VERIFY SMART CORP. v. BANK OF AMERICA, N.A. et al

Filing 111

OPINION. Signed by Judge John Michael Vazquez on 6/29/2020. (ld, )

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 1 of 16 PageID: 2569

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

VERIFY SMART CORP.,
Plaintiff,
Civil Action No. 17-4248 (JMV) (JBC)
v.
BANK OF AMERICA, N.A., BANK OF
AMERICA CORP., WELLS FARGO BANK,
N.A., and WELLS FARGO & CO.,

OPINION

Defendants.

John Michael Vazquez, U.S.D.J.
This matter concerns a variety of alleged wrongdoings arising from a challenge to a patent.
Through an inter partes review, Askeladden LLC challenged Plaintiff Verify Smart Corp.’s patent,
U.S. Patent No. 8,285,648 (the “Patent”). In the Second Amended Complaint (“SAC”), Plaintiff
sues Bank of America, N.A. and Bank of America Corp. (collectively “BoA”) as well as Wells
Fargo Bank, N.A. and Wells Fargo & Co. (collectively “WF”) (all collectively “Defendants”).
Plaintiff’s Second Amended Complaint does not name Askeladden; The Clearing House Payments
Company LLC (“CHP”); and The Clearing House Association (“CHA”), all of which were named
as Defendants in Plaintiff’s Complaint and First Amended Complaint. The gist of Plaintiff’s
claims is an overarching, nefarious scheme by Defendants to challenge patents in retribution for
Plaintiff having previously sued the Defendant banks as to the Patent. To this end, Plaintiff argues
that both BoA and WF breached settlement agreements with Plaintiff by causing Askeladden to
challenge the Patent. Plaintiff alleges breaches of contract; tortious interference; fraud; and a

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 2 of 16 PageID: 2570

Racketeer Influenced and Corrupt Organizations (“RICO”) conspiracy, 18 U.S.C. § 1962(d). D.E.
87.
Currently pending before this Court are Defendants’ motion to dismiss Plaintiff’s Second
Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim, D.E. 98, and BoA’s motion for sanctions, D.E. 99. The Court reviewed all submissions1
and considered these motions without oral argument pursuant to Federal Rule of Civil Procedure
78(b) and Local Civil Rule 78.1(b). For the following reasons, Defendants’ motion to dismiss is
GRANTED and BoA’s motion for sanctions is DENIED.
I. BACKGROUND 2 & PROCEDURAL HISTORY
For purposes of the pending motions, the Court does not retrace this case’s full factual and
procedural history. The Court instead incorporates by reference the detailed background in its
April 15, 2019 Opinion and Order (the “Prior Op.”), which dismissed Plaintiff’s First Amended
Complaint for failure to state a claim. D.E. 84, 85. While certain Defendants are no longer the
named in the Second Amended Complaint, the factual allegations for the most part remain the

1

Defendants’ joint brief in support of their motion to dismiss is referred to as “Def. MTD Br.”
D.E. 98-1. BoA’s brief in support of their motion for sanctions is referred to as “BoA Br.” D.E.
99-1. Plaintiff’s opposition to both motions is referred to as “Pl. Opp.” D.E. 104. Defendants’
reply in support of their motion to dismiss is referred to as “Def. MTD Reply.” D.E. 105. BoA’s
reply in support of their motion for sanctions is referred to as “BoA Reply.” D.E. 106. The parties
also submitted letters of supplemental authority, primarily regarding Plaintiff’s appeal before the
Federal Circuit against Askeladden, D.E. 107–09 (collectively “Supp. Auth. Letters”).
2

The facts are taken from Plaintiff’s First and Second Amended Complaints. When reviewing a
motion to dismiss, the Court accepts as true all well-pleaded facts in the complaint. Fowler v.
UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Additionally, a district court may consider
“exhibits attached to the complaint and matters of public record” as well as “an undisputedly
authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s
claims are based on the document.” Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998
F.2d 1192, 1196 (3d Cir. 1993).
2

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 3 of 16 PageID: 2571

same. To the extent the Second Amended Complaint asserts new factual allegations, they are
discussed in the analysis section below.
Plaintiff commenced this action against Defendants BoA, Askeladden, CHP, and CHA on
June 12, 2017. D.E. 1. On August 25, 2017, Defendants filed a joint motion to dismiss. D.E. 26.
Following a consent order, D.E. 50, Plaintiff filed its First Amended Complaint against the same
parties and, for the first time, WF. D.E. 54, 58 (“FAC”). Plaintiff’s FAC asserted eight counts:
(I) breach of contract against BoA; (II) breach of contract against WF; (III) tortious interference
with prospective economic benefit against all Defendants; (IV) common law fraud against all
Defendants; (V) deceptive business practices against all Defendants; (VI) a substantive Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), claim against all
Defendants; (VII) a RICO conspiracy, 18 U.S.C. § 1962(d), claim against all Defendants; and
(VIII) Section 1 and Section 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2, claims against all
Defendants. FAC ¶¶ 160-537. Defendants moved to dismiss the FAC on May 14, 2018. D.E. 68,
70. On April 15, 2019, the Court dismissed Plaintiff’s FAC for failure to state a claim. D.E. 84,
85. Among other findings, the Court held that Plaintiff failed to plausibly allege the requisite
relationship between both BoA and Askeladden, as well as WF and Askeladden, to impose liability
on BoA or WF for Askeladden’s actions in challenging Plaintiff’s Patent. Prior. Op. at 15.
Plaintiff was granted leave to file an amended pleading. D.E. 85.
On June 14, 2019, Plaintiff filed its Second Amended Complaint (“SAC”) against only
BoA and WF. 3 D.E. 87. Plaintiff’s SAC asserts five counts: (I) breach of contract against BoA;
(II) breach of contract against WF; (III) tortious interference with prospective economic benefit

3

On June 27, 2019, Askeladden, CHP, and CHA filed a motion to dismiss with prejudice and to
award fees and costs, D.E. 90, which the Court denied. D.E. 110.
3

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 4 of 16 PageID: 2572

against BoA and WF; (IV) common law fraud against BoA and WF; and (V) a RICO conspiracy,
18 U.S.C. § 1962(d), claim against BoA and WF. Id. On August 12, 2019, BoA and WF filed the
pending motion to dismiss, D.E. 98, and BoA filed the pending motion for sanctions, D.E. 99.
Defendants now seek to dismiss the SAC in its entirety pursuant to Federal Rules of Civil
Procedure 12(b)(6), 9(b), and 8(a). D.E. 98. Plaintiff opposed both motions in one single brief,
D.E. 104, to which both Defendants and BoA replied, D.E. 105, 106.
II. MOTION TO DISMISS
A. STANDARD OF REVIEW
Rule12(b)(6)
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a defendant to move to
dismiss a count for “failure to state a claim upon which relief can be granted[.]” To withstand a
motion to dismiss under Rule 12(b)(6), a plaintiff must allege “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A
complaint is plausible on its face when there is enough factual content “that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). Although the plausibility standard “does not impose a probability
requirement, it does require a pleading to show more than a sheer possibility that a defendant has
acted unlawfully.” Connelly v. Lane Const. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal
quotation marks and citations omitted). As a result, a plaintiff must “allege sufficient facts to raise
a reasonable expectation that discovery will uncover proof of [his] claims.” Id. at 789.
In evaluating the sufficiency of a complaint, a district court must accept all factual
allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.
Phillips v. Cty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). A court, however, is “not

4

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 5 of 16 PageID: 2573

compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions
disguised as factual allegations.” Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007). If,
after viewing the allegations in the complaint most favorable to the plaintiff, it appears that no
relief could be granted under any set of facts consistent with the allegations, a court may dismiss
the complaint for failure to state a claim. DeFazio v. Leading Edge Recovery Sols., 2010 WL
5146765, at *1 (D.N.J. Dec. 13, 2010).
Rule 9(b)
“Independent of the standard applicable to Rule 12(b)(6) motions, Rule 9(b) imposes a
heightened pleading requirement of factual particularity with respect to allegations of fraud.” In
re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002). Thus, pursuant to
Rule 9(b), when “alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake . . . [m]alice, intent, knowledge, and other conditions of a person’s
mind may be alleged generally.” Fed. R. Civ. P. 9(b). A party alleging fraud must therefore
support its allegations with factual details such as “the who, what, when, where and how of the
events at issue.” U.S. ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294,
307 (3d Cir. 2016). Accordingly, “[t]o satisfy the particularity standard, ‘the plaintiff must plead
or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure
of substantiation into a fraud allegation.’” Feingold v. Graff, 516 F. App'x 223, 226 (3d Cir. 2013)
(citing Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007)). This heightened pleading
standard is designed to “ensure that defendants are placed on notice of the precise misconduct with
which they are charged, and to safeguard defendants against spurious charges of fraud.”
Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir. 1989) (internal quotation marks
omitted).

5

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 6 of 16 PageID: 2574

B. ANALYSIS
Breach of Contract (Counts I & II)
In Count I, Plaintiff alleges that “[b]y virtue of the Verify IPR filing challenging the validity
of the ‘648 Patent by its agent, privy and proxy Askeladden, [BoA] has committed a wrongful act
which contravenes and thus breaches the aforementioned contractual agreement between [BoA]
and [Plaintiff].” SAC ¶ 54. In Count II, Plaintiff asserts the same as to WF. Id. ¶ 67.
To state a claim for breach of contract under New Jersey law, 4 a party must allege (1) the
existence of a contract; (2) breach of the contract; (3) damages as a result of the breach; and (4)
that the complaining party performed its own duties under the contract. Pollack v. Quick Quality
Restaurants, Inc., 452 N.J. Super. 174, 188 (App. Div. 2017) (citing Globe Motor Co. v. Igdalev,
225 N.J. 469, 482 (2016)). Here, Askeladden was not a party to the agreements that Plaintiff
alleges were breached. Therefore, the threshold issue is whether BoA and WF can be held liable
for the actions of Askeladden. See Def. MTD Br. at 12.
Plaintiff once again argues that under the principals of agency – particularly actual
authority (both express and implied) – BoA and WF are liable for the actions of Askeladden, their
agent. Pl. Opp. at 24–25. “An agency relationship is created when one party consents to have
another act on its behalf, with the principal controlling and directing the acts of the agent.” Sears
Mortg. Corp. v. Rose, 134 N.J. 326, 337 (1993) (citing Restatement (Second) of Agency § 1
(1958)). This consent to act on the principal’s behalf, or grant of “authority,” may be “actual” or

4

New Jersey law applies to Plaintiff’s non-federal claims. Plaintiff asserts that the Court has
jurisdiction over the state law claims through diversity jurisdiction. See SAC ¶ 6. A court sitting
in diversity must resolve choice of law questions by applying the choice of law analysis adopted
by the forum state. Pollock v. Barrickman, 610 F. Supp. 878, 879 (D.N.J. 1985) (citing Klaxon
Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941)). Therefore, the Court applies New Jersey
choice of law rules, which result in the application of New Jersey law. In addition, neither party
contests that New Jersey substantive law applies.
6

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 7 of 16 PageID: 2575

“apparent.” Id. Actual authority, whether express or implied, may “‘be created by written or
spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to
believe that the principal desires him so to act on the principal's account.’” Jennings v. Reed, 381
N.J. Super. 217, 231 (App. Div. 2005) (citing Restatement (Second) of Agency § 26).
In rejecting Plaintiff’s agency theory based on actual authority in the FAC, the Court ruled
as follows:
First, Plaintiff does not plausibly allege facts demonstrating that
BoA or WF (or an agent thereof) expressly or implicitly directed
Askeladden to challenge Plaintiff’s Patent in the IPR Proceeding.
Plaintiff alleges only that CHP “is owned by 25 of the world’s
largest commercial banks, including [BoA] and [WF],” Am. Compl.
¶ 7; that “Askeladden is a wholly-owned subsidiary of [CHP],” id.
¶ 15; and that CHP “conceived . . . [Askeladden] as a vehicle that
could file IPRs without risk of involving [CHP] or its owner banks
as parties to the proceedings,” id. ¶ 49. These allegations do not
plausibly reflect actual authority. Similarly, Plaintiff’s conclusory
allegations that “[CHP] is an agent of [BoA and WF], and acts on
[their] behalf,” id. ¶¶ 166, 185 and that “Askeladden is an agent and
proxy for [CHP], and acts under its direction and control,” id. ¶¶
167, 186 are insufficient. Plaintiff is missing the crucial factual
allegation that an appropriate employee or representative from BoA
or WF directed Askeladden to challenge Plaintiff’s Patent. Of
course, Plaintiff would also have to sufficiently allege that any BoA
or WF representative had the ability to direct Askeladden to act.
Prior Op. at 11–12. (emphases added).
In response, Plaintiff added the following allegations in its SAC. As to Count I against
BoA, Plaintiff alleges that “[u]pon information and belief, TCH director and [BoA] Global General
Counsel, David Leitch, was involved in directing Askeladden to file the Verify IPR.” 5 SAC ¶ 44.
As to Count II against WF, Plaintiff alleges that “[u]pon information and belief, TCH director and

5

“IPR” stands for inter partes review.
7

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 8 of 16 PageID: 2576

[WF] Senior Executive Vice President and General Counsel James M. Strother was involved in
directing Askeladden to file the Verify IPR.” Id. ¶ 59.
Plaintiff still fails to plausibly plead actual authority. As Defendants point out, it is critical
that these new allegations were “offered solely on information and belief” and “[a]bsent any factual
support.” Def. MTD Br. at 13–14.

The Third Circuit has explained “that pleading upon

information and belief is permissible ‘[w]here it can be shown that the requisite factual information
is peculiarly within the defendant’s knowledge or control’ – so long as there are no ‘boilerplate
and conclusory allegations’ and ‘[p]laintiffs … accompany their legal theory with factual
allegations that make their theoretically viable claim plausible.’” McDermott v. Clondalkin
Group, Inc., 649 Fed. Appx. 263, 267–68 (3d Cir. 2016) (internal citations omitted).
As to the allegations “upon information and belief” that BoA Global General Counsel
David Leitch and WF Senior Executive Vice President and General Counsel James M. Strother
were “involved in directing Askeladden to file the Verify IPR,” Plaintiff failed to include necessary
factual allegations that would make these claims plausible. For example, Plaintiff failed to allege
that Leitch’s position as Global General Counsel for BoA includes any duties related to directing
Askeladden to file IPRs (and the same applies to Strother and his role). Plaintiff also failed to
allege why, perhaps based on timing or past, similar instances, the claims upon information and
belief would be plausible. Instead, Plaintiff vaguely alleged that Leitch and Strother were
“involved” in directing Askeladden. The word “involved” is also insufficient. It can mean
anything from being copied on an email to active participation and direction. As the Court stated
in its April 15 Opinion and Order, in addition to pleading that “an appropriate employee or
representative from BoA or WF directed Askeladden to challenge Plaintiff’s Patent,” Plaintiff
needed to also “sufficiently allege that any BoA or WF representative had the ability to direct

8

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 9 of 16 PageID: 2577

Askeladden to act.” Prior Op. at 11–12. Plaintiff failed to allege that Leitch and Strother either
“had the ability to direct Askeladden to act” or exercised that ability. 6
Accordingly, the Court finds that Plaintiff has failed to plausibly allege the requisite
relationship between BoA and Askeladden, and WF and Askeladden, to impose liability on BoA
or WF for Askeladden’s actions in challenging Plaintiff’s Patent. As a result, Plaintiff has not
plausibly pled any breach of the settlement agreements, and the breach of contract claims against
BoA (Count I) and WF (Count II) are dismissed.
Tortious Interference (Count III)
In Count III, Plaintiff alleges tortious interference with prospective economic benefit
against BoA and WF. SAC ¶¶ 69–89. Under New Jersey law, such a claim consists of the
following:
(1) a plaintiff's reasonable expectation of economic benefit or
advantage, (2) the defendant's knowledge of that expectancy, (3) the
defendant's wrongful, intentional interference with that expectancy,
(4) in the absence of interference, the reasonable probability that the
plaintiff would have received the anticipated economic benefit, and
(5) damages resulting from the defendant's interference.
Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992) (quoting Printing
Mart–Morristown v. Sharp Elec. Corp., 116 N.J. 739 (N.J. 1989) and Restatement (2d) of Torts §
766B). Plaintiff’s tortious interference claim is premised on BoA and WF’s agency relationship
with Askeladden, Pl. Opp. at 27–28, however the Court already found this relationship to be
implausibly pled. Therefore, the Court dismisses Plaintiff’s tortious interference claim (Count III).

6

Plaintiff relies once again on Applications In Internet Time, LLC v. RPX Corp., 897 F.3d 1336
(Fed. Cir. 2018) and Worlds Inc. v. Bungie, Inc., 903 F.3d 1237 (Fed. Cir. 2018) to argue that BoA
and WF are each “real parties in interest” and thus Askeladden is an agent of both BoA and WF.
Pl. Opp. at 19–22. Plaintiff relied on these cases in opposition to Defendants’ prior motions to
dismiss Plaintiff’s FAC, see D.E. 75, 79, but the Court did not find the decisions applicable to
question of agency. The Court again reaches the same conclusion.
9

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 10 of 16 PageID: 2578

Fraud (Count IV)
In Count IV, Plaintiff alleges that Askeladden, in filing the Verify IPR on behalf of BoA
and WF, committed fraud by only identifying itself as the “real party in interest” (“RPI”) and
intentionally omitting BoA, WF, and TCH as RPIs, violating 35 U.S.C. § 312(a)(2). SAC ¶¶ 90–
99. In New Jersey, a fraudulent misrepresentation claim requires: “(1) a material misrepresentation
of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an
intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and
(5) resulting damages.” Hoffman v. Liquid Health Inc., No. 14-01838, 2014 WL 2999280, at *10
(D.N.J. July 2, 2014) (quoting Banco Popular N. Am. v. Gandi, 184 N.J. 161, 172-73 (2005)).
Plaintiff’s claim for common law fraud in the SAC is made against BoA and WF, not
Askeladden. As a result, Defendants argue that Plaintiff fails to allege the threshold element that
BoA or WF made a material misrepresentation or statement. Def. MTD Br. at 22. The Court
agrees. Given the Court’s finding that the agency relationship between Askeladden and BoA and
WF is implausibly pled, Askeladden’s statement 7 cannot be imputed to BoA or WF. Therefore,
the Court dismisses Plaintiff’s fraud claim (Count IV).
RICO Conspiracy (Count V)
Finally, Plaintiff brings a RICO conspiracy claim against BoA and WF under 18 U.S.C.
1962(d) (conspiracy to violate 1962(c)). SAC ¶¶ 100–32. Plaintiff claims that BoA and WF
conspired “to commit various wire fraud schemes involving settlement fraud, false promises to
settle infringement cases. In each cases the Banks omitted to tell the settling party that Askeladden
would file a Petition for [IPR] to challenge the settling party’s patent in the PTAB after the

7

The Court does not address whether the statement made by Askeladden was actually a material
misrepresentation.
10

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 11 of 16 PageID: 2579

settlement.” 8 Id. ¶ 101. “The civil RICO statute allows ‘[a]ny person injured in his business or
property by reason of a violation of section 1962 of this chapter [to] sue therefor in any appropriate
United States district court.’” Anderson v. Ayling, 396 F.3d 265, 268-69 (3d Cir. 2005) (quoting
18 U.S.C. § 1964(c)). “The elements predominant in a [Section 1962] subsection (c) violation are:
(1) the conduct (2) of an enterprise (3) through a pattern of racketeering activity.” Salinas v. United
States, 522 U.S. 52, 62 (1997).
As for BoA and WF’s alleged (separate) schemes against Plaintiff, Plaintiff states that both
BoA’s counsel (in New York) and WF’s counsel (in North Carolina) sent by email execution
copies of settlement agreements between BoA and Plaintiff and WF and Plaintiff, respectively, to
Plaintiff’s counsel in New Jersey. SAC ¶¶ 108, 113. BoA’s settlement agreement included an
agreement by BoA “not to challenge or knowingly assist or cause any third party to challenge” the
Patent and “release[d] and forever resolve[d]” any claims BoA had against Plaintiff “involving”
the Patent. Id. ¶ 108. WF’s settlement agreement included an agreement by WF that it “releases
and forever discharges [Plaintiff] … from any and all actions” relating to the Patent. Id. ¶ 113.
Plaintiff indicates that these statements made by BoA and WF were false because both BoA and
WF “intended to subsequently challenge the Patent through litigation initiated by Askeladden as
in fact occurred with the filing of the Verify IPR.” Id. ¶¶ 108, 114. Plaintiff claims that, as a
result, the settlements were “induced by fraud perpetrated through interstate wires,” violating the
federal wire fraud statute 18 U.S.C. § 1343 – a form of RICO racketeering activity under 18 U.S.C.
§ 1961(1)(B). Id. ¶¶ 109, 115. Plaintiff also alleges related schemes against other patent owners.
Id. ¶¶ 116–30.

8

“PTAB” is the Patent Trial and Appeal Board, an administrative law body of the United States
Patent and Trademark Office, which hears inter partes reviews.
11

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 12 of 16 PageID: 2580

Defendants claim that Plaintiff’s allegations are not plausible and do not establish wire
fraud as a matter of law. Def. MTD Br. at 28. Defendants state that “because [Plaintiff] fails to
adequately allege that either [BoA] or [WF] actually challenged the ‘648 Patent … [Plaintiff] also
fails to allege that any act by either Defendant was fraudulent.” Id. (citing Lum v. Bank of Am.,
361 F.3d 217, 223 (3d Cir. 2004) (“A scheme or artifice to defraud … must involve some sort of
fraudulent representation or omission reasonably calculated to deceive persons of ordinary
prudence and comprehension.”)). Given the Court’s finding that the agency relationship between
Askeladden and either BoA or WF is implausibly pled, Askeladden’s action of challenging the
Patent cannot be imputed to BoA or WF.
Defendants also argue that Plaintiff fails to plead these allegations of wire fraud with
specificity under Federal Rule of Civil Procedure 9(b). Id. at 28. Defendants emphasize that
Plaintiff “pleads no facts creating an inference that [BoA] or [WF] intended to challenge the ‘648
Patent through the later-filed IPR proceeding at the time they entered into their respective
settlement agreements with [Plaintiff] – let alone facts sufficient to show who at either bank held
that belief.” Id. at 29. The Court agrees that Plaintiff failed to comply with Rule 9(b)’s
particularity requirement.

While intent can be plead generally under Rule 9(b), Plaintiff

nevertheless must state with particularity the circumstances constituting fraud. Here, Plaintiff
provides no factual allegations to support its contention that, at the time each bank’s counsel sent
Plaintiff’s counsel the executed copies of the settlement agreements, either Defendant had already
decided to challenge the Patent.
When a plaintiff fails to establish a substantive RICO claim, the plaintiff’s RICO
conspiracy must also fail. See Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1191 (3d Cir.
1993) (“Any claim under section 1962(d) based on conspiracy to violate the other subsections of

12

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 13 of 16 PageID: 2581

section 1962 necessarily must fail if the substantive claims are themselves deficient.”). For the
above reasons, the Court finds that Plaintiff has not plausibly pled either a substantive RICO claim
or a RICO conspiracy claim. As a result, the Court dismisses Plaintiff’s RICO conspiracy claim
(Count V).
Collateral Estoppel
Defendant also argues that each of Plaintiff’s claims is “barred by the collateral estoppel
doctrine because [Plaintiff] has already litigated and lost before the PTAB the issue of whether
[BoA] and [WF] were real parties in interest in the IPR proceeding.” Def. MTD Br. at 33.
However, given the fact that each claim has been dismissed for failure to state a claim, the Court
does not reach Defendant’s collateral estoppel argument.
III.MOTION FOR SANCTIONS
A. LEGAL STANDARD
Federal Rule of Civil Procedure 11 imposes on any party who presents “a pleading, motion,
or other paper . . . an affirmative duty to conduct a reasonable inquiry into the facts and the law
before filing, and that the applicable standard is one of reasonableness under the circumstances.”
Bus. Guides, Inc. v. Chromatic Commc’ns Enters., Inc., 498 U.S. 533, 551 (1991). 9

9

Rule 11(b) provides as follows:
By presenting to the court a pleading, written motion, or other paper
– whether by signing, filing, submitting, or later advocating it—an
attorney . . . certifies that to the best of the person's knowledge,
information, and belief, formed after an inquiry reasonable under the
circumstances:
(1) it is not being presented for any improper purpose . . .;
(2) the claims, defenses, and other legal contentions are warranted
by existing law or by a nonfrivolous argument for extending,
modifying, or reversing existing law or for establishing new law;
13

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 14 of 16 PageID: 2582

“[R]easonableness [under the circumstances is] defined as an objective knowledge or belief at the
time of the filing of a challenged paper that the claim was well-grounded in law and fact.” Ford
Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 289 (3d Cir. 1991) (citations and internal
quotations omitted). Attorneys are required to conduct a “normally competent level of legal
research to support the[ir] presentation.” Simmerman v. Corino, 27 F.3d 58, 62 (3d Cir. 1994).
If Rule 11(b) is violated, then Rule 11(c)(4) permits the Court to impose sanctions,
including reasonable attorneys’ fees, expenses, or nonmonetary directives. However, any sanction
“must be limited to what suffices to deter repetition of the [sanctionable] conduct[.]” Fed. R. Civ.
P. 11(c)(4). “Generally, sanctions are prescribed only in the exceptional circumstance where a
claim or motion is patently unmeritorious or frivolous.” Ford Motor Co., 930 F.2d at 289 (internal
citations and quotations omitted). Additionally, “the imposition of sanctions for a Rule 11
violation is discretionary rather than mandatory.” Grider v. Keystone Health Plan Cent., Inc., 580
F.3d 119, 146 n.28 (3d Cir. 2009) (citation omitted). In deciding a Rule 11 motion, “[a]ny doubt
. . . should be resolved in favor of the party charged with the violation.” Sanders v. Hale Fire
Pump Co., No. 87-2468, 1988 WL 58966, at *1 (E.D. Pa. June 1, 1988) (citing Eavenson,
Auchmuty & Greenwald v. Holtzman, 775 F.2d 535, 544 (3d Cir. 1985)).
B. ANALYSIS
BoA moves for sanctions under Rule 11(b) against Plaintiff and its counsel of record,
claiming that Plaintiff’s allegations, “which now span three complaints,” are “frivolous and devoid
of factual support.” BoA Br. at 1. BoA claims Plaintiff lacked any factual or legal support for its

(3) the factual contentions have evidentiary support[.]
Fed. R. Civ. P. 11(b)(1)-(3).
14

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 15 of 16 PageID: 2583

theories of agency and piercing the corporate veil. Id. at 13, 17. BoA also argues that Plaintiff’s
counsel has “a history of flouting the federal rules.” Id. at 19. Plaintiff opposes the motion,
claiming the SAC was “not being presented for any improper purpose” and was filed “in good
faith based on facts and evidence it attained in the course of an inquiry that was, and is, reasonable
under the circumstances of this case.” Pl. Opp. at 30.
The Court does not impose Rule 11 sanctions. Although the Court had concerns that any
attempted amendment to the FAC regarding agency might be futile, it nevertheless granted
Plaintiff the opportunity to do. See Prior Op. at 11–12. In response, Plaintiff amended the FAC
to include additional allegations pertaining to its agency theory. See SAC ¶¶ 44, 59. While the
Court concludes that the SAC still came up short, the Court does not find the filing of Plaintiff’s
SAC to be patently unmeritorious or frivolous. Frankly, the Court agrees that the alleged
circumstances are suspicious, assuming the veracity of Plaintiff’s other allegations. BoA and WF
agreed not to challenge the Patent. CHP is owned by 25 large commercial banks, including BoA
and WF. Askeladden is a wholly owned subsidiary of CHP, and CHP created Askeladden as an
entity that could file IPRs without risk of involving CHP or its owner banks as parties to the
proceedings. Again, if the allegations are true, and BoA or WF had any role in filing the inter
partes review of the Patent, then both Defendants would apparently be in breach of their settlement
agreements. Therefore, the Court denies BoA’s motion for sanctions.
Although such circumstances may be suspicious, Plaintiff is still obligated to meet its
pleading requirements and counsel is obligated to follow the dictates of Rule 11. As a result, the
Court will permit Plaintiff one additional opportunity to file an amended pleading without
prejudice to Defendants making another motion for sanctions if Defendants believe it appropriate.

15

Case 2:17-cv-04248-JMV-JBC Document 111 Filed 06/29/20 Page 16 of 16 PageID: 2584

IV. CONCLUSION
In sum, the Court grants Defendants’ motion to dismiss (D.E. 98) without prejudice and
denies BoA’s motion for sanctions (D.E. 99). Plaintiff has thirty days to file a third amended
complaint, if it so chooses, consistent with this Opinion. If Plaintiff does not do so, this matter
will be dismissed with prejudice. An appropriate Order accompanies this Opinion.

Date: June 29, 2020

__________________________
__
__ ___
__ __
__________________________
n
S.D J
John Michael Vazquez, U.S.D.J.
U.S.D.J.

16