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Leibholz v. Robert Hariri and Celgene Corp.

July 26, 2007

STEPHEN W. LEIBHOLZ, PLAINTIFF
v.
ROBERT HARIRI AND CELGENE CORP., DEFENDANTS.



The opinion of the court was delivered by: Honorable Esther Salas, United States Magistrate Judge

OPINION AND ORDER ON FORMAL MOTION

This matter having been opened to the Court upon Motion by Robert Zeller, Esq., of the Rem Zeller Law Group, attorneys for Plaintiff, seeking leave to file a Second Amended Complaint pursuant to FED. R. CIV. P. 15(a); and considering Defendants' opposition; for the reasons set forth below, the Motion is hereby granted.

I. FACTUAL BACKGROUND*fn1

Defendant Hariri ("Defendant/Hariri") is a medical doctor and researcher who specializes in the areas of neurosurgery, neurotrauma/critical care, cell biology and vascular pathology. Hariri formed LifeBank, Inc., which commenced active business operations in 1998, later changing its name to Arthrogenesis, Inc. LifeBank harvested stem cells from umbilical cords and placentas and performed medical research on the medical uses of umbilical blood stem cells.

Plaintiff Leibholz ("Plaintiff/Leibholz") is a businessman and physicist with experience in U.S. defense contracting. At the time Leibholz met Hariri, Leibholz was operating Chesapeake TechLabs, Inc., and was engaged in consulting services. In 2000, Leibholz was introduced to Lifebank as an advisor to Mr. Richard Farkas, one of the prospective investors in Lifebank. Thereafter, from early 2000, through September 2000, Leibholz periodically visited LifeBank and discussed management, marketing and technical matters with Hariri. Leibholz states that he and Hariri worked together on a preliminary design for a transporter device for live stem cells, and Leibholz incorporated a non-profit entity, the Biomedical Research Institute, Inc. ("BRI"), at Hariri's request.

According to Leibholz, the purpose of BRI was to perform research and development using LifeBank facilities and personnel, and to qualify LifeBank for certain government research grants. Leibholz also certified that he and Hariri explored possible participation in government defense projects involving stem cells. Liebholz claims that "during one or more meetings in September of 2000," Hariri offered to give Leibholz LifeBank stocks and stock options from Hariri's personal holdings in exchange for Leibholz's services. Leibholz avers that he agreed to this arrangement, but that he requested that Hariri confirm in writing the number of shares and share options that Hariri was proposing. Liebholz alleges that he continued to perform services for Hariri in reliance on Hariri's oral promises.

On September 29, 2000, Hariri wrote Leibholz a letter stating that Hariri wanted Leibholz to have an equity interest in LifeBank "as an incentive for further collaboration." In that letter, Hariri pledged to give Leibholz 20,000 shares of Hariri's stock in LifeBank and 20,000 warrants to purchase Lifebank common stock from Hariri's personal holding at $5.00 per share, exercisable through December 31, 2005. Leibholz claims that during the twelve-month period following September 29, 2000, he made five visits to the LifeBank office and two trips to Oak Ridge, Tennessee, where he met with officials at the Oak Ridge National Laboratories ("REACT") and discussed a possible relationship with LifeBank. Further exploration of the REACT project was abandoned, however, when Hariri refused to participate. Although Leibholz met and spoke with Hariri during this time, they did not discuss Leibholz's compensation.

Sometime in 2004, LifeBank merged into Celgene, Inc., a major pharmaceutical and biotechnological company. This prompted Leibholz, who had only kept in sporadic touch with Hariri after 2002, to review his documents. On December 31, 2004, Leibholz sent a letter to Hariri demanding that Hariri honor the terms of his September 29, 2000, letter. Hariri refused, claiming that LifeBank had gone out of business and that, in any event, the September 29, 2000, offer was retracted by his October 2, 2000, letter.

Leibholz and his secretary certified that Leibholz did not receive Hariri's October 2, 2000, letter. Hariri paints a wholly different picture of Leibholz's involvement with LifeBank. According to Hariri, Leibholz continually represented that he had the ability to raise substantial funds for LifeBank.. Hariri admits that he engaged in preliminary discussions concerning a possible collaboration with Leibholz's company, TechLabs, to pursue government research grants. Hariri claims that his September 29, 2000, letter merely outlined the draft terms of a possible business relationship with Leibholz's company, and that this proposal was retracted by a letter sent to Leibholz on the next business day. The October 2, 2000, letter detailed a discussion Hariri had with John Haines, LifeBank's CEO, who advised Hariri against any business relationship with Leibholz. Hariri and his staff certified that Hariri sent the October 2, 2000, letter to Leibholz on October 2, 2000, by first class mail.

Hariri further denies having ever requested or received any services from Leibholz, as a consultant or otherwise, and characterizes Leibholz as someone "seeking to obtain a joint venture partner," whose overtures were repeatedly rejected by Hariri and LifeBank. Hariri points out that Leibholz never had access to LifeBank's books, records or proprietary information, and that Leibholz produced no records in connection with the alleged "consulting services." Hariri also avers that the only connection Leibholz had with Hariri and LifeBank after October 2, 2000, was Leibholz's unauthorized representation to government entities that Leibholz had potential access to Lifebank's products and services.

In his counterclaims, Hariri alleges that Leibholz is the owner and proprietor of an entity known as Gensor, Inc. ("Gensor"), which is billed on its website, www.gensor.com, as a biochemical and nanotechnology company. The Gensor website contains a page which lists the people and resources involved with the company, and this listing includes Hariri, who is identified as the Vice President and Chief Scientist. Hariri is specifically listed as follows:

"The VP Chief Scientist, Robert Hariri, MD, PhD, is a biologist, neurosurgeon, and inventor with extensive scientific and entrepreneurial experience."

Gensor also has a picture of the laboratory of Lifebank, which is owned and operated by Hariri and which is wholly unconnected with Gensor, labeled as "Bio Laboratory" on its website. Hariri is not the VP and Chief Scientist of Gensor, nor is he associated with Gensor in any way. Leibholz was aware at all relevant times ...


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