Calhoun et al v. Invention Submission Corporation et al

RESPONSE IN OPPOSITION Plaintiffs' Memorandum in Opposition to the InventHelp Defendants' Objections to Report and Recommendation with Certifcate of Service to 93 Objections to Report and Recommendation, filed by ETTA CALHOUN, CYNTHIA GRAY, SHERRY PORTER. (Pechersky Plitt, Julie)

Western District of Pennsylvania, pawd-2:2018-cv-01022

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6 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA ETTA CALHOUN, SHERRY PORTER, and CYNTHIA GRAY, On Behalf of Themselves and All Other Persons Similarly Situated, Civil Case No: 18-01022 Plaintiffs, v. INVENTION SUBMISSION CORPORATION, d/b/a JUDGE CATHY BISSOON INVENTHELP, et ah, MAGISTRATE JUDGE PATRICIA L. DODGE ELECTRONICALLY FILED Defendants. PLAINTIFFS' MEMORANDUM IN OPPOSITION TO THE INVENTHELP DEFENDANTS' OBJECTIONS TO REPORT AND RECOMMENDATION OXMAN LAW GROUP, PLLC Attorneys for Plaintiffs 120 Bloomingdale Road, Suite 100 White Plains, New York 10605 (914) 422-3900 6 TABLE OF CONTENTS TABLE OF AUTHORITIES..........................................................................................................ii INTRODUCTION.......................................................................................................................... 1 ARGUMENT..................................................................................................................................3 I. THE AIPA DISCLOSURE MISREPRESENTATION CLAIMS ARE ROBUST........... 3 A. False Disclosures Are A Per Se AIPA Violation.................................................... 4 B. The SAC's New Facts Give Rise To An Inference That InventHelp's Disclosures Are False ................................................................................................................ 5 1. Sherry Porter's License Agreement.................................................................. 6 2. Cynthia Gray's License Agreement.................................................................. 8 II. THE SAC ADEQUATELY ALLEGES FRAUD AGAINST DEFENDANT SUSA....... 9 A. The SAC Alleges Susa's Personal Participation In The Fraud............................... 9 B. The SAC Pleads A Conspiracy............................................................................. 11 CONCLUSION 12 6 TABLE OF AUTHORITIES Cases Page No(s) Accurso v. Infra-Red Services, Inc, 169 F.Supp.3d 612.................................................................................................................. 11 Arabiv. Vigilane Anesthesia Group LLC., 2018 WL 4181455 (W.D.Pa. Aug. 31,2018)............................................................................9 Ashcroft v. Iqbal, 556 U.S. 662(2009).............................................................................................................. 3,4 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)....................................................................................................................3 Fowler v. UPMC Shadyside, 578 F.3d203 (2009)................................................................................................................3,4 H Contractors, LLCv. E.J.H. Construction, Inc., 2017 WL 658240 (W.D.Pa. Feb. 16, 2017).............................................................................10 LMIns. Corp. v. All-Ply Roofing Co., Inc., 2019 WL 366554 (D.N.J. Jan. 30,2019)........................................................................... 10,11 Maleski v. DP Realty Trust, 653 A.2d 54 (Pa. Cmwlth. 1994)............................................................................................... 9 Schrock v. Nomac Drilling LLC, 2016 WL 1181484 (W.D.Pa. Mar. 28, 2016)........................................................................... 10 Thompson v. Real Estate Mortg. Network, 748 F.3d 142 (3d Cir. 2014)...................................................................................................4,6 WhiteSand Research, LLC v. Sehn, 2018 WL 2728847 (Pa. Super. June 7,2018)..........................................................................11 Statutes 35 U.S.C. § 297(a).....................................................................................................................1, 5 ii 6 Plaintiffs Etta Calhoun, Sherry Porter and Cynthia Gray, by and through their undersigned counsel, submit the instant memorandum of law in opposition to the February 19, 2020 objections of Defendants Invention Submission Corporation d/b/a InventHelp, Western Invention Submission Corporation d/b/a Western InventHelp, Techno systems Consolidated Corporation, Technosystems Service Corporation, Universal Payment Corporation, Intromark Incorporated, and Robert J. Susa (collectively, the "InventHelp Defendants" or "InventHelp") (Doc. No. 93) ("InventHelp Brf") to Magistrate Judge Dodge's January 16, 2020 Report and Recommendation (Doc. No. 78) (the "Report"), and in support thereof state: INTRODUCTION The InventHelp Defendants raise two objections to the Report. They argue: (1) that the Second Amended Complaint (Doc. No. 56) ("SAC") does not adequately allege disclosure misrepresentation claims pursuant to the American Inventors Protection Act of 1999, 35 U.S.C. § 297 ("AIPA"); and (2) that the SAC does not allege fraud against Defendant Robert J. Susa. First, the Court should reject InventHelp's absurd contention that "Plaintiffs do not allege any facts to support their assertion that the 60-day licenses are concocted solely for the purpose of bolstering InventHelp's AIPA disclosures." (InventHelp Brf. at 4). The SAC's factual allegations give rise to a plausible inference that the identical, short-term license agreements detailed therein are not in fact real, that the companies named in those agreements are also not real, and that InventHelp engages in this practice so that it can falsely include these fraudulent arrangements in its AIPA disclosures, which, according to law, it must distribute to each and every InventHelp customer. 6 To wit, InventHelp sent Plaintiffs Sherry Porter, Cynthia Gray, and other InventHelp clients literally identical "License Agreements." (SAC Exs. A, D and E). Each of those "License Agreements" has a term of only two months during which time the purported licensees would have "the exclusive right and license to produce, sell and otherwise practice the INVENTION in the TERRITORY." (Id.). These are 60-day contracts to license and manufacture undeveloped, unpatented ideas on behalf of companies that do not exist. The SAC alleges that despite repeated requests, InventHelp never sent Plaintiff Cynthia Gray a fully executed contract, and InventHelp refused to provide her with the name of the purported licensee, (fflf 216-234). After she received her $500 check in the mail, never heard from InventHelp again. (| 234). Similarly, the SAC alleges that no company resides at the address listed on Plaintiff Sherry Porter's contract, and the website for the purported company provides incorrect information about the company, 134-137). As of the date of Plaintiff Porter's "License Agreement," April 18, 2018, there already existed on the open market scores of products virtually identical to her invention, begging the question of the purported licensee's motivation to spend money licensing something that it was free to produce and sell without doing so. After she received her $500 "Royalty" check in the mail, Sherry Porter never heard from InventHelp again. (][| 162-163). These factual allegations, among others detailed in the SAC, support the contention that InventHelp's actions vis-a-vis Plaintiffs illustrate its practice of falsification of AIPA numbers. This practice impacts all InventHelp consumers because InventHelp disseminates identical, false AIPA disclosures to each and every client and potential client. Second, the SAC alleges fraud against Defendant Susa, including that he signing the phony $500 checks. (SAC Exs. B, F and fflf 236-237). 2 6 Plaintiffs respectfully request that this Court overrule the InventHelp Defendants' objections. ARGUMENT I. THE AIPA DISCLOSURE MISREPRESENTATION CLAIMS ARE ROBUST The SAC's fulsome factual allegations give rise to a plausible inference that the InventHelp Defendants' AIPA disclosures are false. In Fowler v. UPMC Shadyside, 578 F.3d 203 (2009), the Third Circuit analyzed pleading standards as defined by Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and provided guidance regarding their practical application. In sum, the Third Circuit instructed that courts should engage in a two-part analysis, first separating alleged facts from legal conclusions, and second determining whether the factual allegations, taken as true, are sufficient to show a "plausible claim for relief." 578 F.3d at 210-11. Among other things, the prior, Amended Complaint (Doc. No. 25), compared the numbers in the InventHelp disclosures provided to Plaintiff Calhoun with the numbers in the Western InventHelp disclosures provided to her. (Doc. 25, Compare ^ 61 with 162 and ]j 94 with % 95). Because these numbers contradicted one another, the Amended Complaint asserted that the disclosures contained misrepresentations, among other reasons. (See e.g. Doc. 25 63, 145). This Court's April 9, 2019 Memorandum Order (Doc. No. 55) ("Memorandum Order"), however, accepted InventHelp's argument that the contradictory numbers are not in fact contradictory because they are on behalf of two different entities. (Memorandum Order at 8).1 1 Plaintiffs contend that the Court's crediting of InventHelp's factual assertions as to the disputed numbers was in error and not in accord with Ashcroft and Twombly, which did not change the basic requirement that courts must accept a plaintiff's factual allegations as true. Nevertheless, the instant SAC beefs up the AIPA disclosure claims considerably, and is now the operative pleading. 3 6 The Court granted leave to amend and instructed Plaintiff to provide a "basis on which the Court could infer that these [AIPA] figures are mutually inconsistent or inaccurate." (Id.). Since that time, Plaintiffs' investigation has uncovered InventHelp's shocking practice of concocting bogus licensing agreements in order to bolster and falsify its AIPA numbers. These new, detailed factual allegations suffice to allow the Court to "draw the reasonable inference that the defendant is liable for the misconduct alleged" and to raise a reasonable expectation that discovery will reveal those numbers to be wrong. Thompson v. Real Estate Mortg. Network, 748 F.3d 142,147 (3d Cir. 2014)(citing/Wmrq/t v. TgW, 556 U.S. at 678). The Report examined the new, detailed pleadings and found that the SAC has "sufficiently alleged a factual basis upon which the Court could infer that the disclosure numbers. . . were not accurate, namely, the inclusion of the questionable 60-day License Agreements in InventHelp's disclosure numbers." (Report at 24). The Report rejected InventHelp's contention (reasserted now) that Plaintiffs are merely "disappointed" with their individual results, holding that the InventHelp Defendants "have avoided the central point of these allegations, which is that these 60-day licenses were not real (an allegation that must be accepted as true at this stage of the proceedings)." (Report at 24). Plaintiffs respectfully request that this Court adopt the Report's finding that the AIPA disclosure misrepresentation claims are sufficient to state a claim here. A. False Disclosures Are A Per Se AIPA Violation First, InventHelp avers that the AIPA claims fail because the SAC does not allege that InventHelp Defendants "somehow benefit from purportedly inflating the number of license agreements." (InventHelp Brf. at 4). This argument fails - False disclosures are a per se 4 6 violation of the statute. See 35 U.S.C. § 297(a). In any event, the 'benefit' is self-evident - InventHelp can claim to clients and potential clients that some of its customers do in fact receive licensing agreements, thereby falsely representing the legitimacy of their operation. B. The SAC's New Facts Give Rise To An Inference That InventHelp's Disclosures Are False Next, unbelievably, the InventHelp Defendants appear to argue the facts, asserting that that Plaintiffs' licensing agreements are in fact real. (InventHelp Brf. at 5). Plaintiffs d