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Sleppin v. Thinkscan.com, LLC

United States District Court, E.D. New York

October 23, 2014

STUART SLEPPIN and ROBERT TEEMAN Derivatively as Members of THINKSCAN. COM, LLC, and THINKSCAN.COM, LLC, Plaintiffs,
v.
THINKSCAN.COM, LLC, and JOEL WEINBERGER, DREW WESTEN, ROBERT BORNSTEIN, and IMPLICIT STRATEGIES, LLC, Defendants

As Corrected October 28, 2014.

Page 367

[Copyrighted Material Omitted]

Page 368

[Copyrighted Material Omitted]

Page 369

For the Plaintiffs: Douglas Hirsch, Esq., Jennifer Rossan, Esq., Michelle N. Tanney, Esq., Of Counsel, Sadis & Goldberg, LLP, New York, NY.

For Joel Weinberger, Drew Westen, Robert Bornstein and Implicit Strategies, LLC, Defendants: David W. Feeney II., Esq., Of Counsel, Feeney Law Office, Ithaca, NY.

For Drew Westen, Defendant: Jura C. Zibas, Esq., Of Counsel, Stephen James Barrett, Esq., Of Counsel, Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, New York, New York.

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DECISION AND ORDER

ARTHUR D. SPATT, United States District Judge.

On May 3, 2012, the Plaintiffs Stuart Sleppin, Robert Teeman, and Thinkscan.com, LLC (" Thinkscan" ), derivatively, (collectively, " the Plaintiffs" ) commenced this action against the Defendants Thinkscan and Joel Weinberger (" Weinberger" ) in the Supreme Court of the State of New York, County of Suffolk, seeking dissolution of Thinkscan and asserting various state law causes of action against Weinberger for damages. On July 24, 2012 and February 7, 2014, the Plaintiffs amended their state court complaint twice to add the Defendants Drew Westen (" Westen" ), Robert Bornstein (" Bornstein" ), Implicit Strategies, LLC (" Implicit" ), and Westen Strategies.

On March 3, 2014, the Defendants Westen Strategies and Westen filed a notice of removal to federal court pursuant to 28 U.S.C. § 1441(b) on the ground that, the Plaintiffs state law claims were preempted by 17 U.S.C. § 301, et seq., of the Copyright Act (the " Copyright Act" ), and the case fell within the Court's federal question jurisdiction under 28 U.S.C. § 1331. On March 12, 2014, the Defendants Thinkscan, Weinberger, Bornstein, and Implicit filed a petition to join the notice of removal.

On March 27, 2014, the Plaintiffs filed a third amended complaint withdrawing its state law claims for conversion, unjust enrichment, and for injunctive relief and removing Westen Strategies as a Defendant. On April 21, 2014, the Defendants Weinberger, Bornstein, and Implicit asserted counterclaims for various state law causes of action, as well as claims for declaratory judgments as to copyright ownership and non-infringement.

Presently before the Court is the Plaintiffs' motion to remand this action to New York State, Supreme Court, Suffolk County, and for attorneys' fees and costs incurred in connection with this motion. The Plaintiffs argue that this Court does not have jurisdiction over any of the claims of the parties. For the reasons set forth below, the Court grants the Plaintiffs' motion to remand and denies their motion for attorneys' fees and costs.

I. BACKGROUND

This case involves a dispute over a failed business venture involving the Plaintiffs Stuart Sleppin and Robert Teeman and the Defendant Joel Weinberger. In the late 1990s, the three individuals started a business with the aim of developing software capable of performing product evaluations of consumer products to help potential clients sharpen their marketing and advertising strategies. (Third Am. Compl. ¶ 16; the Defs.' Answer and Countercls. ¶ 197.)

The Plaintiffs allege that on January 21, 1999, Sleppin, Weinberger, and Teeman formed Research.com, Inc. as a New York corporation (" Research.com" ). (Third Am. Compl. ¶ 18.)

From about 1999 to 2007, the Plaintiffs allege that Sleppin, Teeman, and Weinberger oversaw computer programming teams developing software which would

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implement the product surveys that the joint venture sought to market to the advertising industry. (Third Am. Compl. ¶ ¶ 27, 32.) During this period, the Plaintiffs also allege that the Defendant Weinberger asked the Defendants Drew Westen and Robert Bornstein, two psychology academics, to assist in developing the software. (Third Am. Compl. ¶ 30.)

The Plaintiffs allege that in about 2007, Sleppin, Teeman, and Weinberger formed a new entity, Thinkscan, a New York limited liability company, and transferred all of the assets and liabilities from Research.com to Thinkscan. (Third Am. Compl. ¶ 41.)

From 2007 through 2009, the Plaintiffs allege that Thinkscan continued to refine its software using its own employees, as well as paying a team of computer programmers in Manila. (Third Am. Compl. ¶ 50.) During this period, the Plaintiffs allege that Thinkscan launched its software and was engaged by several corporate clients. (Third Am. Compl. ¶ 60.)

On October 27, 2009, then-counsel for Weinberger and Westen sent a letter to Thinkscan ending their business relationship with the Plaintiffs. (Third Am. Compl. ¶ 69; the Defs' Answer and Countercls. ¶ 340.)

After Weinberger and Westen left Thinkscan, the Plaintiffs allege that Weinberger, Westen, and Bornstein formed Implicit, a company designed to compete with Thinkscan. (Third Am. Compl. ¶ 19.) The Plaintiffs contend that Weinberger, Bornstein, and Westen misappropriated, among other things, Thinkscan's customer lists, presentation materials, and software for the benefit of Implicit. (Third Am. Compl. ¶ 84.) The Plaintiffs also contend that immediately after they left Thinkscan, Weinberger and Westen engaged in negotiations to transfer Thinkscan's clients to Implicit. (Third Am. Compl. ¶ 99.) Based on these actions, the Plaintiffs have brought state law claims against the Defendants seeking an order directing that Thinkscan's property be assigned to its creditors in satisfaction of certain debts owed to the creditors and for damages of at least $355,044.30. (Third Am. Compl. ¶ 151.)

In response, the Defendants maintain that the Plaintiffs formed Research.com and Thinkscan without their knowledge or consent, and believed that the parties' business venture was organized as an unincorporated partnership from the 1990s until October 27, 2009. (The Defs.' Answer and Counterclaims ¶ ¶ 155, 206, 215, 216.) As such, the Defendants maintain that the software and presentation materials at issue were owned by Weinberger and that he never assigned ownership of these works to the Plaintiffs. (The Defs.' Answer and Countercls. ¶ ¶ 401-404.) The Defendants Weinberger and Westen further allege that they terminated their relationship with Thinkscan over disputes with the Plaintiffs about whether the Thinkscan software could be reliably marketed, as it allegedly contained design flaws. (The Defs.' Answer and Countercls. ¶ 277.) They also allege that they terminated their relationship with Thinkscan over a dispute about whether Weinberger would give up an additional percentage of his equity in the business to help finance efforts by additional computer programmers to fix the alleged software flaws. (The Defs.' Answer and Countercls. ¶ 281.) Based on these actions, the Defendants assert various counterclaims, including two claims for a declaratory judgment that the works at issue were owned by Weinberger and not misappropriated by the Defendants in violation of the Copyright Act, 17 U.S.C. § 101, et seq. (The Defs.' Answer and Counterclaims ¶ ¶ 407, 528.)

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II. DISCUSSION

A. Legal Standard on a Motion to Remand

Pursuant to 28 U.S.C. § 1441(a), " any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441; see also Lincoln Property Co. v. Roche, 546 U.S. 81, 126 S.Ct. 606, 610, 163 L.Ed.2d 415 (2005) (explaining that § 1441 " authorizes the removal of civil actions from state court to federal court when the action initiated in state court is one that could have been brought, originally, in a federal district court" ). Accordingly, for a federal court to have removal jurisdiction, it must have original subject matter jurisdiction over a cause of action. See, e.g., Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (" Only state-court actions that could have been filed in federal court may be removed to federal court by the defendant." )

Following the removal of a state court action, " if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). Defendants bear the burden of demonstrating that federal subject matter jurisdiction exists. Cohen v. Narragansett Bay Ins. Co., No. 14-CV-3623 (PKC), 2014 WL 4701167, at *1 (E.D.N.Y. Sept. 23, 2014) (quoting Cal. Pub. Emps.' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir. 2004)).

Pursuant to 28 U.S.C. § 1331, the district courts have original subject matter jurisdiction " over all civil actions arising under the [United States] Constitution and the laws and treaties of the United States." Under the " well-pleaded complaint rule," federal jurisdiction is present only if a question of federal law appears on the face of the plaintiff's " well-pleaded complaint" -- thus requiring a court to ignore any and all answers, defenses, and counterclaims. Fleet Bank, Nat'l Ass'n v. Burke, 160 F.3d 883, 886 (2d Cir. 1998) (" [The well-pleaded complaint] rule requires a complaint invoking federal question jurisdiction to assert the federal question as part of the ...


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