Path Instruments Internat'l Corp. v. Asahi Optical Co.

• Citation: 312 F. Supp. 805
• Decision Date: 19 March 1970
• Docket Number: No. 69 Civ. 3435.,69 Civ. 3435.
• Parties: PATH INSTRUMENTS INTERNATIONAL CORP., Plaintiff, v. ASAHI OPTICAL CO. Ltd., the Hughes-Owens Company, Ltd., the Hughes-Owens Corp., Saburo Matsumoto, Masa Tanaka, Hiroshi Hara, Peter Hopper, Arthur Temperton and Del Fleury, Defendants.
• Court: U.S. District Court — Southern District of New York

312 F. Supp. 805

PATH INSTRUMENTS INTERNATIONAL CORP., Plaintiff, v. ASAHI OPTICAL CO. Ltd., the Hughes-Owens Company, Ltd., the Hughes-Owens Corp., Saburo Matsumoto, Masa Tanaka, Hiroshi Hara, Peter Hopper, Arthur Temperton and Del Fleury, Defendants.

No. 69 Civ. 3435.

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

March 19, 1970.

Daniel H. Greenberg, New York City, for plaintiff.

Cleary, Gottlieb, Steen & Hamilton, New York City, for defendants Hughes-Owens Co., Ltd., Hughes-Owens Corp., Peter Hopper, Arthur Temperton and Del Fleury; James W. Lamberton and John S. Murray, New York City, of counsel.

Weil, Gotshal & Manges, New York City, for defendants Asahi Optical Co., Ltd., Saburo Matsumoto, Masa Tanaka and Hiroshi Hara; Ira M. Millstein and Marshall C. Berger, New York City, of counsel.

MANSFIELD, District Judge.

In this action brought by Path Instruments International Corporation ("Path") against three corporate and six individual defendants seeking damages and injunctive relief, defendants move to dismiss the complaint and to quash return of service.

On July 20, 1966, Path entered into a written agreement with the Meisei Trading Company ("Meisei") and the Fuji Surveying Instruments Manufacturing Company ("Fuji"), under the terms of which Path was made the sole distributor in the United States and Canada of surveying instruments manufactured by Fuji and exported from Japan by Meisei. The agreement was to continue through June 30, 1968, and would be automatically renewed unless terminated by notice given more than 60 days before that date.

On January 24, 1967, Fuji was acquired by the defendant Asahi Optical Company, Ltd. ("Asahi"), becoming the latter's wholly-owned and operated subsidiary. Thereafter, changes began to occur in Fuji's distribution and sales systems. On May 6, 1968, Asahi established a wholly-owned subsidiary in New York, to be known as Asahi Optical America, Inc. ("Asahi (America)"). On June 10, 1968, Fuji terminated its export and foreign sales agreements with Meisei.¹ During this same period Path experienced difficulty in filling orders placed with Fuji either directly or through Meisei, and apparently resorted to other suppliers in order to obtain the instruments it needed. On November 22, 1968, Fuji wrote to Path advising it that in view of Path's purchases from other suppliers, in violation of the exclusive dealing agreement of July 20, 1966, it would henceforth consider that agreement breached and void.²

In the meantime Fuji had been negotiating with the Hughes-Owens Company, Ltd. ("Hughes-Owens (Canada)"), a Canadian concern which had for some years purchased Fuji products from Path for distribution in Canada, with respect to Hughes-Owens (Canada) becoming a direct distributor of Fuji products in Canada and the United States. On October 31, 1968, Hughes-Owens (Canada) accordingly set up an Illinois subsidiary, The Hughes-Owens Corporation of Illinois ("Hughes-Owens (Illinois)"), and in December, 1968, executed a distributorship agreement with Fuji in Japan.

For descriptive convenience the defendants may be divided into the Japanese and the Canadian group. The Japanese group comprises Asahi and three of its officers and directors: Saburo Matsumoto, who is also president of Asahi (America); Masanori Tanaka, who is also vice-president of Asahi (America); and Hiroshi Hara, who is also president of Fuji. The Canadian group consists of Hughes-Owens (Canada), Hughes-Owens (Illinois), two officers and directors of Hughes-Owens (Canada)—Arthur Temperton, who is also vice-president of Hughes-Owens (Illinois), and E. Peter Hopper, who is also president of Hughes-Owens (Illinois)— and one employee of Hughes-Owens (Illinois) who was previously employed by its Canadian parent.

Plaintiff's complaint states four causes of action arising out of the transactions described above: FIRST CLAIM (against all defendants): conspiracy to injure Path's business by inducing breach of contract: SECOND CLAIM (against Asahi and its three officers): breach of contract; THIRD CLAIM (against Hughes-Owens (Canada) and its officers): inducement of breach of contract; and FOURTH CLAIM (against all defendants): unfair competition. The conspiracy claim (FIRST CLAIM) alleges that the two groups of defendants conspired together to destroy Path's business by (1) breach of the distributorship agreement between Path, on the one hand, and Asahi and its subsidiary Fuji, on the other; (2) by breach of the sub-distributorship arrangement between Path and Hughes-Owens (Canada); (3) by creation of the new distributorship agreements between Fuji and Hughes-Owens (Canada) whereby the latter would act as the selling agent of Fuji instruments in the United States and Canada; (4) by creating Asahi (America) to transact Asahi's business in New York; and (5) by cutting off plaintiff's sources of supply and marketing outlets, and soliciting and selling to plaintiff's customers in the United States through various means of unfair competition. The breach of contract claim (SECOND CLAIM) alleges that Asahi, acting through the individual defendants Matsumoto, Tanaka and Hara, breached the agreement of July 20, 1966, between Path and Fuji, the wholly-owned, operated and managed subsidiary of Asahi, by repudiating the agreement and by neglecting and refusing to fill orders properly submitted by Path. The third cause of action alleges that Hughes-Owens (Canada) acting by and through individual defendants Temperton and Hopper, induced Asahi to breach the 1966 contract. In the FOURTH CLAIM both groups of defendants are further alleged to have competed unfairly with plaintiff by employing, in their sales and distributional efforts on behalf of Fuji products, catalog and style numbers as well as descriptive terminology created and first employed by Path in its own marketing of Fuji products. Plaintiff seeks damages of $1,000,000 with respect to each of the four causes of action stated and a permanent injunction restraining the defendants from further use of catalog and style numbers and descriptive terminology borrowed from plaintiff.

All defendants move to dismiss the complaint for lack of personal jurisdiction over them. The Japanese group move to dismiss the complaint for failure to state a claim on which relief can be granted.

Jurisdiction

Jurisdiction over both groups of defendants is predicated upon New York's "long-arm" statute, § 302 of the Civil Practice Law and Rules. That section provides in pertinent part as follows:

"(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary * * * who in person or through an agent:

"1. transacts any business within the state; or

* * * * * *

"3. commits a tortious act without the state causing injury to person or property within the state * * * if he

(i) regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or

(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; * * *."

Putting to one side for the moment questions as to the liability of a parent for the acts of a subsidiary, it is alleged in the first cause of action that all of the defendants and each of them conspired together to injure plaintiff's business by the various means outlined above, including breach of the distribution agreement with plaintiff, creation of a new distributorship, establishment of a new New York subsidiary, cutting off supplies, etc. While the term "conspiracy," which refers merely to a joint or partnership undertaking as distinguished from independent conduct, would not be sufficient to convert a breach of contract into a "tortious act" within the terms of § 302(a) (3) (ii), cf. Rosemont Enterprises, Inc. v. Random House, Inc., 261 F.Supp. 691, 694-695 (S.D.N.Y.1966); Schenin v. Micro Copper Corp., 272 F.Supp. 523, 529 (S. D.N.Y.1967), a conspiracy to destroy plaintiff's business by the various alleged means would constitute a "tortious act", Sorenson v. Chevrolet Motor Co., 171 Minn. 260, 214 N.W. 754 (1927); Avon Products, Inc. v. Berson, 206 Misc. 900, 135 N.Y.S.2d 867 (Sup.Ct.1954), and would not be rendered less so by the fact that one of the means was breach of contract.

The question remains whether each of the defendants meets the further requirements of either subsection (i) or (ii) of § 302(a) (3). With the exception of Asahi, it does not appear that any of the corporate defendants has contacts with the State of New York of the continuous sort contemplated by subsection (i).³ Nor does any of them, again with the possible exception of Asahi, derive "substantial" revenue from goods used or consumed or services rendered within the state. All of them, however, must reasonably have expected any acts designed to injure the business of plaintiff Path, a New York corporation, to "have consequences in the state" of New York. All of them, furthermore, do derive "substantial revenue from interstate or international commerce." Asahi is a large manufacturer of optical devices and instruments, exporting such items as the well-known Honeywell Pentax line of cameras and accessories. Some indication of the magnitude of its export operations is revealed by the 1966 contract between Path and Fuji—the latter of which, six months later, became a wholly-owned subsidiary of Asahi— providing that Path would purchase a minimum of $300,000 of surveying equipment from Fuji in the year 1967. Hughes-Owens (Canada) is in the business of producing, supplying and distributing drafting supplies and related lines of equipment. It employs about 370 employees in Montreal and at 13 other locations in Canada. While all of its sales (disregarding its Illinois...