Connectu, Inc. v. Facebook, Inc. et al

Filing 34

Opposition re 16 MOTION to Dismiss, 17 MOTION to Dismiss, 18 MOTION to Dismiss - - CONNECTU INC.'S CONSOLIDATED OPPOSITION TO FACEBOOK DEFENDANTS' MOTIONS TO DISMISS filed by Connectu, Inc.. (Hornick, John)

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Connectu, Inc. v. Facebook, Inc. et al Doc. 34 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 1 of 50 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS CONNECTU, INC., Plaintiff, v. FACEBOOK, INC., MARK ZUCKERBERG, EDUARDO SAVERIN, DUSTIN MOSKOVITZ, ANDREW MCCOLLUM, CHRISTOPHER HUGHES, AND THEFACEBOOK, LLC, Defendants. Civil Action No. 1:07-CV-10593 (DPW) Related Action: Civil Action No. 04-CV11923 (DPW) District Judge Douglas P. Woodlock Magistrate Judge Robert B. Collings CONNECTU INC.'S CONSOLIDATED OPPOSITION TO FACEBOOK DEFENDANTS' MOTIONS TO DISMISS Dockets.Justia.com Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 2 of 50 I. II. III. IV. TABLE OF CONTENTS INTRODUCTION ...............................................................................................................1 STATUS OF PROCEEDINGS............................................................................................2 FACEBOOK DEFENDANTS' MOTIONS ARE NOT TIMELY AND SOLELY FOR DELAY .......................................................................................................................3 CONNECTU'S CLAIMS CARRY OVER FROM THE RELATED ACTION .................5 A. The Equitable Tolling Doctrine Protects the Five Challenged Claims....................5 1. 2. B. Equitable Tolling Is Appropriate in This Exceptional Situation .................5 All Applicable Limitations are Subject to Equitable Tolling ......................8 ConnectU's Three Challenged Massachusetts Claims Are Protected by The Massachusetts Renewal Statute, M.G.L. c. 260, § 32..............................................9 1. 2. 3. 4. 5. Facebook, Inc. Has Been a Defendant for Two and a Half Years .............10 The Corporate Defendants Were on Notice of the Claims ........................10 ConnectU's Amended Complaint Related Back to the Filing Date ..........12 ConnectU LLC Owned All Rights; Thus Renewal Statute Applies ..........12 M.G.L. c. 93, § 42 Is Based on the Same Cause of Action From the Related Action ...........................................................................................14 V. FACEBOOK INC. AND THEFACEBOOK, LLC MUST BE HELD LIABLE FOR EACH CLAIM ASSERTED AGAINST THEM...............................................................16 A. B. C. The Corporate Defendants Expressly or Impliedly Assumed Liability.................16 The Corporate Defendants Were Created by a de facto Merger............................17 The Corporate Defendants are a Mere Continuation .............................................18 VI. NO CLAIM IS PREEMPTED BY CONNECTU'S COPYRIGHT CLAIM ....................19 A. B. Defendants' Arguments are Baseless and Misleading...........................................19 The Test for Copyright Preemption .......................................................................20 1. 2. The First Prong Is Not Met ........................................................................21 The Second Prong Is Not Met As the Claims Have Extra Elements .........22 VII. DEFENDANTS' ASSIGNMENT OF CLAIMS ARGUMENT MUST FAIL .................24 i Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 3 of 50 VIII. CONNECTU ADEQUATELY PLEADED ALL CLAIMS..............................................27 A. B. C. Legal Standard Under Fed. R. Civ. P. 12 (b)(6) Favors ConnectU .......................27 Rule 8, Not Rule 9, Governs All Claims Except Fraud .........................................28 ConnectU Adequately Pleaded Trade Secret Misappropriation ............................30 1. 2. 3. D. E. F. G. H. I. J. K. Elements of Pleading for Misappropriation of a Trade Secret ..................30 ConnectU Made All Necessary Misappropriation Allegations .................30 Facebook Defendants' Cases Favor ConnectU..........................................31 ConnectU Adequately Pleaded Breach of Contract...............................................32 ConnectU Adequately Pleaded Breach of Implied Covenant................................33 ConnectU Adequately Pleaded M.G.L. 93A--Unfair Trade Practices .................34 ConnectU Adequately Pleaded Breach of Fiduciary Duty ....................................36 ConnectU Adequately Pleaded Unjust Enrichment...............................................36 ConnectU Adequately Pleaded Its Intentional Interference Claim........................37 ConnectU Pleaded Fraud with Sufficient Particularity..........................................37 ConnectU Satisfied the Requirements of Fed. R. Civ. P. 10(b).............................38 IX. CONCLUSION..................................................................................................................40 ii Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 4 of 50 TABLE OF AUTHORITIES Federal Cases Anderson v. Bd. of Trustees, 77 F.3d 364 (11th Cir. 1996) ....................................................................................................... 39 Burnett v. N.Y. Central R.R. Co., 380 U.S. 424 (1965)...................................................................................................................5, 7 Calderón-Ortiz v. Laboy-Alvarado, 300 F.3d 60 (1st Cir. 2002)..........................................................................................................27 Chongris v. Board of Appeals of Andover, 811 F.2d 36 (1st Cir. 1987)..........................................................................................................27 Corliss v. City of Fall River, 397 F. Supp. 2d 260 (D. Mass. 2005) .............................................................................. 11, 14, 15 Court-Appointed Receiver for Lancer Management Group L.L.C. v. Taubman, No. 05-60199, 2007 U.S. Dist. LEXIS (S.D. Fla. March 27, 2007)............................................34 Crane Const. Co. v. Klaus Masonry, 114 F. Supp. 2d 1116 (D. Kansas 2000)......................................................................................16 Curtis v. Citibank, N.A., 226 F.3d 133 (2d Cir. 2000) .......................................................................................................... 7 Cyr v. B. Offen & Co., 501 F.2d 1145 (1st Cir. 1974)......................................................................................................16 Data General Corp. v. Grumman Systems Support Corp., 825 F. Supp. 340 (D. Mass. 1993) ............................................................................................... 32 Data General Corp. v. Grumman Systems Support Corp., 795 F. Supp. 501 (D. Mass. 1992) ......................................................................................... 15, 20 Dialogo, LLC v. Bauza, 456 F. Supp. 2d 219 (D. Mass. 2006) .......................................................................................... 22 Division Records, LLC v. Q Records and QVC, Inc., No. Civ. A. 99-10828-GAO, 2000 U.S. Dist. LEXIS 1773 (D. Mass. Feb 11, 2000) ................ 34 Donnelli v. Peters Secs. Co., L.P., No. 02 C 0691, 2002 U.S. Dist. LEXIS (N.D. Ill. Aug. 28, 2002)................................................4 Doyle v. Hasbro, Inc., 103 F.3d 186 (1st Cir. 1996)........................................................................................................37 iii Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 5 of 50 Ecological Fibers, Inc. v. Kappa Graphic Board, B.V., 345 F. Supp. 2d 13 (D. Mass. 2004) ............................................................................................ 29 Fox v. Eaton Corp., 615 F.2d 716 (6th Cir. 1980) ......................................................................................................... 6 Garita Hotel Ltd. Partnership v. Ponce Federal Bank, F.S.B. 958 F.2d 15 (1st Cir. 1992)..........................................................................................................29 Garrett v. Tandy Corp., 295 F.3d 94 (1st Cir. 2002)..........................................................................................................28 Godfrey v. Eastern Gas & Fuel Associates, 71 F. Supp. 175 (D. Mass. 1947) ................................................................................................. 12 Henley Drilling Co. v. McGee, 36 F.3d 143, 150 (1st Cir. 1994)..............................................................................................3, 25 Honda v. Clark, 386 U.S. 484 (1967).......................................................................................................................8 Howard v. Cycare Sys., Inc., 128 F.R.D. 159 (D. Mass. 1989) ...........................................................................................37, 38 Hunter v. Squirrel Hill Assoc., 413 F. Supp.2d 517 (E.D. Pa. 2005) .............................................................................................. 8 In re Hemingway Transp., Inc., 993 F.2d 915 (1st Cir. 1993)........................................................................................................34 John G. Danielson, Inc. v. Winchester-Conant Properties., Inc., 186 F. Supp. 2d 1 (D. Mass. 2002) .............................................................................................. 21 Jon-Don Prods., Inc. v. Malone, No. Civ. 02-429 (D.N.H. April 10, 2003)....................................................................................29 Jones-Booker v. U.S., 16 F. Supp. 2d 52 (D. Mass. 1998) ................................................................................................ 8 Kuney Int'l v. DiIanni, 746 F. Supp. 234 (D. Mass. 1990) ............................................................................................... 38 Langadinos v. American Airlines, Inc., 199 F.3d 68 (1st Cir. 2000)..........................................................................................................29 Leatherman v. Tarrant Cty. Narcotics Intell. and Coordination Unit, 507 U.S. 163 (1993).....................................................................................................................28 LiButti v. United States, 178 F. 3d 114 (2d Cir. 1999) ....................................................................................................... 16 iv Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 6 of 50 Massachusetts v. Mylan Labs, 357 F. Supp.2d 314 (D. Mass 2005) ...................................................................................... 36-37 Moore v. Ford Motor Co., No. 92 C 1130, 1994 U.S. Dist. LEXIS 652 (N.D. Ill. Jan. 26, 1994) ..................................... 3, 4 Moore v. Marty Gilman, Inc., 965 F. Supp. 203 (D. Mass 1997) ................................................................................................ 31 National Gypsum Co. v. Continental Brands Corp, 895 F. Supp. 328 (D. Mass. 1995) ............................................................................................... 18 Neverson v. Farquharson, 366 F.3d 32 (1st Cir. 2004)............................................................................................................6 Newman v. Burgin, 930 F.2d 955 (1st Cir. 1991)........................................................................................................10 Nunley v. Kloehn, 158 F.R.D. 614 (D. Wis. 1994)....................................................................................................14 Patricia Kennedy & Co. v. Zam-Cul Ent., Inc., 830 F. Supp. 53 (D. Mass. 1993) ................................................................................................. 22 Pearce v. Duchesneau Group, Inc., 392 F. Supp. 2d 63 (D. Mass. 2005) ............................................................................................ 29 Picker Int'l Corp. v. Imaging Equipment Services., 931 F. Supp. 18 (D. Mass 1995) .................................................................................................. 31 Platoro Ltd., Inc. v. Unidentified Remains of a Vessel, 614 F.2d 1051 (5th Cir. 1980) ....................................................................................................... 6 Portfolioscope, Inc. v. I-Flex Solutions Ltd., 473 F. Supp. 2d 252 (D. Mass. 2007) .......................................................................................... 23 Pramco LLC v. San Juan Bay Marina, Inc., 435 F.3d 51 (1st Cir. 2006)............................................................................................................6 Pullen v. NorthStar Presidio Mgmt. Co. No. 98-771, 1998 U.S. Dist. LEXIS 15938 (D. Conn. Sept. 11, 1998).......................................39 Raytheon Co. v. Continental Cas. Co., 123 F. Supp. 2d 22 (D. Mass. 2000) ............................................................................................ 32 Reynolds v. Logan Charter Servs., Inc., 565 F. Supp. 84 (N.D. Miss. 1983)................................................................................................6 Rodi v. S. New England School of Law, 389 F.3d 5 (1st Cir. 2004)..................................................................................................9, 10, 14 v Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 7 of 50 Roma Constr. Co. v. aRusso, 96 F.3d 566 (1st Cir. 1996)..........................................................................................................27 Rosa v. Park West Bank & Trust Co., 214 F.3d 213 (1st Cir. 2000)..................................................................................................27, 28 Santiago-Marrero v. U.S., 61 Fed. Appx. 718 (1st Cir. 2003) ............................................................................................... 28 Stoffels v. SBC Communs., Inc., 430 F. Supp. 2d 642 (W.D. Tex. 2006) ..................................................................................... 3, 4 Swartz v. Schering-Plough Corp., 53 F. Supp. 2d 95 (D. Mass 1999) ............................................................................................... 31 Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002)...............................................................................................................28, 35 Three D Depts., Inc. v. K-Mart Corp., 670 F. Supp. 1404 (N.D. Ill. 1987) .............................................................................................. 39 Tiller v. Atlantic Coast Line R.R., 323 U.S. 574 (1945).....................................................................................................................12 Tingley Systems, Inc. v. CSC Consulting, Inc., 152 F. Supp. 2d 95 (D. Mass. 2001) ...................................................................................... 20, 21 U.S. Fidelity & Guaranty Co. v. Jepsen, No. 90 C 6931, 1994 U.S. Dist. LEXIS (N.D. Ill. Nov. 1, 1991)..............................................3, 4 Zerilli v. Evening News Ass'n, 628 F.2d 217 (D.C. Cir. 1980).......................................................................................................7 State Cases Addison v. State of Cal., 578 P.2d 941 (Cal. 1978) ............................................................................................................... 8 Baker v. Allen, 197 N.E. 521 (Sup. Ct. Mass. 1935) ........................................................................................... 26 Bethlehem Fabricators v. H.D. Watts Co., 190 N.E. 828 (Sup. Ct. Mass. 1934) ............................................................................................ 26 Boutiette v. Dickinson, 768 N.E.2d 562 (Mass. App. Ct. 2002) ....................................................................... 9, 10, 14, 15 Cargill, Inc. v. Beaver Coal & Oil Co., 676 N.E.2d 815 (Mass. 1997) ................................................................................................ 16, 17 vi Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 8 of 50 Central Nat'l Gottesman, Inc. v. Rodman & Rodman, P.C. No. 97-4791, 1998 Mass. Super. LEXIS 542 (Super. Ct. Mass. Sept. 30, 1998)................25 Curtis-Wright Corp. v. Edel-Brown Tool & Die Co., 407 N.E.2d 319 (Mass. 1980) ...................................................................................................... 32 CWE Enters. v. McGraw-Hill Broadcasting Co., Inc., Nos. D046282 & D046672, 2006 Cal. App. Unpub. LEXIS 7134 (Cal. Ct. App. Aug. 16, 2006) ....................................................................................................................................................... 8 David J. Tierney Jr. Inc v. T. Wellington Carpets, Inc., 392 N.E.2d 1066 (Mass. App. Ct. 1979) ..................................................................................... 32 Duff v. Zonis, 99 N.E.2d 47 (Mass. 1951) ........................................................................................ 10, 11, 13, 14 Gifford v. Spehr, 266 N.E.2d 657 (Mass. 1971) ................................................................................................ 10, 11 H.J. Baker & Bro., Inc. v. Orgonics, Inc. 554 A.2d 196 (R.I. 1989).............................................................................................................18 J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 260 N.E.2d 723 (Mass. 1970) ...................................................................................................... 31 Johnson v. White, 774 N.E.2d 685 (Mass. App. 2002) ............................................................................................. 15 Lee v. Mt. Ivy Press, L.P., 827 N.E.2d 727 (Mass. App. Ct. 2005) ....................................................................................... 24 Lexington Savings Bank v. Linnehan, No. 96-2890, 1998 Mass. Super. LEXIS 348 (Mass. Super. Feb. 9, 1998).................................26 Li'l Peach of Massachusetts, Inc. v. Prendergast, No. 95-2855, 1996 Mass. Super. LEXIS 356 (Mass. Super. Ct. Aug. 15, 1996) ........................ 35 Loomer v. Dionne, 155 N.E.2d 411 (Mass. 1959) .......................................................................................... 12, 13, 14 Lovejoy v. Bailey, 101 N.E. 63 (Mass. 1913) ............................................................................................................ 25 Maltz v. Smith Barney, Inc., 694 N.E.2d 840 (Mass. 1998) ...................................................................................................... 13 McCarthy v. Litton Indus. Inc., 570 N.E.2d 1008 (Mass. 1991) .............................................................................................. 18, 19 Mill-Bern Assocs., Inc. v. Dallas Semiconductor Corp., No. CA 98-1435, 2002 Mass. Super LEXIS 181 (Mass. Super. Ct. 2002) ................................. 37 vii Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 9 of 50 Piper v. Childs, 195 N.E.2d 763 (Mass. 1935) ...................................................................................................... 25 Rendek v. Sheriff of Bristol County, 797 N.E.2d 891 (Mass. 2003) ...................................................................................................... 25 Salamon v. Terra, 477 N.E.2d 1029 (Mass. 1985) .................................................................................................... 25 U.S. Funding, Inc. of Am. v. Bank of Boston Corp., 551 N.E.2d 922 (Mass. App. Ct. 1990) ....................................................................................... 35 Warren v. Para Rubber Shoe Co., 44 N.E. 112 (Mass. 1896) ............................................................................................................ 25 Federal Statutes 17 U.S.C. § 301(b) ........................................................................................................................... 20 17 U.S.C. § 102(b) ........................................................................................................................... 21 State Statutes M.G.L. c. 93A ................................................................................................................ 22, 28, 34, 26 M.G.L. c. 93 §42............................................................................................................14, 15, 30, 31 M.G.L. c. 260 §2A ............................................................................................................................. 8 M.G.L. c. 260 §32........................................................................................................................9, 14 M.G.L. c. 266 §30......................................................................................................................14, 30 Federal Rules Fed. R. Civ. P. 7(a) ............................................................................................................................ 3 Fed. R. Civ. P. 8........................................................................................................................passim Fed. R. Civ. P. 9...........................................................................................................1, 2, 35, 36, 38 Fed. R. Civ. P. 10...........................................................................................................36, 37, 38, 39 Fed. R. Civ. P. 12 (b)(1).....................................................................................................................2 Fed. R. Civ. P. 12 (b)(6)...................................................................................................2, 15, 30, 34 Fed. R. Civ. P. 12(h)(2)......................................................................................................................3 Fed. R. Civ. P. 12(g) .......................................................................................................................... 3 Fed. R. Civ. P. 15.........................................................................................................................1, 13 viii Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 10 of 50 Fed. R. Civ. P. 30 (b)(6).....................................................................................................................2 Fed. R. Civ. P. 41(a) .......................................................................................................................... 7 State Rules Mass. R. Civ. P. 9 ............................................................................................................................ 35 Other Authorities 15 W. Fletcher, Fletcher Cyclopedia of the Law of Corporations §7122 (2006)............................16 15 W. Fletcher, Fletcher Cyclopedia of the Law of Corporations §7124.20 (2006).......................17 15 W. Fletcher, Fletcher Cyclopedia of the Law of Corporations §4316 (2006)............................18 2 James Wm. Moore et al, Moore's Federal Procedure § 12:34[1][c] (2006) ............................... 28 5C Charles Wright & Arthur Miller, Federal Practice and Procedure § 1385 (1990).....................4 ix Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 11 of 50 I. INTRODUCTION Facebook Defendants'1 constant and consistent tactic is to delay and stonewall this case to avoid, at any cost, the merits of ConnectU's allegations. Their new batch of motions continues this strategy, as their arguments have no legal merit, should have been made a long time ago, and are interposed solely for the purpose of delay. Immediately after this Court dismissed its original action, ConnectU refiled. Rather than defending their conduct on the merits, Facebook Defendants filed three convoluted and redundant Motions to Dismiss, adopting the arguments of the others, as well as asserting independent arguments (hereinafter, separately, "Corporate, Dkt. 16", "MMH, Dkt. 17," and "Zuckerberg, Dkt. 18").2 For the Court's convenience, ConnectU opposes Facebook Defendants' three motions in this consolidated opposition. Facebook Defendants' arguments fall into three categories: First, that Counts 1, 2, 7, and 8 are time barred. This argument is inapplicable under Fed. R. Civ. P. 15, the doctrine of equitable tolling, and the Massachusetts savings statute. Second, that Counts 3, 4, 5, 7, and 8 are preempted by ConnectU's copyright claim. This argument is baseless, as each claim fails to meet the twopronged preemption test. Third, that Counts 2-9 were not adequately pleaded under Fed. R. Civ. P. 8, 9, and/or 10. These arguments are also meritless, and not a basis for dismissal. Each of ConnectU's claims is viable and adequately pleaded. ConnectU urges this Court to deny Facebook Defendants' frivolous motions and get to the heart of the matter, namely, their illegal and unethical conduct in the development and maintenance of the facebook.com website. 1 "Facebook Defendants" refers to all Defendants except Eduardo Saverin. Mr. Saverin filed his own Motion to Dismiss on May 3. ConnectU incorporates its concurrently filed Opposition to Mr. Saverin's Motion into this Opposition. 2 The Facebook entities and Zuckerberg have moved to dismiss all of the claims asserted by ConnectU. See Corporate, Dkt. 16 at 1 and Zuckerberg, Dkt. 18 at 1. 1 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 12 of 50 II. STATUS OF PROCEEDINGS On September 4, 2004, ConnectU LLC (ConnectU, Inc.'s predecessor)3 sued the Individual Defendants, as well as the only Facebook entity known to ConnectU, Facebook.com.4 Before Defendants answered, ConnectU filed an Amended Complaint on October 28, 2004, joining Facebook, Inc. (R.A. Dkt. 13). Defendants answered on November 18, 2004 (R.A. Dkt. 14), but never moved to assert any deficiencies under Rules 8, 9, 10, or 12(b)(6), or copyright preemption. The parties began discovery and filed numerous motions to compel. Facebook Inc. and its co-Defendants even took a wide-ranging Fed. R. Civ. P. 30 (b)(6) deposition of ConnectU and later moved for additional deposition time. (R.A. Dkt. 90).5 Almost a year after they answered, on October 14, 2005, Defendants filed a Rule 12(b)(1) motion to dismiss. (R.A. Dkt. 94). Evaluating and deciding that motion entailed 23 Facebook subpoenas for documents, 17 Facebook subpoenas for deposition, 10 Facebook depositions, 129 Facebook discovery requests,6 21 briefs, and two evidentiary hearings. This intense process lasted almost 18 months. Facebook Defendants' never hinted of any alleged non-jurisdictional deficiencies in ConnectU's Amended Complaint, that any claims were preempted, or that any statute of limitation had run during the Court's jurisdictional evaluation.7 Facebook Defendants argue that ConnectU, LLC is "now defunct" and that ConnectU, Inc. cannot maintain this suit (see Corporate, Dkt. 16 at 2; MMH, Dkt. 17 at 2). This is wrong. ConnectU, LLC was merged into ConnectU, Inc.. In the merger, ConnectU, Inc. acquired all of ConnectU, LLC's rights, as alleged (Complaint, ¶ 42). 4 ConnectU, Inc. refers to this related action (Civil Docket No. 04-CV-11923) as the "R.A." 5 There have been no depositions of Facebook Defendants. (Esquenet Decl., ¶ 2). Their arguments that discovery increased the applicable pleading standard (see MMH, Dkt. 17 at 5) cannot be relevant where, as here, Defendants were never deposed. Moreover, ConnectU did incorporate document discovery into the Complaint. (See Complaint ¶¶ 15, 18, 22, 24, 26, 29, 31, 33, 34, 36, and 39). 6 By contrast, ConnectU served 51 discovery requests and deposed one witness. (Esquenet Decl., ¶ 3). 7 Defendants asserted a preemption defense (R.A. Dkt. 14, Affirmative Defense 14), but never filed a motion. 2 3 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 13 of 50 On March 2, 2007, Magistrate Collings issued a Report and Recommendation ("R&R") finding ConnectU LLC had no Members on September 4, 2004, and therefore that the Court lacked jurisdiction. Facebook Defendants made no objections to the R&R, even though it did not address many of the arguments in their motion to dismiss, for example, the assignability of the fraud and breach of fiduciary duty claims (discussed infra). See R.A. Dkt. 100 at 16-17. Failure to object to such omissions waived them. Facebook Defendants may not repeat those arguments now. See Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir. 1994); see also § IV, infra. On March 28, 2007, this Court adopted the R&R and dismissed the related action without prejudice. Importantly, this Court held that once refiled, the case would pick up where it left off and proceed promptly to trial. (R.A. March 28, 2006 Order). ConnectU refiled its claims less than four hours after receiving this Court's decision. It could not have done so any earlier. III. FACEBOOK DEFENDANTS' MOTIONS ARE NOT TIMELY AND SOLELY FOR DELAY Facebook Defendants' motions should be denied under Fed. R. Civ. P. 12(g) as untimely, successive motions to dismiss intended merely to delay these proceedings. In their motions, Facebook Defendants attempt to backtrack by newly objecting to claims they previously found sufficient. (See Defendants' Answer, R.A. Dkt. 14). If the related action were still pending, Defendants would be barred from filing an additional motion to dismiss on grounds that were previously available. Defendants should not be permitted to continue their pattern of making this case as prolonged and expensive as possible. Rule 12(g) contemplates that defendants will advance "every available Rule 12 defense and objection he may have that is assertable by motion." Moore v. Ford Motor Co., No. 92 C 1130, 1994 U.S. Dist. LEXIS 652, *5-6 (N.D. Ill. Jan. 26, 1994) (emphasis added); see also U.S. Fidelity & Guaranty Co. v. Jepsen, No. 90 C 6931, 1991 U.S. Dist. LEXIS 16818, *6 (N.D. Ill. Nov. 1, 1991) ("The purpose of Rule 12(b)(6) is to prevent litigants from interposing defenses in a piecemeal fashion for purposes of delay."). Rule 12(g) thus bars a party from filing a successive 3 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 14 of 50 motion to dismiss to assert a defense or objection he could have raised, but failed to raise, in a previous Rule 12 motion. Stoffels v. SBC Communs., Inc., 430 F. Supp. 2d 642, 647 (W.D. Tex. 2006).8 "Generally, courts have denied defendants' attempts to file multiple pre-answer motions to dismiss, finding such motions contravene the purpose of Rule 12(g): to prevent litigants from interposing defenses in a piecemeal fashion and eliminate unnecessary delay at the pleading stage."9 Donnelli v. Peters Secs. Co., L.P., No. 02 C 0691, 2002 U.S. Dist. LEXIS 16305, *10 (N.D. Ill. Aug. 28, 2002) (citing cases). Rule 12(g) applies in cases where, as here, the motion to dismiss is filed in response to a re-filed or amended Complaint. For example, the defendant in U.S. Fidelity, after initially defaulting, moved to dismiss the plaintiff's amended Complaint under Rule 12(b)(6). The motion was granted in part and denied in part. When the plaintiff filed its second amended Complaint, the defendant, after again initially defaulting, filed a motion to dismiss the second amended Complaint under Rule 12(b)(6). Finding that the second motion to dismiss contained arguments made and considered by the court in the first motion, or that could have been made but were not, the court denied the motion on this basis under Rule 12(g). The court noted that the purpose of Rule 12(b)(6) is "to prevent litigants from interposing defenses in a piecemeal fashion for purposes of Fed. R. Civ. P. 12(h)(2) preserves the defense of failure to state a claim only for pleadings under Fed. R. Civ. P. 7(a) or motions for judgment on the pleadings, and does not apply to motions to dismiss. See U.S. Fidelity, 1991 U.S. Dist. LEXIS 16818 at *4 n.2 ("Rule 12(h)(2) is inapplicable to motions to dismiss."); Stoffels, 430 F. Supp. 2d at 647 ("A review of the relevant authorities confirms that Rule 12(g) normally bars successive pre-answer motions to dismiss. Professors Wright and Miller state that the ban against successive pre-answer motions extends to the three `substantial defenses' listed in 12(h)(2), including failure to state a claim upon which relief can be granted under Rule 12(b)(6). `The right to raise these defenses by preliminary motion is lost when the defendant neglects to consolidate them in his initial motion.'") (quoting 5C Wright and Miller, Federal Practice and Procedure § 1385 at pp. 727-729 (1990)). 9 See Moore, 1994 U.S. Dist. LEXIS 652 at *5-6 ("Clearly, in their first motion to dismiss, the Defendants could have objected on the grounds that Plaintiff's fraud and consumer fraud counts failed to state a claim on which relief could be granted, but for unknown reasons, they did not. To allow the Defendants to assert, in their second motion to dismiss the same counts, arguments which could and should have been introduced in the first motion to dismiss would contravene the purpose of Rule 12(g). Accordingly, the Defendants' Motion to Dismiss Counts V and VI is denied."). 4 8 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 15 of 50 delay," and found that the defendant's second motion to dismiss was "simply another delaying tactic" in its pattern of delay. U.S. Fidelity, 1994 U.S. Dist. LEXIS 16818 at *6. As in U.S. Fidelity, Facebook Defendants' motions repeat an argument from their first motion to dismiss10 and raise several other arguments they could have made in their first motion, but did not.11 Clearly, Defendants' motivation is to derail this litigation, contrary to this Court's Order that proceedings should continue where they left off and proceed promptly to trial. Toward that end, Facebook Defendants would not accept service, unsuccessfully sought an extension to respond to a Complaint that is substantively identical to the Complaint they answered 2 ˝ years ago (R.A. Dkt. 13), filed three new motions to dismiss, and have threatened to move to stay in view of ConnectU's appeal of the Court's March 28, 2007 Order adopting the R&R. (Esquenet Decl., ¶ 3, Ex. A). Motions to dismiss filed for delay are prohibited. Defendants simply should not be able to make at this time any arguments they could and should have made 2 ˝ years ago, namely, preemption and pleadings deficiencies. Such parts of their motions should be denied on this basis alone. This leaves only statutes of limitations and arguments where Defendants did not object to their tacit rejection by the R&R. IV. CONNECTU'S CLAIMS CARRY OVER FROM THE RELATED ACTION A. The Equitable Tolling Doctrine Protects the Five Challenged Claims 1. Equitable Tolling Is Appropriate in This Exceptional Situation Because of the exceptional circumstances of this case, justice dictates that this Court should equitably toll the limitations period for all of ConnectU's challenged claims. Burnett v. N.Y. Central R.R. Co., 380 U.S. 424, 434-35 (1965) (statute of limitations for a claim under Federal Employers' Liability Act tolled when plaintiff initially brought claim in improper venue). In Burnett, the U.S. Supreme Court explained that equitable tolling is applied in situations where "a plaintiff has not slept on his rights but, rather, has been prevented from asserting them." Id. at Namely, the assignability of the fraud and breach of fiduciary duty claims (see R.A. Dkt. 100 at 16-17). 11 Namely, copyright preemption, Rule 12(b)(6) defenses, Rule 10 pleading requirements, and the correct legal names of the Corporate Defendants. 5 10 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 16 of 50 429. The Court stated that the purpose of statutes of limitations is to "assure fairness to defendants . . . by preventing surprises through the revival of claims that have been allowed to slumber" but that this policy is "frequently outweighed . . . where the interests of justice require vindication of the plaintiff's rights." Id. at 428. See also Neverson v. Farquharson, 366 F.3d 32, 42 (1st Cir. 2004) (equitable tolling appropriate "when circumstances beyond the petitioner's control have prevented him from filing on time."). Although ConnectU's Complaint in the related action was dismissed for lack of jurisdiction, and the Burnett Court addressed dismissal for improper venue, the Burnett Court's reasoning is equally applicable to the present situation, as equitable tolling can apply where the lack of jurisdiction was unclear at the time of filing. Equitable tolling cases are fact specific; no clear rules have emerged. See Fox v. Eaton Corp., 615 F.2d 716, 719 (6th Cir. 1980) (equitable tolling saved Title VII Complaint after state court dismissed for lack of subject matter jurisdiction); Platoro Ltd., Inc. v. Unidentified Remains of a Vessel, 614 F.2d 1051, 1054-55 (5th Cir. 1980) (equitable tolling permitted plaintiff to refile after dismissal of initial Complaint based on lack of in rem jurisdiction); Reynolds v. Logan Charter Servs., Inc., 565 F. Supp. 84, 86 (N.D. Miss. 1983) (equitable tolling allowed plaintiff to proceed with claim after initial Complaint was dismissed for lack of personal jurisdiction). However, common factors are that the plaintiff diligently pursued its claim, defendant would not be prejudiced by refiling, and equitable tolling avoids injustice. When ConnectU filed its initial Complaint, it was not clear that this Court lacked subject matter jurisdiction. To the contrary, it took more than twenty-one briefs and two evidentiary hearings over the span of 18 months to determine that the Court lacked jurisdiction. Defendants did not even file their first motion to dismiss until a year into the suit. Moreover, Pramco LLC v. San Juan Bay Marina, Inc., 435 F.3d 51 (1st Cir. 2006), which changed First Circuit law on the citizenship of LLCs, was not decided until 16 months after ConnectU filed its Complaint. The facts surrounding whether diversity jurisdiction existed at the time of filing also were far from clear. Defendant Zuckerberg's domicile and Facebook, Inc.'s and Thefacebook LLC's existence were unknown to ConnectU. As this Court has determined, ConnectU's Members were 6 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 17 of 50 unclear at the time of filing. These issues, once resolved after more than 2 ˝ years, determined whether the Court had jurisdiction. The Court then ruled it lacked jurisdiction for a reason no party suggested or briefed. Accordingly, whether this Court had jurisdiction over ConnectU's Complaint was not clear at the time of filing, and therefore this Court should apply the principles of equitable tolling outlined in Burnett and hold that none of ConnectU's claims are time barred. ConnectU also had no choice but to participate in the motion to dismiss process. It could not have voluntarily dismissed after an answer was filed. Fed. R. Civ. P. 41(a)(1). It could not have refiled until the motion was decided, regardless of when limitations periods expired. Refiling would have entailed impermissibly filing a second action with the same claims, with an action already pending. Plaintiffs have no right to maintain two actions on the same subject in the same court, against the same defendant at the same time. See, e.g., Curtis v. Citibank, N.A., 226 F.3d 133, 139 (2d Cir. 2000); Zerilli v. Evening News Ass'n, 628 F.2d 217, 222 (D.C. Cir. 1980). Facebook Defendants would have relied on such case law to dismiss the second action. ConnectU even suggested that the parties agree to dismiss (as Fed. R. Civ. P. 41(a)(2) requires) and refile, but Facebook Defendants never responded. (Esquenet Decl., ¶ 5, Ex. B). The fact that the complex motion proceeding took 18 months, and that the Court did not dismiss until more than three years after facebook.com launched, was entirely outside ConnectU's control. For this reason alone, equitable tolling should apply. Facebook Defendants also will not be prejudiced by tolling. They have been aware of ConnectU's claims since February 2004. By comparison, ConnectU will suffer extreme prejudice if it cannot vindicate its rights, which it has diligently pursued, having filed its Complaint in the related action well within the limitations periods and only six months after discovering Defendants' theft,12 pursuing discovery, involving the Court in discovery logjams, and refiling its Complaint within four hours of dismissal. See Burnett, 380 U.S. at 436 (noting that plaintiff was diligent in commencing the second action eight days after dismissal of the first). 12 Moreover, during that time, ConnectU attempted to resolve this dispute without litigation. 7 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 18 of 50 2. All Applicable Limitations are Subject to Equitable Tolling The limitations period for all three of ConnectU's challenged Massachusetts claims is subject to equitable tolling. See Burnett, 380 U.S. at 427-28 (in applying equitable tolling, courts must first determine whether the intent of the legislature was to permit tolling in appropriate circumstances). The statute of limitations applicable to these three challenged Massachusetts claims, M.G.L. c. 260, § 2A, is not a jurisdictional statute, see, e.g., Jones-Booker v. U.S., 16 F. Supp. 2d 52, 63-64 (D. Mass. 1998), and therefore is subject to equitable tolling. See id.; see also Honda v. Clark, 386 U.S. 484, 501 (1967) (holding that where consistent with the overall congressional purpose, a traditional equitable tolling principle should be applied to a statutory limitations period). Although the First Circuit apparently has not addressed the issue of equitable tolling in the context of a copyright claim, another court has described three nonexclusive situations in which equitable tolling of the copyright statute may be appropriate: (1) where the defendant has actively misled the plaintiff regarding the plaintiff's cause of action; (2) where the plaintiff in some extraordinary way has been prevented from asserting its rights; or (3) where the plaintiff has timely asserted its rights in the wrong forum. Hunter v. Squirrel Hill Assoc., 413 F. Supp.2d 517, 521 (E.D. Pa. 2005). As explained above, ConnectU has exercised utmost diligence in pursing this claim, but could not refile until Defendants' motion to dismiss was granted. To limit ConnectU's copyright claim to the 3 years preceding the new Complaint would unfairly penalize ConnectU for participating in a process that ConnectU could not control, shorten, or avoid. Finally, the equitable tolling doctrine as articulated by California courts provides additional support for holding that ConnectU's breach of confidence claim is timely. Under California law, the three core elements necessary to apply the equitable tolling doctrine are: (1) timely notice to the defendant in filing the first claim; (2) lack of prejudice to the defendant in gathering evidence to defend against the second claim; and (3) good faith and reasonable conduct by the plaintiff in filing the second claim. Addison v. State of Cal., 578 P.2d 941, 943-44 (Cal. 1978) (period for filing was equitably tolled while plaintiff pursued action in Federal Court that 8 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 19 of 50 was dismissed for lack of jurisdiction); see also CWE Enters. v. McGraw-Hill Broadcasting Co., Inc., Nos. D046282 & D046672, 2006 Cal. App. Unpub. LEXIS 7134, at *25 (Cal. Ct. App. Aug. 16, 2006) (statute of limitations for slander claim was equitably tolled pending outcome of plaintiff's federal suit that was dismissed for lack of diversity jurisdiction) (unpublished decision under Cal. R. of Ct. 977(a)). Here, ConnectU filed its Complaint in the related action in September 2004, well within the statute of limitations, and Facebook Defendants will not be prejudiced in gathering evidence to defend against ConnectU's new Complaint because it is based on the same causes of action pleaded in the Complaint and Amended Complaint in the related action. Facebook Defendants have had over 2 ˝ years to gather evidence to defend against ConnectU's claims. Finally, ConnectU has acted in good faith in filing this Complaint by informing Facebook Defendants and this Court of its intention to refile, and, in fact, refiling within four hours of dismissal of the related action. B. ConnectU's Three Challenged Massachusetts Claims Are Protected by The Massachusetts Renewal Statute, M.G.L. c. 260, § 32 The Massachusetts Renewal Statue (the "Renewal Statute") reads: "If an action duly commenced within the time limited in this chapter is dismissed. . . for any matter of form . . . the plaintiff or any person claiming under him may commence a new action for the same cause within one year after the dismissal . . . ." M.G.L. c. 260, § 32. The Renewal Statute "is remedial legislation to be construed liberally to carry out the purpose of the Legislature." Duff v. Zonis, 99 N.E.2d 47, 50 (Mass. 1951). Federal courts can, and should, apply the Renewal Statute when applicable. See, e.g., Rodi v. S. New England School of Law, 389 F.3d 5, 18 (1st Cir. 2004) ("The savings statute applies, inter alia, to an action originally filed and dismissed in a court of another state or in a federal district court."). Because ConnectU refiled this action within four hours of dismissal in the related action, the Renewal Statute applies to all of its challenged Massachusetts claims. See Boutiette v. Dickinson, 768 N.E.2d 562, 564 (Mass. App. Ct. 2002) ("It is settled that 9 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 20 of 50 dismissal for want of jurisdiction is for a `matter of form' within the meaning of the [Renewal] statute."). Thus, all of these claims are timely. 1. Facebook, Inc. Has Been a Defendant for Two and a Half Years Defendants Facebook, Inc. and The Facebook, LLC (the "Corporate Defendants") argue that ConnectU's three challenged Massachusetts state law claims are not protected by the Renewal Statute because neither Facebook, Inc. nor TheFacebook, LLC was named in the original Complaint in the related action. (Corporate, Dkt. 16 at 3). The Corporate Defendants also argue that naming an improper defendant is a matter of substance, not a matter of form, and therefore ConnectU's state law claims are not saved by the Renewal Statute. (Id. at 4-5). They base these arguments on the premise that neither company "was named in the original Complaint." (Id.) The original Complaint named "The Facebook.com a/k/a TheFacebook," not Facebook, Inc., which was unknown to ConnectU at that time. On October 28, 2004, ConnectU amended the Complaint to join Facebook, Inc. (R.A. Dkt. 13). Even before ConnectU filed the Amended Complaint, Facebook, Inc. treated itself as a Defendant by filing a Corporate Disclosure Statement (R.A. Dkt. 8), moving for an extension of time to Answer or otherwise plead (R.A. Dkt. 7), and filing appearances by counsel (R.A. Dkt. 9, 28, 29). Never did it complain it was not a properly named party. Moreover, in its first motion to dismiss, Facebook, Inc. argued that it was the proper party in interest and should have been named instead of TheFacebook.com a/k/a TheFacebook. (R.A. Dkt. 100 at 2). As discussed infra and supra, Facebook, Inc. appeared, answered, asserted counterclaims, participated in a joint L.R. 16 Report, and responded to, objected to, and filed discovery motions, all as a party Defendant, beginning on the original filing date. 2. The Corporate Defendants Were on Notice of the Claims The Corporate Defendants cite cases allegedly supporting their argument that "the naming of a wrong defendant has been recognized to be one of the situations where the renewal statute is inapplicable." (Corporate, Dkt. 16 at 4.) Such cases, however, focus on the lack of proper notice to the defendants as the reason that the Renewal Statute did not apply, not the mere mislabeling of 10 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 21 of 50 a defendant. See Newman v. Burgin, 930 F.2d 955, 964 (1st Cir. 1991) (quoting Gifford v. Spehr, 266 N.E.2d 657, 661 (Mass. 1971)) ("when plaintiff filed a case against the wrong defendant, or failed to serve the defendant properly with process--thus, in principle, failing to `notif[y] the defendant about the case--the SJC has said the dismissal did not involve a `matter of form' and that the statute, therefore, did not save the action.")) (emphasis in original). Indeed, it is the lack of notice that makes a dismissal a matter of substance, rather than a matter of form, and thereby prevents applicability of the Renewal Statute. See Corliss v. City of Fall River, 397 F. Supp. 2d 260, 266 (D. Mass. 2005) ("Case law has also framed the `matter of form' question as involving the distinguishable inquiry of whether the defendant had actual notice that a court action had been initiated against him within the original statute of limitations period."); see also Gifford, 266 N.E.2d at 661 ("It will be noted that in the Loomer case, the defendant knew promptly about the proceeding in the wrong court. There is no indication, however, that [defendant] in the present case knew anything about action no. 1 until August, 1968, shortly before action no. 2 was commenced."). As discussed above, Facebook, Inc. has been aware of --and involved as a Defendant in-- all of the proceedings since the Complaint was filed. Similarly, TheFacebook LLC has been on notice of ConnectU's claims, as its original Members were Defendants Zuckerberg, Moskovitz, and Saverin and its sole current Member is Facebook, Inc. (R.A. Dkt. 182, Ex. 3).13 In its June 12, 2006 Supplemental Brief, ConnectU apprised the Court of Facebook, Inc.'s failure to disclose TheFacebook LLC's existence in response to ConnectU's argument, in its October 28, 2005 opposition to the first motion to dismiss, that more than one Facebook legal entity may have existed on the September 4, 2004 filing date. (R.A. Dkt. 282, p. 2-4). From the beginning, ConnectU intended to sue the parties that caused it harm. Such parties, including the Corporate Defendants, had notice of the claims against them regardless of Since Defendants Zuckerberg, Moskovitz, and Saverin were Thefacebook LLC's Members on September 2, 2004, Thefacebook LLC was on notice through them because each was properly served. 13 11 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 22 of 50 whether or not ConnectU knew their names. See Duff, 99 N.E.2d 47, 49-50 (plaintiff could sue "the person or persons, natural or artificial, by whatever form of organization they might be associated together" and applying the Renewal Statute when the plaintiff, in his initial Complaint, named the defendant as a corporation known as the Zonis Manufacturing Company when in actuality the defendant was a partnership of three individuals by the same name). Accordingly, ConnectU's misnaming of the Corporate Defendants in the initial Complaint does not bar applicability of the Renewal Statute. 3. ConnectU's Amended Complaint Related Back to the Filing Date ConnectU's naming of TheFacebook.com a/k/a TheFacebook instead of Facebook, Inc. and TheFacebook, LLC in the initial Complaint in the related action is irrelevant because ConnectU amended its Complaint in the related action on October 28, 2004. Under Fed. R. Civ. P. 15(c), the Amended Complaint relates back to the filing of the initial Complaint. See Godfrey v. Eastern Gas & Fuel Associates, 71 F. Supp. 175, 177 (D. Mass. 1947) (amended Complaint related back to the filing of the initial Complaint where the plaintiff amended the name of the defendant and the defendant was at all times put on notice regarding the action); see also Tiller v. Atlantic Coast Line R.R., 323 U.S. 574, 581 (1945) (amendment relates back when the original Complaint provided notification to defendant). Accordingly, ConnectU's Amended Complaint relates back to the initial filing, and the fact that the Facebook, Inc. and TheFacebook, LLC were not named in the initial Complaint does not bar application of the Renewal Statute.14 4. ConnectU LLC Owned All Rights; Thus Renewal Statute Applies Facebook Defendants argue, without citing any authority, that ConnectU did not own the rights asserted on the original filing date and cannot now rely on the Renewal Statute because the action was not "duly commenced." (See, e.g., MMH, Dkt. 17 at 4). Again, Facebook Defendants argued ConnectU's lack of rights in its first motion to dismiss (R.A. Dkt. 100 at 12), the R&R 14 Facebook Defendants may reply that the R&R says Rule 15(c) does not apply. (Dkt. 283 at 9, n.3). Even if, arguendo, Rule 15(c) did not allow the Amended Complaint to reach back to cure jurisdiction, there is no reason that it would not have its normal effects. 12 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 23 of 50 does not address the argument, Facebook Defendants failed to object, and therefore they cannot raise it again now. (See § II, VII, infra/supra). Even assuming that ConnectU did not own the rights at the time of filing, it does not follow that the action was not duly commenced as that term is used in the Renewal Statute. "Duly commenced" means "an action declared upon in a proper writ returnable according to law." Loomer v. Dionne, 155 N.E.2d 411, 413 (Mass. 1959) (plaintiff's action was saved by Renewal Statute after mistakenly bringing suit in Superior Court rather than District Court). To "duly" commence an action, under the terms of the Renewal Statute, a plaintiff need only commence the action within the applicable statute of limitations. See Maltz v. Smith Barney, Inc., 694 N.E.2d 840, 842 (Mass. 1998) ("An action has been `duly commenced' if it has been commenced within the time allowed by the applicable statute of limitations."). An incorrect nominal title for one of the parties does not prevent a case from being duly commenced for purposes of the Renewal Statute. See Duff, 99 N.E.2d 47, 49-50. Here, ConnectU filed suit within all applicable periods of limitation and the related action was therefore "duly commenced" as that term is used in the Renewal Statute. Moreover, the pages of the R&R Defendants cite do not support their position that ConnectU LLC did not own the rights at the time of filing for purposes of applying the Renewal Statute. (See MMH, Dkt. 17 at 5). The R&R recognizes that the Operating Agreement could be retroactive for issues other than diversity, and in fact the pages Facebook Defendants cite support this point. (See Dkt. 283 at 36-37). Also, the Operating Agreement and its assignment of rights, is retroactive to formation, and Defendants argued repeatedly that the retroactivity provision in the Operating Agreement applied for all purposes. (See, e.g., R.A. Dkt. 266 at 7). Thus, the retroactivity provision applies and the action was duly commenced, even if ConnectU LLC did not have Members at the time of filing in the related action. In addition, Facebook Defendants falsely assert that ConnectU has not pleaded that ConnectU LLC had rights as of September 2, 2004. (See MMH, Dkt. 17 at 5). In fact, the Complaint expressly states that "Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra 13 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 24 of 50 [the "Founders"] intended that ConnectU LLC would own all of their rights, title, interests, and claims relating to Harvard Connection." (Complaint ¶ 42). Also, Facebook Defendants argued in their October 2006 pre-hearing statement that the Founders assigned their rights to ConnectU before the filing date of the related action, in exchange for membership in ConnectU LLC. (R.A. Dkt. 251 at 3). This is not inconsistent with the R&R's finding, with which ConnectU respectfully disagrees, that Members were not "admitted" until the Operating Agreement was signed. Even if Members were not admitted until August 2005, the Founders--as pleaded--could have intended that ConnectU own their rights before filing, they could have orally assigned the rights before filing, and the Operating Agreement makes the August 2005 written assignment retroactive to formation. Thus, ConnectU properly pleaded ownership of the rights. Thus, Defendants' unsupported contention that ConnectU cannot rely on the Renewal Statute because it did not own the rights on the filing date is barred for failure to object to the R&R and is without merit. This Court should apply the Renewal Statute to ConnectU's three challenged Massachusetts claims. 5. M.G.L. c. 93, § 42 Is Based on the Same Cause of Action From the Related Action ConnectU's misappropriation of trade secrets claim is subject to the Renewal Statute, which permits a party whose initial action was dismissed for a matter of form to "commence a new action for the same cause within one year after dismissal." M.G.L. c. 260, § 32. The two suits must involve the same parties, the same events, the same nucleus of operative facts, and the same causes of action. Corliss, 397 F. Supp. 2d at 269; Rodi, 389 F.3d at 18; Boutiette, 768 N.E.2d at 564.15 15 The Complaint contains one new claim, breach of confidence, but ConnectU's causes of action arising from Defendants' wrongdoing has not changed. See Nunley v. Kloehn, 158 F.R.D. 614, 617 (D. Wis. 1994) ("the sequence of factual occurrences gives rise to a single cause of action which, in turn, is comprised of several claims, or legal theories of recovery. A cause of action, then, may contain numerous claims.") 14 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 25 of 50 In the original Complaint, ConnectU pleaded its trade secret cause of action as a common law misappropriation claim and referenced M.G.L. c. 266, § 30. Although § 30 is the criminal trade secret misappropriation statute, it contains the definition of a "trade secret" used in civil actions.16 In the new Complaint, ConnectU added a reference in the heading for Count Two to M.G.L. c.93, § 42. Otherwise, the trade secret claims are substantively identical in the two Complaints. If it was an error to mention § 30 in the original Complaint (or now), or not to mention § 42 before, it was not fatal because Defendants obviously understood the claim and had notice of it, as they did not object under Rule 12(b)(6) to the sufficiency of ConnectU's earlier claim. See Johnson v. White, 774 N.E.2d 685 (Mass. App. 2002) (unpublished opinion) (although plaintiff brought claim under incorrect statute, the claim did not fail because it put defendant on notice of cause of action). As part of its motion to amend, ConnectU also sought to add a reference to § 42. (R.A. 163 at 6-7). Section 42 is merely a codification of the common law of misappropriation of trade secrets that ConnectU pled in its Complaint in the related case. See Data General Corp. v. Grumman Systems Support Corp., 795 F. Supp. 501, 506-07 (D. Mass. 1992) ("Count I alleges common law misappropriation of trade secrets and confidential information, and Count II a violation of M.G.L c. 93, § 42, the Massachusetts codification of this tort."). Thus, adding a reference to the statute in the Count's heading in the new Complaint does not change the fundamental nature of the trade secret cause of action, and therefore the Renewal Statute applies. See Boutiette, 768 N.E.2d at 564; cf. Corliss, 397 F. Supp. 2d at 269 (Renewal Statute did not apply where plaintiff in first action sought damages for conversion and then in second action sought damages based upon civil rights violations). ConnectU's claim for trade secret misappropriation under the Massachusetts codification of the common law therefore is saved by the Renewal Statute. 16 "The term `trade secret' as used in this section shall have the same meaning as is set forth in section thirty of chapter two hundred and sixty-six." M.G.L. c. 93 § 42. 15 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 26 of 50 V. FACEBOOK INC. AND THEFACEBOOK, LLC MUST BE HELD LIABLE FOR EACH CLAIM ASSERTED AGAINST THEM The Corporate Defendants try to escape liability because "every alleged `bad' act of the Complaint predates the admitted formation of the Facebook Entities" (Corporate, Dkt. 16 at 5), and because they are not responsible for their employees' pre-formation acts. (Id. at 7). Such arguments on the merits are inappropriate at this stage. ConnectU has pleaded successor liability (Compliant, ¶39). Moreover, Facebook Defendants could have made this argument long ago. Courts may impose liability on successor companies where: (1) the successor expressly or impliedly assumes liability of the predecessor; (2) the transaction is a de facto merger or consolidation; (3) the successor is a mere continuation of the predecessor; or (4) the transaction is a fraudulent effort to avoid the liabilities of the predecessor. Cargill, Inc. v. Beaver Coal & Oil Co., 676 N.E.2d 815, 818 (Mass. 1997); 15 W. Fletcher, Fletcher Cyclopedia of the Law of Corporations § 7122 (2006). These exceptions to successor immunity are not limited to corporations. Crane Const. Co. v. Klaus Masonry, 114 F. Supp. 2d 1116, 1119 (D. Kansas 2000). Individuals or partnerships that transfer their property into a corporation, or vice-versa, can also be liable for their previous acts. See Cyr v. B. Offen & Co., 501 F.2d 1145, 1153-54 (1st Cir. 1974) (corporation liable for acts of its predecessor sole proprietorship); accord LiButti v. United States, 178 F. 3d 114, 124 (2d Cir. 1999) (exceptions to successor immunity apply "regardless of whether the predecessor or successor was a corporation or some other form of business organization") (citation omitted). The Corporate Defendants are liable under at least three of these exceptions. A. The Corporate Defendants Expressly or Impliedly Assumed Liability The Corporate Defendants may have expressly assumed liability for any bad acts of the Individual Defendants when they formed. They do not assert otherwise. Only appropriate discovery, which has thus far been blocked by Facebook Defendants (as to which a motion to compel is pending), can shed light on the contractual relationship between the Facebook Defendants (as well as Mr. Saverin). (See R.A. Dkt. 69 at 18-19; Dkt. 89 at 14). 16 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 27 of 50 Even if there was no express transfer of liability, the Individual Defendants surely expected the Corporate Defendants to assume any such liabilities. The Corporate Defendants were formed and are owned by the Individual Defendants, particularly Zuckerberg, to operate the facebook.com website. (See, e.g, Complaint ¶¶ 33, 34). Thus, it can be inferred for this motion that the purpose of creating the corporate entities was to transfer liability and shield the Individual Defendants. Affirmative Defense No. 23 says exactly this. (R.A. Dkt. 14). On this basis alone, successor liability may attach, and therefore this argument to dismiss should be rejected. B. The Corporate Defendants Were Created by a de facto Merger Facebook Defendants produced few details regarding the Corporate Defendants' operations or relationship. It is unclear why, how, or even if the entities acquired assets, such as the facebook.com domain name and website. If the Corporate Defendants acquired the Individual Defendants' interest in thefacebook.com URL and website, this transfer should be viewed as a de facto merger of the partnership TheFacebook.com a/k/a The Facebook ("TheFacebook.com"), which created and operated the facebook.com website, into the Corporate Defendants. Where the formation of the successor entity is the result of this type of consolidation, it is appropriate to find that the successor entity has assumed its predecessor's liabilities, as discussed below. In determining whether to characterize an asset purchase as a de facto merger, Massachusetts courts consider: "[w]hether (1) there is a continuation of ... management, personnel, physical location, assets, and general business operations [of the seller corporation]... whether (2) there is a continuity of shareholders... whether (3) the seller corporation ceases its ordinary business operations...and whether (4) the purchasing corporation assumes those obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations." Cargill, 676 N.E.2d at 818. However, "it is not necessary that all these factors be found for there to be a de facto merger." Fletcher Cyclopedia at § 7124.20. For example, in Cargill, the court considered the similarity of employees, location, and equipment between the companies, that the successor company assumed its predecessor's obligations, and that the predecessor ceased operations after its purchase. Cargill, 676 N.E.2d at 818-19. All of these 17 Case 1:07-cv-10593-DPW Document 34 Filed 05/07/2007 Page 28 of 50 factors support a finding that TheFacebook.com partnership (expressly named in the original Complaint) merged into the Corporate Defendants. Thus, the Corporate Defendants are liable for their actions as TheFacebook.com. C. The Corporate Defendants are a Mere Continuation Alternatively, this Court can rely on the "mere continuation" theory of corporate successor liability. "[W]hen a business is incorporated and the newly formed corporation is a mere continuation of the predecessor, jurisdiction may be based on acts...of the predecessor." Fletch

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