Odish et al v. Apple, Inc. et al
Filing
35
MEMORANDUM OPINION and ORDER Disposing of 10 , 12 , 17 - Signed by District Judge Judith E. Levy. (FMos)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Joseph Odish, Cranbrook Capital
Consulting Group, LLC,
Plaintiffs,
Case No. 15-cv-11955
Hon. Judith E. Levy
Mag. Judge Mona K. Majzoub
v.
Apple,
Inc.,
Timothy
Cook,
Northrop Grumman Corp., Wesley
Bush, Nuance Communications,
Inc. Cognitive Code Corp., Leslie
Spring, Mimi Chen, John Chen,
Salvatore Difazio, Robert Rosen,
International Business Machines
Corp, Joel Bock, Patrick Miller,
Oracle Corp., U.S. Dentons,
Defendants.
________________________________/
MEMORANDUM AND ORDER
DISPOSING OF [10], [12] & [16]
Plaintiffs Joseph Odish and Cranbrook Capital Consulting Group,
LLC initiated this lawsuit on June 1, 2015, and filed their first
amended complaint against seventeen individual and corporate
defendants, bringing claims involving violations of securities, anti-trust,
and civil rights laws, fraud, and conversion, as well as retaliation
against a federal whistleblower, and a claim of patent manipulation.
(Amended Compl. Dkt. 5, Aug. 24, 2015.) Summons for each of the
defendants were issued on June 4, 2015 (Dkt. 6), although no notice of
service appears yet on the docket. Nonetheless, counsel for defendants
Cognitive Code, Salvatore Difazio, Leslie Spring, Mimi Chen, and John
Chen
(collectively,
“Cognitive
Code
defendants”)
has
filed
an
appearance in this matter. (Dkt. 11.)
Before the Court is the Cognitive Code defendants’ motion to
dismiss this case and sanction plaintiffs. (Dkt. 10). Also before the
Court are plaintiffs’ request to strike their first amended complaint and
motion for leave to file a second amended complaint. (Dkt. 12, 16).
For the reasons provided below, defendants’ motion is GRANTED
in part and DENIED in part, and plaintiffs’ motion is GRANTED in
part and DENIED in part. The Court also grants the Cognitive Code
defendants leave to move the Court for an award of fees and costs.
I.
BACKGROUND
Plaintiffs Joseph Odish, an attorney licensed in Michigan, and his
wholly owned company, Cranbrook Capital Consulting Group, LLC, are
no strangers to the Eastern District of Michigan. This matter follows
2
seven prior cases brought by one or both of these plaintiffs in this
District, including one, No. 14-cv-14886, before this Court.1 As for active
litigation, in addition to the above-captioned matter, which the Court
will on occasion refer to as “Odish 8” when necessary for clarity,
plaintiff Odish has renewed an earlier qui tam action, Odish 4, against
(1) Joseph Odish, Sahar Abroo, and Cranbrook Capital Consulting Group,
LLC v. Robert Rosen, Rosen and Associates, P.C. and John Does 1-50, No. 13-cv13799, filed Sept. 6, 2013, terminated Apr. 17, 2014—dismissed for lack of subject
matter jurisdiction, (“Odish 1”); (2) Joseph Odish and Cranbrook Capital Consulting
Group, LLC v. Morganthaler Ventures, Gary Morganthaler, Gaye Morganthaler,
David Jones, John Does 1-20, and Peregrine Semiconductor, Inc., No. 13-cv-14026,
filed Sept. 19, 2013, consolidated with (3) No. 14-cv-10283 on Feb. 12, 2014,
terminated Mar. 11, 2015—dismissed for lack of personal jurisdiction, (“Odish
2&3”); (4) Cranbrook Capital Consulting Group, LLC, United States of America ex
rel. Joseph Odish v. Cognitive Code Corp., Inc., Northrop Grumman Corp., Inc.,
Nuance Communications, Inc., Leslie Spring, Mimi Chen, John Chen, Sal Difazio,
Robert Rosen, and John Bourbeau, Jr., 14-cv-10736, filed Feb. 18, 2014, terminated
Dec. 03, 2015—notice of voluntary dismissal, (“Odish 4”); (5) Joseph Odish and
Cranbrook Consulting Group, PLLC v. Cognitive Code Corporation, Inc, John
Bourbeau, Jr., Mimi Chen, Sal Difazio, John Chen, Leslie Spring, and Apple, Inc.,
No. 14-cv-12382, filed June 18, 2014, terminated June 25, 2014—notice of voluntary
dismissal, (“Odish 5”); (6) Joseph Odish and Cranbrook Capital Consulting Group,
LLC v. Dick & Miller, P.C., Patrick Miller, Don Davidson, MEI Defense
Technologies, Inc., and Intellitar, Inc., No. 14-cv-12571, filed July 1, 2014,
terminated Nov. 10, 2014—notice of voluntary dismissal (“Odish 6”); (7) Joseph
Odish and Cranbrook Capital Consulting Group, LLC v. Nuance Inc., Apple Inc,
Northrop Grumman Corp., Inc., Timothy Cook, Thomas Beaudoin, Wesley Bush,
Cognitive Code Corp., Inc., Leslie Spring, Robert Rosen, Howard Friedman,
Salvatore Difazio, John Chen, and Mimi Chen, No. 14-cv-14886, filed Dec. 23, 2014,
terminated May 15, 2015—dismissed under Fed. R. Civ. P. 4(m) for failure to
prosecute (“Odish 7”).
1
3
the corporate defendants in Odish 8, and that matter, No. 15-cv-13395
(“Odish 9”), is also presently before this Court.2
The above-captioned matter—and, indeed much of the afore
mentioned litigation—arises from a business relationship that began
between plaintiffs and the Cognitive Code defendants in early 2011 and
ended in March 2012. (See, e.g., Am. Compl. ¶¶ 10, 261, 268.) Plaintiffs
assert claims and injuries arising from Odish’s allegedly having become
“a shareholder and board member of a tech startup Cognitive Code[]
that in the previous year had become a vendor and approved
subcontractor for Northrop Grumman.” (Id. at ¶ 10).) From what the
Court is able to glean from an amended complaint rife with incomplete
sentences, pleading paragraphs whose numbers are anything but
sequential, and references to unnumbered exhibits, plaintiffs’ claims
center around a technology called “Silvia,” purportedly created by
Cognitive Code and allegedly similar to the software known as “Siri”
featured in products sold by Apple, Inc. (See, e.g., Am. Compl. ¶ 216).
Apparently, defendants Apple, Nuance, and International Business
Joseph Odish v. Northrup Grumman Corp., Cognitive Code Corp., Inc.,
Nuance Communication, Inc., and Apple, Inc., No. 15-cv-13395, filed Sept. 28, 2015,
(“Odish 9”).
2
4
Machines Corp., presumably along with Apple CEO, defendant Cook,
are implicated in this matter because of alleged conflicts of interest
swirling around Apple’s acquisition of the “Siri” software from Nuance
and an alleged patent infringement by the owners of “Siri” against the
owners of “Silvia.” (See, e.g., id. at ¶¶ 342, 271.) The patent in dispute
was purportedly issued on February 28, 2012, as No. 8126832. (Id. at ¶
714.)3 Plaintiffs also assert conspiracy and fraud on the part of
defendants Spring and Bock with regard to this and related patents.
(Id. at 715-16.) The Cognitive Code defendants are alleged to be vendors
and approved subcontractors of defendant Northrop Grumman and its
CEO defendant Bruce. (See, e.g., Id. at ¶¶ 10, 14-15, 18.)
Plaintiffs allege that Odish and Cognitive Code executed a Letter
of Intent in March 2011 (“LOI”) that obligated Odish to pay $175,000 to
Cognitive Code in exchange for equity in the company—a tech startup
at the time—and to participate in business engagements with the
company. (See, e.g., id. at ¶¶ 15-17.) Plaintiffs allege that the parties
There is a patent assigned to Cognitive Code Corp. that lists Leslie Spring
as the inventor associated with this patent number. It was filed on March 6, 2008,
and published on Sept. 25, 2008. No activity is associated with this patent on Feb.
28, 2012. USPTO Patent Full-Text and Image Database (available at
http://patft.uspto.gov/netahtml/PTO/search-bool.html).
3
5
executed an addendum to the LOI (“Addendum”) on March 18, 2011,
and that this addendum provided “dual signature rights” for defendant
Spring and Odish to control business initiatives of Cognitive Code. (Id.
at ¶¶ 197-98.) Additionally, the amended complaint asserts that on
April 10-11, 2011, plaintiffs received from the Cognitive Code
defendants documentation of their stock interests in defendants’
company via email. (Id. at ¶¶ 212-13.) At this same time, plaintiffs
allege, Odish, who had initially served as “in-house counsel” to
Cognitive Code, “left his practice of law and dedicated his full time to
Cognitive Code, spending over 2000 hours during the following year” as
an employee for the company. (Id. at ¶ 19.) According to the complaint,
shortly thereafter, on April 17, 2011, Odish, his former associate John
Bourbeau, and Cognitive Code signed an agreement (“April 17
Agreement”) regarding option rights for 75,000 shares. (Id. at ¶¶ 37576). Plaintiffs also allege that the shares they were granted outright or
to which they were given options were non-dilutable. (See, e.g., id. at ¶¶
376, 459-60, 469, 486.)
The complaint describes a souring of the relationship with
defendants beginning sometime late in 2011, and culminating in legal
6
demands in March 2012. (See, e.g. id. at 456-62). These disputes
ultimately led plaintiffs to initiate a lawsuit in the Central District of
California on May 6, 2013, seeking a 37.5 percent share in Cognitive
Code, Odish’s “dual signature” rights under the Addendum, and a board
seat. (Def. Mem. Exs. 1, 3 at 4; see also section I.A infra.)
Plaintiffs allege that their former attorney, defendant Rosen, “was
involved in the conspiracy” to “strip Odish of his rights”—presumably
with regard to his purported shares and signature authority in
Cognitive Code—and also participated in a conspiracy to defraud the
United States Government vis-à-vis its contracts with the named
corporate defendants in health care, criminal justice, and defense
contracts. (See, e.g., Am. Compl. ¶¶ 22-28.) Plaintiffs also refer
repeatedly to the first qui tam action, Odish 4, in their amended
complaint, alleging attorney misconduct against defendant Rosen, a
criminal
conspiracy
by
all
defendants
against
United
States
government interests, and actions taken by all defendants to
manipulate and fraudulently register patents. (¶¶ 32, 40, 232-36, 243,
282, 339, 607, 651-56, 706-25.)
7
A. The California Case
Plaintiffs reference this lawsuit, C.D. Cal. No. CV 12-09069
(“California Case”), numerous times in their amended complaint. (See,
e.g., Am. Compl. ¶¶ 9, 11, 34, 502, 527, 552, 635, 647, 654, 708, 720,
723, 774.) The California Case was filed by Odish, John Bourbeau, and
Cranbrook Capital Consulting Group, LLC on October 22, 2012, against
the Cognitive Code Defendants and was dismissed on May 27, 2015,
when the court granted defendants’ motion for summary judgment. The
dismissal was affirmed on July 20, 2015, in response to plaintiffs’ Rule
60 motion. (Def. Mem. Exs. 3, 7,8; C.D. Cal. No. CV 12-09069.)4 The
California court held, and this Court adopts as facts alleged in the
pleadings, that, for reasons grounded in the California State statute
governing attorney conduct, the LOI and April 17, 2011 agreement
referred to in the amended complaint were void and unenforceable.
(Def. Mem. Ex. 3 at 10.) For similar reasons, the California court held
that the Addendum and the April 10, 2011 email were also
“[D]ocuments that a defendant attaches to a motion to dismiss are
considered part of the pleadings if they are referred to in the plaintiff's complaint
and are central to her claim.” Venture Global Eng'g, LLC v. Satyam Computer
Servs. Ltd., No. 10-15142, 2014 WL 7013607, at *4 n.5 (E.D. Mich. Dec. 11, 2014)
(quoting Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir.1997)).
4
8
unenforceable. (Id. at 12-13.) The California lawsuit brought by
plaintiffs against the Cognitive Code defendants is pending appeal
before the Ninth Circuit Court of Appeals, but will not be fully briefed
until February 26, 2016. Case No. 15-55950, 9th Cir., NOA filed June
19, 2015.
The California court held that none of the asserted agreements
and emails implying entitlement to shares of Cognitive Code, rights to
patents
controlled
by
defendants,
or
decision-making
authority
regarding Cognitive Code were valid. (Def. Mem. Exs. 3, 8.) The
California
court
determined
that
the
alleged
agreements
and
entitlements at the center of that litigation were the result of attorney
misconduct in violation of California law, including a breach of Odish’s
fiduciary duties toward his Cognitive Code clients, and were therefore
invalid. (Id. Ex. 3 at 9-10.) The California court also reasoned that
Odish was not acting in his clients’ (the Cognitive Code defendants’)
interests, because assertions that he was entitled to non-dilutable
shares of Cognitive Code and decision-making authority “would impair
Cognitive Code’s ability to attract further investment” and “impede
Cognitive Code’s ability to conduct its affairs.” (Id. Ex. 3 at 12.)
9
Finally, since the California court declared the alleged agreements
between Odish and the Cognitive Code defendants to be voidable, it also
dismissed the plaintiffs’ causes of action related to those alleged
agreements. (Id. Ex. 3 at 18.) These claims included various contract
torts, a prayer for injunctive relief to enforce the terms of the
agreements and cancel stocks and warrants issued without Odish’s
authority, as well as claims predicated on his alleged status as a
stockholder. (Id.) The latter claims in particular “fail[] because the
agreements for Cognitive Code stock are voidable.” (Id.) Finally, the
court dismissed claims for “intentional misrepresentation,” “negligent
misrepresentation,” and “suppression and concealment of the fact that
Spring lacked authority to enter into the contracts” because plaintiffs
put forth no evidence to support those claims, and because Odish’s own
conduct “was manifestly unreasonable.” (Id. Ex. 3 at 19.)
The California court made additional findings relevant to the
present matter when it ruled on plaintiffs’ Rule 60 motion. Namely, in
evaluating new evidence raised by Odish—a 2015 declaration by
attorney Jason Green—the court explained that information therein
was available to plaintiffs in 2013 when Green provided his first
10
declaration, and, in any event, there was no demonstration of due
diligence—that the information provided by Green could not have been
discovered at the time he submitted his 2013 declaration. (Id. Ex. 8 at
6-7.) Finally, the court found no instances of fraud, misrepresentation,
or misconduct on the part of any of the defendants, who include the
Cognitive Code defendants, Rosen, Northrop Grumman, Nuance, the
Morganthalers, and Apple. (Id. Ex. 8 at 7.)
B. Litigation before this Court
On September 28, 2015, three days after the Cognitive Code
Defendants filed their reply brief in this matter, plaintiff Odish once
more took aim against the corporate defendants, firing off another
arrow, Odish 9, from his litigation quiver. (See note 2 supra.) Plaintiff
admits early in Odish 9 that the action is a renewal of Odish 4. (Odish
9, Dkt. 1 at 2.) Adhering to what appears to have become his modus
operandi, observed now for the third time in matters before this Court,
Odish has already filed a notice of intent to amend Odish 9 before the
proverbial ink has dried on the original complaint or service of the
original complaint on any defendants—and in this case, even before a
11
summons has been issued. (Id., Dkt. 4, Oct. 12, 2015; Odish 8, Dkt. 5;
Odish 7, Dkt. 2.)
C. Causes of Action
As best the Court can determine, plaintiffs bring the following
claims in the amended complaint:
1. “Respondeat Superior/Agency” against all defendants (Am.
Compl. ¶¶864-68) ;
2. Declaratory Judgment to Seat a Grand Jury against
Defendants Northrop Grumman, Nuance, Cognitive Code,
and Apple (id. at ¶¶ 869-76);
3. Violation of 42 U.S.C. § 1985 against the Cognitive Code
Defendants, Rosen, and “their employees, agents and coconspirators” for preventing FBI and SEC agents from
conducting an investigation (id. at ¶¶ 877-83);
4. Duplicative of Count 3 (id. at ¶¶ 884-90);
5. Violation of 42 U.S.C. § 1983 against the same defendants as
Counts 3 and 4 for an unspecified constitutional or statutory
violation (id. at ¶¶ 891-96);
12
6. Fraud against the Cognitive Code defendants and Rosen for
“[a]ll of the misrepresentations and omissions detailed
above. . . .” (id. at ¶¶ 897-914);
7. [Cause of Action 15] Constructive Trust related to the
Property and Securities Alleged by Plaintiffs (id. at ¶¶ 91520);
8. [Cause of Action 16] Damages against all defendants for all
actions alleged (id. at 921-23);
9. [Cause of Action 17] Violation of the Sherman Anti-Trust
Act, 15 U.S.C. §§ 1 et seq. against defendants Apple,
Nuance, Northrop Grumman, “and their agents and
employees” (id. at ¶¶ 924-35);
10. [Cause of Action 25] Violations of § 20(a) of the Securities
Exchange Act of 1934, 15 U.S.C. §§ 78a et seq. against the
individual defendants and Northrop Grumman (id. at ¶¶
936-43);
11. [unnumbered] Violation of Whistleblower Protection for
Employees of Publicly Traded Companies, 18 U.S.C. §
1514A
against
defendants
13
Cognitive
Code,
Northrop
Grumman, Apple, and Nuance “and their agents” (id. at ¶¶
944-50); and
12. [unnumbered] Violation of 53 U.S.C. § 297, Patent
Manipulation, against the Cognitive Code defendants (id. at
¶¶ 951-58).
II.
DEFENDANTS’ MOTIONS
Defendants move the Court to dismiss this matter pursuant to
Fed. R. Civ. P. 12(b)(1), 12(b)(6), and 41(a)(1)(B). They also move the
Court to identify Odish as a “vexatious litigant” and impose a sanction
barring him from filing any additional civil actions in this District
without leave of court. (Dkt. 10 at 1-3).
Plaintiffs oppose the motion in a brief that asserts defendants
have brought their motion to distract the Court from their own
wrongdoing. (Pl. Oppos. 8-12.) Plaintiffs oppose defendants’ assertion of
claim and issue preclusion on the grounds that their counts of fraud,
whistleblower
retaliation,
“equitable
estoppel,”
and
“detrimental
reliance” have not been asserted previously in any litigation against
14
these parties.5 (Id. at 12-13.) Plaintiffs oppose the imposition of
sanctions, but also argue that should the Court contemplate a sanction
limiting their rights to file claims in the District, it should exclude from
such a sanction the right to re-file the qui tam action—which plaintiffs
have already refilled as Odish 9. (Id. at 13-14.). Plaintiffs argue,
without citing any caselaw in support, that defendants’ motion is an
untimely Rule 56 motion. (Id. at 14-15.) And, finally, they assert that
public policy demands consideration of the rights of whistleblowers to
press their actions. (Id. at 15-16.)
The Cognitive Code defendants reiterate in their reply brief that
plaintiffs’ claims are entirely precluded through the California court’s
ruling, because the alleged facts all occurred between 2011 and 2013,
well before the California court issued its final judgment, and either
were raised, or should have been raised, in the context of that litigation.
(Reply Mem. 1-5.) Defendants also assert that plaintiffs did not oppose
their
arguments
regarding
subject-matter
jurisdiction
and
the
applicability of Rule 41(a)(1)(B). (Id. at 5-6.) Finally, defendants cite
The Court has found no instance or reference to “equitable estoppel” or
“detrimental reliance” in plaintiffs’ amended complaint.
5
15
plaintiffs’ request to strike their first amended complaint due to
“errata,” as well as the hundreds of attached, but unreferenced,
exhibits, as evidence of the vexatious quality of their litigation efforts.
(Id. at 6-7 (citing Dkt. 12).)
A. Legal Standards
The grounds raised by the Cognitive Code defendants for
dismissal present different legal standards. The Court addresses first
the distinct nature of the legal standards governing motions to dismiss
under Rule 12(b)(1), compared with Rule 12(b)(6), and then addresses
the legal standards governing the doctrines of issue and claim
preclusion underlying defendants’ motion to dismiss. Legal standards
for Rule 41(a)(1)(B) follow.
1. Motion to Dismiss Under Fed. R. Civ. P. 12(b)(1)
“’[A] plaintiff must possess both constitutional and statutory
standing in order for a federal court to have jurisdiction.” Loren v. Blue
Cross & Blue Shield of Mich., 505 F.3d 598, 606 (6th Cir. 2007).
Constitutional standing requires three elements: (1) that the plaintiff
has suffered “an invasion of a legally protected interest, which is
16
concrete and particularized . . . and . . . actual or imminent”; (2) that the
injury is “fairly . . . trace[able] to the challenged action of the
defendant”; and (3) that a favorable decision must be likely to redress
that injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)
(internal quotations omitted) (alteration in original). When a court’s
subject-matter jurisdiction is challenged under Fed. R. Civ. P. 12(b)(1),
the plaintiff has the burden to prove jurisdiction. Moir v. Greater
Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990).
A motion to dismiss under Rule 12(b)(1) can be on a facial or
factual basis. See, e.g., RMI Titanium Co. v. Westinghouse Elec. Corp.,
78 F.3d 1125, 1134 (6th Cir. 1996). The facial attack preserves
“safeguards to the plaintiff,” in that allegations in the complaint are
presumptively true, while under a factual attack, the “the trial court is
free to weigh the evidence and satisfy itself as to the existence of its
power to hear the case.” Id. (quoting Mortensen v. First Federal Savings
and Loan Ass’n, 549 F.2d 884, 890 (3d Cir. 1977). The Sixth Circuit has
explained the crux of a 12(b)(1) motion and its distinction from other
dispositive motions as follows:
17
[I]n a Rule 12(b)(6) motion in which matters outside the
record are relied upon as they were here, the moving party . .
. had the burden of showing there are no genuine issues as to
any material facts, as the motion shall be treated as one for
summary judgment. Fed.R.Civ.P. 56(c). Conversely, where
subject matter jurisdiction is challenged under Rule 12(b)(1),
. . . the plaintiff has the burden of proving jurisdiction in
order to survive the motion. Perhaps even more importantly,
when a Rule 12(b)(6) motion is converted to a Rule 56 motion
for summary judgment, the court, upon finding genuine
issues as to material facts, must deny the motion; whereas on
a Rule 12(b)(1) challenge to subject matter jurisdiction, the
court is empowered to resolve factual disputes.
Id. at 1134-35 (quoting Rogers v. Stratton Industries, Inc., 798 F.2d 913
(6th Cir. 1986) (emphasis in original)).
When Rule 12(b)(6) is raised alongside Rule 12(b)(1) in a motion to
dismiss, courts must first address the Rule 12(b)(1) issue before
addressing the validity of the claim itself. Moir, 895 F.2d at 269 (citing
Bell v. Hood, 327 U.S. 678, 682 (1946)). The preclusive effect of any
factual findings made in support of a Rule 12(b)(1) ruling are limited to
the jurisdictional question. U.S. v. Ritchie, 15 F.3d 592, 598 (6th Cir.
1994). A dismissal under Rule 12(b)(1) may afford the plaintiff the
opportunity to re-plead the matter to cure the lack of subject-matter
jurisdiction. Ohio Nat. Life Ins. Co. v. United States, 922 F.2d 320, 325
(6th Cir. 1990).
18
2. Motion to Dismiss Under Fed. R. Civ. P. 12(b)(6)
When deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6),
the Court must “construe the complaint in the light most favorable to
the plaintiff and accept all allegations as true.” Keys v. Humana, Inc.,
684 F.3d 605, 608 (6th Cir. 2012). Moreover, documents attached to a
plaintiff’s pleading are incorporated into the pleading, but if such an
attachment provides facts that conflict with the pleadings, the facts
alleged in the attachment prevail over those alleged in the complaint.
Williams v. CitiMortgage, Inc., 498 F. App'x 532, 536 (6th Cir. 2012)
(citing cases).
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
plausible claim need not contain “detailed factual allegations,” but it
must contain more than “labels and conclusions” or “a formulaic
recitation of the elements of a cause of action[.]” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007).
While a court is generally constrained to the pleadings when
considering a motion to dismiss under Rule 12(b)(6), matters of public
19
record, including the existence of judicial proceedings and court
opinions may be taken into account. Winget v. JP Morgan Chase Bank,
N.A., 537 F.3d 565, 576 (6th Cir. 2008). Moreover, “a defendant may
introduce certain pertinent documents” referenced by the plaintiff in his
pleadings but not attached to them, and these documents may be
considered in a 12(b)(6) motion when they are central to the claims.
Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997); In re Omnicare,
Inc. Sec. Litig., 769 F.3d 455, 466 (6th Cir. 2014).
3. Issue and Claim Preclusion
Issue and claim preclusion, often referred to as res judicata and
collateral or direct estoppel,6 are doctrines governing the effect of a
prior judgment in foreclosing present litigation—or relitigation—of a
matter. Heylinger, 126 F.3d at 852 (citing Migra v. Warren City School
Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984)). These doctrines arose in
common law and rest in principles of judicial economy most succinctly
described as “a losing litigant deserves no rematch after a defeat fairly
“[I]n the interests of precision and clarity,” the Court will “refrain from
using the predecessors of those terms, whose meanings have become so convoluted.”
Heylinger v. State University and Community College System of Tennessee, 126 F.3d
849, 852 (6th Cir. 1997) (quoting Barnes v. McDowell, 848 F.2d 725, 728 n.5 (6th
Cir. 1988)).
6
20
suffered.” B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S.Ct. 1293
(2015) (quoting Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S.
104 (1991)). Issue preclusion prevents relitigation of a matter already
determined by a final judgment, even if the issue arises in a different
claim. Heylinger, 126 F.3d at 852 (citing Migra, 465 U.S. at 77 n.1);
Taylor v. Sturgell, 553 U.S. 880, 892 (2008). Claim preclusion
“foreclos[es] litigation of a matter that has never been litigated, because
of a determination that it should have been advanced in an earlier suit,”
and it applies irrespective of whether the subsequent litigation raises
the same issues. Id. (quoting Migra, 465 U.S. at 77 n.1); Taylor, 553
U.S. at 892. In other words, these related doctrines “encourage[]
reliance on judicial decisions, bar[] vexatious litigation, and free[] the
courts to resolve other disputes.” Brown v. Felsen, 442 U.S. 127, 131
(1979).
Both issue and claim preclusion can be properly raised under Rule
12(b)(1) to challenge the court’s subject-matter jurisdiction. See, e.g., In
re Graves, 282 F. App’x 432 (6th Cir. 2008); 5 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1350 (3d ed. 1997).
These issues can also be addressed under a Rule 12(b)(6) motion to
21
dismiss. See, e.g., Donohue ex rel. Estate of Donohue v. United States,
No. 1:05 CV 175, 2006 WL 2990387, at *3 (S.D. Ohio Oct. 18, 2006)
(citing Westwood Chemical Co., Inc. v. Kulick, 656 F.2d 12247, 1227
(6th Cir.1981)). If the doctrine is applied to a motion to dismiss for lack
of subject-matter jurisdiction under Rule 12(b)(1), the preclusive effect
of the court’s ruling is limited to the issue of jurisdiction and does not
prevent the plaintiff from repleading to cure the lack or jurisdiction or
raise the matter in a court that does have jurisdiction. Ritchie, 15 F.3d
at 598.
A claim is precluded when four required elements are present:
(1) a final decision on the merits by a court of competent
jurisdiction; (2) a subsequent action between the same
parties or their “privies”; (3) an issue in the subsequent
action which was litigated or which should have been
litigated in the prior action; and (4) an identity of the causes
of action.
Browning v. Levy, 283 F.3d 761, 771-72 (6th Cir. 2002) (quoting
Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 880 (6th Cir. 1997)). In
particular, the fourth element is satisfied if “the claims arose out of the
same transaction or series of transactions or whether the claims arose
out of the same core of operative facts.” Id. at 773-74 (quoting In re
22
Micro-Time Mgmt. Sys., Inc., 983 F.2d 1067 (Table), 1993 WL 1067, at
*5 (6th Cir. 1993)).
Issue preclusion entails the following elements:
(1) the question in this case is the same as the one raised in
the earlier litigation; (2) the answer given in the earlier
litigation was necessary to the decision; (3) that decision was
a final judgment on the merits; and (4) the affected party
had a “full and fair opportunity” to litigate the issue in the
prior litigation.
United States v. United Technologies Corp., 782 F.3d 718, 725 (6th Cir.
2015) (citing Kosinski v. C.I.R., 541 F.3d 671, 675 (6th Cir. 2008). The
legal theories in which the issues arose in the prior litigation, compared
to the subsequent litigation, are immaterial to issue preclusion, as long
as the above conditions are met. Id. The essence of issue preclusion is to
“prevent[] the second court from ‘deciding the same factual issues that
were decided earlier.’” Id. at 729 (quoting Falconer v. Meehan, 804 F.2d
72, 76 (7th Cir. 1986)).
A judgment retains its preclusive effect even when an appeal is
pending. Smith v. S.E.C., 129 F.3d 356, 363 n.7 (6th Cir. 1997); Erebia
v. Chrysler Plastic Products Corp., 891 F.2d 1212, 1216 n.1 (6th Cir.
1989). Importantly, the preclusion applies “not only to bar the parties
23
from relitigating issues that were actually litigated but also to bar them
from relitigating issues that could have been raised in an earlier action.”
J.Z.G. Res., Inc. v. Shelby Ins. Co., 84 F.3d 211, 214 (6th Cir. 1996)
(emphasis in original) (citing Commissioner v. Sunnen, 333 U.S. 591,
597 (1948). Because of the powerful effect these doctrines can have on
“grounds and defenses not previously litigated,” courts are warned to
invoke them “only after careful inquiry.” Brown v. Felsen, 442 U.S. 127,
132 (1979).
Finally, courts may raise claim preclusion sua sponte and dismiss
a matter under Rule 12(h)(3) if there is no subject-matter jurisdiction.
Agg v. Flanagan, 855 F.2d 336, 344 (6th Cir. 1988) (Contie, J.
dissenting) (discussing cases and predicting that “as courts become
increasingly concerned with their interests in forestalling repetitive
litigation, this action will become more common”).
4. The Two-Dismissal Rule
Federal Rule 41(a)(1)(B) provides that in the case of a voluntary
dismissal by a plaintiff, “if the plaintiff previously dismissed any
federal- or state-court action based on or including the same claim, a
notice of dismissal operates as an adjudication on the merits.” This
24
two-dismissal rule has the effect of preventing a further action on the
same claim. Wright & Moore, 9 Fed. Prac. & Proc. Civ. § 2368 (3d ed.
1997). Rule 41(a)(1)(B) applies to situations in which a prior action is
dismissed before process is served, and only when the defendants in
both actions “are the same, substantially the same, or in privity in both
actions.” Id.; Evans v. Laborers’ Dist. Council & Contractors’ Pension
Fund of Ohio, 602 F. App’x 608, 615 (6th Cir. 2015). The two-dismissal
rule was instituted for the practical necessity of “prevent[ing] an
unreasonable use of dismissals” to excessively harass defendants by
bringing multiple suits against them that do not reach a resolution.
Evans, 602 F. App’x at 614 (internal quotation omitted).
B. Analysis
1. Subject-matter jurisdiction
Defendants plainly raise their 12(b)(1) motion on factual grounds,
rather than facial ones. They argue that plaintiffs lack constitutional
standing because there is no injury in fact traceable to defendants’
actions—that is, all of plaintiffs’ claims derive from allegations that
they own Cognitive Code stock, but that these claims are precluded by
25
the California court’s judgment. (Def. Mem. 16-18.) Defendants’
assertions plainly contradict plaintiffs’ repeated claims of entitlement
to, or actual ownership of, shares in Cognitive Code. Plaintiffs counter
that the California Case has no preclusive effect here, because “a
majority of those claims arose after last amended complaint and include
actionable conduct since this action was filed.” (Reply Mem. 12-13.)
Plaintiffs assert Fed. R. Civ. P. 15 and Lawson v. FMR, LLC,7 as legal
authority for their position, but they do not specify which claims from
which amended complaint in which proceeding before which court saves
this matter, Odish 8, from dismissal for lack of subject-matter
jurisdiction through claim preclusion.
The Court must resolve these material issues of fact in order to
determine if subject-matter jurisdiction exists to hear this case.
a. Impact of the California Litigation
As recited in section I.A supra, the California Case features
prominently in plaintiffs’ amended complaint, yet plaintiffs did not
134 S.Ct. 1158 (2014) (holding that whistleblower protection under the
Sarbanes-Oxley Act, 18 U.S.C. § 1514A(a), extended to employees of private
contractors and subcontractors serving public companies).
7
26
attach the opinions issued by the California court granting defendants
summary judgment and affirming that decision to their complaint. The
Cognitive Code defendants attach to their motion to dismiss both
decisions in the California Case. In holding that “a defendant may
introduce certain pertinent documents if the plaintiff fails to do so,” the
Sixth Circuit explained that “[o]therwise, a plaintiff with a legally
deficient claim could survive a motion to dismiss simply by failing to
attach a dispositive document upon which it relied.” Weiner, 108 F.3d at
89. The Sixth Circuit adopted the Seventh Circuit’s approach in such
situations and considers “[d]ocuments that a defendant attaches to a
motion to dismiss [] part of the pleadings if they are referred to in the
plaintiff’s complaint and are central to her claim.” Id. (quoting Venture
Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.
1993)); see also Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 441 (6th
Cir. 2012). Additionally, if such an attached document is “inconsistent
with the allegations of the complaint, the exhibit controls.” Carrier
Corp., 673 F.3d at 441 (quoting Mengel Co. v. Nashville Paper Prod. &
Specialty Workers Union, No. 513, 108 F.3d 86, 89 (6th Cir. 1955)).
27
The Sixth Circuit has cautioned against using statements in an
attachment to trump alleged facts in the pleadings when it is “not a
legally dispositive document,” id. at 441-42, but here the attachment is
a final decision—and a reconsideration affirming that decision by a
federal court—involving many of the same facts at issue in this matter.
Therefore, the Court holds that the facts found by the California court
and holdings made therein that contradict assertions in the pleadings
are to control over the pleadings.
b. Claims and Issues Against the Cognitive Code
Defendants Precluded by the California Decision
Claims raised in the above-captioned matter will be dismissed for
lack of subject-matter jurisdiction if they are precluded by the
California Case. To reiterate, the required elements for preclusion are:
(1) a final decision on the merits by a court of competent
jurisdiction; (2) a subsequent action between the same
parties or their “privies”; (3) an issue in the subsequent
action which was litigated or which should have been
litigated in the prior action; and (4) an identity of the causes
of action.
Browning, 283 F.3d at 771-72. The first element has been satisfied by
the discussion in sections I.A and II.B.1.a supra.
28
As for the second element, the California Case was brought by
plaintiffs Odish and Cranbrook Capital Consulting8 against the
Cognitive Code defendants (Cognitive Code Corp., Leslie Spring, Mimi
Chen, John Chen, and Salvatore Difazio). Therefore, the second element
is satisfied regarding claims brought here against these defendants.
Turning next to the fourth element, that “the claims arose out of
the same transaction or series of transactions or whether the claims
arose out of the same core of operative facts,” Id. at 773-74, the Court
finds that plaintiffs’ amended complaint largely addresses the same
transactions and arises from the same core operative facts as the
California Case. First, the California court found voidable the series of
so-called agreements dated between March and April 2011—the LOI,
Addendum, April 10 email, and April 17 Agreement—which are all
central to plaintiffs’ claims here against the Cognitive Code defendants.
Second, the California court also held that since those four agreements
were voidable, all claims plaintiffs asserted that arose from those
The third plaintiff in the California Case, John Bourbeau, has since
appeared as a defendant in two of the cases brought by plaintiffs in this District.
See note 2 supra. Since he is not a party to this matter, the Court does not address
preclusion with regard to him.
8
29
agreements
were
without
merit.
Third,
the
California
court
reconsidered its decision less than two months after plaintiffs filed this
matter and just one month before plaintiffs filed their amended
complaint,
and
rejected
plaintiffs’
“newly
discovered
evidence”
submitted on June 16, 2015, in support of their Rule 60 motion as
containing
neither
new
information
nor
information
that
was
inaccessible to plaintiffs earlier in the litigation. These findings by the
California court demonstrate that the core of operative facts
surrounding the transactions between plaintiffs and the Cognitive Code
defendants were duly presented and fully litigated, and that even after
plaintiffs filed this matter, the California court held that there were no
new or newly discovered facts that warranted a different outcome. In
other words, in so far as this case seeks redress for transactions
between plaintiffs and Cognitive Code between early 2011 and July
2015, when the California court issued its opinion on the Rule 60
motion, there is an identity of the causes of action between this matter
and the California Case for the purposes of claim preclusion.
Finally, for similar reasons, the third element for preclusion—the
presence of issues, which were or should have been litigated in the prior
30
action—is also satisfied. In this matter, as far as the Court can discern
from plaintiffs’ amended complaint and their briefing in opposition to
defendants’ motion, their claims against the Cognitive Code defendants
arise from their assertions that Odish is a shareholder in Cognitive
Code and has been wrongly denied his entitlements derived from that
status and other promises made by defendants. Furthermore, even
concerns related to patents owned by or controlled by defendants were
addressed in the California Case (see Def. Mem. Ex. 3 at 3); therefore,
any claim derived from defendants’ patents should have been raised in
the California Case as well.
The analysis regarding which issues are precluded by the
California Case further defines the scope of what is precluded here. To
reiterate, the elements of issue preclusion are:
(1) the question in this case is the same as the one raised in
the earlier litigation; (2) the answer given in the earlier
litigation was necessary to the decision; (3) that decision was
a final judgment on the merits; and (4) the affected party
had a “full and fair opportunity” to litigate the issue in the
prior litigation.
United Technologies Corp., 782 F.3d at 725. Having already established
that element three is satisfied, element four is also satisfied, as
31
plaintiffs’ issues were subjected to cross-claims for summary judgment,
as well as a motion to reconsider. Regarding the first two elements, the
questions at the heart of plaintiffs’ claims here are the same as the
claims adjudicated by the California court: namely, did the alleged
transactions and agreements between plaintiffs and the Cognitive Code
defendants dating from March and April 2011 entitle Odish to be a
shareholder, employee, or board member of defendants’ corporation, and
did those alleged agreements provide him with decision-making
authority in the company. The California court answered these
questions unequivocally, “no”; therefore, any claims in the present
matter are precluded if they require an answer different from the
California court’s to any of those questions.
Plaintiffs’ efforts to oppose the preclusive effect of the California
Case are unavailing. First, their invocation of Fed. R. Civ. P. 15, which
governs amendments of pleadings, is inapplicable because preclusion
applies if the issues were raised or could have been raised in the prior
litigation, and attaching new legal theories to the core operative facts
does not cure their preclusion problem. United Technologies Corp., 782
F.3d at 728-29 (“Issue preclusion does not disappear merely because the
32
losing party puts on a better case the second time around.”) (citing
cases).
Second,
plaintiffs
argue
that
their
claims
regarding
whistleblower retaliation are not subject to preclusion, but they fail to
explain how they have whistleblower standing, aside from the
precluded reliance on the voidable agreements, as an employee under
18 U.S.C. § 1514A, or the expanded definition held by Lawson, 134 S.
Ct. at 1176. Third, plaintiffs’ representations in their documents filed
since the California court’s July 2015 denial of their Rule 60 motion are
particularly disingenuous as they persist in asserting rights and
entitlements flatly rejected by the California court, rather than
distinguishing for this Court which of their assertions stands
independent from the rulings in the California Case. (See, e.g. Pl.
Oppos. Mem. 4 (asserting Odish’s status as “an employee, Shareholder
and Board Member of Cognitive Code in March 2011” and his “dual
signature and review rights”); Am. Compl. ¶¶ 15-16 (asserting the
same).)
33
c. Plaintiffs’ Causes of Action Against the Cognitive
Code Defendants
Plaintiffs raise twelve “causes of action” in their complaint, which
the Court addresses in turn for subject-matter jurisdiction.
1. “Respondeat Superior/Agency” against all defendants:
This is styled as a cause of action, but it merely states the
association of the individually named defendants to their corporate
employers and is not otherwise a justiciable claim, as it specifies no
injury attributable to defendants that the Court could redress. The
Court lacks subject-matter jurisdiction over this “claim”.
2. Declaratory Judgment to Seat a Grand Jury against
Defendants Northrop Grumman, Nuance, Cognitive Code,
and Apple;
Fed. R. Crim. P. 6 governs grand juries, and that rule only
pertains to criminal proceedings (id. Rule 1), which this is not. The
above-captioned matter is not the correct form for seeking an
indictment or otherwise prosecuting criminal matters. The Court lacks
subject-matter jurisdiction over this “claim”.
3. Violation of 42 U.S.C. § 1985 against the Cognitive Code
Defendants, Rosen, and “their employees, agents and coconspirators” for preventing FBI and SEC agents from
conducting an investigation;
34
Section 1985(1) prohibits “two or more persons” to act with “force,
intimidation, or threat” to interfere with the ability of federal officers to
carry out their duties. And while § 1985 is to be construed to have broad
applicability, see, e.g., Windsor v. The Tennessean, 719 F.2d 155, 161
(6th Cir. 1983), a plaintiff must be an individual who holds “any office,
trust, or place of confidence under the United States” to bring a claim
under § 1985(1) regarding impediments to her ability to carry out her
duties. Lewis v. News-Press & Gazette Co., 782 F. Supp. 1338, 1342 &
n.5 (W.D. Mo. 1992) (discussing cases). Plaintiffs have not alleged that
they hold such an office in the United States; therefore, they lack
standing on this claim and the Court lacks subject-matter jurisdiction.
4. Duplicative of Count 3;
The Court lacks subject-matter jurisdiction for the same reasons
as in Count 3.
5. Violation of 42 U.S.C. § 1983 against the same defendants as
Counts 3 and 4 for an unspecified constitutional or statutory
violation;
Claims brought under § 1983 must show “1) the deprivation of a
right secured by the Constitution or laws of the United States and 2)
[that] the deprivation was caused by a person acting under color of state
35
law.” St. v. Corr. Corp. of Am., 102 F.3d 810, 814 (6th Cir. 1996). A
cognizable claim under § 1983 brought against a private entity must
show that such a defendant was “exercis[ing] powers which are
traditionally exclusively reserved to the state.” Id. (quoting Ellison v.
Garbarino, 48 F. 3d 192, 195 (6th Cir. 1995)). Plaintiffs have asserted
neither of these two prongs to set forth a claim under § 1983; therefore,
there is no cognizable claim, leaving the Court without subject-matter
jurisdiction on this claim.
6. Fraud against the Cognitive Code defendants and Rosen for
“[a]ll of the misrepresentations and omissions detailed
above. . . .”;
As explained in section II.B.1.a-b supra, the California court held
that claims dependent on the transactions between plaintiffs and the
Cognitive Code defendants from March and April 2011 were voidable.
Here, plaintiffs claim that their assertions of “fraud, misrepresentation,
and [] omission” stem from implied contractual and contractual
relationships with defendants. (Am. Compl. ¶ 900.) Such issues are
precluded; therefore the Court lacks subject-matter jurisdiction with
regard to the Cognitive Code defendants.
36
7. [Cause of Action 15] Constructive Trust related to the
Property and Securities Alleged by Plaintiffs;
Plaintiffs assert claims on property—presumably stock, options,
and revenues from patents—“they were unlawfully stripped of by
Defendants.” (Am. Compl. ¶ 916.) These claims are precluded because
the California court already determined that plaintiffs’ claims to such
property are void. The Court lacks subject-matter jurisdiction for this
claim.
8. [Cause of Action 16] Damages against all defendants for all
actions alleged;
Plaintiffs seek damages arising from representations “made
intentionally, willfully and maliciously and have caused Plaintiff to
suffer humiliation, outrage and indignation.” (Am. Compl. 922.) The
Court cannot discern what concrete and particularized injury is
described by this cause of action, and in so far as defendants’ alleged
actions are grounded in the core of operative facts adjudicated by the
California court, they are precluded. The Court lacks subject-matter
jurisdiction over this “claim”.
9. [Cause of Action 17] Violation of the Sherman Anti-Trust
Act, 15 U.S.C. §§ 1 et seq. against defendants Apple,
37
Nuance, Northrop Grumman, “and their agents and
employees”;
As far as the Court can glean from plaintiffs’ amended complaint,
their injury from any anti-competitive actions by defendants is
predicated upon Odish being a shareholder at Cognitive Code. Any
cause of action predicated on such a fact is precluded by the California
Court’s holdings. The Court lacks subject-matter jurisdiction over
Cause of Action 17.
10. [Cause of Action 25] Violations of § 20(a) of the Securities
Exchange Act of 1934, 15 U.S.C. §§ 78a et seq. against the
individual defendants and Northrop Grumman;
Plaintiffs allege here that defendants “[m]ade untrue statements
of a material fact or omitted to state a material fact . . . or . . . [e]ngaged
in acts, practices and a course of business that operated as a fraud and
deceit upon Plaintiffs in connection with their purchase and sale of
Cognitive Code Corporation Securities.” (Am. Compl. ¶ 929.) Such
allegations are precluded by the California court’s holdings that
plaintiffs’ agreements with defendants were voidable, because that
court’s determination is an essential fact underlying the validity of
38
these claims. The Court therefore lacks subject-matter jurisdiction on
this count as well.
11. [unnumbered] Violation of Whistleblower Protection for
Employees of Publicly Traded Companies, 18 U.S.C. §
1514A against defendants Cognitive Code, Northrop
Grumman, Apple, and Nuance “and their agents”;
As explained in section II.B.1.b supra, plaintiffs have not
explained how they have whistleblower standing without reliance on
issues precluded by the California court’s ruling that the March and
April 2011 agreements between Odish and the Cognitive Code
defendants are voidable. The Court lacks subject-matter jurisdiction for
this claim against the Cognitive Code defendants.
12. [unnumbered] Violation of 35 U.S.C. § 297, Patent
Manipulation, against the Cognitive Code defendants.
The Patent Code provides, in part, that an individual “who enters
into a contract with an invention promoter and who is found by a court
to have been injured by any material false or fraudulent statement or
representation” may recover for the actual damages or a statutory
amount in a civil action against the invention promoter. 35 U.S.C. §
297(b). Such a claim is predicated upon there being a valid contract
39
regarding the patent in question, and the California court determined
that plaintiffs did not have cognizable rights to any patents promoted
by the Cognitive Code defendants. Therefore, a precluded issue
underlies this claim, and the Court lacks subject-matter jurisdiction.
In summation, the Court lacks subject-matter jurisdiction on each
and every claim raised by plaintiffs in their amended complaint against
the Cognitive Code defendants and hereby grants defendants’ motion to
dismiss under Rule 12(b)(1).
2. The Cognitive Code Defendants’ Rule 12(b)(6)
Motion
Since the Court lacks subject-matter jurisdiction on all claims
brought against the Cognitive Code defendants, the Cognitive Code
defendants are dismissed and the analysis need go no further. However,
even if the claims were not dismissed for lack of subject-matter
jurisdiction, the Court also finds that, for the same reasons explained in
section II.B.1.c supra, plaintiffs have in all cases failed to state a claim
upon which relief can be granted, and the claims against the Cognitive
Code defendants would also be dismissed under Rule 12(b)(6).
40
3. Defendants’ Rule 41(a)(1)(B) Motion
Fed. R. Civ. P. 41(a)(1)(B) provides an alternative avenue to
address the preclusive nature, not of matters decided by a previous
court, but rather of matters previously raised and voluntarily dismissed
by plaintiffs. In the interests of judicial economy, the Court briefly
addresses the applicability of Rule 41(a)(1)(B)—the two-dismissal rule—
to the nine cases plaintiffs have filed against many of the same
defendants in this District in less than three years.
The two-dismissal rule operates when there is a second voluntary
dismissal of the same claim against defendants who “are the same,
substantially the same, or in privity in both actions.” Wright & Moore, 9
Fed. Prac. & Proc. Civ. § 2368 (3d ed. 1997); Evans, 602 F. App’x at 615.
Here, plaintiffs voluntarily dismissed a prior case in this district, Odish
5 (see note 1 supra), against the Cognitive Code defendants, Apple, Inc.
and John Bourbeau on June 22 and June 25, 2014, by notices of
voluntary dismissal prior to service. Plaintiffs voluntarily dismissed two
other lawsuits in this district. Odish 6 was voluntarily dismissed on
November 4, 2014, on the day following an order to show cause why the
case should not be dismissed for failure to prosecute. However, that case
41
was brought against different defendants than those in the present
case, Odish 8, or Odish 5. By contrast, Odish 4 was a qui tam action
brought against the Cognitive Code defendants, along with defendants
to
the
current
action,
Northrop
Grumman
Corp.,
Nuance
Communications, Inc., and Rosen, and it was dismissed voluntarily on
December 3, 2014, also on the heels of an order to show cause and prior
to service. (Case No. 14-cv-10736, Dkt. 31-32.)
The question before the Court, then, is whether this second
voluntary dismissal of a qui tam action against the same Cognitive
Code defendants as in Odish 5 qualifies under Rule 41(a)(1)(B) because
it was “based on or include[ed] the same claim.” The Sixth Circuit has
used the phrase “based on the same transaction” to explain the meaning
of “same claim” as used in Rule 41(a)(1)(B). Evans, 602 F. App’x at 614;
Demsey v. Demsey, 488 F. App’x 1, 3 (6th Cir. 2012) (citing Anderson v.
Aon Corp., 614 F.3d 361, 365 (7th Cir. 2010); Randall v. Merrill Lynch,
820 F.2d 1317, 1318–19 (D.C.Cir.1987)). Such an interpretation
comports with the Second Restatement of Judgments, which explains,
in the context of effects of a judgment, that “the claim extinguished
includes all rights of the plaintiff to remedies against the defendant
42
with respect to all or any part of the transaction, or series of connected
transactions, out of which the action arose.” Restatement (Second) of
Judgments § 24 (1982).
Although the types and causes of action in Odish 4 and Odish 5
are distinct—a qui tam case asserting injury on behalf of the federal
government in the case of Odish 4, and a host of federal statutory as
well as common-law claims in Odish 5—the two cases recount
substantially similar transactions between plaintiffs and defendants.
Both rely on the narrative described in section I supra regarding the
relationship between plaintiffs and the Cognitive Code defendants, and
the alleged subsequent false dealings between the Cognitive Code
defendants and various government contractors over patents tied to the
Siri and Silvia technologies. (No. 14-cv-12382, Dkt. 1; No. 14-cv-10736,
Dkt. 1).
While the Court finds there is a sufficient basis to determine that
Rule 41(a)(1)(B) applies to Odish 4 and Odish 5, with the voluntary
dismissal of Odish 4 on December 3, 2014 acting as an adjudication on
the merits, the Court will not rule on this basis. Seeing as the Court
lacks jurisdiction to consider the merits of the present matter, the
43
preclusive nature of these prior cases and claims does not influence the
outcome here. In any event, such a determination would either be an
additional,
redundant
reason
the
Court
lacks
subject-matter
jurisdiction, or an inappropriate consideration of the merits.
III.
IMPACT OF CLAIM PRECLUSION ON SUBJECT-MATTER
JURISDICTION REGARDING OTHER DEFENDANTS
From the analysis in section II.B.1 supra of claims and issues
precluded by the California court’s litigation, the Court turns to the
question of to what extent these holdings must direct a dismissal for
lack of subject-matter jurisdiction under Rule 12(h)(3). The remaining
defendants have not been served in this case, nor have they appeared
on their own accord, as the Cognitive Code defendants, to accept the
case and oppose the claims against them. Nonetheless, under Rule
12(h)(3), “[i]f the court determines at any time that it lacks subjectmatter jurisdiction, the court must dismiss the action.”
The Court declines to dismiss this action against the remaining
parties for lack of subject-matter jurisdiction. First, there is no motion
before the Court setting forth the facts and legal arguments to
challenge subject-matter jurisdiction. In order to find that any of the
44
California court’s holdings or findings of facts acted to preclude claims
raised here against the remaining defendants, there would need to be
showing that these remaining defendants were in privity with the
Cognitive Code defendants such that the California Case had served as
an adjudication with regard to any claims against them as well. The
Court finds that a more prudent course of action regarding the
remaining defendants is to allow plaintiffs an opportunity to amend
their complaint to more clearly articulate the justiciable claims that
may still lie against these defendants. Nonetheless, should a second
amended complaint still be “so attenuated and insubstantial as to be
absolutely devoid of merit,” the Court will not hesitate to dismiss the
case sua sponte against the remaining defendants as well. Keeran v.
Office of Pers. Mgmt., 827 F.2d 770 (6th Cir. 1987) (quoting Hagans v.
Lavine, 415 U.S. 528, 536-7 (1974)).
IV.
PLAINTIFF’S REQUEST TO STRIKE AND MOTION FOR
LEAVE TO AMEND
Plaintiffs filed their complaint in this matter on June 1, 2015, and
filed an amended complaint on August 24, 2015. (Dkt. 1, 5). On August
31, 2015, five days after defendants filed their motion, plaintiffs sought
45
to strike their amended complaint through document styled as a “Notice
of Errata and Privileged Information in First Amended Complaint:
Request for Removal of Document and it Being Struck from the Record.”
(Dkt. 12). Plaintiffs’ counsel (Odish) explained that their first amended
complaint should “be stricken from the record on basis of innocent
Errata and Privileged and potentially prejudicial information.” (Id.). On
September 2, 2015, plaintiffs submitted their motion for leave to file a
second amended complaint, but without attaching the proposed
document as required by E.D. Mich. L.R. 15.1. (Dkt. 16). Defendants
oppose plaintiffs’ motion. (Dkt. 28).
Amendment of pleadings is governed by Fed. R. Civ. P. 15, which
states in part that “[a] party may amend its pleading once as a matter
of course within: (A) 21 days of serving it, or (B) . . . 21 days after
service of a motion under Rule 12(b), (e), or (f), whichever is earlier.”
Fed. R. Civ. P. 15(a)(1). Other amendments may be made “only with the
opposing party’s written consent or the court’s leave.” Id. at (a)(2). As
Odish has already learned from the order issued by Hon. Paul J.
Komives, U.S. Magistrate Judge, in Odish 2, “Rule 15(a)(1) does not
provide for a right to file a second amended pleading under any
46
circumstances.” Odish et al. v. Peregrine Semiconductor, Inc. et al., No.
13-cv-14026, Dkt. 49, E.D. Mich. Nov. 17, 2014, at 1 (quoting Stuart v.
Fisher, No. 1:02-cv-00020, 2013 WL 4591005, at *5 (D. Idaho Aug. 27,
2013); citing Hurst v. Powell, No. 7:13-CV-1, 2013 WL 4763743, at *2
(M.D. Ga. Sept. 4, 2013)).
Rule 15(a)’s mandate “is to be heeded”—that leave to amend “shall
be freely given when justice so requires.” Humantech, Inc. v.
Caterpillar, Inc., No. 11-14988, 2014 WL 346010, at *1 (E.D. Mich. Jan.
30, 2014) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). The Sixth
Circuit has reinforced the “liberality in allowing amendments to a
complaint.” Janikowski v. Bendix Corp., 823 F.2d 945, 951 (6th Cir.
1987). If the motion is to be denied, “there must be ‘at least some
significant showing of prejudice to the opponent.’” Id. (quoting Moore v.
City of Paducah, 790 F.2d 557, 562 (6th Cir. 1986). “In the absence of
any apparent or declared reason—such as undue delay, bad faith, or
dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, futility of the
47
amendment, etc.—the leave sought should, as the rules require, be
‘freely given.’” Foman, 371 U.S. at 182 (quoting Fed. R. Civ. P. 15(a)).
Here, to grant plaintiffs leave to amend—at least with regard to
the Cognitive Code defendants—would be to turn a blind eye to their
well-documented (see notes 1-2 supra) pattern of ineffective lawsuits
pressing increasingly well-worn claims, at least an essential subset of
which have now reached final adjudication through the California Case.
Moreover, since the Cognitive Code defendants already prevailed on
summary
judgment
before
the
California
court
regarding
the
transactions at the heart of plaintiffs’ complaint, and no matter how
plaintiffs would seek to rename their claims and recast the facts, there
is no plausible objective expectation that they can defeat the substantial
preclusive effect of the California court’s ruling. See Dubuc v. Green Oak
Twp., 312 F.3d 736, 751 (6th Cir. 2002) (holding that district court did
not abuse discretion to deny leave to amend a second time in part
because the claims were precluded by a prior decision).
Indeed, the California court’s specific finding in its July 2015
decision on plaintiffs’ Rule 60 motion, that there were no new facts or
facts that could not have been discovered with diligence that would
48
change the outcome of its ruling, is particularly compelling here.
Plaintiffs filed their amended complaint a month after the California
court issued its Rule 60 opinion, and they had not yet served any
defendants when they issued their amended complaint; therefore, they
had ample opportunity, and were under no time pressure, to amend
their complaint in a way that carefully articulated the claims not
adjudicated by the California court and independent of fact findings
made by that court. Moreover, the inclusion in the amended complaint
of allegations directly contradicted by the California court’s rulings is at
best a gross oversight and at worst a deliberate misrepresentation to
the Court in violation of Rule 11. Should plaintiffs prevail before the
Ninth Circuit on their appeal pending in the California Case, the
impact of the two-strike rule as discussed in section II.B.3 supra would
still significantly curtail their ability to raise issues not precluded by
rule 41(a)(1)(B).
Additionally, the Court understands that plaintiffs may have
failed
to
include
their
second
amended
complaint
due
to
a
misunderstanding with the Court. (Dkt. 16.) However, for the reasons
provided, plaintiffs cannot cure the jurisdictional problems of their
49
claims against the Cognitive Code defendants; therefore, this incident of
misunderstanding does not otherwise persuade the Court to grant leave
to amend the complaint against these defendants.
As for the claims against the remaining defendants, while there
may be a colorable avenue for the Court to identify the privity alleged
by plaintiffs between the remaining defendants and the Cognitive Code
defendants, the standard applied in such a decision requires finding
that “the allegations of a complaint are totally implausible, attenuated,
unsubstantial, frivolous, devoid of merit, or no longer open to
discussion.” Apple v. Glenn, 183 F.3d 477, 479 (6th Cir. 1999) (citing
Hagans v. Lavine, 415 U.S. 528, 536–37 (1974)). This may not be an
impossible hurdle with plaintiffs’ claims here, but at this stage of the
litigation—when the remaining defendants have not filed their
appearance let alone moved to dismiss the matter—a sua sponte
dismissal here would not be “in accordance with our traditional
adversarial system of justice because [it] cast[s] the district court in the
role of ‘a proponent rather than an independent entity’ . . . [is] unfair to
the litigants and ultimately waste[s], rather than save[s] judicial
resources.” Tingler v. Marshall, 716 F.2d 1109, 1111 (6th Cir. 1983),
50
abrogated by statute on other grounds, (quoting Franklin v. State of
Oregon, State Welfare Division, 662 F.2d 1337, 1342 (9th Cir. 1981)).
Therefore, in the interests of preserving the adversarial process,
the Court grants plaintiffs leave to amend their complaint. However,
given the extensive impact of claim and issue preclusion here as well as
the significant problems in form and content in the first amended
complaint, this leave is granted subject to the following conditions:
1. There can be
pleadings that
adjudication of
questions that
this ruling.
no factual allegations in the amended
contradict this ruling, contradict the final
the California Case, or rely on answers to
contradict the California court’s rulings or
2. Plaintiffs may allege no claims against the Cognitive Code
defendants, as they are dismissed from this case.
3. Plaintiffs may not exceed twenty pages in filing their second
amended complaint, and these twenty pages must otherwise
entirely comport with L.R. 5.1 governing the filing of papers
in this Court.
Failure to abide by any of the above conditions will constitute a
violation of the Court’s express order.
V.
SANCTIONS
Defendants have also moved the Court to impose sanctions on
plaintiffs. In particular, they move the Court to restrict plaintiffs’
51
ability to file future lawsuits in this District. (Def. Mem. 21-24.) The
Court deems defendants’ motion to be a motion under Rule 11; however,
Rule 11(c)(2) requires that such motions “be made separately from any
other motion. . . .” The Court strikes this portion of defendants’ motion
as to form, and separately issues an order pursuant to Rule 11(c)(3) for
plaintiffs to show cause.
The Court also hereby lifts the ban imposed by the order of
October 8, 2015 on substantive filings in this matter.
IT IS SO ORDERED.
Dated: October 28, 2015
Ann Arbor, Michigan
s/Judith E. Levy
JUDITH E. LEVY
United States District Judge
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served
upon counsel of record and any unrepresented parties via the Court’s
ECF System to their respective email or First Class U.S. mail addresses
disclosed on the Notice of Electronic Filing on October 28, 2015.
s/Felicia M. Moses
FELICIA M. MOSES
Case Manager
52
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