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Exceller Software Corp. v. Dine

United States District Court, S.D. Ohio, Western Division

December 5, 2019

Exceller Software Corp., et al., Plaintiffs,
v.
Jeff Dine, et al., Defendants.

          ORDER

          MICHAEL R. BARRETT, JUDGE

         This matter is before the Court on Magistrate Judge Stephanie K. Bowman's August 24, 2018 Report and Recommendation (Doc. 13) relating to a lawsuit filed pro se by Plaintiffs Exceller Software Corporation and Ergun Fikri against their former attorneys, Jeff Dine, Mark Hyland, Jack Yoskowitz, and the Law Firm of Seward & Kissel LLP.[1] The Magistrate Judge has recommended that Plaintiffs' case be dismissed sua sponte for lack of subject matter jurisdiction.

         The parties received proper notice under Fed.R.Civ.P. Rule 72(b) (id. at PageID 135), which included notice that the parties would waive further appeal if they failed to file objections to the R&R in a timely manner. See United States v. Walters, 638 F.2d 947, 949-50 (6th Cir. 1981). As permitted under the rule, Plaintiffs filed timely objections (Doc. 16) and Defendants filed a response (Doc. 17). Plaintiffs then filed a “sur-reply” to Defendants' response (Doc. 18) without seeking leave of Court to do so.[2] Out of an abundance of caution, the Court has considered the points raised in both Plaintiffs' objections and their “sur-reply.”

         I. STANDARD OF REVIEW

         When the assigned district court judge receives objections to a magistrate judge's R&R on a dispositive matter, the district judge “must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3). After that review, the district judge “may accept, reject, or modify the recommended decision; receive further evidence; or return the matter to the magistrate judge with instructions.” Id.

         II. ANALYSIS

         This case closely relates to a prior civil action between the same parties that this Court dismissed for lack of subject matter jurisdiction. Exceller Software Corp. v. Dine, No. 1:17-cv-277, 2018 WL 542252 (S.D. Ohio Jan. 23, 2018), report and recommendation adopted by 2018 WL 925401 (S.D. Feb. 16, 2018) (“Prior Civil Action”).[3] On the motion to dismiss of Defendants, Magistrate Judge Karen L. Litkovitz concluded there was not complete diversity of citizenship between Plaintiffs and Defendants and, hence, this Court lacked subject matter jurisdiction. 2018 WL 542252, at **1-3. No objections were filed to the Magistrate Judge's R&R, which this Court subsequently adopted. 2018 WL 925401, at *1. Here, Magistrate Judge Bowman also has found that this case should be dismissed for lack of subject matter jurisdiction, notwithstanding Plaintiffs' allegations in the Amended Complaint that this “new” civil action arises under both diversity and federal question jurisdiction. Plaintiffs object to both findings, which will be discussed in turn.

         A. This Court Lacks Diversity Jurisdiction

         Relying on the reasons expressed by Magistrate Judge Litkovitz in the Prior Civil Action, Magistrate Judge Bowman has correctly concluded that the Court does not have diversity jurisdiction. Mr. Fikri is under the mistaken impression that he can assert diversity jurisdiction as to the controversy between himself and Defendants and federal question jurisdiction as to the one between Exceller and Defendants. (See Doc. 16 at PageID 140, Doc. 18 at PageID 162, and Doc. 3 at PageID 55-58, 62). He is unequivocally wrong. The phrase “between . . . citizens of different States” means complete diversity between all plaintiffs and all defendants. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996) (the general diversity statute[4] “applies only to cases in which the citizenship of each plaintiff is diverse from the citizenship of each defendant”) (emphasis added)); see V & M Star, LP v. Centimark Corp., 596 F.3d 354, 355 (6th Cir. 2010) (under the general diversity statute, “there must be complete diversity such that no plaintiff is a citizen of the same state as any defendant”) (emphasis added) (citing Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005)). Mr. Fikri may indeed be diverse from Defendants, but Exceller, being a citizen of both New York and Ohio, [5] plainly is not. Plaintiffs' objection as to diversity jurisdiction, therefore, is overruled.

         B. This Civil Action Does Not Arise Under Federal Copyright Law

         As noted by the Magistrate Judge, Plaintiffs assert federal question jurisdiction[6]based on the premise that their malpractice claim against Defendants arises out of Defendants' alleged course of conduct in a copyright infringement case litigated in the Southern District of New York. (See Doc. 13 at PageID 132-33). Citing Gunn v. Minton, 568 U.S. 251 (2014) and Auto-Owners Ins. Co. v. Ergonomics Plus, Inc., 63 F.Supp.3d 754 (E.D. Mich. 2014) (discussing Gunn), the Magistrate Judge determined that those underlying facts were “not sufficient to invoke federal question jurisdiction in this Court.” (Id. at PageID 133).

         According to Plaintiffs, the Magistrate Judge is “wrong” and has made a “clear mistake” because the Amended Complaint presents a “case within a case” over which federal jurisdiction can be exercised. (Doc. 16 at PageID 139). They argue that the Magistrate Judge misinterpreted Gunn and urge this Court to follow a Florida appellate court decision, Solar Dynamics, Inc. v. Buchanan Ingersoll & Rooney, PC, 211 So.3d 294 (Fl. Ct. App. 2017). Upon review of the case law, however, the Court determines that it is Plaintiffs who are wrong.

         Before analyzing application of Gunn, or Solar Dynamics as Plaintiffs urge, the Court, as a preliminary matter, takes judicial notice of the underlying Southern District of New York litigation to which Plaintiffs refer in their Amended Complaint. See supra n.3. In that litigation, Defendants represented Plaintiff Exceller against Pearson Education and Addison-Wesley Longman, bringing claims for a declaration of joint authorship and for an accounting, copyright infringement, breach of contract, and unfair competition. Exceller Sofware Corp. v. Pearson Education, Inc., No. 1:10-cv-00381-PGG, ECF# 6 (S.D.N.Y. Jan. 15, 2010). That matter settled-on the record in open court after mediation-for $400, 000. (Doc. 3 at PageID 90-95).

         In Gunn, a patent owner brought a malpractice claim in state court against his attorneys over a failed patent infringement lawsuit litigated in federal court. Having lost at the trial court level, on appeal he argued that the state court lacked subject matter jurisdiction to decide his malpractice claim. The success of his claim, he reasoned, relied on a question of federal patent law, over which federal courts have exclusive jurisdiction under 28 U.S.C. § 1338.[7] 568 U.S. at 253-56. Eventually the Supreme Court granted certiorari, and ultimately ruled that § 1338(a) “does not deprive the state courts of subject matter jurisdiction.” Id. at 264. To quote Chief Justice Roberts, “we are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a).” Id. at 258. While resolution of a federal patent question was “necessary” to the underlying malpractice case-a “case within a case”-it was not “substantial in the relevant sense.” Id. at 259, 260. ...


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