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Shamrock Lacrosse, Inc. v. Klehr

June 14, 2010

SHAMROCK LACROSSE, INC., PLAINTIFF-APPELLANT,
v.
KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS, LLP; AND OBERMEYER REBMANN MAXWELL & HIPPEL, LLP, DEFENDANTS-RESPONDENTS, AND NATIONAL IP RIGHTS CENTER, LLC, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1664-08.

The opinion of the court was delivered by: Sabatino, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued April 28, 2010

Before Judges Stern, Sabatino, and J. N. Harris.

This appeal concerns the applicability of the statutory affidavit of merit requirement, N.J.S.A. 2A:53A-26 to -29, to a malpractice action that plaintiff, a New Jersey company, brought in the Law Division against two law firms. Although the law firms are principally located in Pennsylvania, each of them has bona fide offices in this State, and has one or more partners and associates admitted to the New Jersey bar.

Plaintiff's complaint arises out of allegedly negligent omissions by a patent attorney who had worked, in succession, at the two law firms. The complaint alleges that the patent attorney, who is now deceased, failed to assure that certain renewal fees necessary to maintain plaintiff's patent were paid to the United States Patent and Trademark Office ("the USPTO"). Consequently, the patent expired, and plaintiff was unable to get it reinstated. As a result, plaintiff claims that it suffered economic harm in this State. The trial court dismissed the complaint because plaintiff had not served an affidavit of merit upon defendants in accordance with the time limits prescribed by the statute.

On the circumstances presented by this record, we sustain the Law Division judge's legal conclusion that plaintiff was obligated to serve a timely affidavit of merit upon the defendant law firms. However, we vacate the dismissal order on equitable grounds, particularly because the case law in our State was unsettled to date as to whether an affidavit of merit is required in such circumstances, and the federal decisions on the subject attempting to apply New Jersey law have taken arguably divergent approaches.

I.

Plaintiff, Shamrock Lacrosse, Inc., is a New Jersey corporation that has its principal place of business in East Hanover Township in Morris County. Plaintiff is in the business of manufacturing and selling athletic apparel and equipment, with a particular emphasis on the sport of lacrosse. As part of its business, plaintiff manufactures specialized lacrosse sticks.

Defendant Klehr, Harrison, Harvey, Branzburg & Ellers, LLP ("Klehr"), is a large law firm with its principal offices in Philadelphia, Pennsylvania. Klehr is a limited liability partnership organized under Pennsylvania law. At the times relevant to this action, Klehr maintained a bona fide office in Cherry Hill, New Jersey, where one or more partners and associates admitted to the New Jersey bar principally conducted their law practices. Similarly, defendant Obermeyer Rebmann Maxwell & Hippel, LLP ("Obermeyer"), is a large law firm headquartered in Philadelphia. Obermeyer is also a Pennsylvania limited liability partnership. At the times relevant to this action, Obermeyer likewise maintained a bona fide office in Cherry Hill, where apparently several of its partners and associates admitted in New Jersey principally worked.

A. Plaintiff's Patent and Its Expiration Due To Non-Payment

On August 2, 1994, Ron MacNeil, an inventor, filed a patent application with the USPTO for a lacrosse stick head. The patent, number 5494297, (the "'297 patent") was issued on February 27, 1996. Two months later, in April 1996, MacNeil assigned the rights to the patent to plaintiff.

In August 1997, plaintiff retained a patent attorney, Jeff Navon, Esq., and his law firm, defendant Klehr, to represent it before the USPTO concerning the '297 patent. At that time, another patent attorney, Scott J. Fields, Esq., was also employed at the Klehr firm. Both Navon and Fields worked out of Klehr's offices in Philadelphia. According to a letter in the record from Fields, plaintiff "was referred into [Klehr] via a contact of Jeff Navon and [was], prior to his [Navon's] departure, his client." That same letter from Fields further states that plaintiff specifically retained Klehr "to pursue the matter of [a] reissue application [before the USPTO for the '297 patent]." Plaintiff was pursuing the reissue application to cure a previous defect in the '297 patent, a defect that is not specified in the record or germane to this case.

After Navon departed from Klehr in 1999, Fields assumed the responsibility to represent plaintiff in connection with the reissue patent. At that time, Fields was an attorney licensed to practice before the USPTO, and admitted to the bar of the State of Pennsylvania. Fields also had passed the New Jersey bar examination and was admitted to practice in New Jersey in 1987. However, on October 26, 1989, the Supreme Court of New Jersey declared Fields ineligible to practice because of his non-payment of annual fees to the New Jersey Lawyer's Fund for Client Protection ("Client Protection Fund"), pursuant to Rule 1:20-1 and Rule 1:28-2. Fields did not thereafter cure the non-payment deficiency, so he continued to remain each year after 1989 on the ineligibility list.

In late August 1999, the first maintenance payment on the '297 patent was due in the USPTO office. After it did not receive that required maintenance fee, the USPTO sent a reminder notice in September 1999 to the address that it had on file for the '297 patent. The address was that of inventor MacNeil in Milton, Ontario, a suburb of Toronto.*fn1

On February 27, 2000, the '297 patent expired, due to the failure to pay the required maintenance fees to the USPTO. The limited record before us contains no indication of whether Fields was specifically notified of the patent's expiration at that time.

In May 2000, Fields left Klehr and joined Obermeyer, at the latter's Philadelphia offices. The following month, June 2000, Fields filed a notice of change of firm with the USPTO to reflect his new professional affiliation. Subsequently, in January 2001, plaintiff's client file was transferred from Klehr to Obermeyer, where Fields continued to serve as plaintiff's patent attorney.

On April 2, 2002, the USPTO granted an allowance for a reissue of the '297 patent, allowing the cure of the previously-identified defect. Apparently, this administrative action by the USPTO was a mistake, as the '297 patent actually had expired more than two years earlier, in February 2000, because of the non-payment of the maintenance fee.

On October 22, 2002, the USPTO issued patent RE37,894E (the "reissue patent"), ostensibly reissuing the '297 patent. Obermeyer forwarded that reissue patent to plaintiff, along with a letter from Debbie A. Oshansky, a paralegal with the firm. Oshansky's letter advised plaintiff (apparently incorrectly) that the patent remained "in force until October 22, 2019." Her letter also stated to plaintiff that Obermeyer was "not responsible for the payment of annuities," and that "the payment dates have not been entered into [Obermeyer's] computer." Receipt of Oshansky's letter was acknowledged by a return signature of Peter Rogers, plaintiff's company president, on October 30, 2002.

There is no indication in the record, at least as it is presently developed, that any licensed New Jersey attorneys at Klehr or Obermeyer supervised Fields's work on plaintiff's patent. Nor is there any present indication that any other attorney at those firms who had been admitted to the New Jersey bar participated in plaintiff's representation. The record is silent as to which attorney or attorneys supervised Oshansky, the paralegal at Obermeyer who sent plaintiff the October 2002 letter concerning the reissue patent.

Fields left the employ of Obermeyer in 2003 and started his own firm, National IP Rights Center, LLC ("National"), also based in Philadelphia. Plaintiff followed Fields to his new firm, severing its client relationship with Obermeyer.

In August 2003, the second maintenance fee on the '297 patent would have become due, had the patent not expired in February 2000. The grace period for a late payment of that second fee would have expired on February 27, 2004. Evidently this second maintenance fee also was never paid.

On September 26, 2005, Fields's license to practice in New Jersey was administratively revoked by an order of the Supreme Court, pursuant to 2004 amendments to Rule 1:20-1(d) and Rule 1:28-2(c), because Fields had been on the ineligible list for a period of more than seven consecutive years. As a consequence of this revocation, Fields's membership in the New Jersey bar terminated. See R. 1:28-2(c) (providing that "[o]n the entry of a license revocation [o]rder pursuant to this Rule, the attorney's membership in the [b]ar of this State shall cease.")

In January 2007, plaintiff entered into negotiations with a third party on a potential contract involving the '297 patent. During the course of those negotiations, plaintiff discovered that the '297 patent had expired in 2000 and that its reissue patent was therefore invalid.*fn2 This adverse revelation aborted the contract negotiations between plaintiff and the third party.

Plaintiff then retained separate counsel--apparently one not affiliated with Fields, Klehr, or Obermayer--to attempt to reinstate the '297 patent with the USPTO. That effort ultimately proved unsuccessful, and plaintiff consequently lost its patent.

On April 23, 2007, Fields died. In the aftermath of Fields's death, National dissolved as an entity.

B. Plaintiff's Complaint, Defendants' Answers and the Ensuing Motions

After losing its patent, plaintiff filed a complaint in the Law Division on June 4, 2008, against Klehr, Obermayer, and National.*fn3 Specifically, plaintiff alleged that the law firms:

(1) were negligent or grossly negligent in the preparation and protection of plaintiff's intellectual property; (2) breached their contractual obligations to represent plaintiff diligently before the USPTO; (3) committed legal malpractice in not diligently maintaining the '297 patent; and (4) breached their fiduciary duties owed to ...


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