United States District Court, D. Hawaii
ORDER ADOPTING AS MODIFIED THE FINDINGS AND
RECOMMENDATION TO GRANT PLAINTIFFS MOTIONS TO REMAND
C. KAY SR. UNITED STATES DISTRICT JUDGE.
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.
Background Regarding Plaintiffs Alleged
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.
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.
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.
Relevant State Court Proceedings
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.
January 12, 2016, Defendant Salesforce.com 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 Salesforce.com 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
Salesforce.com'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.
filed his First Amended Complaint on March 3,
2016. 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
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. 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.
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.
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.
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.
Relevant Federal Court Proceedings
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.
26, 2017, Defendant Sullivan filed his opposition to the
motions to remand, to which Defendants Nuance Communications,
Salesforce.com 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").
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 ...