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Bralich v. Sullivan

United States District Court, D. Hawaii

October 30, 2017




         For the reasons set forth below, the Court adopts as modified the Findings and Recommendation to Grant Plaintiff Philip Bralich's Motions to Remand, ECF Nos. 13, 17, issued by Magistrate Richard L. Puglisi on August 8, 2017.


         I. Background Regarding Plaintiffs Alleged Claims[1]

         Plaintiff Philip Bralich ("Plaintiff") is a linguist who, together with another individual, developed a programmable theory of syntax between 1991 and 1996. Third Am. Compl. ¶¶ 2, 22-23, ECF No. 1-3 ("TAC"). In 1995, Plaintiff founded Ergo Linguistic Technologies, Inc. ("Ergo") in order to develop the theory into a patentable, proprietary computer program. Id. ¶¶ 2-3, 24. The patent, No. 5, 878, 385 A, was granted on March 2, 1999. Id. ¶¶ 25, 66. The patented software was intended to provide for structural analysis of sentences generated by speech or text and to allow for increased accuracy in functions like database and internet searches. Id. ¶¶ 27-28. Payment for the patent lapsed in 2003. Id. ¶ 66.

         Defendant Barry Sullivan served in various capacities in Ergo, including as Chief Financial Officer and on the Board of Directors, as well as investing and raising capital and functioning as Ergo's attorney. Id. ¶ 4. Around the time Ergo closed down in 1999-2000, Defendant Sullivan formed a competitor corporation known as Thrownet. Id. ¶¶ 45, 80, 84. Supposedly in order to bring in additional investors, Defendant Sullivan received access to the Ergo patent source code so it could be independently evaluated by Defendants John Batali and Chris Fry, who were also involved with Thrownet. Id. ¶¶ 46-48. Plaintiff alleges that Defendant Fry claims to have developed the same type of software component while at Thrownet "with exactly the same number of lines of code" as the Ergo software in only two months, where it took Plaintiff 15 years. Id. ¶ 48. Plaintiff alleges that these Defendants used Ergo's patented technology to make their own software. Id. ¶ 50. Plaintiff also alleges that Defendant Fry worked with other defendants to obtain a number of patents that depended on Ergo's software. Id. ¶¶ 51, 55-62.

         Based on the above, Plaintiff has alleged various claims, including: patent infringement; legal misconduct and violations of various ethical rules; breach of non-disclosure agreements; misappropriation of trade secrets; breach of fiduciary duty and usurpation of corporate opportunity; fraud; tortious interference with contract; conversion; defamation; and conspiracy and RICO violations. Id. ¶¶ 109-191.

         II. Relevant State Court Proceedings

         On July 31, 2015, Plaintiff, proceeding pro se, filed this action in the Circuit Court for the First Circuit of the State of Hawaii. Notice of Removal ¶ 2, ECF No. 1. Plaintiff's initial filing appears to be a compilation of various attachments. See generally ECF No. 53-4. The first document appears to be a temporary restraining order issued against Plaintiff in favor of Defendant Sullivan. Id. at 5-8. Plaintiff then attached a letter to the state court seeking to quash the order and referencing a complaint he had filed with the Hawaii Bar Association alleging legal misconduct against Defendant Sullivan, which he attached to the letter. Id. at 9-34. Plaintiff also alleged that "Sullivan violated his nondisclosure, violated our patent, and stole trade secrets" which he then described in more detail. Id. at 12-23.

         On January 12, 2016, Defendant filed a motion to dismiss or in the alternative for a more definite statement and noted that the summons with which it was served did not appear to be valid. ECF No. 53-5 at 74, 84-85. In its motion, Defendant attempted to parse Plaintiff's allegations that the defendants had illegally stolen and used the Ergo patent, noting he claimed that "Mr. Sullivan and Mr. Fry have stolen and misappropriated intellectual property belonging to Ergo and Plaintiff." ECF No. 53-5 at 81. On January 26, 2016, Defendant Sullivan filed a position statement also asserting that attempted service on him was not valid and moved for dismissal with prejudice as a sanction. ECF No. 53-7 at 1-7. On February 4, 2016, the state court granted Defendant's motion to dismiss without prejudice and motion for a more definite statement, and allowed Plaintiff until April 4, 2016 to refile his complaint. ECF No. 54-5 at 6-13. The court also quashed the attempted service on Defendant Sullivan and denied his motion for sanctions. ECF No. 57-3 at 2-6.

         Plaintiff filed his First Amended Complaint on March 3, 2016.[2] ECF No. 55-5 ("FAC"). In the first portion of the complaint, Plaintiff alleges that the defendants stole his "IT, IP, investment, and source code" and that in doing so, "they violated their non-disclosures and [Plaintiff's] patent." Id. at 6. Plaintiff alleges this was accomplished by "bur[ying] [his] patent software in a variety of patents" by Defendant Fry, who then took the patent to other companies also named as defendants in the complaint. Id. Plaintiff also alleged Defendant Fry "kn[ew] [the] work was patent protected and that Sullivan had no rights to it." Id. at 8. In addition, Plaintiff states that the alleged conduct "is also a violation of both Hawai'i Federal RICO statutes, " quotes the elements of a RICO claim, and seeks treble damages for RICO violations. Id. at 8-12. Plaintiff's complaint then identifies the Ergo patent, including the publication number and date, and details the history of the patent and alleged theft, including that Defendant Fry's review of prior art in his patents "does not include the Ergo patent". Id. at 15-18, 24-26.

         On May 3, 2016, Defendant Sullivan filed a motion to dismiss for failure to properly serve him with an appropriate amended complaint and valid summons, and for lack of subject matter jurisdiction on the basis that federal courts have exclusive jurisdiction over claims relating to patents. ECF No. 59-3 at 1-9. He withdrew that motion on May 11, 2016, and on May 12, 2016 a return and acknowledgement of service by Defendant Sullivan was filed. ECF No. 59-4 at 52-54, 80-81. Defendant Sullivan then filed a motion for a more definite statement or in the alternative to strike portions of the First Amended Complaint on June 2, 2016. ECF No. 60-4 at 1-15. In that motion, Defendant Sullivan stated that "[o]n May 12, 2016, a civil process server, on behalf of Bralich, served Sullivan with Bralich's [amended complaint] with a valid summons" and that it "was properly served" on him. Id. at 5-6.[3] Instead, Defendant Sullivan contended that the complaint violated other rules of state civil procedure, as described in the state court's order allowing him to amend. Id. at 6. In the motion, Defendant Sullivan also noted Plaintiff's repeated allegation that he stole intellectual property from Plaintiff and/or Ergo. Id. at 10.

         On August 4, 2016, the state court denied the motion to strike but granted the motion for a more definite statement. ECF No. 62-4 at 65-69. Plaintiff was granted until August 12, 2016 to "file and serve" on all parties a second amended complaint that complied with state court rules and the court's specific directions to include numbered paragraphs and remove repetitive and irrelevant material. Id. at 66.

         Because Plaintiff failed to file and serve his Second Amended Complaint by the state court's deadline, Defendant Sullivan moved to dismiss on September 2, 2016. ECF No. 64-5 at 1-10. In the motion, Defendant Sullivan noted that on August 12, Plaintiff caused to be served a file-stamped but uncertified partial copy of the First Amended Complaint, and on August 26 Plaintiff provided an unfiled copy of what purported to be the Second Amended Complaint and did not include a summons. Id. at 6-7. On October 31, 2016, the state court denied without prejudice Defendant Sullivan's motion to dismiss but quashed the two attempts to serve him in August. ECF No. 67-7 at 50-52.

         On December 6, 2016, Plaintiff requested leave to file a third amended complaint. ECF No. 68-3 at 1-2. The state court granted the request on January 31, 2017. Id. at 104-105. Plaintiff filed his Third Amended Complaint on March 1, 2017. TAC, ECF No. 68-4. Defendant Sullivan was served with this complaint on April 7, 2017. ECF No. 68-5 at 12-13.

         III. Relevant Federal Court Proceedings

         On May 4, 2017, Defendant Sullivan filed a Notice of Removal based on 28 U.S.C. §§ 1331 and/or 1338, which respectively provide for federal question jurisdiction and jurisdiction over actions relating to, inter alia, patents. Notice of Removal ¶ 1, ECF No. 1. The Notice asserted that all defendants who had then been served joined in or consented to the removal. Id. ¶ 7. The parties then began engaging in substantial motions practice, including two motions for remand filed by Plaintiff on May 17, 2017 and May 24, 2017. ECF Nos. 13, 17. On June 7, 2017, this Court administratively withdrew the various dispositive motions filed, directed that no additional dispositive motions or further briefing related to the pending dispositive motions be filed, and referred the two motions for remand to Magistrate Judge Puglisi. ECF No. 39.

         On June 26, 2017, Defendant Sullivan filed his opposition to the motions to remand, to which Defendants Nuance Communications, Inc., Craig Weissman, Chris Fry, and Microsoft filed substantive joinders. ECF Nos. 46-50. On June 27, 2017, Judge Puglisi ordered Defendant Sullivan to file supplemental briefing regarding cause for extending the removal period for the patent infringement claim and the timeliness of removal based on Plaintiff's RICO allegations. ECF No. 51. Defendant Sullivan filed his supplemental opposition on July 5, 2017. ECF No. 83. Plaintiff filed his reply on July 13, 2017. ECF No. 84. On August 8, 2017, Judge Puglisi issued Findings and Recommendation to Grant Plaintiff's Motions to Remand. ECF No. 8 6 ("F&R").

         In the F&R, Judge Puglisi first determined that the Third Amended Complaint asserted a claim for RICO violations under federal law, which provided a basis for removal. F&R at 9-10. However, Judge Puglisi found that the RICO claims were ascertainable from the First Amended Complaint, which he determined was the operative complaint for purposes of removal. Id. at 10. As Defendant Sullivan had been served with the First Amended Complaint on May 12, 2016, the time for removal expired on June 13, 2016, and thus Defendant Sullivan's removal was not timely. Id. at 11. Judge Puglisi then determined that the Third Amended Complaint also asserted claims relating to the Ergo patent, which provided a basis for removal. Id. at 11-12. However, the patent claims were also ...

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