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Lice Lifters, LLC, et al. v. : Michele Barrack

May 7, 2013

LICE LIFTERS, LLC, ET AL.
PLAINTIFFS,
v.
: MICHELE BARRACK, ET AL. DEFENDANTS.



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

Memorandum Opinion

In this business dispute, Plaintiff, Ilene Steinberg claims that her partner, Michele Barrack, attempted to deprive her of her intellectual property and other interests in their business, Lice Lifters, LLC ("Lice Lifters"). Plaintiff also asserts that Lice Lifters' attorneys, Michael J. Barrie, Esquire ("Barrie") of the law firm of Benesch, Friedlander, Coplan & Arnoff, LLP (the "Benesch Firm") (together "Defendants"), breached their fiduciary duties by representing Barrack's personal interests.

There are presently three motions pending before the Court. First, Plaintiff has moved to dismiss her claims against Barrack with prejudice. (Doc. No. 37.) Second, consistent with that motion, Plaintiff has moved for leave to amend her complaint to assert only a claim for breach of fiduciary duty against Barrie and the Benesch Firm, effectively withdrawing all of her other claims. (Doc No. 41.) Defendants Barrie and the Benesch Firm have also filed a motion to dismiss, arguing that this Court is without subject matter jurisdiction over Plaintiff's breach of fiduciary duty claim, and, in the alternative, that the claim fails as a matter of law. (Doc No. 25.) For the same reasons, Defendants oppose Plaintiff's request to file an amended complaint as futile. (Doc. No. 42.)

Initially, we note that Plaintiff's motion to voluntarily dismiss the claims against Barrack, which follows an out-of-court resolution of the dispute between those parties, is unopposed and will be granted pursuant to Federal Rule of Civil Procedure 41(a). With regard to Plaintiff's remaining claim against Barrie and the Benesch Firm, we agree with Defendants that the Court lacks subject matter jurisdiction over this claim. Accordingly, Defendants' motion to dismiss will be granted, and Plaintiff's request to amend her complaint will be denied as futile.

I.Background

Sometime prior to 2011, Steinberg invented a solution and process to remove head lice, which eventually became the subject of U.S. Patent Application Publication No. 2012/0093949. (2d Am. Compl. ¶ 6.) Barrack approached Steinberg about entering a business relationship, the principal asset being lice removal product and services. (Id. ¶ 8.) Steinberg agreed and the two created Lice Lifters, a Pennsylvania limited liability company that provided lice removal services through franchised service centers. (Id. ¶ 9.)

In September 2011, Barrack retained Defendants Barrie and the Benesch Firm to represent Lice Lifters, and provide general corporate advice as well as intellectual property support. (Id. ¶ 12.) Defendants received access to confidential and proprietary information, and worked with Steinberg to file and prosecute a patent application before the United States Patent and Trademark Office ("USPTO"). On October 13, 2011, Steinberg signed a "Declaration and Power of Attorney," authorizing the Benesch Firm to represent her before the USPTO.

Plaintiff alleges that from the time of their initial engagement through December 18, 2012, Defendants conducted themselves in a manner designed to promote Barrack's personal interests over Steinberg's and the business'. (Id. ¶ 16.) On August 1, 2012, Steinberg, in her capacity as CEO, instructed Barrie to cease all work on behalf of Lice Lifters. (Id. ¶ 21.) Barrie acknowledged Steinberg's request and agreed to comply. (Id. ¶ 22.) Plaintiff alleges that instead of withdrawing as counsel, Barrie continued to work on behalf of Lice Lifters with guidance from Barrack. Specifically, Plaintiff claims Defendants helped Barrack form a Lice Lifters franchise in Florida without her knowledge or consent, falsely represented themselves as equal advisors during meetings concerning a potential buyout of Steinberg's interest in Lice Lifters, and, in the Fall of 2012, filed a lawsuit on Barrack's behalf, and purportedly on behalf of Lice Lifters, against Steinberg in the Montgomery Court of Common Pleas. (Id. ¶¶ 23-29.)

On October 10, 2012, Ilene Steinberg commenced this federal action by filing a complaint against Defendants Michele Barrack, her husband, Lice Lifters of Florida, Barrie and the Benesch Firm. Lice Lifters, LLC and Lice Lifters Franchising, LLC were also named as Plaintiffs in this action. The complaint stated claims against Barrack for breach of contract, related state-law claims, and trademark and copyright violations. Steinberg also asserted a claim against Barrie and the Benesch Firm for breach of fiduciary duty. (Compl., Doc. No. 1.)

Following negotiations, on December 18, 2012, Steinberg and Barrack resolved all the disputes between them. The following day, Steinberg filed a motion to voluntarily dismiss her claims against Barrack, stating that she wished to proceed only with her breach of fiduciary duty claim against Barrie and the Benesch Firm. Defendants respond that this Court lacks subject matter jurisdiction over this claim because it is, in essence, a state-law claim for legal malpractice. Plaintiff disagrees and argues that jurisdiction exists because her claim arises under the Code of Federal Regulations ("CFR"), which govern attorneys' conduct before the USPTO.

II.Legal Standard

Under Federal Rule of Civil Procedure 15(a), a party seeking to amend its pleading after responsive pleadings have been filed may do so "only by leave of court or by written consent of the adverse party." FED. R. CIV. P. 15(a). Generally, leave to amend a complaint should freely be given; however, the court may deny leave if the amendment would be futile, in bad faith or inequitable. Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002). An amendment is futile if it does not cure a defect in the original complaint, for example by advancing a claim or defense that would not survive a motion to dismiss. Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983).

Accordingly, the standard for assessing futility is identical to the motion to dismiss standard. The court must accept the facts pleaded in the complaint, including "facts alleged on information and belief," as true and construe them in the light most favorable to the plaintiff. Semerenko v. Cendant Corp., 223 F.3d 165, 173 (3d Cir. 2000); Melo-Sonics Corp. v. Cropp,, 342 F.2d 856, 859 (3d Cir. 1965). To survive dismissal, a complaint must "contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell ...


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