103 F.3d 1105 (2nd Cir. 1997), 117, PDK Labs, Inc. v. Friedlander

Docket Nº:117, Docket 95-9159.
Citation:103 F.3d 1105
Party Name:41 U.S.P.Q.2d 1338 PDK LABS, INC., Plaintiff-Counter-Defendant-Appellee, v. Mitchell K. FRIEDLANDER, Defendant-Counter-Claimant-Appellant.
Case Date:January 09, 1997
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 1105

103 F.3d 1105 (2nd Cir. 1997)

41 U.S.P.Q.2d 1338

PDK LABS, INC., Plaintiff-Counter-Defendant-Appellee,


Mitchell K. FRIEDLANDER, Defendant-Counter-Claimant-Appellant.

No. 117, Docket 95-9159.

United States Court of Appeals, Second Circuit

January 9, 1997

Argued Sept. 9, 1996.

Page 1106

Gerard C. Fallon, Hackensack, NJ (Sonageri & Fallon, of counsel), for Defendant-Counter-Claimant-Appellant.

Hartley T. Bernstein, New York City (Bernstein & Wasserman, L.L.P., of counsel), for Plaintiff-Counter-Defendant-Appellee.

Page 1107

Before: FEINBERG, MINER and PARKER, Circuit Judges.

FEINBERG, Circuit Judge:

Defendant Mitchell K. Friedlander appeals from an award of summary judgment against him in the United States District Court for the Southern District of New York, Robert P. Patterson, Jr., J., in favor of plaintiff PDK Labs, Inc. in its declaratory judgment action under 28 U.S.C. § 2201. The district court found that Friedlander lacks standing to bring suit against PDK for alleged violations of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the Georgia False Advertising Law, Ga.Code Ann. § 10-1-421, and the Georgia Uniform Deceptive Trade Practices Act, Ga.Code Ann. § 10-1-370 et seq. The district court also dismissed Friedlander's counterclaims under these same statutes on grounds of res judicata and judicial estoppel arising from a related suit by Friedlander against PDK in Georgia. For reasons set forth below, we affirm.

I. Facts and Prior Proceedings

PDK is a New York corporation that manufactures, sells, and distributes weight loss products, 1 including Thermo Diet for Men, Thermo Diet for Women, Trym Tone 1200, Figure Trim, Slimmers Tabs, and the Grapefruit Diet Plan. Friedlander, a Georgia resident and self-described expert in the marketing of weight loss products, is currently developing a weight loss product containing ephedrine, caffeine and aspirin (ECA).

In 1991, Friedlander obtained a patent on a method for producing or maintaining weight loss by administering ECA, and has also commissioned several clinical trials of ECA. However, Friedlander admits that he does not yet market a weight loss product to the general consuming public. He describes his "product" as "his patent or his studies, formula, marketing concepts, etc." for a weight loss product containing ECA. Friedlander markets this product to potential investors to obtain funds needed to develop, test and market a weight loss product approved by the Food and Drug Administration (FDA).

From July through October 1993, Friedlander's New York attorney Gerard Fallon contacted PDK or its subsidiary, alleging that several of its weight loss products violated his ECA patent and that PDK's sale of these products constituted "flagrant violations" of the false advertising provision of the Lanham Act. 15 U.S.C. § 1125(a). In October 1993, after failed attempts to either settle his alleged claims or induce PDK to invest in his undeveloped ECA product, Friedlander sent PDK a "Demand for Relief" under the Georgia Fair Business Practices Act (GFBPA), Ga.Code Ann. § 10-1-390 et seq., and warned that he would assert other legal claims as well.

In November 1993, in response to these threats, PDK filed this declaratory judgment action (the New York action), seeking a declaration that "Friedlander has no standing to bring any lawsuit against PDK arising from PDK's advertising, and sale of" its weight loss products. Thereafter, Friedlander moved to dismiss the action for lack of personal jurisdiction. The district court denied the motion, finding that Friedlander had conducted sufficient business in New York "through his attorney and agent" to warrant jurisdiction under the New York long-arm statute. Friedlander then asserted counterclaims challenging PDK's advertising under § 43(a) of the Lanham Act, the Georgia False Advertising Law (GFAL), and the Georgia Uniform Deceptive Trade Practices Act (GUDTPA). In substance, Friedlander asserts that PDK's advertising falsely represents that its products are FDA-approved (and therefore lawfully sold), safe and effective. He seeks principally to enjoin sale of PDK's products until PDK either obtains FDA approval or changes its product labels to state explicitly that its products have no such approval.

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Meanwhile, Friedlander was also proceeding in the Georgia courts with his attempt to curtail PDK's allegedly false advertising. Days after PDK filed the New York action, Friedlander commenced suit in Fulton County Superior Court, Georgia (the Georgia action), alleging that PDK's marketing of weight loss products in Georgia violated the Georgia Fair Business Practices Act (GFBPA). In February 1994, after PDK removed the case to the United States District Court for the Northern District of Georgia, that court dismissed Friedlander's claim. The court held that Friedlander lacked standing under the GFBPA because the statute allows suit by plaintiffs only in their individual capacity seeking to "serve the public interest" rather than to advance purely private concerns. Soon after, Friedlander appealed this dismissal to the United States Court of Appeals for the Eleventh Circuit.

In August 1995, Judge Patterson granted PDK's motion for summary judgment in the New York action and dismissed Friedlander's counterclaims. The court determined that "Friedlander is without standing to sue PDK for violations of the Lanham Act, the GFAL and GUDTPA," because "Friedlander may not claim that PDK is injuring his competing product which does not exist." With respect to Friedlander's counterclaims, Judge Patterson first observed that his holding on PDK's declaratory judgment action that Friedlander lacks standing applied equally to defeat his counterclaims. The judge went on to rule that the counterclaims were also barred by res judicata given Friedlander's failure to raise them in the Georgia action. (The Georgia district court's dismissal of that action was at the time still pending on appeal to the Eleventh Circuit.) Finally, Judge Patterson held that Friedlander was judicially estopped from bringing these counterclaims by his representations to the New York court that the Georgia action would litigate all claims arising from PDK's marketing and sale of weight loss products.

In Friedlander's appeal of the Georgia action, the Eleventh Circuit certified to the Georgia Supreme Court the question whether "non-consumers have a cause of action under the [G]FBPA when they allege an injury due to a competitor's misrepresentations to the general consuming public." Friedlander v. PDK Labs, Inc., 59 F.3d 1131, 1133 (11th Cir.1995). In January 1996, the Georgia Supreme Court answered the question in the negative. 266 Ga. 180, 465 S.E.2d 670, 670-71 (1996). In July 1996--after submission of briefs to this Court on this appeal but before oral argument--the Eleventh Circuit affirmed dismissal of the Georgia action based on Friedlander's lack of standing under the GFBPA. 89 F.3d 747, 748-49 (11th Cir.1996).

Friedlander now challenges (1) the denial of his motion to dismiss the New York action for lack of personal jurisdiction; (2) the grant of summary judgment to PDK and the finding that Friedlander lacks standing to sue under the Lanham Act, the GFAL and the GUDTPA; and (3) the dismissal of his counterclaims.

II. Personal Jurisdiction

In a federal question case where a defendant resides outside the forum state, a federal court applies the forum state's personal jurisdiction rules "if the federal statute does not specifically provide for national service of process." Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir.1990) (citing Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104-05, 108 S.Ct. 404, 409-10, 98 L.Ed.2d 415 (1987)). We review de novo a district court's finding that it has personal jurisdiction over a defendant. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364-65 (2d Cir.1986). A plaintiff facing a Fed.R.Civ.P. 12(b)(2) motion to dismiss made before any discovery need only allege facts constituting a prima facie showing of personal jurisdiction. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990). Moreover, we construe the pleadings and affidavits in plaintiff's favor at this early stage. CutCo, 806 F.2d at 365. We are mindful that personal jurisdiction inquiries are "necessarily fact sensitive because each case is dependent upon its own particular circumstances." Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir.1991).

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Judge Patterson found that Friedlander "through his attorney and agent, was conducting business in New York, i.e., specifically enforcing defendants' patent rights from New York and seeking investments in defendants' product from New York." The judge did not indicate the section of New York's long-arm statute on which he based jurisdiction. We find that PDK made a sufficient prima facie showing of jurisdiction under N.Y. CPLR § 302(a)(1), which states that jurisdiction exists over a non-domiciliary defendant who "in person or through an agent ... transacts any business within the state" as long as the cause of action arises out of the defendant's New York transactions. As the New York Court of Appeals has explained, "proof of one transaction in New York is sufficient to invoke jurisdiction [under 302(a)(1) ], even though the defendant never enter[ed] New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 527 N.Y.S.2d 195, 198-99, 522 N.E.2d 40, 43 (1988); see CutCo, 806 F.2d at 365. A cause of action arises out of a defendant's New York transactions when it is "sufficiently related to the business transacted that it would not be unfair to deem it to arise out of the transacted business." Hoffritz for Cutlery,...

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