Ontel Products, Inc. v. Project Strategies Corp.

• Decision Date: 14 September 1995
• Docket Number: No. 94 Civ. 9025(HB).,94 Civ. 9025(HB).
• Citation: 899 F. Supp. 1144
• Parties: ONTEL PRODUCTS, INC., d/b/a Pet & Groom, Plaintiff, v. PROJECT STRATEGIES CORP. and Stephen Ziskind, Defendants.
• Court: U.S. District Court — Southern District of New York

899 F. Supp. 1144

ONTEL PRODUCTS, INC., d/b/a Pet & Groom, Plaintiff, v. PROJECT STRATEGIES CORP. and Stephen Ziskind, Defendants.

No. 94 Civ. 9025(HB).

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

September 14, 1995.

COPYRIGHT MATERIAL OMITTED

Kenneth R. Umans, Colucci & Umans, New York City, for Plaintiff.

Charles P. Kennedy, Jonathan A. David, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ, for Defendants.

OPINION AND ORDER

BAER, District Judge.

I. FACTS

Defendant Project Strategies Corporation ("P.S.C.") sells a pet grooming device that it advertises through various media including television. The product is the "pet mitt" that enables pets to be groomed by a glove that pulls off loose hair from the pet. It packages this product with a label that reads "As Seen On TV." P.S.C. is incorporated in and has its only place of business in Florida. It discovered that plaintiff Ontel Products ("Ontel"), which has its principal place of business in New Jersey, was selling a different pet grooming device with the claim that it is "Similar To Those Seen On TV."¹

P.S.C. informed Ontel that because Ontel does not advertise its own pet grooming device on television, Ontel's packaging violates P.S.C.'s rights. Ontel, meanwhile, informed P.S.C. that P.S.C. was harming Ontel's sales of its product by creating the allegedly incorrect impressions to market participants, through advertising, threatened lawsuits, and other means, that (1) Ontel's product violates a P.S.C.-owned patent, and (2) Ontel's use of the "Similar To Those Seen On TV" phrase on its packaging infringes P.S.C.'s rights. The parties entered settlement negotiations, but while the negotiations were ongoing, P.S.C. claims that Ontel filed the instant suit in order to choose the venue of the Southern District of New York rather than the District of New Jersey where P.S.C. could be expected to file a lawsuit if settlement did not transpire.

Ontel filed this action for a declaratory judgment holding that the packaging of its pet grooming device did not infringe P.S.C.'s rights. In addition, Ontel seeks damages for anti-trust violations, unfair competition, false advertising, various commercial torts, and illegal patent marking, and requests an injunction enjoining defendants, inter alia, from

interfering with Ontel's existing or potential contracts to sell pet mitt products by implying to Ontel's suppliers and/or potential suppliers, customers, potential customers and/or to the trade or consuming public that Ontel's pet mitt products are somehow illegal, or not totally free to be sold without authorization of P.S.C.....

Am.Compl. ¶ 4(e).² Later that same day, P.S.C. filed a suit in the District of New Jersey alleging violation of the Lanham Act and seeking damages. P.S.C. brought the instant motion to (1) dismiss Ontel's suit for lack of personal jurisdiction or improper venue; (2) transfer for forum non conveniens to the District of New Jersey; or (3) dismiss the action, or stay it pending disposition of the District of New Jersey proceeding.

For the reasons below, P.S.C.'s motions are granted in part and denied in part. I conclude that the dispute should be resolved here. The parties are therefore enjoined from pursuing the District of New Jersey action, which action has been held in abeyance by the District of New Jersey pending resolution of the instant motions.

II. DISCUSSION

A. Personal Jurisdiction

1. P.S.C.

The extent to which P.S.C. "does business" in New York State subjects it to personal jurisdiction here pursuant to N.Y.Civ.Prac.L. & R. ("CPLR") 301.³ P.S.C.'s transaction of business here includes, among other activities:

(i) an ongoing relationship with Just Packaging, Inc. (which is located in the Eastern District of New York), an independent New York packaging and distribution center that receives the pet grooming mitts from abroad, repackages them, and ships them out to fulfill 80% of P.S.C.'s orders from within and without New York State, Pl.'s Mem.L.Opp'n at 5-6 (citing Decl. of Def. Ziskind);

(ii) a contract with a Manhattan based company, Media Syndication Group (MSG) (which is located in the Southern District of New York), giving it exclusive print media advertising and corresponding distribution rights. MSG purchases pet mitts from the Hong Kong manufacturer and P.S.C. receives commissions on MSG's purchases; and

(iii) a relationship with Emson, a Manhattan based distributor (which is located in the Southern District of New York), whereby P.S.C. has granted Emson the right to sell to retail markets that P.S.C. has chosen not to service directly.

Although Just Packaging, Inc. is an independent contractor, personal jurisdiction over P.S.C. can nonetheless result from this relationship alone. Where New York contacts are such that local representatives— even non-agents—do all that a foreign defendant would do by its own officials if it were in New York, personal jurisdiction can be invoked. See, e.g., Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116 (2d Cir.1967), cert. denied, 390 U.S. 996, 88 S.Ct. 1198, 20 L.Ed.2d 95 (1968); Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967). In practice, this means that the local entity must represent "so significant a portion of the business that the non-resident would have to dispatch its own employees to the State were its affairs not conducted on its behalf." Pneuma-Flo Sys., Inc. v. Universal Mach. Corp., 454 F.Supp. 858, 865 (S.D.N.Y. 1978) (citations omitted). As indicated above, by their own estimate, defendants acknowledge that fully eighty percent of all nationwide orders are fulfilled by Just Packaging, Inc. If P.S.C. did not retain Just Packaging, Inc. to do so, P.S.C. would no doubt have to dispatch its own employees to perform these packaging and distribution activities.

2. Stephen Ziskind

Ontel states that Stephen Ziskind is the "founder, CEO, President and owner of 100% of the capital stock" of P.S.C., Pl.'s Letter Br. at 2, and characterizes Ziskind's deposition testimony as relating that he "was and continues to be the sole driving force behind the activities that stand as the basis for this" lawsuit, id. Ontel concludes that Ziskind's activities in connection with New York give this Court jurisdiction over him pursuant to New York's long-arm statute, CPLR 302(a). Defendants, meanwhile, argue that Ziskind "should ... be dismissed from this action since his actions relating to Ontel's claims were conducted on behalf of P.S.C. solely in his corporate capacity." Defs.' Letter Br. at 3.

In New York, the individual who owns a corporation is generally not subject to personal jurisdiction as a result of the corporation's activities unless (1) the corporate veil can be "pierced" or (2) the corporation acted as an agent for the owner. Lamar v. American Basketball Ass'n, 468 F.Supp. 1198, 1203 (S.D.N.Y.1979). An individual, such as a corporate officer or employee, however, cannot avoid jurisdiction on the basis that he or she engaged in the offending activity solely in the context of his or her corporate capacity. Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 527 N.Y.S.2d 195, 202, 522 N.E.2d 40, 47 (1988).

Ontel proclaims that it "believes ... Mr. Ziskind has clearly formed the corporation for his own wrongful gain," Pl.'s Letter Br. at 5, while defendants note that "the mere fact that a corporation consists of a `one person' corporation sic does not alone justify piercing the corporate veil," Defs.' Letter Br. at 3 (citation omitted). Under Florida law, which controls this question,⁴ piercing the veil requires more than mere conjecture on the plaintiff's part; before a corporation's owners can be required to demonstrate proper maintenance of the corporate form, the plaintiff must make:

a preliminary showing "that the corporation is in actuality the alter ego of the stockholders and that it was organized or after organization was employed by the stockholders for fraudulent or misleading purposes, or in some fashion that the corporate property was converted or the corporate assets depleted for the personal benefit of the individual stockholders, or that the corporate structure was not bona fidely established or, in general, that property belonging to the corporation can be traced into the hands of the stockholders."

Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114, 1120 (Fla.1984) (quoting Advertects, Inc. v. Sawyer Indus., Inc., 84 So.2d 21, 24 (Fla.1955)). Accord Lamar, 468 F.Supp. at 1204 n. 9 (rejecting an effort to pierce a corporate veil where the only evidence plaintiff presented consisted of requests to the court to take "notice of the generally accepted intelligence that the various entities which have been created to enclose the owner's activities ... are no more than the owner's alter egos and have no independent existence for contractual purposes separate and apart from the owner" (quoting plaintiff's att'y's aff.)). Ontel fails to provide any support for its naked statement that Ziskind "clearly formed the corporation for his own wrongful gain," and I will therefore not find that Ziskind is subject to this Court's jurisdiction by virtue of his supposed abuse of the corporate form.

Ontel fails as well in establishing that P.S.C. does business in New York as Ziskind's agent. Ontel has not shown that P.S.C. acted in pursuit of Ziskind's business; rather, there is every indication that whatever activities Ziskind may have personally taken were to further P.S.C.'s business.⁵ See Lamar, 468 F.Supp. at 1204 ("It is not Buffalo Braves, Inc. which is in New York to do the owner's business, but rather the owner who has ... entered New York to do the corporation's business.").

Ontel cannot obtain personal jurisdiction over Ziskind based solely on his position as President of P.S.C.; instead, Ontel must show that Ziskind personally took part in the...