

Summit did not involve the acquiring of the corporation based on the settlement of disputed

litigation. Based on the factors in Summit, the undisputed evidence before the Court does not

support a finding that Mr. Shah’s Duro is “a direct continuation” of Mr. Rodino’s Duro and

therefore, cannot fall under Summit’s exception to the bar of a legal malpractice claim

assignment.

Duro additionally argues that the legal malpractice claim against MOL was properly filed

by Mr. Shah, as a derivative claim on behalf of Duro, a year before the alleged assignment in the

Redemption Agreement and Settlement Agreement. On June 29, 2015, Mr. Shah and Mr. Dugle

filed the Second Amended Complaint and included a derivative legal malpractice claim against

MOL and Warrick & Boyn. [DE 90 at 140–47]. The Indiana courts have not yet addressed the

specific question of whether minority shareholders can bring a derivative suit alleging legal

malpractice of the corporation’s attorney. Nor have they addressed a fact pattern such as the one

presented before the Court—where a minority shareholder’s previous derivative legal

malpractice suit is converted into a direct claim for legal malpractice when the minority

shareholder becomes the sole owner of the corporation due to settlement with the majority

shareholder in the underlying litigation. However, Indiana law makes clear the importance of

public policy when analyzing any type of assignment of legal malpractice claims: “Assignment

should be permitted or prohibited based on the effect it will likely have on modern society, and

the legal system in particular.” State Farm, 873 N.E.2d at 1025. With the guidance of Indiana

law and other jurisdictions regarding public policy and legal malpractice claims as well as the

undisputed evidence before it, the Court finds that Duro’s legal malpractice claim, as it is

controlled solely by Mr. Shah, who never had an attorney-client relationship with MOL,

constitutes a de facto assignment and is therefore prohibited as a matter of law.

In its response, Duro asserts that it is undisputed that Mr. Shah had standing to bring the

derivative legal malpractice claim on behalf of Duro when he first filed those claims in June

2015. However, Duro cites no Indiana case law supporting this assertion nor has the Court found

any. Moreover, the right to bring a derivative legal malpractice action has been rejected by at

least one other state. In McDermott, the California Court of Appeals dismissed a derivative

malpractice suit brought by shareholders against the corporation’s outside counsel. McDermott,

Will & Emery v. Superior Ct., 83 Cal. App. 4th 378 (2000). The court explained the unique

derivative action at play, noting that shareholders suing on behalf of a corporation cannot waive

the corporation’s attorney-client privilege. Id. at 383. The court explained that while

shareholders “stand in the shoes” of the corporation for most purposes in a derivative action, “the

one notable exception is with respect to the attorney-client privilege.” Id. The court distinguished

a derivative action from a direct malpractice action, where an individual suing on his or her own

behalf waives the privilege, thus enabling the attorney to disclose privileged information

necessary to defend against the action. Id. at 383–84. The court held that the corporation was the

holder of the attorney-client privilege, not the shareholders, and dismissed the action because “in

the absence of a waiver by the corporate client, the third-party attorney [was] effectively

foreclosed from mounting any meaningful defense to the shareholder derivative action.” Id. at

381. Although the court declined to view a shareholder derivative action in the same vein as an

assignment, it reasoned that “the rationale used to prohibit all assignments of legal malpractice

actions, on the ground attorneys would be unable to defend such actions in the absence of a

waiver of the privilege by their own client, applies with equal force” to the scenario found in

McDermott. Id. at 385. See also Reilly v. Greenwald & Hoffmann, LLP, 127 Cal. Rptr. 3d 317,

327 (Ct. App. 2011) (applying McDermott to dismiss shareholder derivative action brought by a

minority shareholder, alleging that corporation’s attorney engaged in negligent and tortious

conduct in facilitating majority shareholder’s conversion of corporate funds to her own use after

shareholders had agreed to dissolve the corporation, because attorney’s due process right to

present a defense would have been violated given inability to disclose confidential information).

Here, when Mr. Shah filed the derivative legal malpractice claim, he could not have waived the

attorney-client privilege held by Duro with MOL.

Even assuming Mr. Shah had standing to bring the derivative legal malpractice lawsuit

when he filed the Second Amended Complaint, his position in the corporation and the outcome

of any possible judgment stemming from the malpractice claim has drastically changed. Indiana

law adheres to the well-established corporate law principle “that shareholders of a corporation

may not maintain actions at law in their own names to redress an injury to the corporation even if

the value of their stock is impaired as a result of the injury.” Massey v. Merrill Lynch & Co., 464

F.3d 642, 645 (7th Cir. 2006) (citing Barth v. Barth, 659 N.E.2d 559, 560 (Ind. 1995)). As a

result, when a corporation suffers injury, either from corporate insiders or from a third party, it is

the corporate entity—not the individual shareholders—who retains the cause of action and any

resulting recovery belongs to the corporation. Id. at 646. Therefore, hypothetically, if Mr. Shah

and Mr. Dugle were successful in their derivative claims of legal malpractice against MOL as

alleged in the Second Amended Complaint, Duro, the clients of MOL, not Mr. Shah and Mr.

Dugle, would have received any judgment awarded from MOL. However, the operative

complaint here is the Third Amended Complaint, filed June 8, 2018 and in that complaint, Mr.

Shah converted the legal malpractice claims into direct claims, stating “all previous derivative

claims against parties to the settlement agreement have been dismissed, and the remaining

derivative claims previously made against the Defendant Law Firms are asserted as direct claims

by the Duro Entities.” [DE 408 at 3]. When the Third Amended Complaint was filed, Mr. Shah

had, and continues to have, sole ownership of Duro. Undisputed evidence is before the Court that

Duro is not an operating company, that Mr. Shah has sold any and all assets to his other company

and has distributed all remaining Duro capital to himself. Any potential judgment against MOL

and in favor of Duro would be Mr. Shah’s, who never had an attorney-client relationship with

MOL, which is in stark contrast to the outcome of the derivate claim.

It is this outcome that triggers the policy concerns examined in Picadilly and other

jurisdictions (discussed further below). Here, unlike in McDermott, MOL has been able to

defend itself only because Mr. Rodino, as majority shareholder of Duro at the relevant time and a

client of MOL, as part of his consideration under the Settlement Agreement, executed a

separately signed affidavit waiving all of his attorney-client privilege and attorney work product

protections regarding all communications, disclosures, advice, and documents related to Duro

between himself and MOL. [DE 471 at 5]. Further, the Settlement Agreement expressly reserved

all claims against MOL. Id. at 9. Although McDermott presents a factually different scenario, its

holding represents the problem (finding the lack of attorney-client privilege waiver from a

corporation in a derivative malpractice suit problematic) that Mr. Shah and Mr. Rodino tried to

solve through the negotiation of a settlement agreement, which included Mr. Rodino’s waiver of

attorney-client privilege as consideration to the settlement. However, this solution runs afoul of

Picadilly. Picadilly specifically rejects the use of a legal malpractice claim as consideration in a

settlement agreement, which is exactly what has happened here. As noted above, the Picadilly

court speculated that if legal malpractice claims were assignable, they would “become an

important bargaining chip in the negotiation of settlements—particularly for clients without a

deep pocket. An adversary might well make a favorable settlement offer to a judgment-proof or

financially strapped client in exchange for the assignment of that client’s right to bring a

malpractice claim against his attorney.” This is precisely what has happened here. No reasonable

jury could conclude that Mr. Rodino’s waiver of his attorney-client privilege was anything but a

“bargaining chip” in the negotiation of their settlement agreement. In fact, it was expressly

included in the Settlement Agreement as “Consideration.” [DE 471 at 5]. Not only does Picadilly

make this strictly prohibited under Indiana law but other jurisdictions have also similarly found it

prohibited, and the Court finds their conclusions and public policy concerns persuasive and

consistent with Indiana law.

In Paonia, the Western District of Kentucky, applying state law, granted summary

judgment for Bingham, who were attorneys, and dismissed Paonia’s legal malpractice claim

because it found that there was a de facto assignment of the claim. Paonia Res., LLC v. Bingham

Greenebaum Doll, LLP, 2015 WL 7431041 (W.D. Ky. Nov. 20, 2015). Paonia was formed

solely to acquire assets from several other corporations. Paonia was sued in an attempt to stop its

acquisition of these assets and Bingham represented Paonia in that litigation. That litigation was

settled and Paonia was to receive $4.7 million in that settlement. Despite the agreement, the

Appalachian Fuels Creditors Trust (“Trust”), a non-party separate company, paid Paonia the $4.7

million. After the remittance of those settlement funds to its owners and creditors, including legal

fees to Bingham, Paonia had no assets, no liabilities, and no business operations or prospects.

The company was dissolved as a business entity in 2009. In June 2009, an involuntary

bankruptcy petition was filed against the Trust and in April 2011, the Trust replaced its officers.

The Trust then sued Paonia, which was then a shell corporation, along with others, regarding the

settlement agreement, arguing the payment from it was a fraudulent transfer that could be

recovered from Paonia. The parties settled this case and pursuant to that settlement agreement,

Paonia agreed to pay a judgment to the Trust and the Trust became the majority owner and

managing member of Paonia, which was reinstated as a corporate entity one day prior to the

settlement approval. At the time of the settlement, Paonia continued to have no assets, no

liabilities, and no business operations or prospects. A year later, Paonia, now owned by the Trust,

sued Bingham for legal malpractice alleging that Bingham failed to advise Paonia that the

settlement payment could be considered a fraudulent transfer. The court specifically notes that

the “Trust has never had an attorney-client relationship with Bingham and so has no malpractice

claims against Bingham” and that “Bingham’s motion [for summary judgment] turns on whether

Paonia is merely a defunct entity that exists only to pursue a judgment for the Trust’s benefit.”

Id. at *2.

The Paonia court notes that Kentucky law prohibits the assignment of legal malpractice

claims and holds that Paonia and the Trust affected an impermissible legal malpractice

assignment. Id. at *3–*4. The court cites to other jurisdictions who also disfavor such

assignments, quoting the Picadilly passage concerning assignments becoming a bargaining chip

in the negotiation of settlement agreements. The concern, as the Paonia court discusses, is that

allowing assignments would incentivize collusion and convert “legal malpractice into a

commodity.” Id. at *3 (quoting Kenco Enterprises Nw., LLC v. Wiese, 291 P.3d. 261, 263 (Wash.

Ct. App. 2013)). Paonia argued that its corporate structure should be respected and that an

assignment never happened because it never divested itself of control over its legal malpractice

claim. The Paonia court found that while this is true, Bingham’s argument is that the

“transaction was an assignment in form, if not in name.” Id. Paonia also argued that the court

should not look behind the corporate veil and prevent Paonia from pursing this claim. However,

the court held that “[l]etting this claim proceed merely to respect the contrived corporate

structure would require the Court to ignore the obvious” and it “need not look behind the

corporate veil; the impermissible assignment is front and center.” Id. at *4. It reasoned that

Paonia exists solely to pursue this malpractice claim and if it recovered on the claim, the money

would be used to satisfy its agreed judgment with its new owner, the Trust. Id.

Another case the Court looks to is out of the Washington Court of Appeals. In Kenco, the

court conducted its analysis from the premise that a claim for legal malpractice is not assignable,

directly or indirectly, to one’s adversary in a proceeding from which that legal malpractice is

alleged to have arisen. Kenco, 291 P.3d. at 262. The facts in Kenco are similar to Paonia. Kenco

sued Sleeping Tiger for failing to make payments under a real estate purchase and sale

agreement and Sleeping Tiger countersued. Kenco defended the counterclaims asserting an

affirmative defense arising out of a clause of the agreement drafted by its attorney. The jury

found for Sleeping Tiger and the parties ultimately settled for over a $3 million judgment against

Kenco. Kenco then transferred its ownership interests in the real estate and company to Sleeping

Tiger along with any legal malpractice claims it or its former owners might have against the

attorney who drew up the purchase and sale agreement. Id. Sleeping Tiger, “having swallowed

its adversary Kenco” brought a legal malpractice claim nominally in Kenco’s name against its

former attorneys. Id. Kenco/Sleeping Tiger argued that there was no assignment because the

claim still belongs to Kenco, an entity in its own right. However, the court stated that Kenco only

has one asset, its claim against its former counsel on the transaction and “Kenco’s

metamorphosis as Kenco/Sleeping Tiger amounted to an assignment of that claim, something

they had reason to know was problematic . . . .” Id. at 264. Kenco/Sleeping Tiger argued that the

reason for the change in ownership is a question of fact that needs to be determined at trial. But

the court found that the evidence was sufficient for the assertion that Kenco had no other assets

and therefore Kenco/Sleeping Tiger cannot rest on its general assertions that there was value in

the Kenco name.

While the above cases are non-binding, the Court finds the analyses of Paonia, Kenco,

and McDermott, when applied to the undisputed facts of this case, to be persuasive and

consistent with Indiana law. See also Oceania Ins. Corp. v. Cogan, 457 P.3d 276 (Nev. App.

2020) (“We recognize that Alutiiq’s control over this litigation stems from its ownership interest

in Oceania rather than from a direct assignment of the legal malpractice claim. But in light of the

foregoing, we conclude (as have other courts in similar circumstances) that the transfer of

ownership to Alutiiq nevertheless constituted a de facto assignment of the claim—which Oceania

concedes is its only asset—in violation of Nevada’s public policy.”); Trinity Mortg. Companies,

Inc. v. Dreyer, 2011 WL 61680, at *3–*4 (N.D. Okla. Jan. 7, 2011), aff'd sub nom. Trinity

Mortg. Companies, Inc. v. Dryer, 451 F. App’x 776 (10th Cir. 2011) (finding that “Trinity gave

Junker an ownership interest for the specific and sole purpose of permitting Junker to litigate

Trinity’s claims against [its former counsel]” and disallowing the de facto assignment because it

was “clearly against public policy.”).

The facts here, although not identical, present similar issues as were found in Paonia and

Kenco. Just as the Trust in Paonia did not have an attorney-client relationship with Bingham, nor

did Mr. Shah with MOL. Like in Paonia and Kenco, Duro has no hard assets, no customers, no

employees, no revenue or income, no operations, and its business prospects are unknown. [DE

476-1 at 15–18, 27]. After the Settlement Agreement and Redemption Agreement were

effectuated, Mr. Shah transferred all the Duro assets to his company, Green Stream. Id. at 15–16,

27. Mr. Shah has distributed any remaining cash in Duro to himself. Id. at 16. Duro exists solely

to pursue the malpractice claim, just as the plaintiffs in Paonia and Kenco. Id. at 15–16. Further,

similar to the arguments made by Duro, Paonia argued the corporate structure should be

respected and it never divested control of its legal malpractice claim. But the Paonia court found,

as the defendant attorneys argued there and here, the assignment was in form, if not in name.

This conclusion is similar to the analysis made above by the Court as it pertains to Summit.

Although the Duro name has not changed, it has changed owners and it no longer operates as it

once did. And, again similar to Paonia, the Court need not look far behind the corporate veil to

see this impermissible assignment. Permitting this claim to proceed merely to respect the

contrived corporate structure would require the court to ignore the obvious, that any judgment

here in favor of Duro would be used to satisfy the bargain made in its settlement with Mr. Shah,

just as in Paonia, and would be contrary to public policy and Indiana law.

Lastly, Duro argues that the issue of an assignment of legal malpractice claim is a

question of fact and therefore must be decided by the jury. However, nothing before the Court

creates a disputed fact material to the question of whether an impermissible assignment of the

legal malpractice claim against MOL has occurred. In its reply, MOL specifically notes that

Picadilly affirmed the granting of summary judgment because the assignment was invalid as a

matter of law. Therefore, summary judgment is appropriate where, as here, there is no material

fact in dispute that a de facto assignment of a legal malpractice claim occurred, and it is void as a

matter of law. Accordingly, based on the undisputed facts before it and the public policy

concerns emphasized in Indiana, the Court finds that an impermissible de facto assignment of

legal malpractice claims has occurred and therefore Duro’s claim, brought and controlled

entirely by Mr. Shah who never had an attorney-client relationship with MOL, is prohibited as

against public policy. Thus, MOL’s motion for summary judgement is granted as to the legal

malpractice claim.

Relatedly, in its motion for summary judgment, MOL asserts that Duro did not

sufficiently state a cause of action for breach of duty of loyalty and to the extent the Court finds

that Duro did properly allege a claim for breach of loyalty, disgorgement of attorneys’ fees is not

an appropriate remedy here and MOL is entitled to summary judgment on the issue. [DE 476 at

53–54]. Duro argues that its Third Amended Complaint, its discovery responses, and its expert

witness testimony demonstrates that Duro is pursuing a claim for legal malpractice based on a

theory of breach of fiduciary duty of loyalty and breach of the standard of care. Under the legal

malpractice claim in the Third Amended Complaint, Duro alleges that the “Defendant Law Firms

have breached their respective duties of care, honesty, and loyalty owed to the Duro Entities.”

[DE 408 at 15]. However, as Duro states in its response, it has pled its “legal malpractice claim

premised on a theory of MOL’s breach of fiduciary duty of loyalty and of negligence” [DE 488-1

at 49], the Court finds no difference between the two theories when analyzing whether a de facto

assignment of legal malpractice claims occurred. Therefore, for the same reasons the Court finds

that the de facto assignment of legal malpractice claim is prohibited, so too are any of Duro’s

possible claims made for breach of fiduciary duties proffered in support of its legal malpractice

claim, which were brought and are controlled entirely by Mr. Shah who never had an attorney-

client or fiduciary relationship with MOL.

MOL also briefly asserts an undeveloped argument that Indiana’s prohibition of

assignment of claims is not limited to legal malpractice and asserts that Duro’s CFAA claim is

prohibited as well. [DE 476 at 38]. In its reply, MOL argues that Duro did not address whether

the CFAA claim was impermissibly assigned and therefore conceded that it was. See Palmer v.

Marion Cnty., 327 F.3d 588, 597 (7th Cir. 2003) (holding that claims not addressed in a

summary judgment opposition brief are deemed abandoned). However, even though Duro

waived the argument, the Court finds that MOL has not established that summary judgment

should be granted as a matter of law on the federal CFAA claim based on a state law prohibiting

a legal malpractice claim assignment. While Indiana has a general rule that a right to collect a

penalty is a personal right which is not assignable, the CFAA is a federal statute. Accordingly,

the Court does not extend Indiana’s law to prohibit the bringing of a federal claim and thus,

denies MOL’s motion as to the CFAA claim on this basis.

B. Doctrine of In Pari Delicto

Alternatively, MOL argues that its motion for summary judgment should be granted as to

both the legal malpractice claim and the CFAA claim on the basis of the in pari delicto equitable

defense doctrine. “The doctrine known by the [L]atin phrase in pari delicto literally means ‘of

equal fault.’” Theye v. Bates, 337 N.E.2d 837, 844 (Ind. Ct. App. 1975) (“Plaintiffs who are truly

in pari delicto are those who have themselves violated the law in cooperation with the

defendant.”) (citations omitted)). “The expression ‘in pari delicto’ is a portion of the longer Latin

sentence, ‘In pari delicto potior est conditio defendentis,’ which means that where the wrong of

both parties is equal, the position of the defendant is the stronger.” Id.

MOL argues the facts of this case are similar to those in Knauer v. Jonathon Roberts Fin.

Grp., Inc., 348 F.3d 230 (7th Cir. 2003). In Knauer, Heartland Financial Services and JMS

Investment Group (“Heartland”) operated a Ponzi scheme that collected over $60 million from

hundreds of investors. 348 F.3d at 231. Kenneth Payne founded Heartland and worked with

Daniel Danker. Investors were promised high rates of return when in reality, Heartland did not

invest most of the funds and Payne and his colleagues withdrew and spent the money from

investors for their own personal benefit. The plaintiff, Knauer, was appointed as receiver for

Heartland in connection with an SEC action against the individuals and entities involved in the

Ponzi scheme. Knauer brought the action against the defendants alleging that they were in part

responsible for losses resulting to Heartland and therefore were liable to Heartland for a variety

of torts. The defendants were five broker dealers and Payne and Danker were, at various relevant

times, licensed as registered securities representatives of these five broker dealers. The district

court dismissed Knauer’s complaint, holding that the doctrine of in pari delicto bars Heartland

from pursuing losses for which it was largely culpable. The Seventh Circuit affirmed, holding the

case was distinguishable from Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995), a case where the

Seventh Circuit held that the doctrine did not apply. The Knauer court reasoned that “all of the

liability, according to the complaint, arises from the employment or agency relationship between

the broker dealer defendants and Payne and Danker.” 348 F.3d at 237. But Payne and Danker

were also employed by and ran Heartland, and “[Heartland’s] nexus to Payne and Danker was far

more immediate than that of the broker dealers.” Id. at 238. The broker dealers were a step

removed from Payne and Danker’s operation of Heartland and were entitled to an equitable

defense against the receivership.

In Scholes, there was also a Ponzi scheme perpetrated by a Michael Douglas and his three

solely owned corporations. 56 F.3d at 752–53. Douglas’ operations were derailed by the SEC

and a receiver was appointed. In Scholes, the receiver sought to reach and recover additional

funds, from certain beneficiaries of Douglas’ largesse. The defendants argued “that the

wrongdoer must not be allowed to profit from his wrong by recovering property that he had

parted with in order to thwart his creditors.” Id. at 754. In other words, Douglas made the

fraudulent conveyances to achieve an improper end, that is to put money beyond the reach of

creditors and should not be allowed to undo them to secure a benefit for himself. The Scholes

court found:

That reason falls out now that Douglas has been ousted from control of and

beneficial interest in the corporations. The appointment of the receiver removed the

wrongdoer from the scene. The corporations were no more Douglas’s evil zombies.

Freed from his spell, they became entitled to the return of the moneys – for the

benefit not of Douglas but of innocent investors – that Douglas had made the

corporations divert to unauthorized purposes . . . That the return would benefit the

limited partners is just to say that anything that helps a corporation helps those who

have claims against its assets. The important thing is that the limited partners were

not complicit in Douglas’s fraud; they were its victims.

Id. at 754-55. “The defense of in pari delicto loses its sting when the person who is in pari

delicto is eliminated.” Id. (citing McCandless v. Furland, 296 U.S. 140, 160 (1935)). The court

reasoned that the corporations once created and initially controlled by Douglas were, at the time

of the suit, controlled by a receiver who’s only objective is to maximize the value of the

corporations for the benefit of their investors and any creditors, we cannot see an objection to the

receiver’s bringing suit to recover corporate assets unlawfully dissipated by Douglas. Id. at 755.

The Seventh Circuit finds the difference between Knauer and Scholes to be the following:

The key difference, for purposes of equity, between fraudulent conveyance cases

such as Scholes and the instant case is the identities of the defendants. The receiver

here [in Knauer] is not seeking to recover the diverted funds from the beneficiaries

of the diversions (e.g., the recipients of Douglas’s transfers in Scholes). Rather, this

is a claim for tort damages from entities that derived no benefit from the

embezzlements, but that were allegedly partly to blame for their occurrence.

Knauer, 348 F.3d at 236.

While this Court does not find that the facts of either Knauer or Scholes are directly on

point to those here, it finds that, construing the facts most favorable to Duro, MOL has not

established it is entitled to this equitable defense based on the balancing of the equitable

positions of Duro and MOL. Knauer and Scholes “highlighted that the equitable alignment of

plaintiff and defendant is crucial in applying the in pari delicto defense. In the Seventh Circuit’s

view, the key distinction between Scholes and Knauer was that in Scholes, the plaintiff receiver

sought to recover diverted funds from the people who benefitted from the diversions, whereas in

Knauer the receiver sued defendants who had derived no benefit from the embezzlements.”

Marwil v. Ent & Imler CPA Grp., PC, 2004 WL 2750255, at *9 (S.D. Ind. Nov. 24, 2004)

(Hamilton, J.) (denying motion to dismiss). The application of the in pari delicto defense was

appropriate in Knauer because the equitable balancing in that case favored the defendants—they

had not seen a cent of the diverted funds and their “involvement in the Ponzi scheme as a whole

was quite minor” and there was no allegation that the five broker dealer defendants were directly

involved in the embezzlements or benefited from them. Id. (quoting Knauer, 348 F.3d at 236).

While it is true that Duro does not allege or designate evidence that the attorney fees paid by

Duro to MOL constituted a fraudulent conveyance, it is undisputed that Duro paid MOL for its

legal fees. Nor has MOL presented argument or authority that the in pari delicto defense can

only be denied in cases involving claims of fraudulent conveyances. If Duro is held in equal fault

with MOL under this doctrine, then the undisputed evidence that MOL received payment from

Duro for MOL’s legal representation leads the Court to concluded that MOL may be a

beneficiary of those ill-gotten funds, which is in conflict with the Seventh Circuit’s discussion of

Scholes in Knauer. See Knauer, 348 F.3d at 237 n.6 (“Had the broker dealers been directly

involved in the embezzlements, or attained some tangible benefit from them, this would be a

different case.”).

Duro argues that the in pari delicto defense should be rejected because the wrongdoer

who formally controlled Duro (Mr. Rodino) has since been removed, and cannot benefit from

any recovery on Duro’s claims, citing Scholes. The “equitable alignment” here resembles

Scholes more closely than Knauer. The Court agrees Mr. Rodino’s absence in Duro is relevant. It

is not disputed that Mr. Rodino once controlled Duro and now does not, just as Mr. Douglas was

no longer in charge of the corporations in Scholes, a fact the Seventh Circuit deemed critical,

both in the Scholes opinion and the court’s later analysis of Scholes in Knauer. The same

principle applies here. Further, in arguing that Knauer alone applies here, MOL asserts that

Payne and Danker were Heartland just as here, Mr. Rodino was Duro. However, in Knauer, it

was undisputed that Payne and Danker’s misuse of Heartland resulted in the “fattening of the

companies’ coffers.” Knauer, 348 F.3d at 234. Here, there is disputed evidence as to whether Mr.

Rodino’s actions injured or benefited Duro. The Court particularly notes that the Seventh Circuit

discussed the injury to the plaintiff corporation and its importance in a footnote in Knauer. The

court noted that it “recognized that [Heartland was] made vulnerable to liability as a result of

[its] shareholders’ misconduct. And in a different factual scenario, we might find such exposure

to liability a sufficient injury to accord faultless representatives of a corporation, whether a

receiver or subsequent innocent shareholders, standing to sue for the greater liability or deeper

insolvency created by earlier shareholders.” Knauer, 348 F.3d at 234 n.4 (citing Official Comm.

of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 354 (3d Cir. 2001); Miller v. San

Sebastian Gold Mines, 540 F.2d 807 (5th Cir. 1976). The court goes on to explain that “[i]n a

Ponzi scheme such as this one, however, where the Ponzi fraud pervaded the entire entity at all

relevant times, we cannot find a justiciable injury. At least at the sales stage of the Ponzi scheme,

every dollar tortiously produced was revenue to Heartland.” Id. The factual scenario discussed in

this footnote more closely resembles the facts here. If it is established that Mr. Rodino did what

Duro alleges, he did not benefit Duro, but rather caused it injury, leaving Duro as the victim and

faultless under the doctrine. Neither party argues Mr. Rodino’s “fraud pervaded the entire entity

at all relevant times,” like in Knauer. Rather, unlike Knauer, Duro argues that every dollar Mr.

Rodino allegedly tortiously produced was not revenue to Duro and harmed it, which is why the

minority shareholders brought this case on behalf of Duro in the first place.

MOL also argues that Duro’s actions in settling with Mr. Rodino must also be

considered. MOL argues that because Duro had claims against Mr. Rodino and the settlement for

those claims did not include a cash transfer from Mr. Rodino to Duro it is evidence that “the

Duro Entities are complicit with Mr. Rodino.” Id. However, Duro argues, and the Court agrees,

that a cash payment from Mr. Rodino to Duro is not the only consideration that can give value to

a settlement agreement, as was the case here. In fact, MOL argues the claims against it were used

as consideration in the settlement agreement, albeit improperly, as discussed above in Section

IV.A. Further, Duro points to the evidence designated in the Redemption Agreement as proof

that it received financial benefits in settling the claims with Mr. Rodino, including but not

limited to, Mr. Rodino redeeming all stock and equity interests he owned in Duro, transfer of

clear title of real estate at several locations, Mr. Rodino’s resignation from all positions held with

Duro, the dissolution of Apex, Mr. Rodino could not compete directly or indirectly with Duro for

five years, and Mr. Rodino had to indemnify Duro and its shareholders for prospective tax

liabilities. [DE 488-1 at 35–36; 474-7]. Contrary to MOL’s argument, because of the

Redemption Agreement and consideration included in the Settlement Agreement, the Court does

not find that Duro’s settling of the claims against Mr. Rodino, for no cash payment, establishes

that Duro was complicit with Mr. Rodino.

Accordingly, because MOL has not established that Duro is at equal fault for the

wrongdoing alleged against it, the Court denies MOL’s motion for summary judgment as to both

claims on the basis of the in pari delicto equitable defense.

C. Legal Malpractice Claim

MOL also argues that summary judgment in its favor is warranted because Duro cannot

establish the elements of a legal malpractice claim, particularly the elements of proximate cause

and damages. While the Court has previously found that MOL’s motion is warranted due to

Indiana’s prohibition of the assignment of legal malpractice claims, the Court alternatively grants

MOL’s motion as to Duro’s legal malpractice claim based upon Duro’s failure to establish the

necessary element of proximate cause.

MOL argues that Duro is unable to establish two necessary elements, proximate cause

and damages, therefore the Court need not address the first two elements of legal malpractice.

MOL argues the undisputed material facts demonstrate that MOL was not the proximate cause of

the alleged harm to Duro—Mr. Rodino was. Further, it also argues, that because the supposed

connection between MOL’s alleged acts and omissions and the harm allegedly suffered are not

within the knowledge of a lay person, Duro is required to provide expert testimony that

establishes proximate cause. MOL asserts that Duro’s expert did not opine on proximate cause.

Duro argues that its two experts testified regarding the causal connection between MOL’s

breaches of its duties owed to Duro and the harms ultimately suffered by Duro, and therefore

MOL’s motion for summary judgment should be denied because issues of fact exist regarding

proximate cause.

“To prevail on a legal malpractice claim, the plaintiff must prove: 1) employment of the

attorney and/or firm (duty); 2) failure of the attorney and/or firm to exercise ordinary skill and

knowledge (breach); 3) proximate cause (causation); and 4) loss to the plaintiff (damages).”

Drendall L. Off., P.C. v. Mundia, 136 N.E.3d 293, 304–05 (Ind. Ct. App. 2019), transfer denied

sub nom. Drendall L. Off., P.C. v. Mundia, 143 N.E.3d 952 (Ind. 2020). It is appropriate for a

trial court to grant an attorney summary judgment on a legal malpractice claim if the designated

evidence negates at least one of these elements. Flatow v. Ingalls, 932 N.E.2d 726, 729 (Ind. Ct.

App. 2010). The Indiana Supreme Court has made clear that the “trial-within-a-trial” doctrine

governs claims of legal malpractice. Under the “trial-within-a-trial” doctrine, a client alleging

legal malpractice must prove not only that the lawyer’s conduct fell below the governing duty of

care but also that the client would have prevailed had the lawyer not been negligent. Roumbos v.

Samuel G. Vazanellis & Thiros & Stracci, PC, 95 N.E.3d 63, 64, 65–66 (Ind. 2018) (“[T]he

client must show the outcome of the botched representation would have been more favorable to

the client had the lawyer not been negligent.”); Drendall, 136 N.E.3d at 304 (“[T]o prove

proximate cause, a plaintiff alleging malpractice must show that the outcome of the underlying

litigation would have been more favorable had the lawyer not been negligent.”). “When the issue

of [proximate] cause is not within the understanding of a lay person, testimony of an expert

witness on the issue is necessary.” Singh v. Lyday, 889 N.E.2d 342, 357 (Ind. Ct. App. 2008).

Proximate cause is a question of fact and becomes a question of law only where “a single

conclusion can be drawn from the facts.” Bunger v. Brooks, 12 N.E.3d 275, 282 (Ind. Ct. App.

2014) (citations omitted).

The parties appear not to dispute that the alleged connection between MOL’s negligence

and the harm allegedly suffered by Duro is not within the knowledge of a lay person, and

therefore requires expert opinion that establishes proximate cause. Duro designated two attorney

experts, Hannah Joseph [DE 474-12] and Lucian Pera [DE 474-11], who opined on the standard

of care applicable to MOL. Duro argues Ms. Joseph opined that by failing to adhere to the

appropriate standard of care MOL caused the following harms to Duro: (i) the fees that Duro

paid on Mr. Rodino’s behalf to MOL, because these fees decreased Duro’s corporate assets, and

given the conflict of interest, those fees were improperly paid to MOL; (ii) guidance given by

MOL to Mr. Rodino regarding the formation of Apex and the diversion of the KIK account to

Apex; (iii) MOL’s involvement in blocking the minority shareholders’ discovery of financial

records; and (iv) MOL’s opposition to conducting an audit/accounting because MOL’s duty

should have been to Duro and not to the majority shareholder. [DE 488-1 at 40].

During Ms. Joseph’s testimony, she testified that she did not “know what actions [MOL]

took that did or did not benefit Duro entities.” [DE 485-3 at 5]. When specifically asked if she

made “any determination as to what harm or damages were caused by the concurrent

representation of Mr. Rodino and the Duro Entities,” Ms. Joseph responded that she did not

“know all of the harm that was caused, but there are some categories of harm that seem fairly

evident.” Id. at 9. One category she testified about was that both Mr. Rodino’s and Duro’s fees

were paid by Duro to MOL, thereby decreasing the corporate assets, and since there was a

conflict of interest, those fees were “improperly paid” to MOL. Id. However, Ms. Joseph does

not explain why Duro paying for Mr. Rodino’s fees is a harm caused by MOL’s negligence.

Duro paid for Mr. Rodino’s legal fees because an amendment to the Duro by-laws permitted it.

[DE 474-10 at 2]. Whether Duro was paying MOL or another law firm for Mr. Rodino’s legal

fees, corporate assets would have been depleted due to the by-laws allowing such payments. To

the extent this harm is meant to be tied to the actual amendment of the by-laws permitting the

indemnity, this connection was not made by Ms. Joseph. Further, Duro has not created a material

dispute that MOL had anything to do with those amendments. Mr. Rodino affirmed that MOL

did not amend the by-laws, he did not seek or receive advice from MOL regarding the changes to

the by-laws that allow officers of Duro to be indemnified, nor did he seek, receive or need advice

from MOL regarding payment of MOL’s fees for their representation of him from the Duro

accounts. [DE 474-10 at 2]. Additionally, there is evidence that Warrick & Boyn prepared the

paperwork incorporating Duro and its entities. [DE 418 at 5–7]. Duro has not provided any

evidence to dispute this.

The next category of harm Ms. Joseph testified to is the “concern about some of the

guidance given regarding” the formation of Apex and the alleged diversion of the KIK account

to Apex. In support of this, she references Mr. Walton’s advice to Mr. Rodino regarding Apex.

[DE 485-3 at 9]. Ms. Joseph later testified that she found Mr. Walton’s advice to Mr. Rodino to

be “surprising” and Mr. Walton’s involvement in the formation of Apex seemed “troubling” to

her. Id. at 10–11. However, she does not opine that but for MOL’s involvement, Apex would not

have been formed and used to take a corporate opportunity from Duro. Rather, she opines that

“it’s up to [the business owners] what they choose to do. If they want to set up a separate

business and try and divert business opportunities, that’s their decision and they know their

situation better than I could ever know it.” Id. at 11. She went on to testify that as an attorney she

would “put it in writing that this is a risky decision, that this could result in liability.” Id.

However, Ms. Joseph does not opine that if MOL had done as she suggests, it would have

created a more favorable outcome for Duro or changed the outcome of Mr. Rodino’s

involvement with Apex. Therefore, she did not opine as to MOL’s proximate causation of any

harm caused by Mr. Rodino’s formation or running of Apex. Additionally, Ms. Joseph testified

that even if MOL was aware of a breach of Mr. Rodino’s fiduciary duty to the minority

shareholders regarding Apex, it could not have told the minority shareholders. Id. at 26.

Another category of “potential harm” Ms. Joseph discusses is MOL’s involvement in

blocking the discovery of financial records or assisting in obstructing the discovery of corporate

records. Id. at 10. Duro asserts that because of MOL’s actions, Duro was unable to prosecute its

claims against Mr. Rodino. Ms. Joseph testified that if MOL was “just representing the company,

they should have no interest in obstructing [production of documents] because their duty is to the

best interest of the company, not the best interest of the majority shareholder.” Id. She concludes,

however, by stating that “in and of itself, that is again another example of an inherent conflict.”

Id. This is not an opinion as to proximate cause, however, but rather one regarding the standard

of care and breach, elements that are not at issue here. She later testified that she believes MOL

“made things much more complicated by . . . taking the dual representation” and MOL’s

“involvement significantly increased the cost and length of time this case took.” Id. at 29. First,

the Court points out that Ms. Joseph does not provide the basis for her opinion nor does Duro

provide evidence that establishes that but for MOL’s alleged obstruction of document production

to the minority shareholders, the underlying litigation would have cost less and been shorter. The

evidence that Duro argues establishes this is that many more boxes of documents and materials

were produced after MOL withdrew as counsel. However, Duro has not argued or presented

evidence that from this new production, a forensic accounting or audit of Duro actually took

place, ending the litigation in Duro’s favor. Nor does Duro set forth evidence or argument that

MOL knew or should have known of the existence of additional boxes of discovery or that the

boxes contained previously undisclosed information. Further, Duro did not provide evidence or

argument that this discovery was capable of being produced any earlier than they otherwise were

but for MOL’s acts or omissions. Duro argues that had these boxes of documents been produced

earlier, the claims against Mr. Rodino would have settled “years earlier” and Duro would have

suffered less harm. [DE 488-1 at 47]. Duro cites to deposition testimony by Ms. Joseph to

support this assertion, however, the testimony does not support this assertion, nor does it reflect

that Ms. Joseph reached this opinion. [DE 485-3 at 10]. Ms. Joseph opined that even if another

independent firm was representing Duro during the litigation, Mr. Rodino, as majority

shareholder and president, “would have been able to make the decisions for the Duro entities.”

Id. at 29. Instead, when asked if Duro would have experienced any harm had MOL withdrawn

from the representation at the outset, Ms. Joseph stated “there’s no way to know what would’ve

happened after.” Id. at 10.

A similar argument was unsuccessfully pursued in Price Waicukauski & Riley, LLC v.

Murray, 47 F. Supp. 3d 810 (S.D. Ind. 2014). In Price, a law firm sued for attorneys’ fees and

the client countersued for legal malpractice. The client asserted that it had lost the chance to

pursue certain claims because of the attorneys’ negligence. It argued it could prove proximate

cause through the loss of chance doctrine applied in medical malpractice cases. The court held

“Indiana law simply does not allow [the client] to satisfy the causation factor by showing that

[the attorneys’] negligence resulted in a lost opportunity.” Id. at 820. Duro attempts to reframe

this argument that it lost the opportunity to prosecute the claims against Mr. Rodino. However,

unlike Price where the attorneys failed to include a claim in the complaint, a derivative action

was maintained against Mr. Rodino on behalf of Duro for years and those claims were settled.

Those claims were not involuntarily dismissed nor was the action forcibly ended due to a lack of

evidence. Duro and its expert have not made a causal connection between the production of

materials after MOL’s withdrawing as counsel and the settlement between the parties. The

fundamental question in any legal malpractice claim is how the outcome would have been better

for the client but for the negligence of the attorney and Ms. Joseph does not provide an opinion

how but for MOL’s discovery obstruction, the outcome of the underlying litigation would have

had a better outcome for Duro. See K.B. by Blade-Thompson v. Fies, 2021 WL 1784298, at *10

(N.D. Ind. May 5, 2021) (finding that the plaintiff did not offer any argument or evidence that

any delay caused by the attorney changed the outcome of her claims on the merits in the

underlying litigation).

Ms. Joseph also opines that MOL should have had an independent investigation done into

the allegations made by the minority shareholders. [DE 485-3 at 6, 7, 17]. However, when asked

about her opinion that MOL would have been unable to meaningfully investigate the claims

asserted by the minority shareholder due to their dual representation, she testified that there

would be no way to know what would have happened if MOL had conducted such an

investigation or got a third party to do so. In fact, she described that scenario as “purely

speculation.” Id. at 15. Accordingly, she did not opine regarding whether MOL’s failure to

thoroughly investigate the minority shareholders claims proximately caused harm to Duro.

Duro argues that their other expert, Lucian Pera, opined on the proximate causation

issue.10 Duro asserts that Mr. Pera testified that MOL’s breach of its duties allowed Mr. Rodino

to misappropriate and divert Duro’s assets. Mr. Pera opined that MOL violated the Indiana Rules

of Professional Conduct by its concurrent representation of Duro and Mr. Rodino. However,

Duro agrees that violations of the Indiana Rules of Professional Conduct do not give rise to an

10 A portion of Mr. Pera’s expert testimony is subject to a motion to strike by MOL, however, that motion does not

include or impact the issue of proximate causation.

independent cause of action, nor is MOL contesting the second element of legal malpractice,

whether there was breach of duty to the client by a failure of the attorney and/or firm to exercise

ordinary skill and knowledge. See Liggett, 877 N.E.2d at 183 (“[T]he Preamble [of the Rules]

make[s] it clear that the [Rules of Professional Conduct] do not purport to create or describe any

civil liability.”) (internal quotations omitted). When asked if Mr. Pera agreed that his report does

not contain opinions regarding “what harm” Duro suffered as “a proximate result” of the acts or

omissions of MOL, Mr. Pera responded, “I think that’s right.” [DE 474-13 at 4]. He continues to

say, “whatever it caused, [his] opinion that there was a conflict of interest” in the dual

representation of Duro and Mr. Rodino leads to the “natural consequence” of a “conflict-free

representation.” Id. However, when ultimately asked: “[B]ut you haven’t attempted to say

whether [MOL] did cause an injury or to what extent they caused an injury?,” Mr. Pera

responded: “That is correct.” Id. at 6.

Like Ms. Joseph, Mr. Pera opined as to what MOL should have done in relation to

incorporating Apex, indicating he saw no MOL attorney saying “well, you know we’re not going

to do that for you, or well, you know, we’ll form the corporation but … our representation does

not include these other three things.” [DE 485-1 at 13]. However, this does not establish that but

for MOL’s failure to give this advice, Mr. Rodino would not have created and used Apex in the

manner Duro alleges. Rather, it goes to his standard of care and breach opinion, which are not at

issue here. Mr. Pera testified that he “saw evidence that supported” the allegation that MOL and

Warrick & Boyn advised Mr. Rodino concerning whether Apex was permitted to lawfully

compete with Duro. Id. at 12. Mr. Pera goes on to state that “it seemed as if both Warrick &

Boyn and [MOL] were in some way, shape or fashion, assisting … Mr. Rodino in this plan to

form and use Apex. . . I am not the finder of fact. So maybe there’s . . . another explanation.” Id.

Mr. Pera testified that Mr. Walton’s advice to “get it in writing” that KIK does not want to do

business with Duro because of Mr. Shah’s involvement was “a way to support, establish, create

facts on the ground that would help establish under the corporate opportunity doctrine that this

was not in fact, the corporate opportunity of the Duro Entities.” Id. at 13. When asked further as

to why this would be problematic, Mr. Pera testified that even though he is “not an expert on

corporate opportunity, [he doesn’t] believe it’s at all clear-cut that this was not a corporate

opportunity.” Id. Mr. Pera does not reach the opinion that the creation and use of Apex was a

usurpation of a corporate opportunity from Duro nor does Duro attempt to argue or present

evidence to prove the necessary elements under the usurpation of corporate opportunity. Mr.

Pera’s testimony and expert report also do not reach the opinion that but for Mr. Walton’s advice

to “get it in writing” why KIK did not want to do business with Duro, Mr. Rodino would not

have formed and used Apex in the alleged way. Accordingly, Mr. Pera has not opined on

whether but for MOL’s negligence, the underlying litigation or the alleged diversion of corporate

opportunity would have been different for Duro.

Additionally, Mr. Rodino has affirmed that he did not seek, receive or need advice from

MOL regarding the formation of Apex. [DE 474-10 at 2]. He exercised his own business

judgment in creating Apex to prevent Duro from losing profits. Id. at 2–3. He knew that as a

majority shareholder he could not divert business from Duro to Apex and MOL did not advise

him he could do so. Id. at 3. Further, MOL did not advise him that Apex was legally permitted to

compete with Duro. Id. Alternatively, even if the Court had granted Duro’s motion to strike Mr.

Rodino’s January 2020 Affidavit in Exhibit 9, the Court’s conclusion does not change because

Duro has not established that but for MOL’s acts or omissions, Mr. Rodino would not have

formed Apex and diverted income from Duro.11 Mr. Rodino testified that he went to Warrick &

Boyn’s office, not MOL’s, after leaving KIK’s office and told them to incorporate Apex and they

did. [DE 484-4 at 10]. When asked if he ever spoke with MOL or received advice from MOL

regarding Apex, Mr. Rodino stated that “I don’t remember” and “Not that I know of.” Id.

Accordingly, because neither expert opinion submitted by Duro provides an opinion

connecting MOL’s acts or omissions to Duro’s harm, Duro has not established that MOL was the

proximate cause of the harm alleged. Thus, MOL’s motion for summary judgment is granted as

to the legal malpractice claim. Flatow, 932 N.E.2d at 729 (“It is appropriate for a trial court to

grant an attorney summary judgment on a legal malpractice claim if the designated evidence

negates at least one of these elements.”). Because the Court has granted MOL’s motion for

summary judgment regarding proximate cause, it need not reach the damages element.

D. Computer Fraud and Abuse Act (“CFAA”)

Duro alleges that MOL conspired with Mr. Rodino and a former Duro IT professional,

Mr. Mills, “to intentionally further a fraud by knowingly accessing a protected computer without

authorization or in excess of ‘authorized’ access” and “to knowingly cause the transmission of

computer commands and, as a result of such conduct, intentionally cause damage to the Duro

computers” in violation of the CFAA. [DE 408 at 25]. MOL moves for summary judgment as to

this claim, asserting that Duro cannot establish that there was a violation of the CFAA, that Duro

suffered economic loss, and that MOL conspired with Mr. Rodino to violate the CFAA. [DE 476

at 60–64].

A person violates the CFAA when they “knowingly and with intent to defraud, access[] a

protected computer without authorization, or exceed[] authorized access . . . further[ing] the

11 The Court also notes that even if it had granted Duro’s motion to strike Exhibit 16, that exhibit does not impact

the outcome of the motion for summary judgment.

intended fraud” or “knowingly cause[] the transmission of a program, information, code, or

command . . . intentionally caus[ing] damage without authorization, to a protected computer.” 18

U.S.C. § 1030(a)(4),(a)(5). In this context, “intent to defraud” means that the individual acted

“willfully and with specific intent to deceive or cheat, usually for the purpose of getting financial

gain for himself or causing financial loss to another.” Fidlar Techs. v. LPS Real Est. Data Sols.,

Inc., 810 F.3d 1075, 1079 (7th Cir. 2016) (citation omitted). The statute states whoever conspires

to commit or attempt to commit this offense has violated the CFAA. 18 U.S.C. § 1030(b).

The CFAA “is primarily a criminal anti-hacking statute. However, § 1030(g) provides a

civil remedy for any person who suffers damage or loss due to a violation of § 1030.” Fidlar,

810 F.3d at 1079. The CFAA defines “loss” as: [A]ny reasonable cost to any victim, including

the cost of responding to an offense, conducting a damage assessment, and restoring the data,

program, system, or information to its condition prior to the offenses, and any revenue lost, cost

incurred, or other consequential damages incurred because of interruption of service. 18 U.S.C. §

1030(e)(11). “[T]he term ‘damage’ means any impairment to the integrity or availability of data,

a program, a system, or information,” id. § 1030(e)(8), and includes “the destruction, corruption,

or deletion of electronic files, the physical destruction of a hard drive, or any diminution in the

completeness or usability of the data on a computer system.” Farmers Ins. Exch. v. Auto Club

Grp., 823 F. Supp. 2d 847, 852 (N.D. Ill. 2011) (internal citations omitted). The CFAA’s civil

action is available to anyone who has suffered “damage or loss by reason of a violation of this

section,”, but requires the conduct must involve one of the factors set forth in subsection

(c)(4)(A)(i)(I)-(V). 18 U.S.C. § 1030(g). MOL asserts, and Duro does not dispute, that the only

relevant factor here is (I):

(I) loss to 1 or more persons during any 1-year period (and, for purposes of an

investigation, prosecution, or other proceeding brought by the United States only,

loss resulting from a related course of conduct affecting 1 or more other protected

computers) aggregating at least $5,000 in value

Id. § 1030(c)(4)(A)(i)(I)-(V).

MOL asserts that in order to create a genuine issue of material fact that prevents the entry

of summary judgment in favor of a defendant on a CFAA claim, the plaintiff must designate

expert opinion testimony concerning the deletion of computer files so as to establish a potential

violation of the Act, citing Meridian Fin. Advisors, Ltd. v. Pence, 763 F.Supp.2d 1046, 1062

(S.D. Ind. 2011). Duro provides no response to this assertion. See Palmer, 327 F.3d at 597

(holding that claims not addressed in a summary judgment opposition brief are deemed

abandoned). In Meridian, the CEO defendant was alleged to have engaged in misconduct,

including breach of his duty of loyalty and the deletion of emails belonging to the corporation

that trailed his misconduct. On behalf of the corporation a receiver brought an action against the

defendant on a number of different claims, including a claim for violating the CFAA. The

defendant moved for summary judgment and argued that there was no evidence that he deleted

any data from the computers. The plaintiff designated a detailed report authored by two retained

technology experts that provided analysis of the emails in question, through electronically stored

data (“ESI”) and opined that on dates certain, the defendant’s email box on the server was

reduced in size by ninety-eight percent. Id. at 1062. The defendant challenged the admissibility

of the expert report due to its review of potentially excluded ESI relating to a prior order in the

case. However, the court admitted the expert report and found that viewing the expert reports in

the light most favorable to the plaintiff, a reasonable jury could conclude that the CEO defendant

deleted the email in question. Id.

While the Court does not interpret Meridian as concluding that a CFAA claim must fail at

summary judgment without an expert report, as argued by MOL, the case does suggest that an

expert report aids the court in determining whether a material fact regarding the improper access

or alteration of data is disputed. Here, Duro relies entirely on Mr. Henning’s declaration and the

documents cited therein to defeat summary judgment as to this claim. [DE 488-1 at 54–61]. As

discussed in detail in Section III.C., Duro has not provided the Court with expert testimony or an

admissible report regarding the alleged unauthorized deletion of documents by Mr. Rodino or

Mr. Mills. Those documents and reports created by Protek that Duro cites to in support of Mr.

Henning’s declaration cannot be presented at trial in admissible form because Duro failed to

disclose an expert that could testify to the identification, retrieval, and analysis of those reports

and the underlying data. See supra Section III.C. That failure to disclose was not substantially

justified nor was it harmless. Duro attempts to use Protek reports to establish that Mr. Rodino or

Mr. Mills deleted files, however, the reports, from the Court’s understanding of them, do not

reach the conclusion of who deleted the files in question. And to the extent Mr. Henning reaches

any conclusion of who deleted the files in question, he does so through thin inferences on

circumstantial evidence, such as the days and hours Mr. Mills worked on Duro computers. These

inferences fall short however, because ultimately, the reports he cites in support of his

declaration do not conclude the identity of who deleted the files—Mr. Rodino, Mr. Mills, or

otherwise. If the reports do make a determination as to who deleted the files, without an expert to

assist the Court in understanding this evidence, it cannot consider those conclusions. Without

this evidence, Duro has not set out specific facts showing a genuine issue for trial and has failed

to establish the existence of an element essential to its case, one of which it would bear the

burden of proof at trial. Therefore, there is no material fact in dispute as to whether Mr. Rodino

or Mr. Mills deleted or altered documents on the Duro computers.

Duro’s CFAA claim also fails because it has not established that a material dispute in fact

exists as to whether Mr. Rodino had authorization or exceeded his authorization to access or alter

the documents in question, as required under the statute. At the time of the parties’ merit briefing

of the motion for summary judgment, it was recognized in the Seventh Circuit that previously

authorized use of a computer system may become unauthorized when an employee breaches his

duty of loyalty to his employer. Int’l Airport Centers, L.L.C. v. Citrin, 440 F.3d 418, 420–21 (7th

Cir. 2006), abrogated by Van Buren v. United States, 141 S. Ct. 1648, 210 L. Ed. 2d 26 (2021).12

In Citrin, the Seventh Circuit was called to decide the meaning of “exceeding authorization”

under the CFAA in the context of a defendant-employee who was given a laptop to use in the

course of his duties. Id. at 419. At some point, the defendant decided to quit and go into business

for himself, in breach of his employment agreement. Before returning the laptop, he deleted all

the data, and also installed a secure-erasure program to ensure that the data could not be

recovered. The court held that the plaintiffs adequately stated a claim for a violation of the

CFAA based on the defendant’s conduct, even though the defendant had “authorization” to use

the laptop in a general sense. Id. at 420. The court reasoned that the defendant’s “authorization to

access the laptop terminated when, having already engaged in misconduct and decided to [violate

his employment agreement], . . . he resolved to destroy files that incriminated himself and other

files that were the property of his employer, in violation of the duty of loyalty that agency law

imposes on an employee.” Id. In other words, the defendant’s breach of his duty of loyalty

“terminated his agency relationship . . . and with it his authority to access the laptop, because the

only basis of his authority had been that relationship.” Id. at 420–21.

12 In June 2015, prior to its abrogation, the Court relied, in part, on Citrin when granting minority shareholders’

motion for leave to file their Second Amended Complaint. [DE 89 at 8–9].

However, on June 3, 2021, the Supreme Court abrogated Citrin, putting an end to a

disagreement among the Circuits on this issue. See Van Buren, 141 S. Ct. at 1648.13 In Van

Buren, a police officer was charged with violating the CFAA when he accepted a bribe to

conduct a license plate search in a law enforcement computer database. The Government

asserted that running the search exceeded Van Buren’s authorized access of the computer system

because his search was contrary to department policy. It was undisputed that his personal use of

the system was a violation of department policy. The Supreme Court decided that Van Buren did

not violate the CFAA. The statute specifies two distinct ways of obtaining or altering

information in violation of it: when a person accesses a computer “without authorization” and

when they “exceed[] authorized access.” Id. at 1649. The “without authorization” clause protects

computers from “outside hackers – those who ‘acces[s] a computer without any permission at

all.’” Id. at 1658 (quoting LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir. 2009)).

The “exceeds authorized access” clause protects computers from “inside hackers – those whose

access a computer with permission, but then exceed the parameters of authorized access by

entering an area of the computer to which the authorization does not extend.” Id.

The Supreme Court held that “an individual ‘exceeds authorized access’ when he

accesses a computer with authorization but then obtains information located in particular areas of

the computer—such as files, folders, or databases—that are off limits to him. Id. at 1662.

Because Van Buren did not “excee[d] authorized access” to the database, even though he

obtained information from the database for an improper purpose, he did not violate the CFAA.

13 Van Buren was decided a month after the parties completed briefing on the motion for summary judgment.

However, the parties did not complete briefing their motions to strike until early July 2021, after Van Buren was

decided. MOL discusses Van Buren and its applicability to the instant action in its reply to its motion to strike Mr.

Henning’s declaration. Duro never sought leave to file a sur-reply in response to MOL’s discussion on Van Buren.

Nonetheless, the Court would have addressed Van Buren, regardless of whether it was discussed by the parties, as it

is the law.

Id. Van Buren makes clear that the CFAA is about access, and therefore the focus must be on

what access, if any, the person had. The provision at issue “covers those who obtain information

from particular areas in the computer – such as files, folders or databases – to which their

computer access does not extend. It does not cover those who, like Van Buren, have improper

motives for obtaining information that is otherwise available to them.” Id. at 1652.

To be sure, the precise conduct at issue in this case looks different from the conduct in

Van Buren. Here, Duro is not only alleging that Mr. Rodino, in conspiracy with MOL, accessed

information, but rather took the further step to delete or alter it. However, this does not change its

application. The CFAA treats accessing and altering information identically by its plain terms.

See 18 U.S.C. § 1030(e)(6) (“the term ‘exceeds authorized access’ means to access a computer

with authorization and to use such access to obtain or alter information in the computer that the

access[o]r is not entitled so to obtain or alter”) (emphasis added)).

Given the recent decision in Van Buren, even if the Court had denied MOL’s motion to

strike Mr. Henning’s declaration in its entirety, Duro has not submitted evidence or argument

creating a material fact in dispute that Mr. Rodino, as majority shareholder and president of Duro

at the relevant times, did not have authority or exceeded his authority in accessing and altering or

deleting the documents purported to have been deleted. Nor does Mr. Henning’s declaration

suggest that Mr. Rodino exceeded his authorized access to the documents in question. The Court

notes that that neither party addresses Citrin, which, although now abrogated, was the law of this

Circuit at the time of their briefing. As a result, Duro has not set forth an argument similar to that

analyzed and rejected in Van Buren; that Mr. Rodino or Mr. Mills may have had authorized

access to the documents but exceeded that authorization by deleting documents in breach of their

duty. Because the Court does not find a genuine issue of material fact as to whether Mr. Rodino

or Mr. Mills exceeded their authorized access to obtain or alter documents, the Court need not

reach the issue of loss or damages.

Duro argues that in the Court’s previous decision to dismiss the CFAA claim, it stated

that the “allegations of the Third Amended Complaint strongly support an inference of some

understanding or agreement between MOL and Rodino about what would happen to the relevant

documents, prior to their allegedly improper deletion.” [DE 443 at 6; 488-1 at 55]. However, the

standard of review at summary judgment is very different than on a motion to dismiss. Duro, the

nonmoving party, may not rest on allegations or denials in its own pleading but must set out

specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(c)(1); Beard, 840 F.2d at 410.

As set forth above, Duro has not done so here. Duro has not created a material fact in dispute that

Mr. Rodino deleted files in violation of the CFAA, nor that MOL entered into an agreement with

Mr. Rodino regarding the deletion of those files. Regardless, there can be no conspiracy without

an agreement to commit an illegal act. The Court finds no illegal act in violation of the CFAA

has occurred. Since Duro cannot establish that Mr. Rodino deleted the alleged data or that even if

he did, he was not authorized to so, Duro cannot establish that MOL conspired with Mr. Rodino

or Mr. Mills to violate the CFAA. United States v. Pust, 798 F.3d 597, 602–03 (7th Cir. 2015)

(“To establish the existence of a conspiracy, the offering party must show that there was an

agreement to commit some illegal act and the alleged conspirator knew something of its general

scope and objective.”) (internal quotation omitted) (emphasis added)). Accordingly, for the

above reasons, the Court grants MOL’s motion for summary judgment as to Duro’s CFAA

claim.

V. CONCLUSION

For the forgoing reasons, Defendants E. Spencer Walton, Jr., Georgianne Walker, and

May Oberfell Lorber’s motion for summary judgment is GRANTED as to both remaining claims

of the Third Amended Complaint and the Court DIRECTS the Clerk to enter judgment

accordingly. [DE 473]. Plaintiffs’ motion to strike Defendants’ Exhibits 16 and 9 is DENIED.

[DE 484]. Defendants’ motion to strike and/or exclude the expert opinion of Lucian Pera is

DENIED. [DE 497]. Defendants’ motion to strike and/or exclude the expert opinion of Ronald

Braver is DENIED AS MOOT. [DE 498]. Defendants’ motion to strike portions of the

declaration of John Henning is GRANTED in part and DENIED in part. [DE 499].

SO ORDERED.

ENTERED: September 29, 2021

/s/ JON E. DEGUILIO

Chief Judge

United States District Court