Los Angeles County Superior Court

Case Number: KC065334??? Hearing Date: April 26, 2016??? Dept: J

Re: Zhaosheng Chen, etc., et al. v. Bam Brokerage, Inc., etc., et al. (KC065334)

MOTION TO DISMISS FOR FAILURE TO JOIN INDISPENSABLE PARTY AND LACK OF SUBJECT MATTER JURISDICTION

Moving Parties: Defendnats Britt and Brooke International Limited, Brittany Horowitz, and Brooke Horowitz

Respondents: Plaintiffs Zhaosheng Chen and Yishun Chen

POS: Moving OK; Opposing OK

Plaintiffs seek rescission of patent assignments allegedly obtained by fraud. Plaintiffs commenced this action on 12/28/12. The First Amended Complaint filed on 10/3/14, asserts causes of action for:

1. Intentional misrepresentation
2. Negligent misrepresentation
3. Rescission
4. Declaratory relief
5. Unjust enrichment
6. Conversion
7. Fraudulent Transfer under CUFTA
8. Constructive Trust

A Trial setting conference is set for 4/26/16.

REQUEST FOR JUDICIAL NOTICE:

The court takes judicial notice of the court records in this action and in bankruptcy case number 8:13-bk-11658-TA, attached to Defendants? request as Exhibits A-D and Plaintiffs? request as Exhibits 9-13. (Ev C ? 452(d).)

MOTION TO DISMISS:

Defendants Britt and Brooke International Limited, Brittany Horowitz, and Brooke Horowitz (?Defendants?) move pursuant to CCP ? 389(a) for an order dismissing the action for failure to join Brian Horowitz (?Horowitz?), an indispensable party to this action, and for lack of subject matter jurisdiction because Plaintiffs? First Amended Complaint (?FAC?) requires resolution of substantial questions of federal patent law.

Indispensable Party:

Wherever plaintiff fails to join some person necessary for a just adjudication, the court shall order that person be made a party to the action. (CCP ? 389(a).) If such person cannot be joined, the court must then decide whether ? ?in equity and in good conscience? ? the action should proceed without him, or should be dismissed without prejudice (the absent party thus being regarded as indispensable). (CCP ? 389(b); see also Koster v. County of San Joaquin (Cose & Assocs.) (1996) 47 Cal.App.4th 29, 44 (citing text).) It is thus seen that failure to join an indispensable party is really not a ?jurisdictional? defect in the fundamental sense of lacking power to adjudicate. Rather, it is for reasons of equity and good conscience that the court should not proceed in the absence of such a party. (County of San Joaquin v. State Water Resources Control Bd. (1997) 54 Cal.App.4th 1144, 1151-1153.)

Plaintiff is required to join as parties to the action any person whose interest is such that in the person’s absence, complete relief cannot be accorded among those already parties to the action; or any judgment rendered in the person’s absence might either (a) prejudice the person’s ability to protect his or her interest in later litigation; or (b) leave any of the parties before the court exposed to a risk of additional liability or inconsistent obligations. (CCP ? 389(a); see Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 808-809 ? ?a person is an indispensable party ? when the judgment to be rendered necessarily must affect his rights?; Morrical v. Rogers (2013) 220 Cal.App.4th 438, 460-464.)

While it appears that Horowitz is an indispensable party in this action since any judgment rendered in his absence might prejudice the his ability to protect his interest in later litigation and/or leave any of the parties before the court exposed to a risk of additional liability or inconsistent obligations, Plaintiffs represent that they are not opposed to joining Horowitz as a defendant in this matter (since the bankruptcy court has granted leave for Plaintiffs to prosecute Horowitz in this action in the fraudulent transfer case of action). Since it appears that joinder is feasible, the motion to dismiss on this ground is denied without prejudice. Plaintiffs are ordered to join Horowitz as a defendant in this action.

Subject Matter Jurisdiction:

Patent and copyright claims must be filed in federal court since by virtue of federal law, state courts have no power to adjudicate (no subject matter jurisdiction) such claims. (28 USC ? 1338(a); see Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 248 ? court lacked subject matter jurisdiction over state law malpractice claim that required resolution of substantial patent law questions, even though statute of limitations had expired so that no relief was available in federal court; Lockwood v. Sheppard, Mullin, Richter & Hampton (2009) 173 Cal.App.4th 675, 687 ? action based on alleged misrepresentation to U.S. Patent and Trademark Office necessarily involved examination of patent issues over which federal courts have exclusive jurisdiction; but see Caldera Pharmaceuticals, Inc. v. Regents of Univ. of Calif. (2012) 205 Cal.App.4th 338, 370 ? state court had jurisdiction where adjudicating dispute would not ?entail deciding a necessary, essential and substantial issue of patent law? and plaintiff’s theories of liability for fraud and breach of contract based solely on state law.)

Defendants contend that this court does not have subject matter jurisdiction over this action because the FAC requires resolution of substantial questions of federal patent law. The court disagrees. Plaintiffs? claims in the FAC for breach of contract and fraud, and the request for injunctive relief over a personal property, do not require a determination of the validity of the patents. Thus, the motion to dismiss on this ground is also denied.