CALHOUN v. INVENTION SUBMISSION CORPORATION et al
Filing
155
MEMORANDUM OPINION re 133 MOTION to Appoint Counsel Interim Lead Class Counsel filed by OTHER INTERESTED PARTIES and 142 MOTION to Appoint Counsel filed by ETTA CALHOUN, SHERRY PORTER, and CYNTHIA GRAY. Signed by Magistrate Judge Patricia L. Dodge on 8/25/2020. (mqe)
Case 2:18-cv-01022-CB-PLD Document 155 Filed 08/25/20 Page 1 of 10
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ETTA CALHOUN, SHERRY PORTER and
CYNTHIA GRAY, on behalf of themselves and
all other persons similarly situated,
Plaintiffs,
v.
INVENTION SUBMISSION CORPORATION
d/b/a INVENTHELP, et al.,
Defendants.
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Civil Action No. 18-1022
Consolidated with
Civ. A. No. 2:19-cv-1396
Civ. A. No. 2:20-cv-681
MEMORANDUM OPINION
Plaintiffs Etta Calhoun, Sherry Porter and Cynthia Gray (collectively referred to as the
“Calhoun Plaintiffs”) brought this class action against defendants Invention Submission
Corporation d/b/a InventHelp, Western Invention Submission Corporation d/b/a Western
InventHelp, Technosystems Consolidated Corporation, Technosystems Service Corporation,
Universal Payment Corporation, Intromark Corporation and Robert J. Susa (collectively referred
to as the “InventHelp Defendants”) and Thomas Frost and Thomas Frost, P.A. (collectively
referred to as the “Frost Defendants”). The Calhoun Plaintiffs assert claims under the American
Inventors Protection Act, 35 U.S.C. § 297 (AIPA), and Pennsylvania common law. 1 Simply put,
they claim, among other things, that Defendants engaged in fraudulent invention promotion
practices and services that harmed aspiring inventors and entrepreneurs.
1
The common law claims include fraud, negligent misrepresentation, breach of contract, unjust
enrichment and breach of fiduciary duty.
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In October 2019, Plaintiffs Carla Austin and Nil Leone (collectively referred to as the
“Austin Plaintiffs”), who are represented by a different law firm, commenced a class action
styled Austin v. Invention Submission Corporation. While similar in focus to the Calhoun case,
the Complaint asserts causes of action some but not all of the defendants named in Calhoun and
the claims are not entirely identical.
Counsel for the Calhoun Plaintiffs filed a third related class action in May 2020 with
three named plaintiffs (collectively referred to as the “Miclaus Plaintiffs”), Miclaus v. Invention
Submission Corporation, against the same defendants identified in Calhoun. The claims asserted
in Miclaus are substantially similar to those in Calhoun.
By order dated July 15, 2020, all three cases were consolidated at the Calhoun case
number.
Presently pending before the Court are competing motions filed by counsel for the
Calhoun and Miclaus Plaintiffs and counsel for the Austin Plaintiffs, (ECF Nos. 133, 142), both
seeking to be named interim lead class counsel for all of the consolidated cases. The motions
have been fully briefed (ECF No. 135, 144, 151) and oral argument was held on August 5, 2020.
For the reasons that follow, the Court concludes that appointment of interim lead class
counsel is warranted in this case and the law firm of Berger Montague, PC will be appointed as
interim lead class counsel.
A. Relevant Procedural History
The Calhoun action was originally commenced in the United States District Court for the
Eastern District of Pennsylvania in June 2018. 2 Subsequently, on Plaintiffs’ motion, the Calhoun
2
The Complaint was signed by Richard Levan and Jon-Jorge Aras of Levan Legal (who are no
longer counsel of record). Julie Pechersky Plitt and Marc Oxman of the Oxman Law Group were
2
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lawsuit was transferred to the United States District Court for the Western District of
Pennsylvania. Two rounds of motions to dismiss were resolved, and the operative document is
the Second Amended Complaint (ECF No. 56) to which all Defendants have responded.
The Austin class action was commenced in October 2019. It names as defendants
Intromark Corporation, Invention Submission Corporation, Technosystems Service Corporation
and Western Invention Submission Corp. After Defendants’ motion to dismiss was granted in
part and denied in part, the remaining defendants, Invention Submission Corporation and
Western Invention Submission Corp., filed their Answer in June 2020.
Finally, in the Miclaus action, which was commenced in May 2020 against the same
defendants as named in the Calhoun action, the parties have agreed that a responsive pleading is
not due until fourteen days after the pending motions to appoint interim lead counsel are decided.
The initial case management conference in the Calhoun case has been deferred for
several reasons. In addition to the fact that some of the parties engaged in a mediation effort in
June and July, these three actions were consolidated in July for purposes of discovery and other
pretrial matters.
As noted, both the Calhoun and Austin Plaintiffs’ counsel, the Oxman Law Group, PLLC
(“Oxman”), and the Austin Plaintiffs’ counsel, Berger Montague, PC (“BMPC”), now seek
appointment as interim lead counsel.
B. Standard of Review
Federal Rule of Civil Procedure 23(g)(1) provides that a court that certifies a class must
appoint class counsel. The factors that a court must consider include:
•
The work counsel has done in identifying or investigating potential claims;
identified at that time as “of counsel.” Ms. Plitt and Mr. Oxman entered their appearances in this
Court on September 14, 2018 after the case was transferred here.
3
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•
Counsel’s experience in handling class actions, other complex litigation, and claims
of the type asserted in the action;
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Counsel’s knowledge of the applicable law; and
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The resources that counsel will commit to representing the class.
Fed. R. Civ. P. 23(g)(1)(A)(i)-(iv). A court may also “consider any other matter pertinent to
counsel’s ability to fairly and adequately represent the interest of the class” when appointing
class counsel. Fed. R. Civ. P. 23(g)(1)(B). “If more than one adequate applicant seeks
appointment, the court must appoint the applicant best able to represent the interests of the
class.” Fed. R. Civ. P. 23(g)(2).
Pursuant to Rule 23(g)(3), a court may designate interim lead class counsel to act on
behalf of a putative class before determining whether to certify the action as a class action.
Courts have applied the same requirements to this determination that are applicable to the
appointment of class counsel upon class certification. See, e.g., Outten v. Wilmington Trust
Corp., 281 F.R.D. 193, 197 (D. Del. 2012); Michelle v. Arctic Zero, Inc., 2013 WL 791145, at *2
(S.D. Cal. Mar. 1, 2013). This includes evaluating whether the proposed counsel will fairly and
adequately represent the interests of the class. Smith v. State Farm Mut. Auto. Ins. Co., 301
F.R.D. 284, 288 (N.D. Ill. 2014) (citing Fed. R. Civ. P. 23(g)(2), (4)). See also Manual for
Complex Litigation (4th) § 21.11 at *1 (Federal Judicial Center 2004). Among other reasons why
such appointment is appropriate, designation of interim lead counsel can clarify responsibility for
protecting the interests of the class during precertification activities. Id.
C. Discussion
While there are only three cases that have been consolidated, the Court concludes that
there is a need for the appointment of interim lead counsel for the putative class at this time.
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Indeed, the various constituencies concur that it is appropriate here. Suffice it to say that based
upon the nature of recent filings and communications in this case, appointing one law firm to
address pre-certification issues is not only advantageous from a streamlining perspective, but is
also necessary based on the highly acrimonious relationship between counsel for the plaintiffs.
Thus, in order to advance these consolidated cases through discovery and class certification in an
expeditious manner, one law firm will be named as interim lead counsel.
Both law firms spend a substantial amount of effort in portraying counsel from the other
law firm in the most negative light possible and highlighting what they believe to be improper
behavior. Both firms accuse each other of misconduct, unethical behavior and a lack of
professionalism. “When class counsel have demonstrated a lack of integrity, a court can have no
confidence that they will act as conscientious fiduciaries of the class.” Creative Montessori
Learning Centers v. Ashford Gear LLC, 662 F.3d 913, 918 (7th Cir. 2011). By way of example
only, Oxman argues that BMPC advertised for clients using the Calhoun complaint without
revealing that it was not involved in the case. In turn, BMPC contends that Oxman’s counsel
contacted BMPC and pretended to be a defrauded inventor. They both also cry foul about matters
related to the mediation and the reasons for the withdrawal of the Kirby McInerney law firm as
co-counsel for the Calhoun Plaintiffs. Neither law firm has explained how the Court could
resolve these conflicting accusations or why it should do so at this time, however. See In re
HSBC Bank USA, N.A., Debit Card Overdraft Fee Litig., 2013 WL 3816597, at *10 (E.D.N.Y.
July 22, 2013) (law firms challenged each other’s ability to serve as class representatives, but the
court deemed that argument premature and more appropriately reserved for the class certification
stage of this litigation).
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Admittedly, some of the conduct alleged is indeed troubling. The Court declines,
however, to engage in fact finding and credibility determinations with regard to the parties’
mudslinging because in large measure, these accusations are not relevant to the resolution of this
matter, other than reinforcing the importance of appointing interim lead class counsel in this
case.
Therefore, the Court directs its focus to the factors delineated in Rule 23(g). The first
factor that the Court must consider is the work that counsel has done in identifying or
investigation potential claims. Oxman correctly notes that it filed the Calhoun case more than
18 months prior to the time that BMPC filed the Austin case, that the Calhoun complaint
identifies additional defendants (the Frost Attorneys, Robert Susa and Universal Payment
Corporation) and that unlike the Austin action, the Calhoun Plaintiffs rely upon theories of
recovery that will more comprehensively protect the interests of the putative class. Oxman
contends that the Austin complaint is “watered down” as it only alleges negligent conduct and
seeks only non-monetary relief, unlike the Calhoun complaint that includes allegations of
intentional conduct that would result in more significant relief for the class. BMPC counters that
the Calhoun complaint is “unfocused” and denies that the Austin complaint merely alleges
negligent conduct and seeks only injunctive relief. BMPC also notes that as the cases have been
consolidated, all named defendants and all asserted claims remain in the consolidated actions.
BMPC also asserts that rather than relying upon the efforts of the Oxman firm, it began
investigating and identifying potential claims in mid-2018 and has been contacted by over one
thousand potential class members.
Based upon the information provided to the Court, it appears that both law firms have
performed a significant amount of work in investigating and bringing their respective claims.
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While both have raised various collateral matters regarding this issue, the Court does not find
that they are dispositive. Moreover, the Court declines to analyze counsels’ respective litigation
strategies at this stage of the proceedings. Therefore, it concludes that both law firms have
engaged in a substantial amount of investigation and effort in bringing plaintiffs’ claims, and this
factor does not weigh significantly in favor of either firm.
Turning to the next factor, the Court has evaluated counsel’s experience in handling class
actions, other complex litigation, and claims of the type asserted in the action. Oxman contends
that it has more than sufficient experience to handle this case. Clearly, counsel of record for the
Calhoun Plaintiffs are experienced attorneys who have handled sophisticated litigation matters. It
also appears that they are one the first law firms to prosecute AIPA class claims. Although both
Mr. Oxman and Ms. Plitt have experience in handling class action litigation, Ms. Plitt’s
experience has primarily been on behalf of defendants. The Oxman firm has not been previously
appointed lead plaintiff’s counsel in a class action case. 3
BMPC indicates that it has fifty years of experience handling consumer class actions and
that attorneys Shanon Carson and Peter Kahana, who have sixty years of combined experience,
have successfully litigated and settled many claims on behalf of class plaintiffs. Both have
identified multiple matters in which they served as co-lead counsel for consumer class claims.
BMPC emphasizes its years of experience handling plaintiff class action lawsuits, including
some before other members of this Court.
The Court concludes that BMPC has significantly more experience handling consumer
3
Oxman has indicated that if it is appointed as interim lead class counsel, a second law firm with
significant class action experience would enter its appearance on behalf of the Calhoun Plaintiffs.
The Court cannot evaluate this other law firm, however, because it has insufficient information
to do so. Instead, it bases its decision on the current motion, in which the Oxman firm seeks to be
appointed as interim lead counsel.
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class actions than Oxman, particularly as lead class counsel. This factor strongly weighs in favor
of BMPC.
Regarding counsel’s knowledge of the applicable law, both firms appear to have the
requisite knowledge. The Oxman firm notes that there are very few cases filed under the AIPA
but it has brought three of them. 4 BMPC criticizes Oxman for filing multiple cases instead of
bringing them as one action in one court. As noted above, while the Court will not examine the
litigation strategy of the two law firms, the multiple filings do not appear to be the most efficient
manner in which to proceed.
The fourth factor relates to the resources that the law firms can and will devote to these
actions. Oxman has already committed substantial resources to this case and commits to continue
to do so, including taking all necessary discovery, the use of advanced software systems for
analyzing electronic documents, and the commitment of investigative professionals and attorneys
needed to advance the complex claims here and to represent Plaintiffs and the class adequately
against highly qualified defense counsel.
BMPC is also willing and able to expend the resources necessary to ensure the vigorous
prosecution of the claims in these consolidated actions. BMPC indicates that it has a lengthy
record of success in terms of leading complex consumer class action cases against some of the
largest and wealthiest corporations in the world. At oral argument, BMPC noted that it has spent
approximately 2400 hours and $39,000 litigating the case thus far.
4
At oral argument, the Court inquired as to the status of another AIPA case filed by Oxman in
the Southern District of New York (“Zanotti”). Ms. Plitt stated that the court recently dismissed
the InventHelp defendants from the Zanotti case, although she indicated that she was considering
refiling the claim in state court.
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Oxman and BMPC both have already committed substantial time, effort and resources to
their respective cases and remain willing to continue to devote all necessary resources to advance
the claims asserted in these actions.
Based upon the parties’ submissions, it is evident that both law firms have investigated
and identified multiple claims, have demonstrated a sophisticated knowledge of the law and a
willingness to commit resources to the resolution of these cases. However, BMPC has
significantly more experience in prosecuting class actions, particularly in the role of lead
plaintiffs’ counsel, than does the Oxman firm. Thus, the fact that Oxman was first to file a claim
on behalf of the putative class is insufficient to tip the balance in its favor, particularly given
BMPC’s more extensive experience. See Lowery v. Spotify USA Inc., 2016 WL 6818756, at *1
(C.D. Cal. May 23, 2016) (declining to appoint as lead class counsel an attorney who filed first
but had “never served on an executive committee, steering committee, or any facet of a
leadership structure of a complex class action” and further declining to appoint a firm whose
class action experience was on the defendant’s side); Cadena v. American Honda Motor Co.,
2020 WL 3107798, at *4 (C.D. Cal. June 9, 2020) (law firm that filed first was “capable of
handling this class action [but] the relative experience of [the second firm] in automotive defect
class actions suggests that they would be ‘best able to represent the interests of the class.’”)
Therefore, the Court concludes that it is appropriate to appoint BMPC as interim lead
class counsel.
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At oral argument, counsel for the InventHelp Defendants expressed support for the appointment
of BMPC as lead counsel because of their view that if BMPC is appointed, these actions will
advance in a more coordinated, expeditious and cooperative manner. While Defendants may take
this position for any number of reasons, the Court acknowledges its counsel’s thoughtful oral
argument which provided some further insight into the present acrimony in this case to date.
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As a final matter, the Court notes that this appointment is interim in nature and can and
will be reexamined if a class is certified. Moreover, going forward, it anticipates and expects all
counsel to engage in their advocacy in a professional and ethical manner, and that all counsel for
Plaintiffs will cooperate fully with each other in advancing the interests of all members of the
putative class.
An appropriate order will be entered.
BY THE COURT:
_________________________
PATRICIA L. DODGE
United States Magistrate Judge
Dated: August 25, 2020
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