Norkol/Fibercore, Inc. v. Gubb

• Decision Date: 25 August 2003
• Docket Number: No. 01-C-1267.,01-C-1267.
• Citation: 279 F.Supp.2d 993
• Court: U.S. District Court — Eastern District of Wisconsin
• Parties: NORKOL/FIBERCORE, INC. and P & M Services, Inc. d/b/a Fibercore Equipment Co., Plaintiffs/Counterclaim-Defendants, v. Martin R. GUBB, L & P Converters Corp. and Sterling Technology, Inc., Defendants/Counterclaim-Plaintiffs.

Page 993

279 F.Supp.2d 993

NORKOL/FIBERCORE, INC. and P & M Services, Inc. d/b/a Fibercore Equipment Co., Plaintiffs/Counterclaim-Defendants, v. Martin R. GUBB, L & P Converters Corp. and Sterling Technology, Inc., Defendants/Counterclaim-Plaintiffs.

No. 01-C-1267.

United States District Court, E.D. Wisconsin.

August 25, 2003.

Mark S. Demorest, for Plaintiff or Petitioner.

Joseph S. Goode, James H. Fritz, for Defendant or Respondent.

DECISION AND ORDER

ADELMAN, District Judge.

Plaintiffs ("Fibercore") brought this patent infringement action against defendants Quad/Graphics, Inc. ("Quad/Graphics"), L & P Converters Corp. ("L & P"), Sterling Technology, Inc. ("Sterling"), and Martin Gubb ("Gubb"). Quad/Graphics has since been dismissed as a defendant. Plaintiffs assert two patent infringement claims. Plaintiffs also assert, against defendants Sterling and Gubb, a claim for conspiracy to induce infringement and claims of tortious interference with prospective business advantage and tortious interference with lawful business. This court has jurisdiction over the claims relating to patents under 28 U.S.C. § 1338(a) and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367(a). Before me now are Gubb's motions to dismiss plaintiff's second amended complaint for lack of personal jurisdiction and/or for improper venue, and Sterling and Gubb's motion to dismiss the conspiracy claim for failure to state a claim.

I. FACTS

Fibercore is in the business of cutting off the ends of paper rolls and holds several patents on devices that perform this function. Gubb is a California resident and the owner and president of both L & P and Sterling. Sterling is a division of L & P. Sterling recently sold a machine that cuts paper rolls to Quad/Graphics. This machine is the alleged infringing product. The sale of the machine was negotiated on behalf of Sterling by Gubb. In the course of the transaction, Gubb had a number of contacts with Wisconsin. Quad/Graphics is a Wisconsin company, and Gubb negotiated the sale with Quad/Graphics employees who were located in Wisconsin. Gubb's contacts with Wisconsin were both telephonic and written.

II. PERSONAL JURISDICTION OVER GUBB

Pursuant to Fed.R.Civ.P. 12(b)(2), Gubb moves to dismiss plaintiffs' claims against him based on the absence of personal jurisdiction. Whether a court has personal jurisdiction over a defendant in a patent case is determined according to the law of the federal circuit rather than of the regional circuit in which the case arose. Wayne Pigment Corp., v. Halox, 220 F.Supp.2d 931, 933 (E.D.Wis.2002). Plaintiffs have the burden of proving personal jurisdiction and, for purposes of determining the issue, I take all of their factual allegations as true unless they are directly controverted. Id. I may consider evidence so long as I resolve all factual disputes in plaintiffs' favor. Id.

In determining whether this court has personal jurisdiction over a defendant, I look first to Fed.R.Civ.P. 4(k). Id. Rule 4(k) provides that even when the claim being asserted is a federal one, a federal court applies the relevant state statute to determine personal jurisdiction. Id. The question of whether I have personal jurisdiction over an out-of-state defendant involves two inquiries: (1) whether the forum state's long-arm statute, here, Wis. Stat. § 801.05, permits the exercise of personal jurisdiction; and (2) whether the assertion of personal jurisdiction would violate due process. Id. In applying the state long-arm statute, I defer to the Wisconsin court's interpretation of the statute and I liberally construe it in favor of exercising jurisdiction. Id. Wis. Stat. § 801.05 provides jurisdiction to the full extent provided by due process. Allen-Bradley Co., Inc. v. Datalink Technologies, Inc., 55 F.Supp.2d 958, 959 (E.D.Wis.1999).

Under § 801.05, Wisconsin can exercise two types of personal jurisdiction over a nonresident defendant, general and specific. General jurisdiction is proper when a defendant has "continuous and systematic business contacts" with a state, and it allows a defendant to be sued in that state regardless of the subject matter of the lawsuit. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). On the other hand, a state may exercise specific jurisdiction when the defendant has a lesser degree of contact with the state and the litigation arises out of or is related to those contacts. Id. at 414 n. 8, 104 S.Ct. 1868.

In the present case, in the course of negotiating the sale of the Sterling machine to Quad/Graphics, Gubb had both telephonic and written contacts with Wisconsin, and the quantity of the contacts was more than minimal. Gubb does not dispute that such contacts would be sufficient to establish personal jurisdiction over him under the Wisconsin long-arm statute if, when the contacts occurred, he had been acting as an individual. However, he argues that he made the contacts solely in his capacity as an agent of Sterling and that, therefore, the court may not exercise jurisdiction over him as an individual.¹

Gubb argues that he may not be haled into Wisconsin courts because he is protected by the "fiduciary shield doctrine." The doctrine denies personal jurisdiction over an individual whose presence and activity in the state in which the suit is brought were solely on behalf of his employer or other principal. Rice v. Nova Biomedical Corp., 38 F.3d 909, 912 (7th Cir.1994). Gubb's argument thus raises the question of whether Wisconsin recognizes the fiduciary shield doctrine.

The Wisconsin Supreme Court has not spoken on the issue. Therefore, in addressing Gubb's argument, I must predict how that court would decide the question today. Rodman Indus., Inc. v. G & S Mill, Inc., 145 F.3d 940, 942-43 (7th Cir. 1998). In making this prediction, I may seek guidance from lower Wisconsin courts or courts of other jurisdictions. See King v. Damiron Corp., 113 F.3d 93, 95 (7th Cir.1997). However, I must be circumspect in expanding the boundaries of established state jurisprudence. Id. at 97.

It is generally believed that the fiduciary shield doctrine originated in Rene Boas & Assocs. v. Vernier, 22 A.D.2d 561, 257 N.Y.S.2d 487 (N.Y.App.Div.1965). Intermatic, Inc. v. Taymac Corp., 815 F.Supp. 290, 294 (S.D.Ind.1993). In Boas, the court appeared to conclude that because the non-resident defendant was not personally liable for breach of contract, having executed the contract solely in his capacity as a corporate officer, he was not subject to personal jurisdiction in New York in a suit on the contract. Boas, 257 N.Y.S.2d at 489-90. One year later, in United States v. Montreal Trust Co., 358 F.2d 239 (2d Cir.1966), the Second Circuit read Boas as creating a rule that prevents the exercise of personal jurisdiction over an individual based on the individual's contacts with the forum state, if the contacts occurred while the individual was acting in an official capacity on behalf of an organization. It called this rule the fiduciary shield and, thus, created the doctrine. Intermatic, Inc., 815 F.Supp. at 294.

For a time, courts questioned whether the doctrine was part of federal due process or a matter of state law. See, e.g., Columbia Briargate Co. v. First Nat'l Bank in Dallas, 713 F.2d 1052, 1055-57 (4th Cir.1983). However, it came to be viewed mainly as a state law doctrine that courts considered in determining the scope of state long-arm statutes. Intermatic, 815 F.Supp. at 293 (citing Calder v. Jones, 465 U.S. 783, 788-90, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (holding that defendants' status as employees did not insulate them from jurisdiction and implicitly rejecting due process-based fiduciary shield principle); and Cantrell v. Extradition Corp. of Am., 789 F.Supp. 306, 309 (W.D.Mo.1992) ("The fiduciary shield doctrine is not a constitutional principle, but is rather a doctrine based on judicial inference as to the intended scope of the long-arm statute.")).

The doctrine has been recognized by the courts of many states, although it has also been much criticized and rejected by many jurisdictions. Rice, 38 F.3d at 912. For a number of reasons, I conclude that, if faced with the decision of whether or not to adopt the doctrine, the Supreme Court of Wisconsin would decline to do so.

First, Wisconsin case law points to such a result. Wisconsin cases have led one Seventh Circuit judge to predict that the Wisconsin Supreme Court would not adopt the doctrine. See Steel Warehouse of Wis., Inc. v. Leach, 154 F.3d 712, 716 n. 2 (7th Cir.1998) (Ripple, J. dissenting) ("It appears that Wisconsin most likely would not consider the shield to bar jurisdiction in this case.") (citing Oxmans' Erwin Meat Co. v. Blacketer, 86 Wis.2d 683, 273 N.W.2d 285 (1979) ("We do not think it appropriate or required by the constitution that a corporate agent be shielded from personal jurisdiction if he, as agent of the corporation, commits a tortious act in the forum.")); see also State of Wis. v. Advance Mktg. Consultants, Inc., 66 Wis.2d 706, 225 N.W.2d 887 (1975) (determining that corporate director was subject to personal jurisdiction in Wisconsin because he promoted the venture giving rise to the lawsuit).

Gubb argues that the Wisconsin Court of Appeals adopted the doctrine or something very similar in Pavlic v. Woodrum, 169 Wis.2d 585, 486 N.W.2d 533 (Ct.App. 1992), because it failed to find the existence of personal jurisdiction over Timothy Woodrum, a corporate officer. However, the language of Pavlic suggests the contrary. There, Louis and Timothy Woodrum were officers and shareholders of a Florida corporation. When the corporation failed, Pavlic, an investor, sued Timothy. The state court of appeals found that Wisconsin did not have personal jurisdiction over Timothy because Louis, not Timothy, solicited a business relationship with Pavlic in Wisconsin on behalf of the corporation. However, ...