Surgidev Corp. v. Eye Technology, Inc.

• Decision Date: 06 January 1986
• Docket Number: Civ. No. 4-85-1376.
• Citation: 625 F. Supp. 800
• Parties: SURGIDEV CORPORATION, a California corporation, Plaintiff, v. EYE TECHNOLOGY, INC., a Delaware corporation, and Robert J. Fitzsimmons, Frederick G. Kalfon, James A. Greiling and Debra J. McCoy, Individuals, Defendants.
• Court: U.S. District Court — District of Minnesota

625 F. Supp. 800

SURGIDEV CORPORATION, a California corporation, Plaintiff, v. EYE TECHNOLOGY, INC., a Delaware corporation, and Robert J. Fitzsimmons, Frederick G. Kalfon, James A. Greiling and Debra J. McCoy, Individuals, Defendants.

Civ. No. 4-85-1376.

United States District Court, D. Minnesota, Fourth Division.

January 6, 1986.

Hugh D. Jaeger, Minneapolis, Minn., and Wayne Willenberg and David M. Simon (Spensley, Horn, Jubas & Lubitz, of counsel), Los Angeles, Cal., for plaintiff.

Lawrence C. Brown, Duane W. Krohnke, James L. Volling, and James C. Wine, Faegre & Benson, Minneapolis, Minn., for defendants.

MacLAUGHLIN, District Judge.

This matter is before the Court on plaintiff's motion to dismiss counterclaims brought by the defendants. Plaintiff's motion will be granted in part and denied in part.

FACTS

Plaintiff Surgidev Corporation (Surgidev) is a California corporation with its principal place of business in Goleta, California and is engaged in the manufacture of artificial lenses. Defendant Eye Technology, Inc. (ETI) is a Delaware corporation headquartered in St. Paul, Minnesota. Defendants Robert J. Fitzsimmons, Frederick G. Kalfon, James A. Greiling and Debra J. McCoy are former Surgidev officers and employees now associated with ETI.

This is an action brought by Surgidev charging defendants with unfair competition, misappropriation of trade secrets, breach of contract, breach of fiduciary duty, conversion, and tortious interference with contractual relations and prospective economic advantage. Surgidev is a leading manufacturer of intraocular lenses — artificial lenses implanted in the eyes of cataract patients. In February, 1985, defendant Robert Fitzsimmons resigned his position as executive vice president of marketing and sales at Surgidev to form ETI, of which he is the president, chief executive officer, and treasurer as well as a member of the board of directors. Fitzsimmons was joined at ETI by several other Surgidev executives, including Frederick Kalfon, formerly Surgidev director of marketing; James Greiling, formerly Surgidev's north central regional sales manager; Debra McCoy, formerly Surgidev manager of manpower development; William Fagan, formerly Surgidev northeastern regional sales manager; and Myron Lippman, formerly president of Surgidev. All now hold key positions at ETI.

ETI is currently in the formative stages of corporate life, having been incorporated June 24, 1985. On August 29, 1985, ETI filed with the Securities Exchange Commission a registration statement for a public offering of 2.1 million shares of ETI common stock, intended to provide $6.3 million in operating capital. When completed, the public offering is expected to provide ETI with capital sufficient to establish manufacturing and administrative facilities. The prospectus filed with the SEC by ETI indicates that the corporation plans to engage in the business of manufacturing for sale intraocular artificial lenses.

The crux of Surgidev's complaint is that the individual defendants took valuable trade secrets and marketing information when they left Surgidev's employ to form ETI, and that in so doing each of the individual defendants contravened non-disclosure agreements which they entered into while employed at Surgidev. The trade secrets allegedly misappropriated by the individual defendants relate to technical expertise as well as confidential marketing and sales data. Surgidev seeks compensatory and punitive damages and an injunction restraining defendants from soliciting Surgidev's customers or current employees, using Surgidev's trade secrets, or competing with Surgidev in the manufacture and sale of intraocular lenses.

Defendants have counterclaimed, alleging:

First counterclaim: Tortious Interference with ETI's public offering.

Second counterclaim: Abuse of process and malicious prosecution.

Third counterclaim: Defamation.

Plaintiff now brings this motion to dismiss each of defendants' counterclaims.

DISCUSSION

A. Tortious Interference

Defendants' first counterclaim alleges that plaintiff has tortiously interfered with the ETI public offering by filing this lawsuit. Elements of the tortious interference cause of action are set forth in the Restatement (Second) of Torts § 766B (1977) (adopted by the Eighth Circuit in Missouri v. National Organization for Women, Inc., 620 F.2d 1301, 1316 (8th Cir.1980)):

One who intentionally and improperly interferes with another's prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of

(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or

(b) preventing the other from acquiring or continuing the prospective relation.

Restatement § 766B. Factors to be considered in determining whether the interference is improper are catalogued in the Restatement (Second) of Torts § 767 (1977) (cited with approval in Missouri v. NOW, 620 F.2d at 1316):

In determining whether an actor's conduct in intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors:

(a) the nature of the actor's conduct,

(b) the actor's motive,

(c) the interests of the other with which the actor's conduct interferes,

(d) the interests sought to be advanced by the actor (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other,

(f) the proximity or remoteness or remoteness of the actor's conduct to the interference and

(g) the relations between the parties.

Restatement § 767.

Plaintiff bases its motion to dismiss defendants' tortious interference counterclaim on its first amendment right to petition government. As recognized by the United States Supreme Court in the landmark cases of Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) and United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), the first amendment right to petition government protects the right to bring suit in state and federal courts. Accordingly, the act of filing suit is generally privileged from tort or antitrust liability. See Otter Tail Power Co. v. United States, 410 U.S. 366, 380, 93 S.Ct. 1022, 1031, 35 L.Ed.2d 359 (1973). The courts have recognized only one exception to the Noerr-Pennington doctrine of privilege — resort to the courts which is a mere "sham" intended to disguise tortious or anti-competitive activity is not privileged. See Noerr, 365 U.S. at 140, 81 S.Ct. at 531. The "sham exception" to the Noerr-Pennington doctrine was authoritatively confirmed by the Supreme Court in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 511-16, 92 S.Ct. 609, 612-14, 30 L.Ed.2d 642 (1972), and was thoroughly explored in a recent decision of the United States Court of Appeals for the Eighth Circuit, Razorback Ready Mix Concrete Co., Inc. v. Weaver, 761 F.2d 484 (8th Cir.1985). In Razorback Ready Mix the Eighth Circuit stated:

It is only where a defendant's resort to the courts is accompanied or characterized by illegal and reprehensible practices such as perjury, fraud, conspiracy with or bribery of government decision makers, or misrepresentation, or is so clearly baseless as to amount to an abuse of process, that the Noerr-Pennington cloak of immunity provides no protection.

Razorback, 761 F.2d at 487, quoting Chest Hill Co. v. Guttman, 1981-2 Trade Cas. (CCH) ¶ 64,417, 75,054 (S.D.Ohio May 29, 1981). Thus, the filing of suit will fit within the "sham exception," and will give rise to tort liability, only if "clearly baseless," or if accompanied by perjury, fraud, conspiracy, bribery, misrepresentation, or other "illegal and reprehensible practices."

An analysis of plaintiff's claims reveals that they are neither clearly baseless nor characterized by "illegal and reprehensible practices." As such, plaintiff's claims are protected by the Noerr-Pennington privilege from tort liability. Plaintiff's first cause of action alleges that the individual defendants breached non-disclosure agreements entered into while employed at Surgidev. The non-disclosure agreements signed by each of the individual defendants prohibits just the type of conduct allegedly engaged in by the individual defendants here — misappropriation of trade secrets, hiring of Surgidev employees, and engaging in direct competition with Surgidev in the intraocular lens (IOL) industry.¹ Whether the individual defendants have in fact contravened the terms of the non-disclosure covenants will of course await determination in trial on the merits, nevertheless, given the facial validity of plaintiff's breach of contract counts, it cannot be said that the initiation of this lawsuit was a "mere sham."

The remaining counts of plaintiff's complaint are also facially valid. Given the high corporate rank of the individual defendants while employed at Surgidev, it certainly does not strain the imagination to believe that the individual defendants may have misappropriated trade secrets, converted Surgidev documents, and otherwise engaged in unfair competition, as alleged by the plaintiff. Plaintiff has also raised a colorable claim of tortious interference — plaintiff has alleged that defendants have or will cause Surgidev clients and customers to discontinue present and prospective contractual relationships.

In sum, plaintiff's lawsuit is far from a "sham" lawsuit. The "sham exception" is a "narrow one," Razorback Ready Mix, 761 F.2d at 487. As recognized by the Eighth Circuit in First American Title Co. of South Dakota v. South Dakota Land Title Association, 714 F.2d 1439, 1447 (8th Cir.1983):

"the right of access to the courts is indeed but one aspect of the right of petition";

...