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Accutrax, LLC v. Finnegan Henderson Farabow Garrett & Dunner, LLP

Superior Court of Massachusetts, Suffolk

December 18, 2017

ACCUTRAX, LLC
v.
FINNEGAN HENDERSON FARABOW GARRETT & DUNNER, LLP

          File Date: December 20, 2017

          MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO DISMISS

          Edward P. Leibensperger, Justice

         In this legal malpractice action the defendant law firm moves to dismiss on the ground that the plaintiff, Accutrax, LLC, was not the firm’s client. There is no question, however, that the law firm was engaged to perform the legal services described in the First Amended Complaint (FAC). There is also no question that the FAC adequately pleads a claim for professional malpractice and the other related claims, assuming that the plaintiff is the client of Finnegan. Thus, the issue presented is whether the sole plaintiff, Accutrax, LLC, has standing as a client to assert the claims.

         BACKGROUND

         The following facts are taken from the First Amended Complaint (FAC), and the documents attached to the FAC as exhibits.

         Three individuals acted as partners, or joint venturers, to patent and market a razor utility knife. They agreed to form a Delaware LLC to pursue the project. One partner, Kildevaeld agreed to assign his ownership and patent rights to the LLC in exchange for contributions by the other two partners, Billado and Cumings, to commercialize and market the knife. The three partners went to defendant, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Finnegan) to obtain legal counsel for their enterprise.

         The partners informed Finnegan that they intended to form a Delaware LLC with the name " Contractor Trusted, LLC." They informed Finnegan that the LLC had not yet been formed. Nevertheless, Finnegan prepared an engagement letter for the legal representation, designating the client as " Contractor Trusted, LLC." The engagement letter, dated March 4, 2013, was signed by Billado on behalf of Contractor Trusted, LLC. The engagement letter made it clear that Finnegan’s client was Contractor Trusted, LLC and not any officer, director, shareholder or employee of the LLC. The engagement letter attached an invoice for $5, 000. On March 6, 2013, the invoice was paid by a check from Billado.

         The partners intended to market the knife under the name Accutrax. When they finally incorporated the anticipated LLC, they decided to name the corporation Accutrax, LLC, instead of Contractor Trusted, LLC. Accutrax, LLC was formed on June 6, 2013. No entity by the name of Contractor Trusted, LLC was ever formed. All three partners became members of Accutrax, LLC. " Finnegan had actual as well as constructive knowledge that Kildevaeld, Billado, and Cumings used the name Accutrax, LLC instead of Contractor Trusted, LLC for their LLC." FAC ¶ 35.

         Finnegan proceeded to perform legal services. Billado provided to Finnegan a prior art search result that he had from another attorney. Invoices for April and May 2013 were sent by Finnegan to " Contractor Trusted, LLC" for attorney time and disbursements in connection with the patent application for, as noted on the bills, " Accutrax." The invoices were promptly paid by Billado. Accutrax, LLC alleges that " [b]etween March 2013 and August 2013, Billado paid Finnegan approximately $15, 000 on behalf of the LLC for the engagement." FAC ¶ 38.

         Accutrax, LLC alleges that, counter to the understanding when the partners engaged Finnegan, Finnegan prosecuted the patent application on behalf of Kildevaeld, not the LLC. A patent for the knife was issued to Kildevaeld, individually. Finnegan did not prepare and obtain an assignment of the patent rights from Kildevaeld to the LLC.

         At some time later, after Accutrax LLC was formed, Finnegan took the position that it represented Kildevaeld, individually, not Accutrax, LLC. Finnegan denied that it represented any corporation in connection with the patent application for the knife. The three partners continued as members of Accutrax, LLC to seek marketing opportunities for the knife. In October 2014, Kildevaeld asserted that the patent belonged to him, and began to negotiate for a deal in his own right. Accutrax, LLC alleges that Finnegan assisted Kildevaeld with respect to his claim of ownership of the patent rights, in violation of Finnegan’s fiduciary duty to the LLC. The dispute between Accutrax, LLC and Kildevaeld caused Accutrax, LLC to be unable to secure marketing contracts, thereby causing damage to Accutrax, LLC.

         The FAC indicates that Kildevaeld is no longer a member of Accutrax, LLC. At oral argument, reference was made to litigation (in another county in Massachusetts) between the original partners who formed Accutrax, LLC.

         DISCUSSION

         To survive a motion to dismiss, a complaint must set forth the basis for the plaintiff’s entitlement to relief with " more than labels and conclusions." Iannacchino v. Ford Motor Co.,451 Mass. 623, 636, quoting Bell A. Corp. v. Twombly,550 U.S. 544, 555 (2007). At the pleading stage, Mass.R.Civ.P. 12(b)(6) requires that the complaint set forth " factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief ..." quoting Bell A. Corp., 550 U.S. at 557. The court must, however, accept as true the allegations of the ...


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