Eavzan v. Polo Ralph Lauren Corp.

• Decision Date: 19 November 1998
• Docket Number: No. 97 CIV. 8974(RLC).,97 CIV. 8974(RLC).
• Citation: 40 F.Supp.2d 147
• Parties: Barry EAVZAN, Plaintiff, v. POLO RALPH LAUREN CORPORATION, Lee Sporn, John P. Quirk, and International Research Group Incorporated, Defendants.
• Court: U.S. District Court — Southern District of New York

40 F.Supp.2d 147

Barry EAVZAN, Plaintiff, v. POLO RALPH LAUREN CORPORATION, Lee Sporn, John P. Quirk, and International Research Group Incorporated, Defendants.

No. 97 CIV. 8974(RLC).

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

November 19, 1998.

Edward R. Epstein, Ft. Lauderdale, FL (Edward R. Epstein, of counsel), for Plaintiffs.

Amster, Rothstein & Ebenstein, New York City (Anthony F. Lo Cicero, Denise A. Lindenauer, of counsel), for Defendants Polo Ralph Lauren Corporation and Lee Sporn.

Yudin & Yudin, New York City (Steven G. Yudin, of counsel), for Defendants John P. Quirk and International Research Group Inc.

OPINION

ROBERT L. CARTER, District Judge.

Plaintiff Barry Eavzan ("Eavzan") has filed an action alleging malicious prosecution and intentional wrongs. Defendants John P. Quirk and International Research Group, Inc. move to dismiss pursuant to Rule 12(b)(2), Fed.R.Civ.P., or alternatively pursuant to Rule 12(b)(6), Fed.R.Civ.P. and also move to sanction Eavzan pursuant to Rule 11, Fed. R. Civ. P. Defendants Polo Ralph Lauren Corporation and Lee Sporn move to dismiss pursuant to Rule 12(b)(6), Fed.R.Civ.P., or alternatively, for change of venue pursuant to 28 U.S.C. § 1404(a).

Background

This litigation between plaintiff Barry Eavzan ("Eavzan") and defendants Polo Ralph Lauren Corporation ("Polo") and its associate general counsel Lee Sporn ("Sporn"), and International Research Group, Inc. ("IRG") and its employee John P. Quirk ("Quirk"), grows out of a 1993 Massachusetts lawsuit (the "Massachusetts action"). In the Massachusetts action, Polo accused Eavzan of violating federal and state laws prohibiting trademark infringement and unfair competition. Based on information gathered by IRG, Polo alleged that Eavzan was involved in the manufacture, importation, distribution, and sale of shirts bearing counterfeit Polo trademarks.

Eavzan filed a counterclaim in response, contending that Polo fraudulently orchestrated an elaborate "sting" operation, purportedly to fabricate evidence and entrap Eavzan in counterfeiting activity. Eavzan asserted that under Polo's direction, Quirk solicited him to obtain Polo/Ralph Lauren shirts from manufacturers or suppliers in the Far East. Quirk allegedly invented a fictitious business entity dubbed Luxury Goods, International ("Luxury"), and operated under the pretext that Luxury would re-sell the procured items to its own customers. Eavzan did in fact obtain an Asian factory to manufacture knit shirts, but steadfastly denied that he had ever engaged in counterfeit-related activity.

Both Polo and Eavzan spelled out their respective allegations during a six-day trial in federal court in the District of Massachusetts. At the close of trial, the Massachusetts court provided a Special Verdict Form to the jury with questions designed to streamline deliberation on Polo's trademark claims and Eavzan's counterclaim of fraud. The court also included a question relating to Eavzan's request for attorneys' fees, which asked, "Did Polo initiate this lawsuit in bad faith?" Using the Special Verdict Form, the jury rejected all of the claims presented by both Polo and Eavzan. The jury also determined that Polo did not bring its action in bad faith, and the court denied Eavzan's request for attorney fees.

Eavzan's current litigation in this court is predicated on the same facts that he alleged in his Massachusetts counterclaim. Eavzan now frames his legal claim as malicious prosecution and intentional harm, charging that the defendants concocted their scheme in order to manufacture a baseless lawsuit against him.

Discussion

Personal Jurisdiction

As an initial matter, defendants Quirk and IRG, a resident and corporation of Florida, respectively, argue that as non-domiciliaries they are not subject to the jurisdiction of New York courts and move for dismissal pursuant to Rule 12(b)(2), Fed.R.Civ.P. Personal jurisdiction in a diversity action is determined by the laws of the forum state in which the district court sits, see United States v. First Nat'l City Bank, 379 U.S. 378, 381-82, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965), and therefore the argument by Quirk and IRG must be analyzed by applying New York's long-arm statute, Section 302 of the New York Civil Practice Law and Rules ("CPLR"). Because the court has not conducted an evidentiary hearing on the issue, plaintiff need only make a prima facie showing of personal jurisdiction, and the court will construe all pleadings and affidavits in the light most favorable to the plaintiff. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985).

Eavzan has made a prima facie showing that Quirk and IRG are subject to personal jurisdiction pursuant to CPLR 302(a)(2), which provides that jurisdiction may be obtained over a non-domiciliary who commits a tortious act within New York. According to Eavzan, New York served as the location for planning and carrying out the defendants' alleged plan to manufacture evidence for a baseless lawsuit, and Eavzan contends that Quirk and IRG were actively engaged in conceiving and carrying out the alleged activities. Although Quirk and IRG dispute the extent of their involvement, the court must resolve doubts in the plaintiff's favor. Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985).¹

Count I: Malicious Prosecution

The two sets of defendants, Polo and Sporn, and Quirk and IRG, both argue in separate motions that Eavzan is barred from bringing his malicious prosecution claim because his charges were already settled by the prior Massachusetts action. The defendants base their motions on the doctrine of collateral estoppel, or issue preclusion, which serves the dual purpose of protecting litigants from the burden of re-litigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). The doctrine is "founded upon the generally recognized public policy that there must be some end to litigation and that when one appears in court to present his case, is fully heard, and the contested issue is decided against him, he may not later renew the litigation in another court." Sassower v. Abrams, 833 F.Supp. 253, 265 (S.D.N.Y.1993) (Leisure, J.) (quoting Heiser v. Woodruff, 327 U.S. 726, 733, 66 S.Ct. 853, 90 L.Ed. 970 (1946)). For collateral estoppel to apply: (1) the issues in both proceedings must be identical; (2) the issue in the prior proceeding must have been actually litigated and actually decided; (3) there must have been a full and fair opportunity to litigate in the prior proceeding; and (4) the issue previously litigated must have been necessary to support a valid and final judgment on the merits. Metromedia Co. v. Fugazy, 983 F.2d 350, 365 (2d Cir.1992); In re PCH Associates, 949 F.2d 585, 593 (2d Cir.1991); Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir.1986); Sassower, 833 F.Supp. at 265.²

While the parties do not seriously dispute that Eavzan's prior counterclaim and instant action arise from the same core set of facts, they clash over whether the Massachusetts judgment precludes Eavzan from making out a case for malicious prosecution. Under New York law, a claim of malicious prosecution based on a civil action requires a plaintiff to show: (1) the initiation of an action by the defendant against the plaintiff, (2) begun with malice, (3) without probable cause to believe it can succeed, (4) that ends in failure or, in other words, terminates in favor of the plaintiff, and (5) that interfered with the plaintiff's person or property, or imposed some other burden on the plaintiff beyond the ordinary burden of defending a lawsuit. See O'Brien v. Alexander, 101 F.3d 1479, 1484 (2d Cir.1996); Engel v. CBS, Inc., 961 F.Supp. 660, 662 (S.D.N.Y.1997) (Cedarbaum, J.).

In the defendants' view, Eavzan's prior counterclaim suggested the defendants' malice by contending that Polo and Quirk "colluded," "swindled," "cheated," "deceived" and "defrauded" in their efforts to entrap him. See Quirk Brief at 9 (citing ¶¶ 12-16 of Eavzan's counterclaim in the Massachusetts action). The defendants argue that the jury implicitly reached the issue of malice when it denied Eavzan's charges of fraud.

However, the question of fraud presented by the Special Verdict Form did not require the Massachusetts jury to ascertain the motives of Polo and Quirk, but instead asked, "Did [Eavzan] reasonably rely on a material false statement by Polo to [his] detriment?"³ Since the jury's answer of "no" did not require a finding of defendants' malice, the failure of Eavzan's counterclaim does not, by itself, preclude Eavzan's current litigation under the doctrine of collateral estoppel.

The issue of the defendants' possible malice was addressed more directly by the Massachusetts court's decision on attorneys' fees. Under the Lanham Act, a court may award attorneys' fees in "exceptional cases" to the party which prevails in a trademark action. See 15 U.S.C. § 1117(a). The circuits differ on the issue of whether "bad faith" or something less is required to make a case "exceptional." See Scotch Whisky Ass'n. v. Majestic Distilling Co., 958 F.2d 594, 599 (4th Cir.1992) (collecting cases). Although the First Circuit has not yet clearly established its position, the Massachusetts court found it useful to add the question, "Did Polo initiate this action in bad faith?" to the jury's Special Verdict Form, explaining that it "helps me with a potential award and attorneys' fees, whether Polo instituted the lawsuit in bad faith, and that really is more advice to me as to the attorneys' fees question." See Pl. Mem. Opp'n. to Quirk & IRG Mot. to Dismiss at 14. (quoting Day 6 transcript of Massachusetts action at 91). The jury determined that Polo did not, in fact, initiate its trademark action in bad faith, and the Massachusetts court...