Construction Technology v. Lockformer Co., Inc., 88 Civ. 0742 (MBM).

• Decision Date: 10 January 1989
• Docket Number: No. 88 Civ. 0742 (MBM).,88 Civ. 0742 (MBM).
• Citation: 704 F. Supp. 1212
• Parties: CONSTRUCTION TECHNOLOGY, INC., Plaintiff, v. The LOCKFORMER COMPANY, INC., Met-Coil Systems Corp., Mechanical Data, Inc., Estimation, Inc., Lion International Company d/b/a Orange Systems, and Orange Systems/Lockmer, Defendant.
• Court: U.S. District Court — Southern District of New York

704 F. Supp. 1212

CONSTRUCTION TECHNOLOGY, INC., Plaintiff, v. The LOCKFORMER COMPANY, INC., Met-Coil Systems Corp., Mechanical Data, Inc., Estimation, Inc., Lion International Company d/b/a Orange Systems, and Orange Systems/Lockmer, Defendant.

No. 88 Civ. 0742 (MBM).

United States District Court, S.D. New York.

January 10, 1989.

COPYRIGHT MATERIAL OMITTED

George E. Badenoch, Edward W. Greason, Louis C. Dujmich, Mark D. Giarratana, Kenyon & Kenyon, Irwin P. Underweiser, Jay H. Landau, John Byrne, Underweiser & Underweiser, New York City, for plaintiff.

Thomas L. Abrams, Jones, Day, Reavis & Pogue, New York City, Clarence J. Fleming, Cheryl L. Urbanski, Jones, Day, Reavis & Pogue, Chicago, Ill., Robert P. Ducatman, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for defendants Lockformer Co., Inc. and Met-Coil Systems.

Gary S. Jacobson, Kristine M. Reddington, Jacobson & Triggs, New York City, for defendant Mechanical Data.

Robert R. Bowie, Jr., White, Mindel, Clarke & Hill, Towson, Md., Gary S. Jacobson, Jacobson & Triggs, New York City, for defendant Estimation, Inc.

Stephen H. Galebach, Gregory J. Granitto, West & Galebach, Gaithersburg, Md., David J. Grais, Kaare Phillips, Grais & Richards, New York City, for defendant Lion Intern. Co. d/b/a Orange Systems.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiff Construction Technology, Inc. ("CTI") filed this action against five answering defendants — Lockformer Company, Inc., Met-Coil Systems Corp., Mechanical Data, Inc., Estimation, Inc., and Lion International Co. d/b/a Orange Systems ("Orange Systems").¹ The amended² complaint alleges eight claims for relief, denominated "counts," against them. Count I is unfair competition and false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Count II is for deceptive practices and false advertising under New York General Business Law, §§ 349 and 350. Count III alleges common law unfair competition and false advertising. Count IV alleges common law misappropriation of technology. The first four causes of action are alleged against all defendants. The last four involve only two defendants, Lockformer and Mechanical Data. In count V, plaintiff alleges that these two defendants induced breach of plaintiff's contract with Interactive Computer Systems ("ICS") as well as interfered with its advantageous business relationship with ICS (Count VI). The seventh count alleges that the two defendants conspired to commit the aforementioned acts. The final claim is for conduct of an enterprise through a pattern of racketeering activity ("RICO"). 18 U.S.C. § 1961 et seq. This court has subject-matter jurisdiction for the Lanham Act claim under 28 U.S.C. §§ 1331 and 1338, for the RICO claim under 18 U.S.C. § 1965(a) and pendent jurisdiction of the state law claims.³ This lawsuit has been consolidated with a related patent infringement action against Lockformer, Construction Technology, Inc. v. Lockformer Company, 86 Civ. 0457 (MBM), (S.D.N.Y.1989).

The activities that inspired this lawsuit are set forth in detail below. Basically, plaintiff is a designer of systems to automate the process of designing and manufacturing heating, ventilating and air conditioning ("HVAC") ducts used in buildings. Plaintiff has designed three systems — the Compuduct, the Auto-Plot, and the Auto-Plan — the last two of which are the subject of the above patent infringement action. Defendants are competitors in this market and are alleged to have conspired to appropriate plaintiff's trade secrets and to have engaged in false comparative advertising.

Defendants now move to dismiss each of the claims. Although one defendant suggests that this may be considered a summary judgment motion, all parties agree — as do I — that these motions are more properly made pursuant to Fed.R.Civ.P. 12(b).

Venue

Defendant Orange Systems moves for dismissal because of improper venue. Venue is proper in this district only if plaintiff's claims against Orange Systems arose in this district, 28 U.S.C. § 1391(b), or if Orange Systems resides in this district, 28 U.S.C. § 1391(c). Either will suffice to establish venue. As I find that the claim arose here, I do not reach the question whether Orange Systems is doing business here.

Orange Systems argues that the claim did not arise here because the misappropriation occurred in Maryland at its home office. However, the sale or attempted sale in New York of the product wrongfully developed is an independent tort. See R.F.D. Group Ltd. v. Rubber Fabricators, Inc., 323 F.Supp. 521 (S.D.N.Y.1971). Plaintiff has alleged that Orange Systems constructed a computer-assisted design ("CAD") system for Lockformer's Vantage system with confidential information taken from plaintiff. Complaint at ¶¶ 64, 65. Moreover, this defendant is charged also with helping Lockformer to distribute false advertising. Because Orange Systems is alleged to assist in the marketing of Lockformer's Vantage systems in New York, the claim arises just as much here as in Maryland. Indeed, Orange Systems concedes it has helped Lockformer to market Vantage in New York by attending one national trade show and contacting in person five companies in New York state. Van Zutphen Aff. ¶¶ 15-17.

This is thus one of those "unusual cases in which it is not clear that the claim arose in any one district." Leroy v. Great Western United Corp., 443 U.S. 173, 185, 99 S.Ct. 2710, 2717, 61 L.Ed.2d 464 (1979). In such cases, "a plaintiff may choose between those two ... districts that with approximately equal plausibility — in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff) — may be assigned as the locus of the claim." Id.

The claims asserted here revolve around the actions of the two main defendants — Lockformer and Mechanical Data — both of which are alleged to be doing business in New York. Because Orange Systems is alleged to be assisting these two defendants, much of the evidence is equally here and in Illinois, Lockformer's home state, or in Virginia, Mechanical Data's home state, as well as in Maryland. Further, because plaintiff alleges that the technology Orange Systems eventually received was actually procured from a Louisiana company, many of the witnesses and much of the evidence will be there as well. Moreover, although defendant avers that Maryland law is most appropriate to decide the non-federal claims, Memorandum of Defendant Lion Int'l Co. d/b/a Orange Systems in Support of its Motion to Dismiss the Complaint at 34-35, it concedes that New York and Maryland law are identical in defining the claims asserted in the complaint. Id. at 15-16. Indeed, all other defendants and plaintiff concede that New York law should apply in this case.⁴

To be sure, I am mindful that litigating here will be somewhat inconvenient to Orange Systems. I recognize also that this defendant may be forced to defend a threatened patent infringement action in Maryland because of the restrictive venue provisions for patent actions, 28 U.S.C. § 1400(b). But the fact remains that the witnesses and evidence in this case are strung out across the country: New York, Louisiana, Massachusetts, Virginia, Maryland, and Illinois. This lawsuit could proceed with "approximately equal plausibility," Great Western, 443 U.S. at 185, 99 S.Ct. at 2717, in each of those districts. Accordingly, defendant Orange Systems' motion is denied.

Motion to Transfer

In the alternative, defendant Orange Systems, now joined by defendant Mechanical Data, requests transfer under 28 U.S.C. § 1404(a) to, respectively, Maryland and Virginia. For the reasons stated above, I find that transfer would be inappropriate in this case. These motions are thus denied as well.

Count I & III: Lanham Act and Common Law Unfair Competition

These two claims can be discussed in tandem because they involve the same claims of false comparative advertising.

Plaintiff makes three claims of false advertising. First, plaintiff claims that, in June 1981, defendants Mechanical Data and Estimation placed an advertisement in Snips magazine falsely claiming that Duct Magic "performs all layout work and pattern drawing." Complaint at ¶ 31. Plaintiff, however, concedes that this advertisement is outside any conceivable statute of limitation, contending instead that it is included solely to show a pattern of predicate acts as part of the RICO claim asserted against Lockformer and Mechanical Data. See Plaintiff's Memorandum in Opposition to Defendant Estimation's Motion to Dismiss at 4.

Second, plaintiff asserts that "at an open house in late October 1982, defendants Lockformer, Mechanical Data and Estimation continued their conspiracy to unfairly compete with CTI's Auto-Plot System by, among other unfair and unlawful acts, distributing false and misleading information about CTI and CTI's Auto-Plot System." Complaint at ¶ 42. Specifically, plaintiff alleges that defendants misrepresented that "the Auto-Plot System used more electricity than the Vulcan plasma system" and that "CTI's Auto-Plot System required complete mirror changes twice a year ... and thus was more expensive to maintain than defendants' Vulcan System." Complaint at ¶ 43. Although some of these allegations complain about defendants' disparagement of plaintiff's product, the allegations also complain of false statements made by defendants about defendants' product.

Third, the complaint states that, in June 1985, "copies of a memorandum purportedly comparing the features of the Vantage and Auto-Plan Systems were being distributed by agents of Lockformer and that this memorandum ... misled prospective purchasers into believing that the Vantage System was competitively superior to the Auto-Plan System and resulted in a diversion of sales from CTI to defendants." Complaint at ¶ 69. This is at once a false advertising claim, because plaintiff alleges that def...