ENVIRONMENTAL DYNAMICS v. ROBERT TYER AND ASSOC.
| Decision Date | 21 June 1996 |
| Docket Number | No. C 93-3062-MWB.,C 93-3062-MWB. |
| Citation | 929 F. Supp. 1212 |
| Parties | ENVIRONMENTAL DYNAMICS, INC., Plaintiff, v. ROBERT TYER AND ASSOCIATES, INC., Robert R. Tyer, and Parsons Engineered Products, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
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Richard R. Johnson of Kokjer, Kircher, Bowman & Johnson in Kansas City, Missouri, and James L. Kramer of Johnson, Erb, Bice, Kramer, Good & Mulholland, P.C., in Fort Dodge, Iowa, for Plaintiff EDI.
Daniel V. Thompson of Thompson & Howison, L.L.P., in Dallas, Texas, and Stephen G. Kersten of Kersten & Carlson in Fort Dodge, Iowa, for Defendants Robert Tyer Associates, Inc., Robert Tyer, and Parsons Engineered Products, Inc.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND ................................................... 1217
A. Factual Background ......................................................... 1217
B. Procedural History ......................................................... 1218
1. Complaint, amended complaints, and counterclaims ........................ 1218
2. Dispositive motions and arguments of the parties ........................ 1219
a. Tyer's motion to dismiss ............................................. 1219
b. Defendants' March 12, 1996, motion for partial summary judgment ...... 1220
c. EDI's first motion for partial summary judgment ...................... 1220
d. EDI's motion to dismiss counterclaims ................................ 1221
e. EDI's supplemental motion for partial summary judgment ............... 1222
f. EDI's motion for summary judgment as to RTA .......................... 1222
g. EDI's motion for summary judgment on inequitable conduct defenses .... 1222
II. LEGAL ANALYSIS ............................................................... 1223
A. Standards For Dispositive Motions ......................................... 1223
1. Which circuit's law applies? ........................................... 1223
2. What standards apply to EDI's motions to dismiss its own claims? ....... 1224
B. The Voluntary Dismissal Motions ........................................... 1226
1. Voluntary dismissal pursuant to Fed.R.Civ.P. 41(a) ..................... 1226
2. Voluntary dismissal pursuant to Fed.R.Civ.P. 15 ........................ 1227
C. The "Alter Ego" Claim ..................................................... 1229
1. Summary judgment standards ............................................. 1230
2. Undisputed and disputed facts concerning the "alter ego" claim ......... 1232
3. Elements of an "alter ego" claim ....................................... 1233
a. The nature of the "alter ego" cause of action ....................... 1234
b. "Unity" and "injustice" prongs of the "alter ego" analysis .......... 1234
c. "Federal common law" or "state law"? ................................ 1237
d. Is there a genuine issue of material fact on the "alter ego" claim?.. 1240
4. Relitigation and res judicata .......................................... 1240
a. Relitigation of RTA's liability ..................................... 1240
b. Res judicata ........................................................ 1241
i. Claim preclusion ................................................. 1242
ii. Issue preclusion ................................................ 1245
D. Counterclaims ............................................................. 1247
1. "Reasonable apprehension" of litigation ................................ 1247
2. Discretion to decline to hear declaratory judgment actions ............. 1249
IV. CONCLUSION ................................................................... 1250
The parties to this patent infringement litigation have filed a plethora of dispositive motions. Much of the argument of the parties involves the extent to which a jury verdict of infringement and various judicial decisions in parallel litigation in federal court in Texas should be given res judicata effect in this litigation. The present litigation was stayed during the pendency of the Texas lawsuit. However, the Texas litigation did not involve all of the present defendants. The prompt and coherent disposition of the present litigation has been further complicated by the bankruptcies of one of the corporate defendants and its sole shareholder, prompted by the adverse judgment against the corporate defendant in the Texas litigation. Although the parties have bandied about various principles of patent law and res judicata, making disposition of the motions appear as complicated as slaying Hydra,1 the court finds that determinative issues, for the most part, lie in other areas.
This lawsuit arises from claims of infringement of two U.S. patents for wastewater aeration equipment owned by plaintiff Environmental Dynamics, Inc. (EDI). The patents in suit are U.S. Patent No. 4,960,546 ("the '546 patent"), for "Diffuser Mounting Arrangement for Waste Water Aeration System," and U.S. Patent No. 4,563,277 ("the '277 patent"), for "Apparatus for Aerating and Mixing Waste Water." The original complaint alleged that various defendants were infringing the patents or inducing the infringement of the patents as the result of the design, manufacture, sale, and use of wastewater aeration equipment in a municipal wastewater treatment facility of the City of Mason City, Iowa ("the accused Mason City aeration equipment"). The original defendants were Robert Tyer and Associates, Inc. ("RTA"), Robert R. Tyer, individually ("Tyer"), Parsons Engineered Products, Inc. ("Parsons"), the City of Mason City, Iowa ("the City"), and Story Construction Co. ("Story"). The complaint has been twice amended, changing not only the claims asserted but the defendants against whom they are asserted.
RTA, doing business as Aeration Research Co., brought parallel litigation against EDI in United States District Court for the Southern District of Texas seeking a declaratory judgment of invalidity and non-infringement of the patents also in suit here. EDI filed counterclaims in that litigation, asserting infringement of its patents. Following summary denial of RTA's declaratory claims and defenses of inequitable conduct, the Texas litigation proceeded to jury trial only on EDI's infringement claims. The jury verdict was in favor of EDI and the jury awarded damages for infringement against RTA in the sum of $118,000. On March 17, 1995, the Texas district court entered a final judgment awarding EDI damages of $118,000 plus post-judgment interest. Although RTA filed a Notice of Appeal three days later on March 20, 1995, RTA subsequently filed a voluntary bankruptcy petition under Chapter 7 on April 26, 1995. In light of RTA's bankruptcy and the automatic stay in bankruptcy found in 11 U.S.C. § 362, on July 14, 1995, the Federal Circuit Court of Appeals dismissed RTA's appeal without prejudice to its reinstatement within thirty days after the lifting of the stay or conclusion of the bankruptcy proceeding.
After it had obtained a judgment and RTA had declared bankruptcy, EDI sought leave of the Texas court pursuant to Fed.R.Civ.P. 15 to amend its complaint there to add Tyer as a defendant. The Texas court summarily denied that motion to amend. Owing to RTA's bankruptcy, EDI has never recovered its judgment in the Texas litigation.
During the pendency of the dispositive motions considered here, the automatic stay in RTA's bankruptcy was lifted, thus allowing the present litigation to proceed against RTA. However, the lifting of that bankruptcy stay was not the end of the complications to disposition of the pending motions, as Tyer then declared personal bankruptcy. Tyer's bankruptcy has now been dismissed, so no party is currently in bankruptcy. Further factual background, including both undisputed and disputed facts, will be presented in pertinent portions of this ruling. However, the court turns first to consideration of the involved procedural history of this litigation and the arguments of the parties in their various dispositive motions.
The original complaint in this lawsuit was filed on September 7, 1993. Following answers by all parties and the court's denial of EDI's motion for a preliminary injunction, this action was stayed upon the agreement of the parties pending resolution of the related proceedings brought in federal court in Texas or until September 1, 1994, whichever came first.
Status reports on the Texas litigation were filed in this district during the pendency of matters in Texas federal court and no other activity occurred in this district until completion of the Texas litigation. On June 12, 1995, RTA filed a suggestion of bankruptcy in this case. On June 16, 1995, this court entered a scheduling order for discovery, designation of experts, and dispositive motions in this lawsuit. In light of the decision in the Texas litigation and RTA's bankruptcy, EDI filed a First Amended Complaint on September 21, 1995, which was answered on October 3, 1995. A stipulation for dismissal with prejudice of all claims by EDI against defendants Story and the City was filed on January 10, 1996. EDI then obtained leave to file a Second Amended Complaint on February 20, 1996, which names only RTA, Tyer, and Parsons as defendants. Defendants Tyer and Parsons answered the amended complaint on March 11, 1996. RTA, however, remained in bankruptcy, and has made no answer to the Second Amended Complaint, although the bankruptcy stay as...
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