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Total Recall Technologies v. Luckey

United States District Court, N.D. California

June 16, 2016

TOTAL RECALL TECHNOLOGIES, Plaintiff,
v.
PALMER LUCKEY and OCULUS VR, LLC, as successor-in-interest to Oculus VR, Inc., Defendants.

          ORDER GRANTING MOTION FOR SUMMARY JUDGMENT SUBJECT TO STATED CONDITIONS

          William Alsup Judge

         INTRODUCTION

         A partnership agreement between two persons provided that no lawsuit would be maintained without the approval of both. Over the objection of one, the other brought a lawsuit in the name of the partnership against third parties, who now move to dismiss the suit as unauthorized. Subject to certain conditions, their motion is Granted.

         STATEMENT

         1. Total Recall Technologies.

         Plaintiff Total Recall Technologies (“TRT”) is a general partnership of Thomas Seidl and Ron Igra formed in 2010 in Hawaii for the purpose of developing virtual reality technology. Seidl and Igra entered into a written partnership agreement to govern TRT. Paragraph 19 of the partnership agreement provided:

Thomas Seidl or Ron Igra has the right to Vito [sic]. This means that for any decision regarding the company Ron Igra and Thomas Seidl have to agree on any action with the exception of an event laid out in point 20.

         The partnership agreement did not define the uncapitalized word “company”; however, there is no dispute that Paragraph 19 referred to decisions involving TRT. The exception detailed in Paragraph 20 concerned a buy-out, which all agree is not applicable here. The partnership agreement contained an integration clause and stated that it could be amended “only by the written agreement” of all partners (Exh. A ¶¶ 16, 19-20).[1]

         2. Palmer Luckey.

         In August 2011, Seidl entered into an agreement with defendant Palmer Luckey pursuant to which Luckey was to make a prototype for a head-mounted virtual reality display according to certain specifications supplied by Seidl. That agreement included various provisions relating to confidentiality and exclusivity. Although Seidl negotiated the agreement with Luckey and ultimately signed it in his own name, Igra provided the funding for materials for Luckey’s prototype. This order presumes for the sake of argument that Seidl made the agreement on behalf of TRT.

         In April 2012, without informing anyone at TRT, Luckey formed Oculus LLC (later re-registered as defendant Oculus VR, LLC), and he raised more than one hundred million dollars through crowd-funding and venture financing in order to commercialize head-mounted virtual reality displays.

         The complaint herein contends that Luckey violated the confidentiality and exclusivity terms of the agreement between Seidl and Luckey and misappropriated Seidl’s design features.

         3. Seidl’s Objection.

         After Oculus and its fabulous financing became public, a running dispute ensued between Seidl and Igra over whether to sue Luckey for supposedly stealing their prototype ideas. Igra wanted to sue. Seidl did not. Here are the details.

         Igra requested that Seidl provide him with a copy of his agreement with Luckey. Seidl complied, via email, as follows (Exh. E) (emphasis in original):

Here is the [P]almer contract.
DO NOT CONTACT HIM OR START ANY LEGAL ACTION WITHOUT TALKING TO ME FIRST.
We need him. Much more useful as an ally.

         Two months later, Seidl repeated that admonition in the following exchange on Skype, a text messaging platform (Exh. F at 16038) (errors in original):

[IGRA]: Hi Tom. As I mentioned on Friday, I need to talk to you about our case with Palmer Luckey. The matter is urgent and I’ve waited for over 3 weeks to hear from you, I can wait no longer. I’ve hired a litigation lawyer [REDACTION]. Please send me copies of the emails or skype conversations you had with him concerning the [head-mounted display]. I’m going to give you until 5 pm tomorrow to respond to me and if I don’t get your cooperation, I will take legal action against you as well.
[SEIDL]: Sure take legal action aghainst me and see what happens [SEIDL]: what you going to sue me for?
[obscenities omitted]
[SEIDL]: as I told you don’t sue palmer

         In March 2014, Facebook Inc. announced that it would acquire Oculus for more than two billion dollars. Igra then followed up with Seidl, again seeking his cooperation in a lawsuit against Luckey so they could “both get rich, ” but Seidl responded, “my views on taking [P]almer to court are the same as before that it makes bad financial sense for you and me” (Exh. F at 16042). Nevertheless, Igra retained counsel.

         In April 2014, Igra commenced an action against Seidl in Hawaii state court (where TRT was founded and based) seeking the production of certain documents and information pertaining to the agreement with Luckey. Igra dismissed that action without prejudice once Seidl provided documents. Then, Igra wrote the following email to Seidl (Exh. I at 8658-59):

I hope you will cooperate with me on this and withdraw your veto and give us your support so that Robert [Stone of Quinn Emanuel, Igra’s counsel, ] and I can continue working on getting us the damage settlement.
The way I see it is that you have a choice to make between 2 options:
1. If you cooperate with us on this case against Palmer we can get rich from a damage settlement and I promise to make it worthwhile for you in the future business we will be doing together.
2. You choose not to cooperate - in which case I will go to great effort to get what I feel belongs to me and we will both waste time and money fighting against each other in court and veto actions. The chances of our business succeeding together would be slim to none and eventually I will ...

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