Wechsler v. Macke Intern. Trade Inc.

• Decision Date: 27 February 2004
• Docket Number: No. CV 00-00296-CAS.,CV 00-00296-CAS.
• Court: U.S. District Court — Central District of California
• Parties: Lawrence I. WECHSLER, Plaintiff, v. MACKE INTERNATIONAL TRADE, INC.; Anthony O'Rourke; and Petsmart, Inc., Defendants.

327 F.Supp.2d 1139

Lawrence I. WECHSLER, Plaintiff, v. MACKE INTERNATIONAL TRADE, INC.; Anthony O'Rourke; and Petsmart, Inc., Defendants.

No. CV 00-00296-CAS.

United States District Court, C.D. California, Western Division.

February 27, 2004.

Thomas F. Smegal, Irfan A. Lateef, Knobbe Martens Olson & Bear, San Francisco and Irvine, CA, for Plaintiff.

Conrad Solum, Fulbright and Jaworski, Los Angeles, CA, for Defendant.

ORDER GRANTING SUMMARY JUDGMENT IN PART AND DENYING SUMMARY JUDGMENT IN PART AS TO DEFENDANT ANTHONY O'ROURKE

SNYDER, District Judge.

I. INTRODUCTION

Plaintiff Lawrence I. Wechsler is the inventor of a portable device for feeding animals, for which he owns U.S. Patent No. 5,636,592 ("the '592 patent"), issued June 10, 1997. In this action, plaintiff alleges that defendant Macke International Trade, Inc. ("Macke") and Anthony O'Rourke, Macke's President and Secretary, have infringed the '592 patent by "importing, using, offering for sale, and selling in the United States, two different products, the `Handi-Drink' and the `Handi-Drink 4' products as well as inducing infringement of the '592 patent." Plaintiff's Statement of Genuine Issues of Material Fact ("SGI") ¶ 1; see also defendants' Statement of Uncontroverted Facts ("SUF") ¶ 2. The Handi-Drink products are portable water dispensing and drinking devices for animals, with the Handi-Drink ("HD-1") being the original device and the Handi-Drink 4 ("HD-4") being a later, smaller model. SUF ¶ 2.

Plaintiff filed the original complaint in this action on July 19, 1999. Plaintiff subsequently filed a First Amended Complaint ("FAC") on May 8, 2000, adding defendant Petsmart, Inc., and asserting claims against all defendants for infringement in violation of 35 U.S.C. § 271(a), and against O'Rourke and Macke for inducing infringement pursuant to 35 U.S.C. § 271(b).

Following a March 23, 2001 hearing held in accordance with Markman v. Westview Instruments, Inc., 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996), the Court issued an Order Construing Patent on August 20, 2001. Subsequently, on October 30, 2001, the Court issued an Order Construing Additional Portions of Claims 1 and 18.

The Court granted defendants' motion for summary judgment of non-infringement of the '592 patent on February 13, 2002. The Federal Circuit reversed the Court's grant of summary judgment of non-infringement with respect to HD-1, and affirmed the Court's grant of summary judgment of non-infringement with respect to HD-2 in an order dated January 29, 2003.

All claims against defendant Petsmart, Inc., and Petsmart Inc.'s counterclaim against plaintiff were dismissed with prejudice pursuant to a stipulation and order entered on July 7, 2003.

Defendants Macke and O'Rourke then moved for summary judgment of invalidity of the '592 patent. On November 25, 2003, the Court denied defendants' motion.

The parties are now before the Court on defendants' motion for summary judgment, seeking the dismissal of defendant Anthony O'Rourke, filed January 8, 2004. The Court held a hearing on defendants' motion for summary judgment on February 9, 2004.¹

II. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate where "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the initial burden of identifying relevant portions of the record that demonstrate the absence of a fact or facts necessary for one or more essential elements of each cause of action upon which the moving party seeks judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

If the moving party has sustained its burden, the nonmoving party must then identify specific facts, drawn from materials on file, that demonstrate that there is a dispute as to material facts on the elements that the moving party has contested. See Fed.R.Civ.P. 56(c). The nonmoving party must not simply rely on the pleadings and must do more than make "conclusory allegations [in] an affidavit." Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990). See also Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548. Summary judgment must be granted for the moving party if the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322, 106 S.Ct. 2548. See also Abromson v. American Pacific Corp., 114 F.3d 898, 902 (9th Cir.1997).

In light of the facts presented by the nonmoving party, along with any undisputed facts, the Court must decide whether the moving party is entitled to judgment as a matter of law. See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 & n. 3 (9th Cir.1987). When deciding a motion for summary judgment, "the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted); Valley Nat'l Bank of Ariz. v. A.E. Rouse & Co., 121 F.3d 1332, 1335 (9th Cir.1997). Summary judgment for the moving party is proper when a rational trier of fact would not be able to find for the nonmoving party on the claims at issue. See Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.

III. DISCUSSION

A. Should Defendants' Motion for Summary Judgment be Granted as to the Issue of Whether Macke is the Alter Ego of Anthony O'Rourke Pursuant to California Law?

Defendants argue that Macke cannot be held to be the alter ego of Anthony O'Rourke under California law. Mot. at 4. Defendants contend that "a corporation's liability may be imposed on an individual, only when two conditions are met: (1) there is such a unity of interest and ownership that the individuality, or separateness, of the said person and corporation has ceased and (2) adherence to the fiction of the separate existence of the corporation would sanction a fraud or promote injustice." Mot. at 5-6, citing Firstmark Capital Corp. v. Hempel Financial Corp., 859 F.2d 92, 94 (9th Cir.1988).

Defendants argue that California courts have found a unity of interest between a shareholder and a corporation in situations in which the shareholder: (1) fails to contribute capital or issue stock, (2) commingles corporate funds with personal funds, or (3) fails to observe corporate formalities. Mot. at 5. Defendants argue that the relationship between Macke and O'Rourke falls into none of these categories. In particular, defendants contend that "Macke, Inc., is a sufficiently capitalized corporation as evidenced by its twelve years of successful operation." Mot. at 5, citing O'Rourke Decl. ¶ 5. In addition, defendants point to an insurance policy which they contend is "sufficient to capitalize [Macke] for all reasonably foreseeable contingencies." Mot. at 6, citing O'Rourke Decl., Ex. C. Defendants further contend that a likely damage award in this action "would be less than $30,000 to $70,000" and that there is "no evidence suggesting that Macke cannot respond to such a damage award."² Reply at 7, citing Second O'Rourke Decl. ¶ 4. Defendants also argue that Macke observed corporate formalities by appointing officers, holding board meetings, keeping minutes, maintaining corporate records and filing corporate tax returns. Mot. at 6, citing O'Rourke Decl. ¶ 6, Ex. D. According to defendants, Macke was also monitored by an independent corporate accountant who ensured that there was no commingling of corporate and personal funds. Id., citing O'Rourke Decl. ¶ 9, Ex. G. Finally, defendants state that Macke leases office space. Id., citing O'Rourke Decl. ¶ 8, Ex. F.

As to the issue of whether adherence to the corporate veil would result in fraud or injustice, defendants argue that "[t]here is no evidence in the record, nor can [p]laintiff point to any which would indicate any injustice or equitable purpose that may result from ignoring its corporate form." Mot. at 6.

Plaintiff responds that "it is undisputed that [O'Rourke] is the sole shareholder, director and officer of [Macke]" and that "an examination of the totality of the circumstances leads to the inescapable conclusion that the separate personalities of the corporation and the individual no longer exist." Opp. at 3. Regarding the insurance policy cited by defendants, plaintiff argues that defendants have not disclosed the existence of any insurance coverage for the patent infringement claims in this action, and that the Certification of Interested Parties filed pursuant to the Local Rules on October 10, 2003, does not identify any insurance carrier.³ Opp. at 4, citing O'Rourke Decl. ¶ 5, and R. Wechsler Decl. ¶¶ 2,3. Plaintiff argues that the balance sheet of Macke as of October 31, 2000, raises a genuine issue of material fact in that "the California Supreme Court has held that undercapitalization alone will justify piercing the corporate veil." Opp. at 4, quoting Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec, 854 F.2d 1538, 1544 (9th Cir.1988), and citing Wechsler Decl., Ex. H.

Plaintiff also sets forth additional arguments as to why there exists a unity of interest exists between O'Rourke and Macke. Plaintiff first argues that O'Rourke has held himself out as being personally liable for the debts of Macke in two letters written to Macke's customers by counsel to O'Rourke and Macke. Opp. at 5, citing R. Wechsler Decl., Confid. Exs. F, G. Plaintiff also contends that O'Rourke treats the assets of Macke as his own by referring to one of Macke's registered trademarks entitled "Petcrew" as "Anthony O'Rourke's Pet Crew" on the Internet web sites "www.handi-drink.com" and "www.petcrew.net." See Opp. at 5, citing L. Wechsler Decl. ¶¶ 2,4. Plaintiff further contends that O'Rourke "uses his...