SAN DIEGO (CN) – A case involving a British bike helmet inventor and American investors accused of making false promises to bring the revolutionary bike helmets to the United States via Wal-Mart has moved forward in Federal Court.
U.S. District Court Judge William Hayes denied a request by defendants Robert Miller, Kenneth Strong, Kranium Sports and Mobility Tools to dismiss the first amended complaint and their motion for sanctions for malicious prosecution.
Surabhi came up with the Kranium bike helmet after suffering a serious concussion in a cycling accident. Despite being made mostly of cardboard, the helmet is very strong due to its design that mimics the anatomy of a woodpecker’s natural shock-absorbing beak.
The cardboard helmet has an internal honeycomb-like structure which has more flexibility and “give” in the event of a crash – withstanding more force than traditional helmets, which frequently crack when put to the test.
Surabhi formed U.K.-based Kranium in 2010. Kranium owned the technology, several prototype molds of the helmet and a number of contracts with third parties to license the technology. The technology was licensed to German bike accessories manufacturer Abus in 2012 and 2013.
According to the complaint, the defendants met with Surabhi multiple times in September 2013 during a bicycle trade show, claiming to have strong ties to Wal-Mart and that they could facilitate the distribution of Kranium helmets at the retail giant’s stores in the United States. The defendants also claimed to have business ties to the many bike-sharing companies popping up in cities across the United States.
The defendants later revealed to Surabhi they wanted to purchase Kranium and hire Surabhi to work in San Diego as director of product development.
The parties entered into a contract on Dec. 19, 2013. Surabhi agreed to sell his ownership interest in the technology in exchange for a 10 percent ownership stake, $400,000 from the sale of helmets, and a job as defendants’ director of product development.
Surabhi’s contract with the defendants also gave him 35 percent equity in a design and development entity the company was working to create.
But Surabhi claims the defendants didn’t pay him what they promised, refused to grant him 10 percent ownership in Kranium Sports, did not make him as director of product development and have not created the design and development entity.
Surabhi is seeking damages and interest, claiming the defendants knew what they’d told him during contract negotiations was false. He also claims after the contract was signed they “attempted to strong-arm plaintiff, including by using physical intimidation, all in an effort to coerce him to agree that his ownership interest was subject to a vesting period that eviscerated its value.”
The defendants sought to dismiss the case, claiming the events did not take place in the district under the court’s jurisdiction, even though the individual defendants are residents of California and the corporate defendants are limited liability companies doing business in California.
Hayes granted the defendants’ motion to dismiss Surabhi’s claim for unjust enrichment, noting state and federal courts in California are split on whether the claim should be recognized as a separate cause of action.
However, Hayes advanced Surabhi’s fraud, contract and unfair business practices claims – which defendants argued weren’t specific enough – finding Surabhi had offered enough particulars to dodge dismissal.
Hayes also denied the defendants’ request to strike Surabhi’s complaint, which they claim is based on “unmeritorious, fallacious beliefs and contentions of a vindictive, vexatious and litigious plaintiff.”
And he denied their demand that Surabhi post an undertaking for their attorney fees, which he found unnecessary based on the facts presented in the case so far.
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