Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP

• Decision Date: 29 November 2011
• Docket Number: No. 08–CV–931 (NGG)(JO).,08–CV–931 (NGG)(JO).
• Citation: Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP, 834 F. Supp. 2d 141 (E.D. N.Y. 2011)
• Parties: PROTOSTORM, LLC and Peter Faulisi, Plaintiffs, v. ANTONELLI, TERRY, STOUT & KRAUS, LLP, Dale Hogue, Frederick D. Bailey, Carl I. Brundidge, and Alan Schiavelli, Defendants/Third–Party Plaintiffs, v. Kathy Worthington, Third–Party Defendant/Cross–Claimant, v. Duval & Stachenfeld LLP and John J. Ginley, III, Third–Party Defendants/Cross–Defendants.
• Court: U.S. District Court — Eastern District of New York

834 F.Supp.2d 141

PROTOSTORM, LLC and Peter Faulisi, Plaintiffs,

v.ANTONELLI, TERRY, STOUT & KRAUS, LLP, Dale Hogue, Frederick D. Bailey, Carl I. Brundidge, and Alan Schiavelli, Defendants/Third–Party Plaintiffs,

v.Kathy Worthington, Third–Party Defendant/Cross–Claimant,

v.Duval & Stachenfeld LLP and John J. Ginley, III, Third–Party Defendants/Cross–Defendants.¹

No. 08–CV–931 (NGG)(JO).

United States District Court, E.D. New York.

Nov. 29, 2011.

Arthur M. Handler, Robert S. Goodman, Mound Cotton Wollan & Greengrass, Jonathan E. Moskin, Foley & Lardner LLP, New York, NY, for Plaintiffs.

Amy M. Monahan, Anthony P. Colavita, Cherice Patrice Vanderhall, Eugene H. Goldberg, Marian C. Rice, Scott E. Kossove, L'Abbate, Balkan, Colavita & Contini, LLP, Garden City, NY, for Plaintiffs/Defendants/Third-Party Plaintiffs.

Ariel Michael Furman, Ruth Evon Idahosa-Howard, Kaufman, Borgeest & Ryan LLP, New York, NY, for Defendants/Third-Party Plaintiffs,

Esther S. Rhee, Martin Harris Samson, Davidoff Malito & Hutcher LLP, Stephen R. Krawitz, Stephen R. Krawitz, P.C., New York, NY, for Third-Party Defendant/Cross-Claimant.

Jung Hyun Park, Blaise U. Chow, Diane Fazzolari, Geoffrey William Heineman, Ropers, Majeski, Kohn & Bentley, New York, NY, for Third–Party Defendants/Cross–Defendants.

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, District Judge.

Despite the voluminous record, this is a relatively simple case. Plaintiff Peter Faulisi (“Faulisi”) along with non-party Courtland Shakespeare (“Shakespeare”) wanted to market and patent an invention they believed would be very valuable through their company Protostorm.com, LLC (“Protostorm”). ² They enlisted the help of several lawyers—the Defendants and Third–Party Defendants. As a result of some combination of negligence and miscommunication the patent application was abandoned. Plaintiffs, invoking the court's diversity jurisdiction, bring claims for legal malpractice and breach of fiduciary duty against Antonelli, Terry, Stout & Kraus, LLP (“ATS & K”), Frederick D. Bailey (“Bailey”), Carl I. Brundidge (“Brundidge”), and Alan Schiavelli (“Schiavelli”) (collectively, “Defendants”). ( See 2d Am. Compl. (Docket Entry # 114).) ³ Defendants, in turn, as Third–Party Plaintiffs, bring claims for indemnification and contribution against Third–Party Defendants Kathy Worthington (“Worthington”), Duval & Stachenfeld LLP (“D & S”), and John J. Ginley, III (“Ginley”). ( See Am.3d Party Compl. (Docket Entry # 133).) Worthington cross-claims against D & S and Ginley, also bringing claims for indemnification and contribution. ( See 2d Am.3d Party Answer & Cross–Cl. (Docket Entry # 226).) Every party has moved for summary judgment under Federal Rule of Civil Procedure 56. (Docket Entry 277, 281, 296, 313.) For the reasons stated below, those motions are granted in part and denied in part.

I. SUMMARY JUDGMENT STANDARD

A motion for summary judgment must be granted if “the movant shows 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). In determining whether a genuine issue of material fact exists, the court may not “make credibility determinations or weigh the evidence,” but instead “must draw all reasonable inferences in favor of the nonmoving party.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). “Summary judgment is inappropriate when the admissible materials in the record make it arguable that the claim has merit.” Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir.2010) (internal quotation marks omitted). The burden of showing the absence of any genuine dispute as to a material fact rests on the movant. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

A fact is material if its existence or non-existence “might affect the outcome of the suit under the governing law,” and an issue of fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Rule 56 “mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In such a situation, “there can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at 323, 106 S.Ct. 2548. A grant of summary judgment is proper “[w]hen no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight.” Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1224 (2d Cir.1994).

The party opposing summary judgment is not entitled to rely on unsworn allegations in the pleading, but must instead “show that there is admissible evidence sufficient to support a finding in her favor on the issue that is the basis for the motion.” Fitzgerald v. Henderson, 251 F.3d 345, 360–61 (2d Cir.2001). Even where a statement is sworn, a genuine issue of material fact is not “created merely by the presentation of assertions that are conclusory.” Patterson v. Cnty. of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir.2004).

II. BACKGROUND⁴A. The Initial Retainers

Protostorm is a limited liability company with offices in New York. ( See Faulisi Decl. (Docket Entry # 304) ¶ 2.) Faulisi, who lives in New York, co-founded the company with his co-inventor, Shakespeare, and continues to be a member of the company. ( Id. ¶¶ 1, 3; Pls.' Local Rule 56.1 Statement (“Pl. 56.1”) (Docket Entry # 309) ¶¶ 3, 4.) The other current member is non-party Alan Rummelsburg (“Rummelsburg”), who was Protostorm's main investor at the time of the events in question. (Pl. 56.1 ¶ 5; Rummelsburg Dep. (D & S Ex. I) at 12–13.) ⁵ Faulisi, Shakespeare, and Rummelsburg will be referred to as Protostorm's “principals.” In February 2000, the principals asked D & S, Protostorm's corporate counsel, to oversee Protostorm's interactions with other attorneys, in particular billing and correspondence. (Faulisi Decl. ¶ 15; Faulisi Dep. (D & S Ex. F) at 262; Duval Dep. (D & S Ex. H) at 22.)

When the principals informed D & S that they wanted to obtain a patent for an online computer game and related software (the “Invention”), D & S advised them to obtain patent counsel. (Duval Dep. at 99; Faulisi Decl. ¶¶ 6–11.) Ginley, a lawyer at D & S, introduced them to Worthington, who was not a patent lawyer, but who was knowledgeable about intellectual property matters, and whom the principals then retained to advise them in connection with obtaining the desired patent. (Faulisi Decl. ¶ 16; Worthington Dep. (Def. Ex. 14) ⁶ at 4–5, 234–35, 240; Ginley Dep. at 14.) According to Rummelsburg, Protostorm hired Worthington “to help write the patent application.” (Rummelsburg Dep. (D & S Ex. I) at 31.) Worthington submitted her invoices for Protostorm-related work to D & S, which paid her. (Worthington Dep. (D & S Resp. Ex. 35) at 382, 395–96.) ⁷

In May 2000, Worthington introduced the principals to ATS & K, a Virginia-based law firm that specialized in patent work, and Dale Hogue (“Hogue”), who was of counsel to ATS & K. (Faulisi Decl. ¶ 17; Pl. 56.1 ¶¶ 7, 16–17.) According to Faulisi, “[n]o specific limits on the professional roles of ATS & K or Mr. Hogue were discussed, and it was and is my understanding these attorneys were eager to assist Protostorm with respect to any and all appropriate forms of intellectual property protection.” (Faulisi Decl. ¶ 18.) Faulisi further states that, “[a]lthough we continued to work with Ms. Worthington during this period, we understood that, because of the specialized nature of patent law, we would be relying primarily on Mr. Hogue and his firm, ATS & K, to prepare and file any patent applications and to oversee the process to completion.” ( Id. ¶ 19.)

B. The Provisional Patent Applications

On June 19, 2000, Worthington emailed documents relating to the preparation of a provisional, non-final patent application to Brundidge, an attorney and member of ATS & K. (Pl. 56.1 ¶¶ 11, 20.) On June 27, 2000, Bailey, an ATS & K associate, signed the first provisional patent application, dated that day, and submitted it to the United States Patent and Trademark Office (“PTO”). ( Id. ¶¶ 22–23.) Faulisi and Courtland were listed as the “inventors” on the first provisional application and ATSK was listed as the contact for “correspondence.” (Pl. Prior Ex. 3.) ⁸ The provisional application permitted Faulisi and Shakespeare to disclose key elements of the Invention and thereby to secure their priority as inventors; it also permitted them to take an additional year to submit a final application. (Faulisi Decl. ¶ 20.) Brundidge and Bailey informed Ginley and Worthington that the provisional application had been filed and that the final application was due by June 27, 2001. (Pl. 56.1 ¶¶ 24–25.)

In February 2001, an attorney at D & S “review[ed]” Protostorm's “patent application.” ( See Billing Record (D & S Ex. J) at DS00148.)

In or about April 2001, Worthington filed a second provisional patent application, in order to cover new features of the Invention. (Worthington Dep. (Def. Ex. 14) at 271–72; Pl. 56.1 ¶ 28). Faulisi and Courtland were again listed as the “inventors,” and Worthington was listed as the contact. (Protostorm Prior Ex. 35.) ⁹

C. The Final Patent Application

On May 8, 2001, Worthington wrote to Shakespeare, Faulisi, and Ginley to advise them that the final patent application was due on June 27, 2001, and that, if they missed that deadline, they would lose their June 27, 2000 priority date (established by the filing of the first provisional...