United States District Court, D. New Jersey
OPINION DENYING PLAINTIFFS' MOTION TO
Dunn Wettre, United States Magistrate Judge.
the Court is plaintiffs' motion for leave to amend the
Complaint. ECF No. 38. Defendant opposes the motion. ECF No.
39. This motion is decided without oral argument, pursuant to
Federal Rule of Civil Procedure 78. Having considered the
parties' submissions, plaintiffs' motion to amend is
DENIED for the reasons set forth below.
a legal malpractice action in which plaintiffs allege
defendant Friedman & Friedman, Ltd. ("Friedman &
Friedman") and various other law firms failed to
properly represent Demodulation, Inc. in three patent
infringement actions. Plaintiffs commenced this action in the
Superior Court of New Jersey, Bergen County, Law Division in
March 2016. See ECF No. 1-1. Defendant removed the
action to this Court on grounds of diversity of citizenship
jurisdiction, 28 U.S.C. § 1332, in August 2016.
See ECF No. 1. Plaintiff James O'Keefe is a
citizen of New Jersey and plaintiff Demodulation is a
Delaware corporation with its principal place of business in
New Jersey. ECF No. 1-1 ¶¶ 1-2. Defendant Friedman
& Friedman is an Illinois corporation whose principal
place of business is in Chicago, Illinois. ECF No. 1 ¶
16. The amount in controversy exceeds the $75, 000
after defendant removed the action to this Court,
then-counsel for plaintiffs filed a motion to withdraw, ECF
No. 4, and defendant filed a motion to dismiss for lack of
personal jurisdiction and for failure to state a claim, ECF
No. 5. The Court granted the motion to withdraw and
defendant's motion to dismiss was administratively
terminated to permit plaintiffs time to secure new counsel.
ECF Nos. 12, 13. Acting pro se, plaintiff
O'Keefe filed a motion for leave to amend the complaint
on March 6, 2017. ECF No. 25. Joshua Thomas, Esq. filed a
notice of appearance on behalf of plaintiffs on July 12,
2017, and plaintiffs pro se motion to amend was
withdrawn without prejudice. ECF No. 31. The Court held an
in-person settlement conference with the parties on September
29, 2017, after which the Court granted plaintiffs leave to
file the instant motion by November 9, 2017, which was timely
filed. ECF Nos. 37, 38. Defendant opposes the motion. ECF No.
seek to file an Amended Complaint that would add several
defendants and claims to the current Complaint. Presently,
the Complaint alleges that in September 2015, plaintiffs
retained defendant Friedman & Friedman to represent
Demodulation in a patent infringement matter,
Demodulation, Inc. v. United States, Civ. No.
11-236, filed in the Court of Federal Claims. ECF No. 1-1
¶¶ 5-6. The Complaint further alleges that due to
defendant's failure to perform its duties, plaintiffs
terminated the agreement two months later on November 16,
2015. Id. ¶ 10. Nevertheless, plaintiffs
allege, the defendant billed plaintiffs approximately $270,
000 for legal work done in connection with the litigation.
Id. ¶ 11. The Complaint asserts a claim for
legal malpractice and seeks a declaration of reasonable legal
fees, a declaration that the fees billed by defendants are
unreasonable, and the return of plaintiffs' files.
Id. at 3-7.
Proposed Amended Complaint ("PAC") includes the
foregoing allegations, as well as entirely new factual
allegations and claims against additional defendants. The
allegations, although difficult to discern, seem essentially
to aver that defendant Friedman & Friedman and the
proposed defendants conspired to defraud plaintiffs.
See PAC, ECF No. 38. The PAC alleges that in
November 2010, proposed defendant Benjamin Light, Esq. served
as lead counsel for Demodulation and that his firm, Armando
& Light, merged into the Callagy Law Firm. Id.,
¶¶ 1-3. According to the PAC, the Callagy Law Firm
filed three lawsuits on behalf of Demodulation in the
Superior Court of New Jersey, the District of New Jersey, and
the Court of Federal Claims, for which the firm received
significant funds from a New-Jersey based company, Law
Funder, and a large amount of documentation and evidence from
Demodulation. Id. ¶¶ 7-11. The PAC avers
that although Mr. Light believed in the merits of the
lawsuits, Mr. Callagy did not and conspired to curtail their
success by, inter alia, failing to retain the
necessary resources and experts, tampering with Mr.
Light's pleadings, and unilaterally dismissing one
action. Id., ¶¶ 12-17, 20. The PAC does
not provide any explanation of the three alleged underlying
lawsuits, and therefore it is entirely unclear to which suits
the PAC is referring, and the way in which this alleged
behavior affected the suits.
goes on to allege that Mr. Light and Mr. Callagy had an
employment dispute that negatively affected
Demodulation's lawsuits. Id. ¶¶ 19-28.
The PAC states that after the dispute was resolved,
plaintiffs' lawsuits were assigned to a junior attorney
at the Callagy Firm, Mr. Saltman, who was incapable of
handling the actions. Id. ¶¶ 29-31. The
PAC states Mr. Light, then, attempted to "scuttle
Demodulation's lawsuits" by engaging in unauthorized
"backdoor" settlement discussions with a defendant
in one of the actions and intensely pressured plaintiffs to
settle. Id. ¶¶ 32-35. The PAC then appears
to allege that the firm's failure to properly represent
Demodulation in an unidentified lawsuit, which allegedly
included filing a pleading after the statute of limitations
had passed, a "dump" of discovery upon opposing
counsel, and improperly giving experts confidential
information, resulted in multiple Court imposed sanctions
against the company. Id. ¶¶ 37-39, 44-45.
The PAC further avers that the Callagy Firm lost a number of
critical documents relating to the actions. Id.
then seems to turn its allegations against the proposed
defendants from negligent to intentionally tortious conduct.
Plaintiffs allege that Mr. Light and Mr. Smikun, whose
involvement is not explained and who is not named as a
proposed defendant in this matter, "wrote two extortion
letters" demanding that Mr. O'Keefe perjure himself,
in a manner unexplained by the PAC, regarding their
representation of Demodulation in the patent actions.
Id. ¶¶ 46-51. The PAC alleges this was
done in order to "mitigate against any possible
malpractice suit... by Demodulation." Id.
then claims that Mr. Callagy, Mr. Light, Mr. Smikun, and Mr.
McKenna, conspired and "crafted a scheme for
their own pecuniary gain, " id. ¶¶
55-56, and that "an enterprise consisting of four law
firms, a ... funding company, and a total of twelve
individuals" was formed "for the purpose of running
a money laundering scheme to divert 'contingency'
funds intended for three lawsuits filed by Demodulation Inc.,
to other purposes and to facilitate fraudulent actions."
Id. ¶ 94. Although the underlying facts
comprising this scheme are unclear, the PAC avers that the
scheme included the following: the Callagy Firm obtained a
$3, 000, 00 malpractice insurance policy, id. ¶
58; Mr. Light gave his old friend, Mr. McKenna, $200, 000 to
take on Demodulation as a client "in return for
protecting The Calagy [sic] Defendants from exposure for
their actions, " id. ¶¶ 60-62; and
the alleged conspirators would "obtain an additional
$269, 441.25 kickback comprised of lawyer fees claimed by
Friedman [&] Friedman, Ltd., " id. ¶
appears to imply that plaintiffs were not informed of the
purported relationship between the law firms. Id.
¶ 66. Further, without elaboration, the PAC alleges that
Mr. O'Keefe was forced to sign two contracts: one
releasing the Callagy attorneys from liability, id.
¶ 67, and another retaining Friedman & Friedman, the
originally named defendant, under which O'Keefe agreed to
be held personally responsible for the legal fees of
Demodulation, id. ¶¶ 110, 113. As alleged
in the original Complaint, the PAC avers that Friedman &
Friedman's representation of Demodulation quickly
deteriorated. The PAC adds that as a result, a judgment in
favor of Friedman & Friedman of $269, 411.25 was entered
against Mr. O'Keefe in Illinois. Id. ¶ 91.
Additionally, the PAC alleges that this judgment was issued
as a result of Mr. McKenna's failure adequately to
represent plaintiffs. Id. ¶¶ 89-90.
on the foregoing allegations, plaintiffs seek leave to
implead multiple defendants, including thirteen law firms and
eight attorneys,  and to assert additional claims for fraud,
wire fraud, a violation of the Racketeer Influenced and
Corrupt Organization Act ("RICO"), legal
malpractice, and breach of contract. Plaintiffs assert this
Court would have federal question jurisdiction over the
proposed amended action pursuant to 28 U.S.C. § 1331.
Friedman & Friedman argues the Court should deny
plaintiffs' motion to amend because the new claims
against the additional defendants in its proposed Amended
Complaint are futile. See Defendant's Opposition,
ECF No. 39. For the reasons set forth below, the Court denies
plaintiffs' motion to amend the Complaint.
15(a)(2) of the Federal Rules of Civil Procedure provides
that a court should "freely give leave [to amend] when
justice so requires." Fed.R.Civ.P. 15(a)(2). Courts
grant leave to amend liberally in light of "the
principle that the purpose of pleading is to facilitate a
proper decision on the merits." Foman v. Davis,
371 U.S. 178, 182 (1962). The United States Supreme Court
holds that leave to amend under Rule 15 may be denied in
cases of: (1) undue delay; (2) bad faith or dilatory motive;
(3) undue prejudice; or (4) futility of amendment.
Id. "The burden is generally on the party
opposing the amendment to demonstrate why the amendment
should not be permitted." Luppino v. Mercedes-Benz
USA, LLC, Civ. No. 09-5582 (DMC) (JAD), 2012 WL 850743,
at *2 (D.N.J. Mar. 8, 2012).