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United States Court of Appeals, Second Circuit.

PROTOSTORM, LLC, Plaintiff-Appellee-Cross-Appellant, PETER FAULISI, Plaintiff, v. ANTONELLI, TERRY, STOUT & KRAUS, LLP, CARL I. BRUNDIDGE, AND FREDERICK D. BAILEY, Defendants-Third-Party-Plaintiffs-Appellants-Cross-Appellees, ALAN E. SCHIAVELLI, Defendant-Third-Party Plaintiff-Appellee, DALE HOGUE, Defendant-Third-Party Plaintiff, KATHY WORTHINGTON, Third-Party Defendant-Cross-Claimant, JOHN J. GINLEY, III, DUVAL & STACHENFELD, LLP, Third-Party Defendants-Cross-Defendants.

Nos. 15-2084

Decided: December 21, 2016

Present: ROBERT A. KATZMANN, Chief Judge, RALPH K. WINTER, Circuit Judge, SIDNEY H. STEIN, District Judge.* For: Defendants-Appellants-Cross-Appellees Antonelli, Terry, Stout & Kraus LLP and Alan E. Schiavelli: GREGORY M. WILLIAMS (Richard W. Smith, on the brief), Wiley Rein LLP, Washington, DC. For: Defendant-Appellant-Cross-Appellee Frederick D. Bailey Frederick D. Bailey, Esq., pro se, Fairfax, VA. For: Defendant-Appellant-Cross-Appellee Carl I. Brundidge JASON C. SPIRO (Jeffrey A. Shooman, on the brief), Spiro LLC, Short Hills, NJ. For: Plaintiff-Appellee-Cross-Appellant Protostorm, LLC JONATHAN E. MOSKIN, Foley & Lardner, LLP, New York, NY; ROBERT S. GOODMAN, Mound Cottan Wollan & Greengrass LLP, New York, NY (Arthur M. Handler, Arthur M. Handler Law Offices LLC, New York, NY, on the brief).

Defendants-Appellants-Cross-Appellees Antonelli, Terry, Stout & Kraus LLP (“ATS&K”), Frederick D. Bailey, and Carl I. Brundidge appeal from a judgment of the United States District Court for the Eastern District of New York (Chen, J.) entered against them following a jury trial on a legal malpractice claim. In addition, ATS&K and Defendant-Appellant-Cross-Appellee Alan E. Schiavelli appeal from the district court judgment holding them in contempt. Plaintiff-Appellee-Cross-Appellant Protostorm, LLC cross-appeals from the district court's order declining to hold Brundidge and Bailey jointly and severally liable with ATS&K for the compensatory damages awarded by the jury. We assume the parties' familiarity with the factual and procedural background to this case, as well as the issues on appeal.

ATS&K argues 1 that the district court's judgment must be overturned because the invention for which Protostorm sought patent protection is not patentable under 35 U.S.C. § 101 (“Section 101”), particularly in light of the U.S. Supreme Court's decision in Alice Corp. Pty. v. CLS Bank Int'l et al., 134 S. Ct. 2347 (2014). However, ATS&K did not raise the Section 101 issue in its motions for judgment as a matter of law made during trial pursuant to Fed. R. Civ. P. 50(a). Therefore, ATS&K has not preserved its Section 101 challenge to the patentability of Protostorm's invention. See Lore v. City of Syracuse, 670 F.3d 127, 152 (2d Cir. 2012). In particular, because resolution of the Alice issue in this particular case would require “additional fact-finding,” Baker v. Dorfman, 239 F.3d 415, 420 (2d Cir. 2000) (quoting Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 302 (2d Cir. 1996)), ATS&K's argument about patentability under Section 101 is not a “purely legal argument.” Pittman by Pittman v. Grayson, 149 F.3d 111, 120 (2d Cir. 1998). Similarly, we uphold the district court's ruling that ATS&K failed to preserve its challenge to the patentability of Protostorm's invention under 35 U.S.C. § 103 (obviousness).

ATS&K further argues that Protostorm's malpractice claim fails as a matter of law because Protostorm did not adequately prove damages. However, to the extent that ATS&K has not waived its challenge to the damages award, Protostorm's damages analysis was sufficient to support the jury's verdict. Consequently, we decline to overturn the jury's damages award.

In addition, ATS&K and Schiavelli appeal the district court's order holding them in contempt for violating the terms of a December 24, 2014 court order barring ATS&K from making payments except (as relevant here) payments for “operating expenses incurred in the ordinary course of business.” Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP, No. 08-CV-931, 2015 WL 5999368, at *1 (E.D.N.Y. Oct. 14, 2015). “We review a district court's factual findings for clear error, but a finding of contempt under an abuse of discretion standard. However, our review of a contempt order is more exacting than under the ordinary abuse-of-discretion standard because a district court's contempt power is narrowly circumscribed.” Perez v. Danbury Hosp., 347 F.3d 419, 423 (2d Cir. 2003) (citation omitted). Here, the district court did not abuse its discretion in finding that payments made by ATS&K after the firm had ceased practicing law were not made in the “ordinary course of business.” Therefore, we uphold the district court's contempt order against ATS&K. However, we vacate the district court's order as against Schiavelli, who was no longer managing partner of ATS&K at the time the relevant payments were made. The district court had stayed execution of the contempt award pending resolution of the instant appeal, Protostorm, 2015 WL 5999368 at *2, and we now decline to effect execution of this award.

Brundidge, in his appeal,2 argues that Protostorm's suit against him was time-barred as a matter of law. However, to the extent that Brundidge has not waived this claim, the jury's verdict on the statute of limitations was legally proper and was supported by sufficient evidence. See Protostorm, LLC v. Antonelli, Terry, Stout & Krauss, LLP, No. 08-CV-931, 2015 WL 3605143, at *21-*24 (E.D.N.Y. June 5, 2015); Protostorm Br. at 79-87. Brundidge also challenges the district court's partial grant of summary judgment against the defendants on the issue of breach. However, Brundidge's argument is largely better conceived as a challenge to the jury charge, to which Brundidge did not, in relevant part, object. A challenge to a jury charge to which a party does not object at trial is reviewed according to the plain error standard, and Brundidge has made no showing that any “error affects substantial rights.” Rasanen v. Doe, 723 F.3d 325, 332 (2d Cir. 2013) (quoting Fed. R. Civ. P. 51(d)(2)). To the extent that Brundidge has not waived any of his challenge to the district court's partial grant of summary judgment, and assuming arguendo that such a challenge is reviewable, the district court properly concluded that summary judgment on the issue of breach was warranted against the defendants, including Brundidge. Additionally, we uphold the jury's award of punitive damages against Brundidge, because, as the district court explained, the jury could reasonably have arrived at this result on the basis of the evidence before it. See Protostorm, 2015 WL 3605143, at *24-*26.

As for Protostorm's cross-appeal, Protostorm argues that the district court erred by not holding ATS&K attorneys Brundidge and Bailey jointly and severally liable with ATS&K for the compensatory damages that the jury awarded on Protostorm's malpractice claim. However, we find that Protostorm waived this issue through statements made by Protostorm's counsel at trial. See Trial Tr. 2838-39, 3024. Consequently, we decline to find in Protostorm's favor on its cross-appeal.

We have considered all of the parties' remaining arguments and find in them no basis for altering our decision. Accordingly, for the foregoing reasons, the judgment of the district court is AFFIRMED in part and REVERSED in part.




1.   ATS&K's brief was submitted on behalf of ATS&K, Schiavelli, and Bailey.

2.   ATS&K, Schiavelli, and Bailey join in Brundidge's brief.

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