Even in default, damages must still be shown

NITV Fed. Servs., LLC v. Dektor Corp., 2019 WL 7899731 No.
18-80994-Civ-Brannon (S.D. Fla. Dec. 16, 2019)
This is a default judgment, but it still has interesting
bits. The parties compete to sell truth verification technology, which will
become ironic. NTIV sued Dektor and its principal Herring for false advertising/product
disparagement/defamation/tortious interference. Bankruptcy stayed the proceedings,
and later the court ruled that Herring deliberately deprived NITV of
discoverable evidence, such that the extraordinary sanction of default was
warranted.  In contesting NITV’s
multimillion-dollar damage claims, Herring largely contended that NITV’s lie
detector was “a fake or fraud” and that NITV was blaming Herring for its own problems.
Facts (based on the allegations): NITV makes a patented
Computer Voice Stress Analyzer that is “the most widely used truth verification
tool in the United States law enforcement community,” used by approximately
2,000 local, state, federal, and international law enforcement agencies.  An older company, Dektor, patented a “Psychological
Stress Evaluator,” but went out of business; defendant Dektor is unrelated. Defendant
Dektor reverse-engineered the older product and began selling its own “PSE”
voice stress analyzer product while capitalizing on the name and history of the
original Dektor, including by claiming that “[s]ince 1969, all PSE models
[detect stuff]… Thousands of various PSE models have been sold worldwide for 45
years. For 50 years, PSE has been known worldwide because PSE constantly proves
it is the most superior system for truth verification. Only the Dektor system
has proven it is the real technology for Voice Stress Analysis.”
Dektor also disparaged NITV on its website, in emails to law
enforcement agencies, telephone calls, and professional speaking engagements,
including by stating that NITV’s products were proven unreliable/no more
reliable than a coin toss and disparaging NITV’s founder. Herring contacted the
Dallas Crimes Against Children’s conference and got NITV disinvited (even
though it had already paid to attend) by making false claims, such as that an
employee scheduled to speak at the conference had been dishonorably fired from
his prior position as a sex crimes investigator when in reality that employee
The court found NITV’s witness on damage credible, including
a recent incident where one sheriff’s department told the NITV marketing person
(not the witness) that, due to information received from Dektor, they were
discontinuing purchases of CVSA systems (to avoid hearsay on hearsay, I think
the marketing person should’ve been on the stand, but it’s been a long time
since civil procedure and maybe you can do that with a default?).
Anyway, the well-pled facts entitled NITV to victory on its
Lanham Act and FDUTPA claims, as well as business defamation/disparagement and
tortious interference. NITV was entitled to a permanent injunction and damages,
the latter of which required a legitimate basis.  NITV sought nearly $6 million in damages, trebled
for willfulness. The court declined to go so far. NITV had upped its demands
from $1.3 million to $6 million within less than a year, and the numbers were speculative.  NITV suggested that 10-15% of existing/prospective
customers would choose not to buy from NITV because of defendants’ conduct, but
the court didn’t see a basis for this.
And then a puzzling bit: “Although Mr. Herring and Dektor
pointed out alleged defects and disseminated materially false information about
Plaintiff’s product to existing and prospective customers who would not have
heard of any issues, other customers may have learned of these items by their
own searches. In the internet age, it is fair to say that clients buying truth
verification technology will check that technology on the internet.” I say
puzzling because if customers did their own searches and found false stuff planted
by defendants, defendants are still causally responsible.  But if customers also would have found
non-false stuff, or even false stuff for which defendants were not responsible,
that might also lead them to question their purchases, then the court’s hesitance
makes more sense.
The court found the testimony about that one sheriff’s
office to be “reliable hearsay,” as well as the lost conference attendance,
totalling about $50 thousand. The court didn’t agree that Herring was the only
reason that the state of Texas didn’t change its polygraph-only laws to allow
the use of NITV’s technology. The court accepted that at least ten customers had
been lost, for base damages of nearly $425,000 total. It then doubled the
damages, based on the intentional false advertising, to nearly $850,000.
Giving some sense of what’s been going on, the permanent
injunction prohibited any false or disparaging statement including “any
statement comparing or equating Plaintiff, its product, or its employees to the
German Nazi party or Joseph Goebbels specifically.”  Although the court didn’t make specific findings
about how this harmed NITV, the court also enjoined representations or
suggestions that Dektor had any relationship or affiliation to old Dektor/had
been in business since 1969/sold a product related to old Dektor’s product, etc.

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