Verify Smart Corp. v. Bank of America, N.A. et al

RESPONSE re Notice

D.N.J.January 18, 2018

ZIMMERMAN LAW GROUP _______________________________________ ATTORNEYS AT LAW 233 WATCHUNG FORK WESTFIELD, NJ 07090 TEL: (908) 768-6408 FAX: (908) 935-0751 www.zimllp.com WRITER’S E-MAIL jmz@zimllp.com January 18, 2018 VIA CM/ECF Hon. John Michael Vazquez Martin Luther King, Jr. Building & U.S. Courthouse 50 Walnut Street Newark, NJ 07101 Re: Verify Smart Corp. v. Bank of America, N.A. et al. Case No. 17-cv-04248-JMV-JBC Dear Judge Vazquez: Plaintiff, Verify Smart Corp. (“Verify”), through its attorneys, respectfully responds to Defendants’ submission of supplemental authority made yesterday (Dkt. 43), and incorporates herein by reference the filing it submitted on October 19, 2017 (Dkt. 34), which sought leave of this Court for additional discovery to support an Amended Complaint. The December 26, 2017 decision of the Patent Trial and Appeal Board (“PTAB”) in Askeladden LLC v. Verify Smart Corp., Case No. IPR2017-00726 (“PTAB Decision”), attached as Ex. A to Defendants’ submission, clearly supports the main position set forth in the Complaint, namely that the mandatory statement of Real Party-in-Interest (“RPI”) filed by Askeladden was false, and that at least The Payments Company should have been added as an RPI in the IPR proceeding. In Defendants’ Motion to Dismiss, Verify’s contention that both The Payments Company and its owner Bank of America (“BofA”) were RPIs, was labeled implausible. Now, in light of accepting the aforementioned PTAB decision, thereby acknowledging the plausibility of Verify’s position that The Payments Company should have been named as an RPI, Defendants persist in claiming it to be implausible that BofA is an RPI, despite no evidence having been presented to the PTAB to support such a determination, Case 2:17-cv-04248-JMV-JBC Document 44 Filed 01/18/18 Page 1 of 3 PageID: 791 2 and despite Verify having not been given an opportunity to conduct any discovery to refute such a determination. Further, the adjudicated falsity of the mandatory statement pursuant to 35 U.S.C. §312, naming Askeladden as the sole RPI, bolsters the plausibility of Plaintiff’s claim that the communication of this false statement constituted wire fraud, a predicate act for a RICO claim. Likewise, it supports the plausibility of BofA using its control and influence over The Payments Company, and hence its wholly owned subsidiary, Askeladden, to commence and maintain the IPR. Defendants note that the PTAB found that the administrative record in the IPR did not include sufficient evidence to support Verify’s claim that BofA should be added as an RPI or that the IPR should be terminated based on the IPR being time-barred if BofA was a RPI. However, such findings were to be expected, given that PTAB rules restrict discovery of or about non-RPIs, and the PTAB specifically denied Verify’s earlier request for such discovery. Verify believes that the limited scope of discovery permitted to it in the PTAB proceeding is a significant motivating factor in Defendants’ decision not to name TCH or BofA as RPIs. Unfortunately, these same rules and policies impede Verify from inquiring further as to this issue. Therefore, based only on documents available in the public record, a declaration and deposition of an independent contractor to Askeladden’s Patent Challenge Committee (“PCC”) with no management authority, and a declaration and deposition of an outside technical expert to the PCC, both of whom denied particular first-hand knowledge, the PTAB ruled on the relationships of TCH and BofA, two non-parties to the proceeding before it at the time, to each other and to Askeladden. Thus, the PTAB supposedly determined that BofA was not an RPI to the IPR because neither Askeladden nor The Payments Company were its agents, and because Verify did not “provide persuasive arguments or evidence that [BofA] controls or had the opportunity to control [the IPR]”, despite Verify having to date been given no opportunity for meaningful discovery regarding these issues from BofA, The Payments Company, The Association, or even from Askeladden’s Executive Committee that manages its affairs. Incredibly, even after conceding to the PTAB’s finding and having added The Payments Company as an RPI in the IPR on January 10, 2018, Defendants continue their efforts to shield the true nature of their activities and relationships to one another from this Court and the PTAB as evidenced by Askeladden’s Counsel denying on January 11, 2018 Verify’s request for “routine discovery” (i.e., mandatory discovery provided for and required by PTAB rules) of The Payments Company, thereby frustrating Verify’s ability to present admissible evidence of Defendant’s wrongdoing. A renewed request by Verify for such discovery is presently pending before the PTAB, but despite submission of an email on January 11, 2018, requesting a telephone conference with the PTAB to discuss this discovery, the PTAB has yet to respond. Case 2:17-cv-04248-JMV-JBC Document 44 Filed 01/18/18 Page 2 of 3 PageID: 792 3 The PTAB also supposedly found that there was “no indication of bad faith on the part of [Askeladden] in its failure to name [The Payments Company],” and that under the totality of circumstances it would be in the interest of justice to allow Askeladden to amend its IPR Petition, despite the PTAB having had no evidence before it regarding Askeladden’s motivation in failing to so name The Payments Company as an IPR. Further, and as discussed above, the PTAB did not permit Verify discovery of Askeladden’s executives, and made no ruling whatsoever as to whether The Payments Company acted in bad faith, despite Verify’s allegations that the creation of Askeladden, and the subsequent creation of its PCC, were merely artifices created to insulate the interests of The Payments Company and its owner banks, including BofA and Wells Fargo, from their liabilities and obligations inherent as the real parties or their privies behind and provoking the IPR. In any case, the fact that the PTAB found, without permitting full discovery on the issue, that there was no evidence of bad faith on the part of Askeladden alone, does not make such a finding of culpability by Defendants in this Court implausible. Therefore, since Defendants have now raised through submission of the PTAB Decision of December 27, 2017 in this proceeding, the relationship between The Clearing House and BofA, and the motivation of Askeladden and The Clearing House in filing the IPR, as issues supporting Defendants’ outstanding Motion to Dismiss, Verify respectfully requests that it be permitted limited discovery on these issues to support an Amended Complaint. This discovery is required in the interests of justice, since these issues are ripe for consideration, having been raised by both parties for consideration by this Court. Further, discovery in the IPR is subject to a Protective Order which the Defendants have relied on to prevent Verify from disclosing to this Court information and documents disclosed in the PTAB pertaining to these issues. Since, as per footnote 3 of Defendants’ Motion to Dismiss, judicial notice of PTAB administrative decisions is available, especially when, as here, they are presented as evidence, discovery of issues raised but unresolved by such evidence should be available. Accordingly, Verify respectfully proposes that its request for leave to conduct limited discovery be considered during the upcoming telephone conference scheduled for February 7, 2018 at 9:30 a.m. Respectfully submitted, /s/Jean-Marc Zimmerman Jean-Marc Zimmerman JMZ/bw cc: All Counsel of Record via e-mail Case 2:17-cv-04248-JMV-JBC Document 44 Filed 01/18/18 Page 3 of 3 PageID: 793