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RocketFuel Blockchain Co. v. Ellenoff Frossman & Schole LLP

Malpractice Claim Stated Against Law Firm Over Its Negligence in Due Diligence on Patents

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MEMORANDUM OPINION AND ORDER Defendant Ellenoff Grossman & Schole LLP (“EGS”), a law firm, represented Plaintiff RocketFuel Blockchain Company (“Rocketfuel”) in a reverse acquisition transaction in which B4MC Gold Mines, Inc. (“B4MC”), a shell company later renamed Rocketfuel Blockchain, Inc. (“RBI”, the other Plaintiff in this case), acquired Rocketfuel in exchange for a controlling interest in RBI common stock. RocketFuel alleges that EGS was retained in part to conduct due diligence of Rocketfuel’s assets, including five patent applications that had been assigned to Rocketfuel by one of its co-founders, Joseph Page (“Page”), all of which Rocketfuel and RBI later learned were legally deficient. Although Plaintiffs have sued Page in Nevada, in this action, they lay fault with EGS. EGS, in turn, has moved to dismiss. For the following reasons, EGS’ motion to dismiss is GRANTED in part and DENIED in part. BACKGROUND On January 8, 2018, Joseph Page (“Page”), Rocketfuel’s co-founder and treasurer; Gert Funk (“Funk”), Rocketfuel’s co-founder and president; and Bennett Yankowitz (“Yankowitz”), president of B4MC (later RBI) executed a letter of intent (“LOI”) for a reverse merger, in which Page and Funk would form Rocketfuel and Page would transfer his patent applications directly to Rocketfuel. See generally Touitou Decl., Dkt. 34-3, Ex. 3 (LOI); Second Amended Complaint (“SAC”), Dkt. 27

7-8, 21. In the reverse merger, Rocketfuel shareholders would exchange their shares in Rocketfuel for 75 percent of the total common stock of B4MC, leaving Rocketfuel a wholly-owned subsidiary of B4MC-turned-RBI. Ex. 3 at 2. In exchange for the assignment of his patent applications, Page would receive over 5 million shares of RBI stock. SAC

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