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Total Recall Technologies v. Luckey

United States District Court, N.D. California

March 9, 2017

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

          ORDER DENYING MOTION FOR RELIEF FROM PRIOR ORDER AND CLOSING FILE

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         A prior order held this action should be dismissed as unauthorized under the governance rules of the partnership purporting to sue. That order stayed its effect, giving plaintiff a long opportunity to cure the authorization problem and identified two alternative avenues under which the authorization problem could be cured. Time has passed. Neither condition has been met. Plaintiff now moves for relief from the prior order on the theory that the authorization problem has been cured by alternative means. For the reasons stated below, plaintiff's motion is Denied, the stay is Lifted, and the action is Dismissed.

         STATEMENT

         A prior order set forth the facts of this case (Dkt. No. 179). Briefly, in 2010, Ron Igra and Thomas Seidl formed a two-person partnership, Total Recall Technologies (“TRT”), with the goal of developing consumer virtual-reality technology. They formed TRT in Hawaii. Seidl supplied the know-how, and Igra supplied the finances. Significantly, the partnership agreement gave each of the two partners veto power over any decision regarding TRT, as follows (Dkt. No. 133-2 ¶ 19):

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 [except for certain sales of a controlling interest in the partnership].

         In August 2011, Seidl entered into a written agreement with defendant Palmer Luckey to develop a prototype for a head-mounted virtual-reality display according to certain specifications supplied by Seidl. That written agreement made no reference to TRT. Nevertheless, as in prior orders, this order presumes for the sake of argument that Seidl made the agreement on behalf of TRT. Luckey made a prototype for Seidl.

         Luckey eventually formed Oculus LLC, which later re-registered as defendant Oculus VR, LLC, and sold it to Facebook, Inc. Oculus is now a prominent player in virtual-reality technology.

         Once Luckey sold Oculus to Facebook in 2014, Igra wanted to sue Luckey on the theory that Luckey had misappropriated Seidl's ideas. Seidl, however, did not want to sue. In 2014, Igra commenced an action in Hawaii state court against Seidl, seeking to compel Seidl to authorize an action against Luckey in TRT's name. Igra and Seidl continued to correspond, but Seidl maintained his objection to suing Luckey and Oculus.[1]

         In May 2015, with the Hawaii action still unresolved, Igra, using TRT's name, commenced this action over Seidl's objection here in federal court in San Francisco. After substantial motion practice, it became clear that Igra brought this action in TRT's name without Seidl's authorization.[2]

         After discovery closed, which included discovery into the authorization issue, an order stayed the action pending resolution of the Hawaii action but invited defendants to bring an early motion for summary judgment on the authorization issue. In their motion, defendants contended that Igra lacked authority to pursue this action due to Seidl's refusal to agree to sue. Igra responded that there remained a dispute of fact as to whether Seidl in fact had exercised his veto pursuant to the partnership agreement, but there was no dispute about the facts of the communication between Igra and Seidl. Igra merely disputed the legal effect of Seidl's objections.

         On June 16, 2016, an order held Seidl had never authorized the lawsuit, so Igra could not maintain this action in TRT's name as a matter of law (Dkt. No. 179) (“the June 16 Order”). The June 16 Order, however, postponed its effect, as follows (id. at 14-15):

Rather than dismissing the action immediately, however, this order will, for the time being, merely maintain the stay and give counsel an opportunity to cure the authorization problem. To that end, the stay previously entered will remain in effect (i) until such time as Ron Igra and Thomas Seidl, the partners of Total Recall Technologies, file [] sworn declarations herein affirmatively and without qualification stating that both authorize and agree to the maintenance of this civil action in the name of Total Recall Technologies against Palmer Luckey and Oculus VR, LLC, that both ratify all actions taken herein so far on behalf of Total Recall Technologies, and that both consent to continued prosecution of the case by the law firm of Quinn Emanuel Urquhart & Sullivan, LLP, or (ii) until such time as a final order arrives from the Hawaii courts to the same legal effect. The stay will not last indefinitely but will last at least until the end of December to allow the trial in Hawaii to conclude.

         A status conference was scheduled for January 12, 2017. A few weeks beforehand, the undersigned judge observed that Igra and Seidl had stipulated to dismissal of the Hawaii action. In advance of the status conference, the parties herein were requested to show cause in writing, supported by sworn declarations, why our case should not be dismissed for the reasons stated in the order on defendants' motion to dismiss. The written responses addressed the details of a new “Confidential Settlement and Release Agreement” between Igra and Seidl.[3]

         Pursuant to the settlement agreement, Seidl withdrew from the TRT partnership, as follows (Igra Supp. Decl., Exh. A ¶ II.A) (Dkt. No. 204-2):

Seidl agrees to withdraw from the TRT partnership effective October 14, 2016, by executing a Withdrawal from Partnership . . . . Following Seidl's withdrawal from TRT, Seidl shall have no control over TRT or any decision-making rights with respect to TRT.

         The settlement agreement defined the term “California Lawsuit” to mean our instant action, and assigned ...


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