Leesona Corporation v. Duplan Corporation

• Decision Date: 07 August 1970
• Docket Number: Civ. A. No. 4315.
• Citation: 317 F. Supp. 290
• Parties: LEESONA CORPORATION, Plaintiff, v. The DUPLAN CORPORATION et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

317 F. Supp. 290

LEESONA CORPORATION, Plaintiff, v. The DUPLAN CORPORATION et al., Defendants.

Civ. A. No. 4315.

United States District Court, D. Rhode Island.

August 7, 1970.

Edward F. Hindle, John V. Kean, John H. Blish, and James P. Kelly, Edwards & Angell, Providence, R. I., for plaintiff.

Edwin H. Hastings, and DeWitte T. Kersh, Jr., Tillinghast, Collins & Graham, Providence, R. I., for moving defendants.

PETTINE, District Judge.

On October 9, 1969, Leesona, a Massachusetts corporation with its principal place of business in Rhode Island, commenced suit in Rhode Island Superior Court against some sixty corporate defendants, seeking declaratory and other equitable relief. It was subsequently removed to this court. Several of the named defendants moved to dismiss on a number of grounds, and on April 21, 1970, this Court rendered an opinion dismissing the suit, because the state court had lacked jurisdiction over the subject matter, and therefore this Court had no derivative jurisdiction upon removal. (Leesona Corp. v. Concordia Mfg. Co., Inc., 312 F.Supp. 329, D.R.I.).

The instant action was therefore commenced by Leesona in this court on April 28, 1970, against forty-nine corporate defendants. Plaintiff seeks recovery of allegedly past due royalties and a court order requiring payment of future royalties which allegedly will come due under certain patent licensing agreements. On August 30, 1969, before Leesona had brought any suit upon these patents, Kayser-Roth Corporation and twenty-six other corporations (all twenty-seven of whom are among the forty-nine defendants in the action before this court) brought suits¹ against Leesona in the United States District Court for the Eastern District of New York, seeking a declaratory judgment of non-infringement of certain U. S. Letters patent² held by Leesona. Those twenty-seven corporations had been granted non-exclusive licenses under those patents by Leesona, but they had allegedly terminated the licenses by cancellation of future royalty payments on August 29, 1969. The plaintiffs in that action also alleged antitrust violations relating to misuse by Leesona of the patents in question,³ for which they sought treble damage recovery. As part of its answer to these complaints, Leesona presented the affirmative defense of plaintiff's default on royalty payments. Furthermore Leesona counterclaimed for patent infringement and breach of the contractual obligation to make royalty payments. This Court today decides several motions which have been briefed and argued exhaustively to this Court. Thirty-nine defendants have joined in a motion to dismiss for lack of personal jurisdiction and in an alternative motion to stay and/or transfer the pending action. One defendant has separately made similar motions.⁴ Nine defendants have not joined in these motions at all.

MOTION TO DISMISS

My denial of the earlier motion to dismiss is controlling here, for I find no facts which materially distinguish this motion from my earlier ruling.

MOTION TO TRANSFER

Defendants' motion to transfer this action to the Eastern District of New York is based upon 28 U.S.C. Section 1404(a), which provides:

"§ 1404. Change of Venue.

(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." (emphasis added)

Passing for the moment the question of whether "the convenience of parties and witnesses" and "the interest of justice" favors the transfer requested by the defendants, this Court must first determine whether the Eastern District of New York is a district in which this action "might have been brought." Counsel have agreed that 1404(a) requires that the proposed transferee forum have jurisdiction over the subject matter of the action, that venue be proper there and that the defendants must be amenable to service of process by the transferee court. The moving defendants assert that this action might have been brought in the Eastern District of New York, as follows:

(1) Plaintiff could have brought a counterclaim to all the pending suits in New York, insofar as the original twenty-seven plaintiffs therein are among the forty-nine defendants here;⁵

(2) Twelve of the remaining defendants here have entered a stipulation with this Court to be bound by the judgment of the New York Court;

(3) Certain of the defendants here, including some who brought suit in N. Y., some who have entered stipulations in N. Y., and some who have done neither, are subject to the personal jurisdiction of the New York Court, by virtue of their doing business there.

The first issue which this Court must face, therefore, is whether the requirement that the proposed transferee forum be one in which the action "might have been brought" is satisfied by the opposing party's right to bring a counterclaim to a previously-instituted action, which Leesona has already done in New York.

A consideration of relevant case law upon defendants' argument must begin with Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960), in which the Supreme Court consolidated two cases for decision. In both, a District Court granted transfer of an action to a forum in which neither venue nor service of process would have been proper at the time the action was instituted, but in which defendants had subsequently consented to be sued. In rejecting that interpretation of 1404(a), the Court adopted the following language of one of the Circuit Court opinions:

"If when a suit is commenced, plaintiff has a right to sue in that district, independently of the wishes of defendant, it is a district `where the action might have been brought'. If he does not have that right, independently of the wishes of defendant, it is not a district `where it might have been brought', and it is immaterial that the defendant subsequently makes himself subject, by consent, waiver of venue and personal jurisdiction defenses or otherwise, to the jurisdiction of some other forum. 260 F.2d at page 321, and 261 F.2d at page 469." (emphasis added) 363 U.S. at 344, 80 S.Ct. at 1090.

Leesona contends that as applied to the situation before this Court, Hoffman means that the Eastern District of New York must be a court in which it could have sued these defendants originally, as of right, and independently of their filing of an action in which Leesona concededly had a right to counterclaim at the time it instituted this Rhode Island suit. There is some thrust to the argument that the right to counterclaim is not "independent of the wishes of defendant" and therefore does not meet the test of Section 1404(a). However, this Court feels that the right to bring a counterclaim against a defendant in the proposed transferee forum, if that right existed at the time the action which is proposed to be transferred was instituted, qualifies that forum as one in which suit "might have been brought." I reach this result because such a situation is not afflicted with the "gross discrimination" in choice of forum with which the Court in Hoffman was concerned.⁶ Here, on April 28, 1970, Leesona had the choice, at least with respect to twenty-seven of these defendants, of bringing suit in Rhode Island or counterclaiming for royalty payments in the New York declaratory judgment action. This is a materially different situation from Hoffman, because there is no attempt here by defendants subsequent to April 28, 1970 to create a proposed transferee forum in which Leesona could not have sued on that date.

In so holding, this Court recognizes that there exists a very limited amount of Federal District Court authority, which is contra. A situation analogous to that facing this Court arose in New York Central Railroad Co. v. United States, 200 F.Supp. 944 (S.D.N.Y. 1961), in which defendant raised the argument that where New York plaintiff had a specific statutory right, under 28 U.S.C. § 2323, to appear as intervenors in a prior Maryland case, that was sufficient to make the latter forum one in which suit "might have been brought." The Court never reached the question, for it decided that plaintiff's specific claims could not be raised in the Maryland suit. However, the Court did say in dictum, that since Section 1404(a) speaks of a district where "it" i. e., "the action," might have been brought, the mere right to assert claims as an intervenor is insufficient to qualify the proposed transferee forum:

"Plaintiff's third contention, also, (that the mere right to assert claims is insufficient) is not to be readily dismissed, especially in view of the tendency to give a rather literal reading to 1404(a) evidenced by (Hoffman v. Blaski)." 200 F.Supp. at 948.

Similarly, in Foster-Wheeler Corp. v. Aqua-Chem, Inc., 277 F.Supp. 382 (E. D.Pa. 1967), the Court reached a result contrary to the result I reached today. In granting a stay of the declaratory judgment proceeding before it, in favor of a patent infringement suit filed earlier in another forum, the Court remarked, "(t)he preliminary issue of transfer scarcely needs comment." 277 F.Supp. at 383. It added, however:

"Contrary to defendant's contention, the hypothetical ability of (the Pa. plaintiff) to file a counterclaim in the Louisiana suit previously instituted by (defendant) against (plaintiff's indemnity) in no way qualifies that district under § 1404(a) as one to which suit may properly be transferred." 277 F.Supp. at 384.

Continuing, the Court found that the language of Hoffman, supra, bars transfer to another forum under 1404(a) unless the actual suit in question could have been brought there at the time when it was filed.

Though not relied upon by counsel this Court has not overlooked the following footnote remark in the dissenting opinion of Justice Douglas in Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486, 88 S.Ct. 602, 19 L.Ed.2d 723 (1968):

"Our decisions in Hoffman v.

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