(CN) – GetFugu claims the Patton Boggs law office and some of its clients cost the mobile technology company more than $500 million by filing a frivolous lawsuit “as a pretext to tell would-be customers and investors that GetFugu and its officers and directors were being sued for racketeering.”
In its complaint in Los Angeles Superior Court, GetFugu claims the defendants’ scheme undermined its stock price, to the advantage of its competitors.
GetFugu sued Patton Boggs, its attorney Richard Oparil, and GetFugu competitors Simon Davies and David Warnock. California law firm Cummins & White and its attorney Iman Reza are also named as defendants.
Since 2007, GetFugu has developed mobile search tools by which consumers can research products without typing a website address or search term into a browser. Its products include applications that recognize logos and products through mobile phone cameras and allow consumers to speak into the phone to retrieve content, a tool designed to work with GPS systems of mobile phones and Hotspotting, an e-commerce tool that enables the consumer to retrieve information featured in a video by touching it on the screen.
According to the complaint, “GetFugu Inc. was a public company which had a market capitalization of over $320 million before the actions of defendants improperly destroyed and/or injured the company. GetFugu introduced its initial product to consumers as a next generation mobile search tool and e-commerce application. GetFugu’s technology integrated the key strengths of cellular telephones – image, voice and location recognition – and allowed consumers to retrieve content more expediently. By capturing photographs of a company logo with a camera phone, speaking the name of a company into the phone, or allowing GPS to determine their current location, the GetFugu application allowed consumers to gather desired information without needing to conduct Internet browser searches. But for defendants’ tortious and wrongful acts alleged herein, the GetFugu platform would have been available for 97 percent of the mobile phones available (over 3.3 billion handsets) worldwide. Thus, but for the improper actions of defendants the value of the company and its common stock would have increased substantially in value. Instead, it lost over 99 percent of its value due to defendants’ wrongful conduct.” (Parentheses in complaint.)
GetFugu says it owns “a comprehensive intellectual property portfolio, including nine (9) utility patent applications that have been filed with the United States Patent and Trademark Office.”
In November 2007, the company’s president Carl Freer acquired the rights to various patents related to cellular telephone marketing and other intellectual property formerly held by Gizmondo Europe Limited, the maker of a failed handheld console, which declared bankruptcy in 2006.
GetFugu claims that “for years, Warnock and Davies have been primarily engaged in the business of seeking to sell mobile advertising goods and services. They viewed GetFugu as their principal competitors and impediment to their own ability to penetrate the market.”
In November 2009, Warnock and Davies, represented by Patton Boggs – a national law firm and lobbyist which employs more than 600 lawyers – filed a federal lawsuit against GetFugu, alleging racketeering and civil conspiracy.
U.S. District Judge George H. King dismissed the claims in August 2010, but not before the allegations harmed GetFugu’s reputation and stock value, according to the complaint.
“Utilizing a deliberate campaign of misinformation, defendants implemented a scheme to unfairly compete with a cutting-edge technology company and its principals, for the purpose of improperly promoting defendant Simon Davies and David Warnock’s competing mobile advertising technology,” the complaint states.
“In furtherance of this scheme, defendants filed a frivolous lawsuit under the Racketeer Influenced and Corrupt Organizations Act (‘RICO’) against plaintiff as a pretext to tell would-be customers and investors that GetFugu and its officers and directors were being sued for racketeering. Defendants filed a RICO lawsuit against plaintiff that was filled with false and defamatory allegations, subsequently repeated those accusations to the press, would-be customers and investors, and then contended that their false and defamatory statements were protected under California’s litigation privilege. The frivolous RICO action was nothing more than a ruse to (1) tell the press, prospective customers and investors that plaintiff was being sued for racketeering and (2) repeat the false and defamatory allegations in the RICO action to the press, prospective customers and investors.
“The frivolous RICO action was the culmination of a larger scheme to unfairly promote defendants’ competing goods and services over GetFugu’s, and to manipulate the public market for GetFugu’s common stock in order to undermine the success of its valuable products, and create an undeserved windfall for themselves and their co-conspirators.”
GetFugu says the “defendants, and each of them, acted without probable cause in bringing the federal action for civil RICO claims against GetFugu and its officers and directors since defendants, and each of them, did not believe that there were proper and/or legally viable grounds for the RICO claims.”
The defendants falsely claimed that the Securities and Exchange Commission was investigating GetFugu, according to the complaint. It adds that Davies and Warnock, who were not shareholders of GetFugu, lacked legal standing to sue, failed to make a proper pre-suit demand on GetFugu’s Board of Directors, as required under California law, and were in conflict with the interests of both the GetFugu shareholders and the company itself.
The complaint states: “Defendants knew that the RICO complaint was based on alleged promissory notes, which, on information and belief, had been forged. Defendants further knew that neither Davies nor Warnock had transferred any money to Gizmondo or [former subsidiary] Tiger Telematics, as falsely alleged by defendants in the federal action to manufacture their standing for meritless RICO claims.”
After Judge King dismissed the RICO action, the defendants failed to appeal, acknowledging their lawsuit had no merit, GetFugu says.
“In addition to filing the RICO action without probable cause, the filing of a frivolous RICO lawsuit for the purpose of repeating allegations to the press, would-be customers and investors was done with malice,” the complaint states.
It adds: “Davies and Warnock attempted to put GetFugu out of business or force it to pay hush money, by disseminating their false story to multiple third parties, including friends and business associates of Mr. Freer, and actual and potential business partners, customers, investors, stockholders and regulators of GetFugu. They even went so far as to make false claims to federal regulators when their unjustified demands were not met.”
GetFugu claims the defendants tried to “bully” its business associates into disclosing confidential information about the company, and falsely accused GetFugu and Freer of stealing intellectual property belonging to Davies and Warnock.
The defendants’ false accusations caused several members to resign from the Board of Directors, the complaint states.
“When Warnock and Davies’ tactics proved to be unsuccessful, they enlisted the support of defendants Patton Boggs LLP, Richard J. Oparil, Cummins & White LLP, and Iman Reza, who maliciously filed and prosecuted a frivolous RICO action against GetFugu and its officers and directors,” the complaint states.
GetFugu claims another law firm, which initially represented the defendants, withdrew from the case when GetFugu warned it about the allegedly frivolous lawsuit.
GetFugu says Patton Boggs pursued the defendants’ frivolous claims despite its warnings.
It claims that “defendants Patton Boggs and Oparil maliciously issued several public press releases stating that ‘racketeering claims’ have been filed against GetFugu and its officers and directors, and that the SEC and FBI were investigating plaintiff, for the apparent purpose of (1) promoting their own purported legal expertise and soliciting potential clients and (2) helping Davies and Warnock to put GetFugu out of business.”
Get Fugu adds: “As a result of defendants’ bringing and maintaining the federal action against plaintiff, the price per share of GetFugu’s common stock dropped form a high of $3.20 per share to a low of $0.003 per share, a decrease of more than 99 percent in value, representing an actual loss in market capitalization of more than $500 million. In addition, GetFugu lost investors, who were planning to make substantial investments in GetFugu, as well as potential customers of GetFugu’s revolutionary technology.”
GetFugu seeks compensatory and punitive damages for malicious prosecution, more than $700,000 in attorney’s fees, and wants the defendants enjoined from further wrongful conduct.
It is represented by Theona Zhordania with Luce, Forward, Hamilton & Scripps.