Kinetic Instruments, Inc. v. Lares, 92 Civ. 1194 (LBS).

• Citation: 802 F. Supp. 976
• Decision Date: 25 August 1992
• Docket Number: No. 92 Civ. 1194 (LBS).,92 Civ. 1194 (LBS).
• Parties: KINETIC INSTRUMENTS, INC., Plaintiff, v. Craig J. LARES, Defendant.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

802 F. Supp. 976

KINETIC INSTRUMENTS, INC., Plaintiff, v. Craig J. LARES, Defendant.

No. 92 Civ. 1194 (LBS).

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

August 25, 1992.

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Levisohn, Lerner & Berger, New York City (Andrew S. Langsam, Thomas M. Furth, of counsel), for plaintiff.

Brooks Haidt Haffner & Delahunty, New York City (William R. Robinson, G.T. Delahunty, Charles G. Mueller, of counsel), for defendant.

OPINION

SAND, District Judge.

Kinetic Instruments, Inc. (hereinafter "Kinetic") brings this action for patent infringement against Craig J. Lares (hereinafter "Lares"), the President of Lares Research, Inc. (hereinafter "Lares Research"). Kinetic alleges that its United States Patent Number 3,634,938 and Reexamination Certificate Number B1 3,634,938 (hereinafter collectively "the '938 Patent") for a dental handpiece were infringed by Lares' manufacture and sale of fiber optic dental handpieces under the trade designation Apollo prior to the patent's expiration on January 18, 1989. These alleged activities are the subject of an action against the corporation Lares Research, previously filed by Kinetic and pending in this Court, Kinetic Instruments, Inc. v. Lares Research, Inc., 90 Civ. 8190 (LBS) (hereinafter "the corporate action"). In the present case, Kinetic asserts that Lares is personally liable for acts of infringement and inducing infringement of the '938 Patent under 35 U.S.C. § 271.¹ Plaintiff filed this action on February 19, 1992. Defendant has moved to dismiss for lack of personal jurisdiction and improper venue or, in the alternative, for summary judgment. Defendant also moves for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure. While there has been discovery in the corporate action, no discovery has taken place in the present suit. For the reasons discussed below, defendant's motion to dismiss or for summary judgment is denied without prejudice to the making of another jurisdictional motion upon completion of all discovery. Defendant's motion for sanctions is denied.

JURISDICTIONAL FACTS

Defendant Lares resides in the state of California. He is the President and majority shareholder of Lares Research, a California corporation which manufactures and sells dental handpieces and systems, and manufactured and sold the dental handpieces accused of patent infringement in the present case (hereinafter "the accused product"). Plaintiff alleges, and defendant does not appear to dispute, that the accused product was sold in the Southern District of New York.

Lares does not have a place of business in New York. He has attended the annual Dental Show in New York City, although he states that he was last present at the show in November 1984. See Affidavit of Craig J. Lares, March 12, 1992, ¶ 7 (hereinafter "Lares Aff. I"). Since that time, Lares has been present in New York on three occasions. In March of 1987, he met in New York with an inventor on a project unrelated to the accused product. Lares made two other trips to New York in 1991 in connection with the lawsuit pending against the corporation, Lares Research. See Lares Aff. I ¶ 8.

DISCUSSION

A. Standard of Review and Applicable Jurisdictional Law

Plaintiff bears the ultimate burden of establishing personal jurisdiction over a defendant. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); Hvide Marine Int'l Inc. v. Employers Ins. of Wausau, 724 F.Supp. 180, 182 (S.D.N.Y.1989). If jurisdiction is challenged prior to discovery, as is the present case, the plaintiff may defeat the motion by a good faith pleading of legally sufficient allegations. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, ___ U.S. ___, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990).

This court has exclusive jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1338(a) and 35 U.S.C. § 281. In an action arising under a federal question, a federal court will look to the law of the state in which it sits to govern the question of personal jurisdiction, unless a federal statute specifically authorizes service of process on a party not an inhabitant of or found within the forum state. See Fed.R.Civ.P. 4(e); Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104-05, 111, 108 S.Ct. 404, 406, 413, 98 L.Ed.2d 415 (1987); Canterbury Belts Ltd. v. Lane Walker Rudkin, Ltd., 869 F.2d 34, 40 (2d Cir.1989). Since there is no such authorization concerning patent infringement, New York law will control whether this Court can exercise personal jurisdiction over the defendant. See Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 297 (3d Cir.), cert. denied, 474 U.S. 980, 106 S.Ct. 383, 88 L.Ed.2d 336 (1985); Applied Biosystems, Inc. v. Cruachem, Ltd., 772 F.Supp. 1458, 1462 (D.Del.1991); Gor-Vue Corp. v. Hornell Elektrooptik AB, 634 F.Supp. 535, 536 (N.D.Ohio 1986).

B. Assertion of Personal Jurisdiction over Lares under New York Law

Plaintiff appears to assert three different theories for obtaining jurisdiction over the defendant: 1) Lares' personal contacts with New York subject him to jurisdiction here; 2) Lares Research is Lares' "agent" and its activities in New York are sufficient to subject Lares to jurisdiction here; and 3) Lares Research is the "alter ego" of the defendant, or other evidence justifies "piercing the corporate veil," so that the corporation's activities should be attributed to him, thereby subjecting him to jurisdiction in New York.

1. Lares' Personal Contacts With New York

The parties do not appear to dispute that all of Lares' contacts with New York were related to his position as an officer of the corporation, Lares Research. Until quite recently, the federal courts construing New York's jurisdictional rules had applied the fiduciary shield doctrine, which provides that a corporate employee sued in his personal capacity will not be subject to jurisdiction if his contacts with the forum state are solely on behalf of his corporate employer. See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir. 1981); Trafalgar Capital Corp. v. Oil Producers Equipment Corp., 555 F.Supp. 305, 309 (S.D.N.Y.1983). However, in Kreutter v. McFadden Oil Corp., the New York Court of Appeals found that prior New York state cases had "provided no basis for development of the jurisdictional doctrine the Second Circuit attributed to it," and unequivocally held that the fiduciary shield doctrine may not be invoked to defeat jurisdiction over a corporate employee under the New York long-arm statute. Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 468, 472, 522 N.E.2d 40, 44, 47-48, 527 N.Y.S.2d 195, 199-200, 202 (1988).² Therefore, it is clear that the defendant Lares will not be insulated from jurisdiction in New York simply because his contacts here were made in his capacity as an officer of the corporation, Lares Research. However, we conclude that plaintiff has not alleged sufficient personal contacts of Lares with New York to satisfy the jurisdictional requirements of New York law.³

Plaintiff asserts that this Court has jurisdiction over defendant on the basis of N.Y.C.P.L.R. § 302(a).⁴ Under § 302(a)(1), a defendant who "transacts business" in state is subject to jurisdiction here. A single transaction is sufficient, even if the defendant never enters the state, "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 at 467, 522 N.E.2d at 43, 527 N.Y.S.2d at 198-99.

The Complaint alleges that defendant attended the Dental Show in New York for several years during the term of the '938 Patent. See Complaint ¶ 9. However, such attendance at trade shows has been held insufficient to satisfy the "transacting business" standard. See Loria & Weinhaus, Inc. v. H.R. Kaminsky & Sons, 495 F.Supp. 253, 257 (S.D.N.Y.1980). The Complaint further states that defendant "has sold within this district dental products ... which infringe the '938 Patent." Id. However, in a general paragraph regarding jurisdiction, the plaintiff states: "the cause of action stated herein is based upon the manufacture and sale of dental handpieces ... by defendant, Craig J. Lares, through a corporation which he controls ..." See Complaint ¶ 4. Thus, plaintiff does not appear to be alleging that Lares personally sold the accused product, and makes no allegation of any other personal transaction of business by Lares regarding the product. We find that plaintiff has not sufficiently alleged the personal transaction of business in New York by Lares so as to make jurisdiction proper under § 302(a)(1).

Section 302(a)(2) confers jurisdiction over a defendant who "commits a tortious act within the state." The courts have interpreted this provision to require that the defendant be physically present within the state while committing the tort. See Dept. of Economic Dev. v. Arthur Andersen & Co., 747 F.Supp. 922, 929 (S.D.N.Y.1990); Paul v. Premier Electrical Construction Co., 576 F.Supp. 384, 389 (S.D.N.Y.1983). Plaintiff has alleged no act of Lares while in New York that constitutes tortious activity, and therefore has made no showing that jurisdiction would be proper on this basis.

Section 302(a)(3) confers jurisdiction over any defendant who commits a tort outside the state causing injury in the state, and; either regularly does or solicits business in New York or derives substantial revenue from goods used in the state; or expects or reasonably should expect the tortious act to have consequences in the state and derives substantial revenue from interstate or international commerce. N.Y.C.P.L.R. § 302(a)(3); Forgash v. Paley, 659 F.Supp. 728, 731 (S.D.N.Y.1987). As discussed above, plaintiff has not alleged that Lares personally does or solicits business in New York, and while the Complaint states...