Mobil Oil v. ADVANCED ENV. RECYCLING TECHNOLOGIES

• Decision Date: 28 September 1993
• Docket Number: Civ. A. No. 92-351-JJF.
• Citation: 833 F. Supp. 437
• Parties: MOBIL OIL CORPORATION, Plaintiff, v. ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., Defendant. ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., Counterclaim Plaintiff, v. MOBIL OIL CORPORATION, Mobil Corporation, Mobil Chemical Company, Inc., Arthur C. Ferguson, Andrew U. Ferrari and Paul M. Herbst, Counterclaim Defendants.
• Court: U.S. District Court — District of Delaware

833 F. Supp. 437

MOBIL OIL CORPORATION, Plaintiff, v. ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., Defendant.

ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC., Counterclaim Plaintiff, v. MOBIL OIL CORPORATION, Mobil Corporation, Mobil Chemical Company, Inc., Arthur C. Ferguson, Andrew U. Ferrari and Paul M. Herbst, Counterclaim Defendants.

Civ. A. No. 92-351-JJF.

United States District Court, D. Delaware.

September 28, 1993.

COPYRIGHT MATERIAL OMITTED

Charles S. Crompton, Jr., and William J. Marsden, Jr., of Potter Anderson & Corroon, Wilmington, DE, Richard E. Kurtz, and Albert T. Keyack, of Woodcock Washburn Kurtz Mackiewicz & Norris, Philadelphia, PA, James F. Rill, John B. Williams, and Christopher J. MacAvoy, of Collier Shannon Rill & Scott, Washington, DC, for Mobil Oil Corp., Mobil Corp., Mobil Chemical Co., Inc., Arthur C. Ferguson, Andrew U. Ferrari, and Paul M. Herbst.

Douglas E. Whitney, Jack B. Blumenfeld, R. Judson Scaggs, Jr., and Michael L. Vild, of Morris Nichols Arsht & Tunnell, Wilmington, DE, for Advanced Environmental Recycling Technologies, Inc.

FARNAN, District Judge.

I. INTRODUCTION

Presently before the Court are three Motions to Dismiss filed by Counterclaim Defendants, Andrew U. Ferrari (D.I. 87), Arthur C. Ferguson (D.I. 84), and Paul M. Herbst (D.I. 90). The Counterclaim Defendants seek dismissal of Advanced Environmental Recycling Technologies, Inc.'s ("AERT") counterclaims against them pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure on the grounds that the Court lacks personal jurisdiction over them. Because the Court finds that it lacks personal jurisdiction over Mr. Ferrari the Court will grant his Motion to Dismiss and will dismiss AERT's counterclaims against him. However, the Court finds that it does have personal jurisdiction over Mr. Herbst and Mr. Ferguson. Accordingly, the Court will deny their Motions to Dismiss.

II. PROCEDURAL BACKGROUND

On June 9, 1992, Mobil filed this declaratory judgment action against AERT seeking a determination that it has not infringed four patents owned by AERT, and the four patents are invalid and unenforceable. (D.I. 1). Mobil amended its Complaint on August 28, 1992 seeking a declaratory judgment that Mobil has not breached a confidential relationship between AERT and Mobil. (D.I. 17).

On December 8, 1992, AERT filed its Answer to Mobil's First Amended Complaint together with four counterclaims naming as defendants Mobil Oil Corporation, Mobil Corporation, Mobil Chemical Company, Inc., and three individuals, Mr. Ferguson, Mr. Ferrari, and Mr. Herbst. Answer and Counterclaims (D.I. 67). The Counterclaims allege that the counterclaim defendants: (1) violated of Section 1 of the Sherman Act (D.I. 67 at ¶¶ 36-41), (2) violated of Section 2 of the Sherman Act (D.I. at ¶¶ 42-46), (3) breached of a confidential relationship (D.I. 67 ¶¶ 47-52), and (4) engaged in unfair competition (D.I. 67 at ¶¶ 53-56). Central to the present motions to dismiss is AERT's allegation that the counterclaim defendants violated federal anti-trust laws by filing this declaratory judgment as part of its attempt to monopolize the composite products market and it therefore constitutes "sham litigation."

Ferguson, Ferrari and Herbst each filed a Motion to Dismiss on January 7, 1993, arguing that the Court does not have personal jurisdiction over them because (1) all of their actions relating to AERT's complaint were taken as corporate representatives and the fiduciary shield precludes the Court from exercising jurisdiction over them under Delaware's long-arm statute; and (2) exercising personal jurisdiction over them would violate the minimum contacts standard of International Shoe.

III. FACTS

AERT alleges the following facts in support of its counterclaims, which the Court includes for the purpose of providing context for the present motion. (D.I. 67 at ¶¶ 2-35). Mr. Ferguson was during the relevant time period the executive responsible for Mobil's composite product business and authorized the filing of the Complaint on behalf of Mobil. Mr. Ferrari reported to Mr. Ferguson as Mobil's venture manager. Mr. Herbst, during the relevant time period, was the attorney responsible for the legal affairs of Mobil's composite products business and authorized the filing of the Complaint on behalf of Mobil. AERT is a small, publicly traded company that makes and sells composite products from recycled plastic and wood fiber. AERT owns U.S. patents 5,082,605, 5,088,910, 5,096,046, and 5,096,406 which cover methods and equipment used by AERT in making composite products.

On October 2, 1989, March 6, 1990, and May 14, 1991, representatives of Mobil, including Mr. Ferrari, visited AERT's facility in Junction, Texas. Mobil was interested in AERT's plastic film reclamation and cleansing business. The Mobil representatives signed a confidentiality agreement and then toured the facility. During the visit on May 14, 1991, the Mobil representatives assured AERT that Mobil was interested in AERT only as a potential supplier of film reclamation and cleansing services and was not interested in entering the composite products business.

In April, 1992, Mobil acquired the assets of Rivenite, a company that is involved in the composite products business. Shortly thereafter, Mobil filed this declaratory judgment action seeking a determination that Rivenite's process does not infringe AERT's patents, and that AERT's patents are invalid and unenforceable. AERT then counterclaimed challenging Mobil's purchase of Rivenite and Mobil's declaratory judgment suit as attempts to monopolize the composite products market. In addition, AERT alleged that Mobil breached the confidentiality agreement by using trade secrets it acquired from AERT during Mobil's tour of AERT's facility.

IV. DISCUSSION

The sole issue raised by the individual counterclaim defendants' motions is whether AERT has established that the counterclaim defendants had sufficient contact with the state of Delaware to permit the Court to properly exercise personal jurisdiction over them. Rule 4(e) of the Federal Rules of Civil Procedure provides that a federal court may exercise personal jurisdiction over a nonresident "to the extent permissible under the law of the state where the district court sits." Mesalic v. Fiberfloat Corp., 897 F.2d 696, 698 (3d Cir.1990). In this regard, the Court must first determine whether in personam jurisdiction exists over Ferrari, Ferguson and Herbst under Delaware's long arm statute. The Court must then ascertain whether the exercise of such jurisdiction would comport with the Due Process Clause of the United States Constitution under the standards announced in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny. Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir.1984).

Once a defendant properly raises the jurisdictional defense, the Plaintiff has the burden of establishing by a preponderance of the evidence that minimum contacts have occurred. Patterson v. F.B.I., 893 F.2d 595, 604 (3d Cir.), cert. denied, 498 U.S. 812, 111 S.Ct. 48, 112 L.Ed.2d 24 (1990). AERT "must sustain its burden of proof ... through sworn affidavits or other competent evidence." Time Share Vacation Club, 735 F.2d at 67 n. 9 (citing International Ass'n of Machinists & Aerospace Workers v. Northwest Airlines, Inc., 673 F.2d 700 (3d Cir. 1982)); Stranahan Gear Co. v. NL Indus., Inc., 800 F.2d 53, 58 (3d Cir.1986) (plaintiff must show sufficient evidence to withstand a defendant's Rule 12(b)(2) motion, bare pleadings and allegations are not enough).

A. FIDUCIARY SHIELD DOCTRINE

The fiduciary shield doctrine is a judicially created doctrine that immunizes acts performed by an individual in the individual's capacity as a corporate employee from serving as the foundation for the exercise of personal jurisdiction over that individual. Rollins v. Ellwood, 141 Ill.2d 244, 152 Ill.Dec. 384, 565 N.E.2d 1302 (1990); see generally, Note, The Fiduciary Shield Doctrine: Minimum Contacts in a Special Context, 65 B.U.L.Rev. 967 (1985). The three individual counterclaim defendants argue that the fiduciary shield doctrine immunizes them from personal jurisdiction in Delaware because their only contacts with Delaware involved acts that they performed in their capacities as representatives of Mobil. Thus, before determining whether the individual counterclaim defendants have minimum contacts with Delaware sufficient for the Court to constitutionally exercise personal jurisdiction over them, the Court must decide to what extent it may rely on the contacts that the three defendants had with Delaware in their capacities as corporate representatives of Mobil. Because this issue has not been addressed by the Supreme Court of Delaware, the Court in the first instance must decide to what extent the Delaware Supreme Court would recognize the fiduciary shield doctrine as a defense to personal jurisdiction. To support their reliance on the fiduciary shield doctrine, the individual counterclaim defendants cite Plummer & Co. Realtors v. Crisafi, 533 A.2d 1242, 1246-48 (Del.Super.1987), the only published decision by a state court of Delaware that addresses the fiduciary shield doctrine. In Plummer, the Superior Court of Delaware recognized the fiduciary shield doctrine as a valid defense to personal jurisdiction. Because the fiduciary shield doctrine had not been discussed by any prior published Delaware case, the superior court looked to Illinois decisional law,¹ and noted that the Illinois courts have adopted "the defense, known as the fiduciary shield doctrine, ... to insulate employees and officers of a corporation from being sued in the courts of a jurisdiction where their sole contacts have been on behalf of their corporation." Id. at 1246 (citing State Security Ins. Co. v. Frank B. Hall & Co., 530 F.Supp. 94, 97 (N.D.Ill.1981)). However, relying...