Opinion
Case No. 00-10381-BC
September 30, 2002
The plaintiff, Finnsugar Bioproducts (Finnsugar), filed its complaint on October 10, 2000. Defendant Monitor Sugar Company (Monitor) filed its Answer on November 3, 2000, and its Amended Third-Party Complaint on May 14, 2001. Third-Party Defendant Danisco Finland Oy (Danisco) subsequently filed motions entitled "Motion to Strike Allegations Relating to the `430 and `957 Patents From Third Party Complaint on the Grounds of Res Judicata" and "Motion to Dismiss the Amended Third-Party Complaint" on grounds of lack of personal jurisdiction and failure to state a claim. This Court subsequently referred all pretrial proceedings to Magistrate Judge Charles E. Binder. On May 1, 2002, the magistrate judge filed a report recommending that Danisco's Motion to Strike be construed as a Motion for Summary Judgment, and that it be denied. On June 11, 2002, the magistrate judge filed a report recommending that the motion to dismiss the amended third-party complaint be denied. The parties have filed objections and responses to each others' objections.
The Court has conducted a de novo review of both motions and finds that the conclusions of the magistrate judge are correct, as more hilly explained below. The Court will therefore deny Danisco's motions to strike and to dismiss.
I.
As the Magistrate Judge explained, the First Amended Third-Party Complaint asserts claims of unfair competition under the Lanham Act, tortious interference with the actual and prospective business relationships of Monitor, and antitrust violations. Danisco's involvement in this case stems from Monitor's allegations that Danisco, formerly known as Culter, is a shell company through which Danisco controls Finnsugar Bioproducts, whose primary purpose is to secure a monopoly on both the manufacture of betaine itself and its sale on the market.
In Count 3 of its counterclaim, alleging antitrust violations, Monitor claims that Danisco willfully misused what have been labeled the `420 and `957 patents, knowing that they were unenforceable, invalid, and not infringed. Monitor asserts that Finnsugar entered into licensing agreements with producers of betaine for the purpose of controlling the production and price of betaine products, to restrain trade in those same products, and to monopolize the market. In 1997 and 1998, Finnsugar allegedly competed with a supplier of Monitor, Amalgamated Research, Inc. (ARi), to provide technology for Monitor's use at its Bay City manufacturing facility. During those negotiations, Finnsugar "knowingly and in bad faith asserted and threatened assertion of" the fraudulent `420 and 957 patents. First Amended Third-Party Complaint ¶ 26. Monitor seeks both injunctive and retrospective relief
These patents have also been at issue in a lawsuit still pending before Judge Coar in the United States District Court for the Northern District of Illinois. Finnsugar also initiated that lawsuit, which was brought against Raytheon Engineers and Constructors. Amalgamated Sugar Company, and ARi. Subsequently, the parties filed a stipulation with the Court stating, in relevant part:
Plaintiff, Finnsugar Bioproducts, Inc. ("Plaintiff") and Defendants, the Amalgamated Sugar Company, LLC and Amalgamated Research, Inc. ("Defendants") stipulate and jointly move to dismiss with prejudice certain claims in this action.
1. Plaintiff and Defendants stipulate and jointly move to dismiss with prejudice Plaintiff's claims of infringement of U.S. Patent Nos. 4,359,430 (the `430 Patent) and 5,127,957 (the `957 Patent) against Defendants, and any of the Defendants' subsidiaries, parents, affiliates, customers and/or licensees, as to the following processes that have been at issue in this lawsuit: the specific head-tail process, the specific block displacement process, and the specific coupled loop process that are reflected in documents that have been produced to Plaintiff by Defendants in this lawsuit.
2. In addition, Plaintiff and Defendants stipulate and move to dismiss with prejudice the portion of each of Defendants' First, Second, and Third counterclaims concerning the `430 Patent and the `957 Patent. This dismissal, however, does not affect the Defendants' ability to assert the causes of action raised in such counterclaims in response to any future assertion or claim brought on the `430 Patent and/or `957 Patent concerning processes which are not the specific head-tail process, the specific block displacement process, and/or the specific coupled loop process as reflected in documents that have been produced to Plaintiff by Defendants in this lawsuit. The parties also intend and stipulate that the foregoing dismissal of Defendants' claims is effective as to Cultor corporation, Danisco A/S and any of their affiliates or subsidiaries.
3. The parties stipulate and move that no evidence or arguments (including opening statements) may be introduced in the trial of this case that refer to the subject matter of such dismissed claims or dismissed counterclaims.
4. Pursuant to the above motions, the parties request that the court enter the attached Stipulation and Order of Dismissal with Prejudice.
Stipulation and Motion (emphasis added). Judge Coar approved the stipulation in a minute order entered December 20, 1999.
The magistrate judge found that Danisco's motion to strike should be treated as a motion for summary judgment, a conclusion with which this Court agrees for the reasons stated in the Report and Recommendation. Then, citing the recent case of Browning v. Levy, 283 F.3d 761 (6th Cir. 2002), the magistrate judge found that res judicata will only apply when four criteria have been met:
A claim is barred by the res judicata effect of prior litigation if all of the following elements are present: "(1) a final decision on the merits by a court of competent jurisdiction; (2) a subsequent action between the same parties or their `privies'; (3) an issue in the subsequent action which was litigated or which should have been litigated in the prior action; and (4) an identity of the causes of action."Id. at 771-72 (quoting Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 880 (6th Cir. 1997)). Although he found that Danisco had proven elements two through four, the magistrate judge concluded that the stipulation and order entered by Judge Coar could not be considered a "final decision on the merits," id., because no final judgment has yet been entered in the Illinois litigation. Accordingly, the report recommends that the Motion to Strike be denied.
Danisco objected, arguing that the Stipulation and Motion was in fact a "final decision" as to the `430 and `957 patents, and that an order can be a "final decision" without being part of a final judgment. A final decision, Danisco insists, arises when a dismissal occurs with prejudice and without a right of appeal. Danisco asserts that a final judgment could "never include a stipulated dismissal with prejudice, because it is not appealable." Danisco Objs. at 4. In its objections, Monitor contends that the magistrate judge correctly decided the first prong, but inaccurately analyzed the second through fourth requirements.
The term "final decision" is used interchangeably with "final judgment" in this Circuit. See ATAC Corp. v. Arthur Treacher's, Inc., 280 F.3d 1091, 1097 n. 4 (6th Cir. 2002) ("The term final decision has a well-developed and longstanding meaning. It is a decision that ends litigation on the merits and leaves nothing more for the court to do but execute the judgment.") (quoting Green Tree Fin. Corp. Alabama v. Randolph, 531 U.S. 79, 87 n. 2 (2000)). They are functionally the same thing. Moreover, the stipulation to dismiss specifically excepts from its operation counterclaims of the nature sought to be asserted by Monitor in this case.
Danisco's failure to establish the first and most important requirement for the application of res judicata relieves the Court of its obligation to consider the parties' arguments as to the remaining three prongs of the res judicata analysis. Given that the applicability of res judicata depends heavily on the facts of the two cases being compared, a definitive ruling on the other prongs of the res judicata analysis would be premature in the absence of a final judgment to apply, particularly if the final judgment in the Illinois litigation does not clearly vindicate any one party's position. Furthermore, based on the presentations of the parties to date, the Court is not convinced that there is a sufficient identity of interest between Monitor and ARi to conclude that Monitor should be bound by any decision in separate litigation in which it was not a party.
The Court will therefore decline to adopt the portions of the recommendation addressing these other issues, and expresses no opinion as to the accuracy of the magistrate judge's conclusions with respect to them. The motion to strike, considered as a motion for summary judgment, will be denied.
II.
Danisco's Motion to Dismiss the Amended Third-Party Complaint is based on two grounds. First, Danisco alleges that its contacts with the State of Michigan are insufficient and that this Court accordingly lacks jurisdiction over its person. Second, even if it has been properly haled into Court, Danisco asserts that the three claims in the Amended Third-Party Complaint are conclusory and insufficient to state any claim upon which relief can be granted. The magistrate judge found that there was a sufficient basis for this Court to exercise limited personal jurisdiction over Danisco, and that all counts of the amended third-party complaint were legally sufficient.
A.
Danisco objects to the finding of personal jurisdiction, asserting that the threats, if any, were made by the Finnsugar representative, not the Danisco representative. Thus, no availment occurred, and the cause of action did not arise out of that contact. Monitor responds that the two companies presented a united front at the October, 1997 meeting and both engaged in unlawful threats. Furthermore, Monitor asserts that the "national contacts" available in antitrust cases and supplemental jurisdiction arising therefrom provides an independent basis to assert jurisdiction.
The magistrate judge cited Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992) for the proposition that Michigan's long-arm statute is coextensive with the Due Process Clause, and that there accordingly is no reason to conduct a two-part inquiry. Although the citation is correct, the Court notes that the Sixth Circuit's prediction on this point has since been proven incorrect. Since Griepentrog was issued, the Michigan Supreme Court has clarified that its statute does no automatically extend to the limits of the Due Process Clause. Thus, if the defendant's conduct is not covered by the long-arm statute, there is no need to conduct a Due Process analysis. Green v. Wilson, 455 Mich. 342, 350-51, 565 N.W.2d 813, 816-17 (1997).
Although this Court generally must follow Circuit construction of state law, even if it believes it erroneous, Perez v. Brown Williamson Tobacco Corp., 967 F. Supp. 920, 925 (S.D. Tex. 1997), it need not do so if an intervening decision of the Supreme Court of that state makes it clear that the Circuit's previous construction of state law was incorrect. Burleson v. Liggett Group, Inc., 111 F. Supp.2d 825, 827 (E.D. Tex. 2000). It is worth noting that in its most recent exposition of personal jurisdiction law involving the power of the Michigan courts to assert personal jurisdiction, the Sixth Circuit, without acknowledging its prior precedent to the contrary, applied Michigan's current two-part personal jurisdiction test. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002).
Personal jurisdiction over a parent company does not arise merely because the forum state properly asserts jurisdiction over one of its subsidiaries. Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1273-74 (6th Cir. 1998). The analysis must focus on what the parent corporation has done, not its subsidiary. Id. at 1274. Furthermore, unless the plaintiff clearly shows otherwise, the Court will presume that companies holding themselves out as parent and subsidiary are in fact separate entities. Id. at 1273-74.
The plaintiffs, therefore, have the burden of proving the Court's jurisdiction over this defendant. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002). Because this Court is relying only on the pleadings and affidavits of the parties, the plaintiff "need only make a prima facie showing of jurisdiction." Id. In the absence of an evidentiary hearing, the "court will not consider facts proffered by the defendant that conflict with those offered by the plaintiff." Id. The Court views the facts in the light most favorable to the nonmoving party. Serras v. First Tenn. Bank Nat'l Ass'n., 875 F.2d 1212, 1214 (6th Cir. 1989).
"In a diversity case, personal jurisdiction must be appropriate both under the law of the state in which the district court sits and the Due Process Clause of the Fourteenth Amendment." Bagsby v. Gehres, 195 F. Supp.2d 957, 961 (E.D. Mich. 2002) (citing Neogen Corp., 282 F.3d at 888). In Michigan, jurisdiction over the person can exist on the basis of general personal jurisdiction, see Mich. Comp. Laws §§ 600.701 and 600.711, or limited personal jurisdiction, see Mich. Comp. Laws §§ 600.705 and 600.715. The parties in this case agree that limited personal jurisdiction is the only possible basis for bringing Danisco into this Court. Limited personal jurisdiction may he exercised over a defendant who has certain minimum contacts with the forum but only over claims which arise from or relate to those contacts. Theunissen v. Matthews, 935 F.2d 1454, 1460 (6th Cir. 1991). However, even a single contact with the forum state may suffice for personal jurisdiction if it is directly and substantially related to the plaintiff's claim. Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998). See also LaFarge v. Altech, ___ F. Supp.2d ___, No. 02-10117-BC, 2002 WL 31041848, at *4 (E.D. Mich. Sept. 12. 2002) (Lawson, J.).
Danisco's business dealings in Michigan need not be extensive or prolonged, since the Michigan statute allows "any" business dealings to suffice, and "any" includes even the slightest amount. See Sifers v. Horen, 385 Mich. 195, 199 n. 2, 188 N.W.2d 623 (1971). The Michigan Court of Appeals has broadly defined the concept of transacting business:
The phrase "transaction of any business" is not defined in the statute. Therefore, it is proper to rely on dictionary definitions in determining the meaning of that provision. Popma v. Auto Club Ins. Ass'n, 446 Mich. 460, 470, 521 N.W.2d 831 (1994). "Transact" is defined as "to carry on or conduct (business, negotiations, etc.) to a conclusion or settlement." Random House Webster's College Dictionary (1997). "Business" is defined as "an occupation, profession, or trade . . . the purchase and sale of goods in an attempt to make a profit."Oberlies v. Searchmont Resort, Inc., 246 Mich. App. 424, 430, 633 N.W.2d 408, 413 (2001) (holding that extensive marketing efforts directed toward Michigan consumers satisfied subsection (1)).
The Court determines compliance with the Due Process Clause under the following test:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.Neogen, 282 F.3d at 890 (quoting Southern Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968)). "Purposeful availment" occurs when "the defendant's contacts with the forum state proximately result from actions by the defendant himself that create a substantial connection with the forum State." Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). "This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts, or of the `unilateral activity of another party or a third person.'" Id. A cause of action clearly arises from purposeful availment if the cause of action would not exist but for the contacts cited. See Theunissen v. Matthews, 935 F.2d 1454, 1461 (6th Cir. 1991); Payne v. Motorists' Mutual Insurance Cos., 4 F.3d 452, 456 (6th Cir. 1993). Once the first two factors have been established, only extraordinary circumstances will lead the Court to conclude that the assertion of jurisdiction would not be reasonable. Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1268 (6th Cir. 1996). The reasonableness of asserting jurisdiction is assessed by considering "the burden on the defendant, the interest of the forum state, the plaintiff's interest in obtaining relief, and the interest in other slates in securing the most efficient resolution of controversies." Id.
The Court agrees with the magistrate judge that Danisco's contacts with Michigan satisfy the requisites of the Michigan long-arm statute for corporations. The evidence submitted by Monitor abundantly demonstrates that Danisco transacted business in the State of Michigan along with Finnsugar. See Mich. Comp. Laws § 600.715(1). For example, on October 24, 1997, Danisco representative Paananen and Finnsugar representative Monten met with Monitor in Bay City, Michigan to inform Monitor that failure to license Finnsugar's chromatographic technology would force Finnsugar to bring suit to enforce its patents. Aff. of Robert L. Hetzler ¶¶ 4-6. Monitor eventually chose to deal with Finnsugar's competitor, ARi. Monitor alleges that the October 24, 1997 contact was directly related to its decision to license chromatographic technology, which is the basis for this entire suit. First Am. Third-Party Compl. ¶ 26. Given that the connection between the business transacted and the state "is established by the slightest act of business within Michigan," Neogen, 282 F.3d at 888, and the clear relationship between the October 24, 1997 meeting and the allegations in the Amended Third-Party Complaint, Monitor has made a prima facie case for jurisdiction over Danisco under Michigan law. Danisco's assertion that its representative was silent while Finnsugar issued the alleged threats creates at best an issue of fact for later resolution, and does not preclude the prima facie case for personal jurisdiction set forth by Monitor. See Neogen, 282 F.3d at 893.
Likewise, the Court concludes that assertion of personal jurisdiction would not offend the Due Process Clause. As the magistrate judge observed, sending one's representative to negotiate potential business is a quintessential example of purposeful availment. Monitor also alleges that its cause of action arises in part out of the threats issued at the meeting by the Finnsugar and Danisco representatives. Finally, the magistrate judge found that the exercise of jurisdiction would not be unreasonable, noting the presence of Danisco's counsel in both Michigan and Illinois, the importance of Monitor Sugar to this part of the State, Monitor's interest in obtaining relief here, and the likely absence of interest of any other state in the third-party complaint. Report and Recommendation at 20. Danisco complains that the location of its counsel is irrelevant, but does nothing to refute the magistrate judge's other findings, much less the presumption that arises upon satisfaction of the first two factors.
B.
The magistrate judge also rejected Danisco's argument that Monitor had insufficiently pleaded various claims in its third-party complaint. First, despite Danisco's contrary assertion, he found that Monitor was not seeking to pierce the corporate veil, but instead sought to hold Danisco liable either directly or based on the theory that Finnsugar acted as Danisco's agent. As such, no claim for piercing the corporate veil was intended or required. Second, the magistrate judge found Monitor's Lanham Act claims to be sufficient under the governing Federal Circuit case law. Third, he found that Monitor's tortious interference claim to be a state-law claim that was properly pleaded. Finally, the magistrate judge rejected Danisco's claim that the antitrust claim was insufficient, finding that Monitor properly alleged anti-competitive activity by Finnsugar acting as Danisco's agent.
In its objections, Danisco reiterates at length that it is not liable for the acts of its subsidiary. It also claims that the agency theory, if any, is pleaded in such "conclusory" terms that it fails to set forth any facts which explain the basis for the claim. Second, Danisco reasserts that the Lanham Act claim fails to state the alleged misrepresentations made with the specificity required by Federal Rule of Civil Procedure 9(b). Furthermore, general statements of opinion about a competitor's product are insufficient to state a claim under the Lanham Act. Third, Danisco objects to the suggestion that Monitor's tortious interference claim is sufficient, claiming that the third element — an intentional interference inducing the breach or termination of a business relationship — was never specifically described by Monitor in its claim. Finally, Danisco reasserts that its Motion to Strike should be granted and that, in any event, Monitor's bald assertion that "Danisco was involved . . . with Finnsugar" is too conclusory to state a claim for an antitrust violation.
Danisco's objections offer little more than a reiteration of its arguments contained in its motion before the magistrate judge. The Court finds that the magistrate judge's analysis of the law and its application to the text of the challenged pleading is cogent and well-reasoned, and the Court need not attempt to improve upon the analysis. The Court agrees with the magistrate judge's report which concluded that Monitor sufficiently pleaded the claims in each of the three counts of the amended third-party complaint, and the Court adopts the reasoning as its own.
III.
The magistrate judge correctly found that the referenced Stipulation in the Illinois litigation was not a "final decision" entitled to res judicata effect. Likewise, the magistrate judge correctly concluded that jurisdiction is properly asserted over Danisco, and that the amended third-party complaint states valid claims against Danisco.
Accordingly, it is ORDERED that the Report and Recommendation [dkt #61] is ADOPTED IN PART.
It is further ORDERED that the Motion to Strike Allegations Relating to the `430 and `957 Patents From Third Party Complaint on the Grounds of Res Judicata [dkt #33] is DENIED.
It is further ORDERED that the Motion to Dismiss the Amended Third-Party Complaint [dkt #26] is DENIED.