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Chromagen Vision, LLC v. Roger Eichenholtz

August 27, 2012

CHROMAGEN VISION, LLC,
PLAINTIFF,
v.
ROGER EICHENHOLTZ, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Pratter, J.

MEMORANDUM

For a case that concerns products that are supposed to promote clarity, thus far, obfuscation, mud-slinging, and defiance have been the orders of the day at least for one of the litigants. Plaintiff ChromaGen Vision LLC has filed motions for default judgment as to all four Defendants in this case. The three Corporate Defendants have never appeared in this action, but Defendant Roger Eichenholtz has appeared and opposes the motion seeking default judgment against him. The Court heard oral argument on June 6, 2012 and entertained supplemental briefing thereafter.*fn1

I. FACTUAL*fn2 AND PROCEDURAL BACKGROUND

ChromaGen Vision LLC ("CMGN") is a limited liability company organized under Delaware law whose principal place of business is in West Chester, Pennsylvania. Roger Eichenholtz, a former employee/manager/co-owner of CMGN, is a New York resident, and the principal of the three Corporate Defendants.

This case centers on a dispute over the intellectual property rights supporting the ChromaGen product line, which is "a system of colored filters and contact and spectacle lenses which can aid in the diagnosis and treatment of dyslexia and reading disorders." Compl. ¶ 12. The products, first marketed in Europe, came to Mr. Eichenholtz's attention in 2005, at which time he formed Defendant ChromaGen USA to market the products in the United States. On November 3, 2005, he and ChromaGen USA entered into an exclusive distributorship with Cantor & Nissel, the British manufacturer of the products.

Even with this exclusive license, Mr. Eichenholtz had difficulty capitalizing on his investment, so in 2006, he and Ted Edwards, Jr. signed an operating agreement for a new company, ChromaGen International LLC, which later became CMGN. CMGN's operating agreement provides for the designation of a board of managers to manage CMGN's business and gives that board authority to make decisions on CMGN's behalf by majority vote. It also expressly disallows any one manager from entering into any agreements independently. CMGN and its principals raised funds sufficient to purchase the U.S. patents, trademarks, and other intellectual property relating to ChromaGen products on February 15, 2007 from Cantor & Nissel. On that same date, CMGN, ChromaGen USA and Cantor & Nissel executed an agreement by which Mr. Eichenholtz and ChromaGen USA assigned all rights in the exclusive licenses held by ChromaGen USA to CMGN.*fn3

On October 18, 2009, a majority of CMGN's board voted to remove Mr. Eichenholtz from all CMGN positions for cause and to terminate his employment agreement. He still, however, retained his membership interests in CMGN. Mr. Eichenholtz and CMGN thereafter became embroiled in a dispute over his, Mr. Edwards', and other members' respective interests in CMGN and the rights flowing therefrom. On June 11, 2010, Mr. Eichenholtz filed for bankruptcy, and on December 8, 2010, CMGN purchased all of Mr. Eichenholtz's remaining interest in CMGN from the bankruptcy trustee.*fn4 Judge Drain of the U.S. Bankruptcy Court for the Southern District of New York approved the sale.*fn5

CMGN alleges that both before and after the sale, the ChromaGen intellectual property was its property, and that it did not at any time license any of the Defendants to use it.*fn6 After the sale, according to CMGN, Mr. Eichenholtz began publicizing that he or one of the Defendants retained the rights to the ChromaGen intellectual property and that he intended to use the Corporate Defendants to continue to practice the patent. For instance, when the Complaint was filed, Defendant ChromaGen USA maintained a website at www.chromagen.us, which stated that ChromaGen USA held the rights to the ChromaGen intellectual property and offered ChromaGen products for sale. The Complaint also alleges "by information and belief" that Mr. Eichenholtz tried to raise funds for use in manufacturing and/or marketing ChromaGen products from third parties after the bankruptcy sale by claiming that he or the Corporate Defendants has the right to practice the ChromaGen intellectual property.

CMGN also asserts that Mr. Eichenholtz sent CMGN's managers emails accusing them of fraud and threatening criminal charges in an attempt to interfere with CMGN's contractual relationship with the managers.*fn7 Mr. Eichenholtz's activities, CMGN alleges, have harmed and continue to harm its efforts to market the unique ChromaGen products.

On April 29, 2011, CMGN filed a Complaint asserting four causes of action against the Defendants. The first count is for declaratory judgment to clarify the ownership of the ChromaGen intellectual property. In this count, CMGN claims that Mr. Eichenholtz has claimed ownership of the intellectual property and has repeatedly harassed and threatened CMGN as a result of this claim of ownership. This count does not mention that the Corporate Defendants have claimed ownership of the intellectual property.

The second count is for trademark infringement and asserts that Defendants are using the ChromaGen mark in commerce.*fn8 The third is for patent infringement and is similar to the trademark infringement count, in that it asserts that all Defendants offered infringing products for sale. Count Four asserts a claim against Mr. Eichenholtz only for interference with contractual relations. In it, CMGN claims that contractual relationships exist between it and the members of its board of managers, that Mr. Eichenholtz knew about these relationships and tried to damage them by threatening board members with civil or criminal prosecution and IRS investigation, that this "interference" was not privileged or justified, and that CMGN was harmed because it was forced to spend time and money countering Mr. Eichenholtz's allegations.

On June 8, 2011, Mr. Eichenholtz filed a pro se "motion to dismiss" the Complaint, in which he ignored Rule 12 standards and simply asserted his own set of facts, which generally paints Mr. Edwards as a crook and extortionist who monkeyed with the available shares of CMGN and fraudulently issued "phantom shares," lied to others about Mr. Eichenholtz's interests in the company, and fraudulently obtained Mr Eichenholtz's shares through the bankruptcy action. He also asserts that under federal tax law, the 2010 sale of his interests automatically dissolved CMGN, and that his contributed assets, including the ChromaGen intellectual property, reverted to him. He asked for a stay of the case.

A week later, Plaintiff CMGN filed a motion for a temporary restraining order, claiming that Mr. Eichenholtz had been sending emails to the doctors listed on CMGN's website telling them that CMGN is an "illegal" business. In the motion, CMGN also partially addressed Mr. Eichenholtz's "motion to dismiss," noting that Delaware limited liability company law, not federal tax law, governs when and how an LLC is dissolved and arguing that the loss of a member does not automatically dissolve an LLC. On June 22, 2011, CMGN also requested default as to the Corporate Defendants. Default was entered.

On June 28, 2011, the Court held a hearing on the TRO motion. Mr. Eichenholtz did not attend due to health issues. That same day, the Court denied his motion to dismiss without prejudice, pointing out that it was not a rule-compliant motion to dismiss and permitting him to file a compliant motion to dismiss or answer by July 22, 2011. The Court also denied his request for a stay. On July 1, 2011, the Court granted the TRO motion, enjoining Defendants from representing to anyone that they owned the rights to the ChromaGen intellectual property (or otherwise infringing the ChromaGen trademark or patents), representing that CMGN was dissolved or does not own the rights to the ChromaGen intellectual property, and interfering in CMGN's business relationships. In that Order, the Court instructed Defendants to file a brief to address Plaintiff's application for the entry of a preliminary injunction.

On July 8, 2011, Mr. Eichenholtz filed his brief. In it, he asserted arguments very similar to those in his "motion to dismiss." On July 12, 2011, the Court held another hearing, at which the parties agreed to continue the TRO restraints with some additions and to give Mr. Eichenholtz more time to secure counsel. The Court issued an Order outlining this agreement, setting forth the TRO restraints and additional terms limiting Mr. Eichenholtz's ...


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